When people think about bookkeeping and accounting, they will be eager to figure out the difference between the two of them. While accounting and bookkeeping share the same sort of goals, they support your business in different stages of the financial cycle.
Accounting is subjective, providing you a business perception based on bookkeeping, whereas bookkeeping is more administrative and transactional, concerned with recording financial transactions.
In this article, I will ride you through functional differences between accounting and bookkeeping, as well as their roles in running a business.
The Function of Bookkeeping
Darwin Bookkeeping provides an efficient way of recording day to day transactions persistently and is a key to establishing a financially successful business.
Bookkeeping consists of:
- Maintaining financial transactions
- Producing invoices
- Posting credits and debits
- Recording and balancing subsidiaries, accounts’ history, and overall logs
- Finishing payroll
Maintaining a general ledger is one of the fundamental parts of bookkeeping. The general ledger is a primary document where a bookkeeper maintains the record of amounts from sales to expense receipts. It can be created with computer software, a specialized spreadsheet, or even a simple lined sheet of paper.
The difficulty level of the bookkeeping system depends upon the extent of the business and the number of transactions it makes daily. All sorts of transactions your business makes need to be recorded in a ledger, and a few transactions even need supporting documents.
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The Function of Accounting
Accounting is an advanced-level process that utilizes financial information organized by a bookkeeper or the business owner and builds financial layouts using that information. Accounting is more intuitive than bookkeeping, which is more transactional.
Accounting consists of:
- Preparing financial statements of a company
- Preparing adjusting entries (nothing down the transactions that have not been recorded by bookkeeping yet)
- Assessing the costs of operation
- Completing income tax returns
- Assisting the company owner in analyzing the impact of financial decisions
The accounting process provides reports that bring core financial indicators together. The outcome is a better understanding of actual profitability and alertness of the actual cash flow in the business. Accounting converts the information provided by the ledger into statements that unveil the broader picture of the business and the path of progress the company is taking. Business owners will frequently look into the accountants for help with technical tax planning, tax filing, and financial forecasting.
The Role of a Darwin Bookkeeper versus the Role of an Accountant
Bookkeepers and accountants play a similar role sometimes but, a bookkeeper’s first job is to keep a record of your transactions to keep you financially organized. The accountant’s role is to do further processing. Accountants provide discussion, assessments, and are more qualified to advise on tax-related matters.
Bookkeepers do not need to have any formal education. To thrive in their work, Darwin bookkeeper need to be masters of accuracy and have a fair knowledge regarding the key financial topics. Usually, the company’s owner or an accountant monitors a bookkeeper’s work. Therefore, Darwin bookkeepers cannot give themselves the title of an accountant.
To work as an accountant in any company, a person needs to have a Bachelor’s degree in Accounting. The ones who do not have a degree in accounting can provide a finance degree as an alternative to an accounting degree. Accountants can also apply to attain other professional certifications. For instance, accountants can obtain the title of Certified Public Accountant after working for a sufficient period and gaining adequate experience. To get this certification, an accountant must clear the Uniform Certified Public Accountant exam and must have experience of working as an accountant at a well-recognized company.
The Darwin bookkeeper produces properly arranged financial records, and well-maintained finances, along with a sound financial strategy and appropriate tax filing, can lead to the prolonged prosperity of a business. Some of the business owners try to manage the finances on their own, while others prefer to hire a finance specialist so that they can focus on the areas of business they like. Investment of any sort, money, or time, into the finances, will not only help your business grow but achieve unimaginable heights.