Bookkeeping vs. Accounting: What’s the Difference?

Bookkeeping and accounting are frequently confused with one another, despite the fact that they are two distinct tasks.

Bookkeeping refers to the practise of documenting financial transactions, whereas accounting is the process of summarising, analysing, and reporting on those transactions in order to control and manage the financial aspects of an organisation. This essay aims to educate you on the distinctions between accounting and bookkeeping so that you can make an informed decision on which service is best for your company.

Bookkeeping and accounting are two independent areas of financial management, despite the fact that these terms are sometimes used interchangeably with one another. Continue reading if you are unsure what the difference is or whether one is more applicable to your company's needs. We will walk you through the fundamentals of each option and help you choose the one that is most suited to your needs.

Bookkeeping and accounting are terms that are familiar to you, but you could be confused by the distinctions between the two. Accounting is the process of compiling, analysing, and reporting on financial information for the purpose of making choices about a company, whereas bookkeeping is the process of tracking a company's financial information.

In a nutshell, bookkeeping is primarily concerned with recording transactions, whereas accounting is primarily concerned with interpreting and reporting those transactions. Therefore, it is essential to clearly understand the difference between these two notions if you plan on starting your own company or working in financial management at some point in your career.

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Bookkeeping vs. Accounting: An Overview

When one is thinking about pursuing a career in either accounting or bookkeeping, it is important to be aware of the slight but significant differences between the two. For example, bookkeepers are responsible for recording the day-to-day monetary activities of an organisation. In contrast, accountants tend to concentrate more on the whole picture.

When it comes to bookkeeping, there are a lot of nitty-gritty details to keep track of, and careful attention to detail is very necessary. Accountants, on the other hand, often make use of the bookkeeper's inputs in order to compile financial statements. Accountants also routinely check and analyse the financial information that bookkeepers record. They do out audits and provide projections on future business requirements.

There is a lot of overlap between the two professions, and accountants and bookkeepers frequently collaborate on projects. Therefore, these professions need many of their candidates' abilities and characteristics. However, there are substantial variations, such as the work done in each vocation and the requirements necessary to succeed.

The following examination contrasts the educational prerequisites, skill sets, typical beginning incomes, and employment prospects of two distinct but related fields: accounting and bookkeeping.

It is not an unheard-of step in a bookkeeper's professional trajectory to first obtain experience in the workforce, then pursue more education, become certified, and work as an accountant.

Key Takeaways

• Bookkeepers and accountants are two distinct professions with quite different qualifications, despite the fact that their job names are sometimes used interchangeably.
• Bookkeeping is the typical starting point for careers in accounting because to the reduced obstacles to entry and typically satisfactory income in the field.
• Even though it is not officially needed, it is common for accountants to earn their Certified Public Accountant (CPA) certification and a master's degree.
• Bookkeepers are responsible for organising all of the company's financial records, while accountants are in charge of reviewing and arranging those documents.
• To become an accountant often takes a higher level of schooling than to work as a bookkeeper. Most accountants in the 21st century have at least a bachelor's degree, and many have further degrees such as master's degrees in accounting or business administration (MBA) with accounting or finance specialities.

Bookkeeping

To work as a bookkeeper, one must possess the appropriate knowledge and certifications. The Certificate IV in Accounting and Bookkeeping (FNS40217) is intended to assist students in acquiring the information employers desire in accounting and bookkeeping.

This course has been granted national accreditation and satisfies the prerequisites for becoming a registered Business Activity Statements (BAS) Agent.

A high degree of accuracy, extensive knowledge across a range of financial issues, and meticulous attention to detail are the qualities that define a professional bookkeeper. The work of a bookkeeper is overseen, either directly or indirectly, by an accountant or the owner of a small firm whose financial accounts are being kept.

If you can demonstrate that you are skilled with numbers and have a great attention to detail, you can start a career as a bookkeeper straight after you graduate from high school. While they are still in school, many individuals who aspire to become accountants find work in the field as bookkeepers. In addition, bookkeepers who demonstrate exceptional performance on the job may receive promotions to accounting roles, even if they do not possess the amount of schooling that the organisation normally prefers.

Bookkeepers are responsible for a variety of tasks, including the recording of journal entries and the performance of bank reconciliations. A bookkeeper needs to be able to easily switch focus and spot minute, concealed problems in a budget or an invoice. If a bookkeeper works as a consultant, they often divide their time between a few different assignments for a variety of customers.

