When it comes to finances, there are many terms and concepts that can be confusing. Two of the most commonly misunderstood terms are bookkeeping and accounting. Although related, these are not interchangeable terms. In this blog post, we’ll dive into the definitions of bookkeeping and accounting, their differences, and why they are both important.

What Is Bookkeeping?

Bookkeeping is the process of recording financial transactions that occur in the business. This includes things like purchases, sales, receipts, and payments. 

A bookkeeper is the professional responsible for keeping accurate records of these transactions, organizing them, and ensuring that they are up to date. 

Bookkeepers also prepare financial statements, such as balance sheets and income statements, that provide a snapshot of the company’s financial position. 

What Is Accounting?

On the other hand, accounting is more about analyzing financial data to make better financial decisions. 

Accountants need to have an in-depth understanding of the financial data recorded in the books. They assist in analyzing the data to plan budgets and may even get to make financial decisions themselves.

The Relationship Between Bookkeeping and Accounting

As you can see, the work of bookkeepers and accountants isn’t the same, although it is related.

Accountants use the financial information prepared from bookkeeping to help business owners make informed decisions.

In short, accountants interpret financial data gleaned by bookkeepers to help organizations make informed decisions about their finances.

The Difference Between Bookkeeping and Accounting

Now let’s take a look at things that set these two disciplines apart.

The most important difference between bookkeeping and accounting is that bookkeeping focuses on recording data, while accounting is focused on the interpretation of said data.

This basic difference means that the work of bookkeeper and accountants differs in some important ways. While bookkeepers generate statements and prepare books, accountants analyze that information, perform audits, and provide advice. 

Keep in mind that while the differences between bookkeeping and accounting are clear, things are not so simple in real life. For example, it’s not uncommon to see bookkeepers perform some basic accounting tasks. 

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