What’s the Difference Between Bookkeeping and Accounting?

Accounting and bookkeeping are vital processes that small businesses use to ensure their financial information is accurate and complete.

Bookkeepers and accountants work with financial data, and both professions require a basic knowledge of accounting practices. Because of this, small business owners might think they’re one and the same.

Regardless of their similarities, the functions of accounting and bookkeeping are distinct and equally important for businesses of any size. Use this guide to understand all you need to know about these essential business processes. 

What’s the difference between bookkeeping and accounting?

Use this side-by-side comparison to understand top-line skills, objectives, certifications, and more for accountants and bookkeepers. 

Bookkeeping vs. Accounting Comparison

Bookkeeping and accounting can be used in conjunction. For example, businesses can use both to generate financial statements. A financial statement serves as the backbone of your business’s financial reporting. These statements, including the income statement, cash flow statement, and balance sheet, are crucial in understanding your business’s performance, liquidity, and overall financial health. Bookkeeping provides the data necessary to create these statements, while accounting ensures their accuracy and completeness.

Often, bookkeepers and accountants work closely with each other. Without properly maintained books, accountants wouldn’t have the data they need to create financial models. 

What does a bookkeeper do?

Advantages

The function of bookkeeping for a small business is to ensure that all financial data is properly recorded by creating a general ledger. The general ledger is where information such as debits and credits are recorded. Maintaining the ledger is detail-heavy work, with its thorough information providing the best tools for financial data interpretation, decision-making, and forecasting. 

The role of a bookkeeper doesn’t typically involve advisory, and they’ll never do your taxes. Bookkeepers maintain the records for a small business, as well as handling payroll and creating invoices. They also handle the important task of financial reconciliation – which entails ensuring your bank statement matches the records in the general ledger.

Main bookkeeper tasks include:

• Creation and maintenance of the general ledger and balance sheets
• Tracking of sales and expenses
• Financial reconciliation 
• Running payroll
• Creating and tracking invoices
• Tracking financial transactions 

Required Credentials

Bookkeepers aren’t typically required to have a bachelor’s degree or credentials. There’s no bookkeeping equivalent of a CPA. Bookkeepers can seek certification and become certified bookkeepers, but that is done at their discretion. A bookkeeper needs financial knowledge and strict attention to detail to execute the position successfully.

What does an accountant do?

Advantages

Accountants use the financial information compiled by bookkeepers to produce financial reports. These reports are designed to help business owners better understand their profitability, cash flow, and financial path. Often, business owners turn to accountants for help understanding their finances at a high level for tax planning, forecasting, and advice.

Accountants are typically financial experts who also handle the preparation and filing of tax returns.

Main accounting tasks include:

• Analyzing financial information
• Financial modeling
• Tax preparation and filing
• Advising business owners on financial decisions
• Preparing financial statements

Required Credentials

Unlike bookkeepers, accountants are usually required to have a formal education and some kind of certification or credential. Accountants are required to hold a degree in accounting or finance. They can become CPAs via certification with their state or EAs by being certified at the federal level.

Do you need both a bookkeeper and an accountant?

Small businesses benefit the most from using a bookkeeper and accountant in tandem. The bookkeeper compiles the detailed information an accountant needs to generate financial insight that helps business owners understand where they are today and aids in future growth.

Some small businesses operate without a bookkeeper, without an accountant, or without both. It isn’t advisable even if you’re comfortable handling these duties. For example, you might be detail-oriented enough for the bookkeeping process, but tracking financial transactions is also incredibly time-consuming, taking you away from important business functions. Aspects of a business can suffer when ownership wears too many hats.


If you’re in a scenario where you have enough budget for one or the other, choose the accountant or bookkeeper who can address your immediate needs. If you need support with strategic budgeting to meet IRS requirements and get your tax return done, hire an accountant. Hire a bookkeeper if you need help with your general ledger or tracking your financials. 

1-800Accountant for your bookkeeping and accounting needs

Working with the right bookkeeper and accountant can be a decisive advantage over the competition. But you can’t just pick anybody. You need small business professionals intimately familiar with your state’s and industry’s inner workings. You need the experts at 1-800Accountant, America’s leading virtual accounting firm for small businesses.

Whether it’s small business tax preparation, advisory, or bookkeeping, we have the solution you need at a price that fits your budget. Schedule a quick consultation – usually 30 minutes or less – to learn how we can address your business needs.