Five key differences between Accounting and Bookkeeping

What is the difference between accounting and bookkeeping?

It’s a question the Premier Training tutors and course advisors are asked on a daily basis.

Accounting and bookkeeping are closely related functions in the field of finance and are often used interchangeably. However, they serve different purposes and involve distinct activities within a company’s financial management process. Here are the key differences between accounting and bookkeeping:

 

1. Scope of Work

• Bookkeeping: Bookkeeping is primarily concerned with recording daily financial transactions. It involves the systematic and detailed recording of financial data such as sales, purchases, expenses, and receipts. Bookkeepers maintain accurate and up-to-date financial records, often using software or ledger books.
• Accounting: Accounting goes beyond the data entry of bookkeeping and involves interpreting, analyzing, and summarising financial information. Accountants use the data provided by bookkeepers to create financial statements, perform financial analysis, and provide insights into the company’s financial health.

 

2. Data Entry vs. Analysis

• Bookkeeping: Bookkeepers are responsible for data entry, which means they record transactions as accurately as possible. They focus on the day-to-day, routine tasks of recording and categorising financial data.
• Accounting: Accountants use the data recorded by bookkeepers to prepare financial reports, analyse financial performance, and make recommendations based on the data. They interpret the financial information to help organisations make informed decisions.

 

3. Timing

• Bookkeeping: Bookkeeping is an ongoing and routine process, with data entry and record-keeping activities occurring daily, weekly, or monthly, depending on the company’s needs.
• Accounting: Accounting activities are often periodic, typically occurring at the end of a reporting period, such as monthly, quarterly, or annually. Accountants prepare financial statements and reports at specific intervals to assess the company’s overall financial position.

 

4. Roles and Responsibilities

• Bookkeeping: Bookkeepers are responsible for tasks like recording transactions, reconciling accounts, and maintaining general ledgers. They focus on accuracy and compliance with accounting standards.
• Accounting: Accountants analyse financial data, prepare financial statements (e.g., income statements, balance sheets), ensure compliance with tax regulations, and offer financial advice and strategic planning to businesses. They play a critical role in decision-making and financial management.

 

5. Education and Qualifications

• Bookkeeping: Bookkeepers may not necessarily have a formal education in accounting, but they often receive training or certification in bookkeeping. They typically have a good understanding of accounting principles and financial regulations. They will often begin their Accounting training with AAT or ICB qualifications.
• Accounting: Accountants typically have a formal education in accounting, finance, or a related field. They will often begin their Accounting training with internationally-recognised AAT qualifications.

 

In summary, while bookkeeping focuses on recording financial transactions and maintaining accurate records, accounting involves a deeper level of analysis, interpretation, and financial reporting. Both functions are crucial for a company’s financial management, with bookkeeping serving as the foundation upon which accounting is built.

A popular starting point for aspiring accountants, bookkeepers and finance employees is the AAT Level 2 Certificate in Accounting, which incorporates a blend of bookkeeping and accounting units.