What a Bookkeeper Does

The recording of financial transactions, such as purchases, sales, payments, and receipts made by or on behalf of a person or corporate organisation, is what is meant to be understood by the term "bookkeeping." Either an individual or a corporate organisation may carry out this task. The most important tasks that accounting does within a financial cycle are broken down below and can be summed up as follows:

• Accounting is the process of recording a company's financial transactions.
• Posting a business's debits and credits
• ensures general ledgers, subsidiary books, and historical accounts are in balance while also keeping them
• invoicing customers and conducting payroll tasks simultaneously.

The upkeep of the general ledger is traditionally regarded as the aspect of bookkeeping that has the most weight. This is a basic document in which the book-keeper, who is an authority on the subject matter, outlines the complexities of the day-to-day financial transactions that were carried out by making use of the sales and cost receipts. The book-keeper is an authority on the subject topic.

The total number of closed sales that take place prior to the close of the accounting cycle will determine the amount of space that has to be allocated in the ledger. This cycle can be completed once each day, once per week, or once per month. It is quite possible that you are already aware of the fact that the vast majority of this task is now conducted on computers, which makes it much simpler to carry out the tasks that are essential to keep the ledger up to date.

Remember that even while the use of technology makes things simpler, proper business practise necessitates that some transactions have supporting paperwork. This is the case even when the use of technology makes things easier. The Australian Taxation Office is where one may obtain information on commercial transactions that need for supporting paperwork (Australian Tax Office).

Accounting

In order to be successful in accounting, you need to have an analytical mind and a hunger for problem-solving. The Accounting Diploma (FNS50217) is intended to provide students with the education and skills necessary to pursue a variety of professional paths within the accounting, business, and finance industries. In addition, you will earn part of the needed academic units to become a Registered Tax Agent by successfully completing this course, which has received national accreditation.

It's possible that becoming an accountant requires you to be good with numbers, but it's not the only talent you'll need. In addition to this, it is essential to have excellent reasoning skills and the ability to solve problems in the broadest sense possible. Bookkeepers are responsible for ensuring that the various components fit together correctly, whereas accountants use the various components to derive far more significant and extensive conclusions.

You can work for a corporation or for yourself as an accountant. Accountants can find work in a wide variety of fields, including the legal field, the insurance and healthcare sectors, small businesses, and tax accounting organisations.

All-day long, accountants deal with numerical data and specifics of financial transactions. Therefore, those who dislike mathematics, struggle to keep their head straight when performing even the most basic computations, or are generally hostile to number crunching should not submit an application.

What Accounting Entails

Accounting is the recording, sorting, storing, summarising, retrieving, and presenting financial transactions to assist a business or any other commercial establishment in making informed decisions. Accounting can be defined as the action or process of recording, sorting, storing, retrieving, and presenting these transactions. This is something that may be done in order to assist the company or organisation in making more money. The following are some examples of things that may or may not be included in the accounting process:

• Putting together and modifying the entries (searching for and recording transactions not recorded in the books).
• Conducting an investigation of the expenses incurred by the organisation while it is in operation
• The process of putting together the company's financial statements
• preparing tax forms, including returns for individual income tax
• Assisting company owners in gaining a better understanding of the implications of their financial choices

Accounting's goal is to produce reports that are compilations of a variety of various types of financial data; this is the objective of accounting. Accounting's aim is to deliver these reports. In light of this, the fundamental objective of accounting is to provide a better understanding of a company's profitability as well as the awareness of cash flow. In addition, accounting helps identify potential problems with the company's financial position. This is the most important goal that accounting strives to achieve. This state of affairs came to be as a result of the fact that early civilizations had various systems of accounting.

It does so by making use of the information that the bookkeepers have compiled and made accessible in the ledgers. In addition, accountants offer owners of businesses assistance in the areas of financial forecasting, the filing of tax returns, and tax planning that is strategic in nature.

Key Differences: Required Education

Bookkeepers and accountants typically have college degrees, however, this level of education is not always required for employment. Finding work as a bookkeeper is possible right after graduating from high school, although employers are not required to do so. There is also the possibility of bookkeepers holding an associate degree.

Bookkeepers often begin their careers by gaining expertise in a smaller company's bookkeeping needs before furthering their education in accounting or finance. Those who are considering a career in bookkeeping would do well to expand their understanding of finance by enrolling in one of the most reputable online accounting schools currently available.

If you are considering a career in accounting, you should know that being a certified public accountant (CPA), which requires passing an exam, can be advantageous to your professional development. Obtaining this designation is a target that is shared by a good number of accountants.

