How to Distinguish Between Accounting & Bookkeeping

Accountants and bookkeepers are not the same.

The main difference between accounting and bookkeeping is the degree of complexity involved in the work performed. Bookkeeping consists of everyday accounting of financial transactions usually done by individuals with minimal or no financial training. Despite its simplicity, good bookkeeping is an essential activity for a business and it serves as the backbone of good accounting. Accounting is usually performed by individuals who have financial training or experience, including licensed professionals such as certified public accountants, or CPAs. Accounting activities usually require a higher level of financial knowledge and expertise in recording, reporting and analyzing financial transactions and reports.

Instructions

1. Identify bookkeeping activities. A review of a bookkeeper's job description can provide insight on the daily responsibilities involved in bookkeeping. Job duties can include recording everyday entries of the business for transactions under a certain amount, classifying and summarizing financial data and organizing transaction documents for safekeeping. Depending on his level of experience and the complexity of the business's operating environment, a bookkeeper may perform some simple accounting activities, such as a bank reconciliation. A bank reconciliation adjusts a company's cash balance to the bank's cash balance by adding or deducting transactions missing on the company's books that are on the bank statement and vice versa.

2. Identify accounting activities performed by a non-licensed accountant. Non-licensed accountants perform all types of accounting analyses, as well as record and report financial transactions and financial reports. Most of their duties involve analyzing, recording or reporting complex or higher amount transactions that require a greater level of knowledge and authority to complete. Accountants are responsible for closing and adjusting entries recorded throughout and at the end of an accounting period. They also sort through financial data and organize it into reports or financial statements used for decision making.

3. Identify accounting activities performed by a licensed accountant. A licensed accountant is referred to as a CPA. A CPA has a state license designating that he has completed additional requirements granting him a license. The license assures the public that a CPA will meet and practice certain standards when performing his professional duties. CPAs and non-licensed accountants can perform the same work with certain exceptions. For example, a CPA must be involved in the audit of the annual financial statements of a publicly traded company and he must sign off on the auditor's report. The auditor's report is part of a company's financial statements and presents an opinion that the statements' financial information is presented fairly and in accordance with accounting guidelines.

References

• "Financial: CPA Exam Review"; DeVry/Becker Educational Development Corp.; 2009

Resources

• Accounting Coach: What is the difference between a bookkeeper and an accountant?