You must have completed at least 150 hours of postsecondary education, equivalent to a bachelor's degree in accounting, in addition to an extra 30 hours of graduate-level study. The majority of those who want to become certified public accountants go on to get master's degrees.

Many different employment options are available to accountants (and bookkeepers, too), such as working as a forensic accountant, becoming a financial auditor, or enrolling in the Internal Revenue Service (IRS).

1. Enrolled Agent

An enrolled agent, often known as an EA, is a tax professional who the government has granted authorisation. Their goal is to advocate for taxpayers and offer assistance to them if they encounter problems. You are need to achieve a passing score on the EA test in order to become one.

Bookkeepers interested in making a career change but do not own a college degree could want to consider becoming enrolled agents. This position calls for five years of tax preparation expertise rather than a college degree as a prerequisite.

Every EA is required to participate in 72 hours of continuing education every three years. If you already have a CPA certification, you do not need to take the test to become an agent. The only need is a licence from the federal government.

1. Financial Auditor

As a financial auditor, you can work either "externally" or "internally" for the company. In order to work as an external auditor, you will almost certainly be employed by a public accounting company. Furthermore, you will be required to hold a CPA licence in addition to a bachelor's degree and, most of the time, a master's degree.

An individual who will work as part of a small firm, managing its records and financial activities, does not often require a CPA certification. This type of auditor is known as an internal auditor. It's possible to get by with just a bachelor's degree in finance, accounting, or business if you have relevant work experience and a strong skill set.

1. Forensic Accountant

The area of accounting known as forensic accounting is one that is extremely specialised. A forensic accountant's responsibility is to conduct inquiries, conduct audits, and provide evidence that financial documentation and transactions are accurate.

The work of these accounting detectives typically revolves on several legal difficulties. Nevertheless, forensic accountants can find opportunities in various fields, including work with charitable organisations, government and law enforcement agencies, legal consulting businesses, and huge enterprises.

In most cases, you need to have a CPA certification in order to become a forensic accountant. In addition, you need to pass the certified fraud examiner exam, which tests your knowledge of the legal aspects of fraud, criminology, ethics, investigation techniques, and how to handle financial transactions.

In addition to this, you are required to be a member of the Association of Certified Fraud Examiners (ACFE). Employers prefer to recruit candidates who have earned at least a bachelor's degree, and completing a master's degree might assist increase your earnings potential.

Skills Needed

Bookkeepers and accountants spend their whole days dealing with numbers and other financial information. Therefore, those who dislike mathematics, struggle to keep their head straight when performing even the most basic computations, or are generally hostile to number crunching should not submit an application.

To be successful as a bookkeeper, you need an almost pathological attention to detail. Careless mistakes that appear to be of little consequence at the moment might, in the long run, result in far larger, more expensive, and more time-consuming difficulties. You also need to be able to switch between different tasks easily. It is unusual for a bookkeeper to spend a whole eight-hour shift working on a single major assignment; rather, a typical workday consists of juggling five or six several smaller projects.

If you want to be an accountant, you need to pay attention to numbers and financial details, but it is much more important that you have acute reasoning skills and the ability to solve problems that include the bigger picture. Bookkeepers are responsible for ensuring that all of the smaller parts fit together properly, but accountants are the ones who utilise those smaller parts to reach far larger and more crucial conclusions about a company's financial situation.

Starting Salaries and Benefits

Both professions have a broad range of starting compensation, especially accounting. As a first-year accountant, the amount of money you make is mostly decided by the professional path you take. Unlike corporate attorneys or investment bankers, accounting may be a lucrative long-term career. However, most accountants do not make a lot of money in their first few years.

In general, in public accounting, a candidate fresh out of school will be paid the most. Depending on the city, you may expect to earn between $40,000 and $60,000 in your first year as an accountant.

Despite the fact that the companies do not publish salaries on their websites, the benefits may be rather enticing. For example, employees can be offered up to 25 days of paid vacation time, as well as telecommuting opportunities and a full health insurance package by a company.

Mid-size and small public accounting firms pay around 10% less on average. The starting pay range is wide if you choose to work for a business internally rather than in public accounting. In most cases, private businesses do not give additional compensation to young accountants with insufficient experience.

Bookkeepers are usually paid on an hourly basis rather than on a yearly basis. The average hourly wage for someone new to the industry is $20. This corresponds to around $40,000 per year, assuming a 40-hour workweek.

Hourly pay offers the benefit of paying 1.5 times your average weekly income for hours worked above 40. During the busy tax season, which runs from January to mid-April, extra hours are customary in bookkeeping.

Unlike professions such as law and medicine, where state licencing authorities determine the level of education necessary, employing firms choose the level of education required of accounting and bookkeeping candidates.

Job Outlook

There are significant distinctions between the two in terms of employment development and salary potential. On the other hand, it is anticipated that the need for accountants and auditors will continue to rise over the next several years. The Australian Bureau of Statistics projects that the number of employed people will increase by 4% between 2019 and 2029.

The Australian Bureau of Statistics (ABS) forecasts a drop of 6% in bookkeeping and accounting clerk positions during the same time period as the overall employment reduction. According to the ABS, the expansion of job opportunities for accountants should follow quite closely behind the expansion of the overall economy. On the other hand, bookkeepers will feel the effects of competition from robots and other forms of automation, which will lower the need for their services.

Special Considerations

In the long run, a career in accounting gives far greater opportunities for professional advancement and money. The level of knowledge necessary to be successful in the profession is, of course, going to be higher, but the potential reward further down the line is going to be far larger.

Bookkeeping is an excellent place to begin if you are considering a career change but are not ready to make a full commitment just yet and want to test the waters. For example, suppose you are searching for a solid work with a reasonable income and excellent stability but are not necessarily interested in pursuing bookkeeping as a long-term career. In that case, you may be a perfect choice for this position. In addition, bookkeeping is a field with far fewer entrance requirements, and the level of competition you will encounter when looking for work is also lower.

Since almost all bookkeeping is done using computerised accounting software and applications, bookkeepers should have no problem picking up new technology, even if they are not already adept in it.

Reasons to Consider a Bookkeeping Career

There is a good chance that you have some inquiries if you have recently begun to think about a profession in bookkeeping. Continue reading to learn about several of the benefits associated with pursuing a profession in bookkeeping.

1. Excellent Jobs Prospects

Bookkeepers are in great demand, and this need is expected to continue to grow. After you have finished your training and earned your qualification, you will have a very good chance of finding work. Bookkeepers are in high demand worldwide; hence, if you have always wanted to work in a foreign country, you should consider making a profession out of bookkeeping.

As a bookkeeper, you also have a lot of options when it comes to fields of employment. First, of course, there are those who are content to remain in the field of finance, but other potential fields of employment include the retail sector, healthcare, and insurance; the list goes on and on.

If you find that you become bored with playing a character quickly, this might be a good option for your career. You won't ever have to worry about your career being mundane since you will have the ability to travel around and work in a variety of situations.

1. You Control Your Career

Bookkeepers and accountants do not share the same functions and duties in an organisation. Despite the fact that they work towards similar objectives, the two are largely engaged in distinct periods of the financial cycle. In spite of this, both of these professional avenues are very necessary in the field of finance.

If you begin your professional life in bookkeeping, you will have the freedom to decide where and how rapidly you grow in your career. A Certificate IV in Accounting and Bookkeeping, for instance, can help you get your foot in the door of a prospective employer. However, in spite of this, if you ever decide to work in accounting or auditing, it will not be difficult for you to get the additional qualifications necessary to do so, such as by taking a course offered by a TAFE.

Bookkeepers can work either part-time or full-time, depending on their preferences and requirements. During tax season and the final month of the fiscal year, it is customary practise to work longer shifts. Bookkeepers often put in their hours between 9 am and 5 pm, Monday through Friday.

1. High Earning Potential

In the current economic climate, having a wage that remains consistent may be a significant source of solace for a person. Bookkeepers bring in a respectable salary, which increases along with their level of expertise. The annual wage of a bookkeeper in Australia is typically around $56,000 on average.

You will also have plenty of opportunities to advance into higher-paying professions within the industry. For example, consider a career in accounting if you have always wanted to earn a salary that would allow you to fulfil lifelong goals like going on trips and purchasing a home. This line of work is ideal for people with these goals.

Taking a course at a TAFE institution might help you improve your earning potential. This is the shortest method to get your foot in the door and earn the on-the-job experience that will land you the greatest opportunities! The Certificate IV in Accounting and Bookkeeping (FNS40217) is the easiest approach to get your foot in the door!

4. Technological Skills Are a Must

Bookkeeping positions sometimes entail various technical responsibilities and frequently need familiarity with a wide range of computer applications and operating systems. In addition, you will need to have solid computer skills because many bookkeeping duties have shifted to being performed by cloud-based software like as MYOB and Xero.

In order to fulfil the duties and responsibilities of a bookkeeper, you will still need to be able to perform calculations by hand in order to guarantee their accuracy. However, if you are able to demonstrate an understanding of IT-related accounting skills, you will have an advantage over other candidates for open positions.

In order to simplify and speed up the bookkeeping process, digital applications are employed. If you already have a job in bookkeeping, you may take a course at a TAFE to improve your computer abilities if you feel like you still want more instruction. On the other hand, the majority of applications will be easy to understand and should not provide too many challenges for you.

Why Should You Pursue An Accounting Career?

1. A Career Always In Demand

No matter where you reside or how the economy is performing, keeping accurate financial records is essential to every successful business. Accountants and bookkeepers are continuously required by governments, enterprises, people, and organisations that do not profit to manage their budgets, deal with taxes, do financial reporting, and carry out audits.

Because the accountant has to comprehensively understand the local company practises and the local tax laws, accounting is not a profession that can be readily outsourced to another country.

In other words, employment opportunities will always be available to you in this industry, particularly if you put up your best effort and remain knowledgeable about laws and technology developments.

1. The Pay Is Great

It could seem like a dream to earn a substantial wage that can cover all of your costs and allow you to live a comfortable life. But on the other hand, if you pursue a job in accounting, you might be able to afford that lifestyle.

According to PayScale, graduates of accounting programmes in Australia may anticipate starting wages of at least $50,000, however, the exact amount will vary depending on the industry and company.

There is a genuine chance for many accountants, particularly those with CPAs or CAs and advanced degrees, to earn twice or even three times that amount, and this may happen occasionally after only a few years of experience in the field.

For a successful career in accounting, it is vital to have a thirst for continual learning, extensive knowledge in a wide array of fields, a good attitude, and the ability to consistently fulfil deadlines.

1. Moving Into Other Fields

It is not necessary to become a public accountant or bookkeeper to pursue a profession in accounting. However, if you have a diverse skill set and talents that are easily transferrable inside a firm, it will be simple for you to switch to a different area in the event you ever need one.

You will have access to a wealth of new chances as time goes on, allowing you to get experience in virtually any area of relevance. For instance, some of the occupations that may be found in the accounting industry are:

• Bookkeeper Bookkeeping Assistant Bookkeeping Clerk Accountant
• Manager of Accounts Receivable Manager of Accounts Payable Manager of Accounts Receivable
• Certified Internal Auditor with experience in Bookkeeping and Budget Analysis
• Chief Executive Officer of a Company (CFO)
• Comptroller/Controller
• CPA/CA
• Accounting With a Forensic Focus
• Accounting for the Government
• Accounting Staff Payroll Clerk Accounting Staff Tax Accountant

1. Stability

Accounting is the financial backbone of every firm that respects itself and should be treated as such. Moreover, a job in accounting can provide some measure of security because there is always a need for people with the relevant skill set.

This is a secure industry to work in since all types of businesses, no matter how large or small, will need services that provide accounting and financial knowledge. When times are good as well as when times are bad, businesses still require accountants.

The advantages include having set working hours, a wage that rises with experience, paid time off, and the capacity to make forward-looking plans for one's life.

When it comes to establishing a family or settling down, these items are very necessary. That way, you may rest certain that the safety of your loved ones and your health will never be put at risk.

How Can A Certificate IV In Accounting And Bookkeeping Assist You In Making Your Decision?

The course work for a Certificate IV in Accounting and Bookkeeping is a combination of the credentials required for accounting and bookkeeping.

You will be able to become a more versatile financial professional if you have abilities in both accounting and bookkeeping, and you will be better equipped to be a skilled bookkeeper if you have both of these talents. And if you later decide that you would rather be an accountant, you will have the opportunity to switch your area of specialisation.

This course satisfies the educational requirements set forth by the Tax Practitioners Board (TPB) in order to become a BAS agent. In addition, there is a requirement for prior experience.

The following are some of the professional results that may be achieved with this qualification:

• A qualified accounting professional
• outsourcing one's bookkeeping duties
• Certified MYOB User Certified Payroll Professional Certified Accounts Payable and Receivable Specialist Certified BAS Agent (subject to Tax Practitioners Board requirements)
• Supervisor of Accounts Accountant Senior Accountant Administrator of Accounts

Which Role Is Best For You?

Compared to bookkeeping, accounting offers stronger opportunities for advancement within the field of financial services, in addition to higher levels of revenue and breadth. On the other hand, bookkeeping is an excellent choice if you want to begin your professional life with little to no experience.