Managing money is serious business. That’s why many employers hire bookkeepers and accountants to handle their company’s finances. Though both jobs provide financial services, bookkeepers and accountants have different responsibilities. The jobs also call for different education tracks. Knowing the differences between bookkeeping and accounting is an important step toward choosing the career that’s right for you.
Accounting vs. Bookkeeping: Handling Financial Data
Both bookkeepers and accountants handle financial data, but on different levels. Bookkeepers are concerned mainly with recording financial transactions and data entry. A bookkeeper’s duties may include issuing invoices and recording cash receipts from customers, processing payroll and petty cash transactions, recording changes in inventory and paying suppliers. Bookkeepers are generally bound by defined procedures that they repeat to record daily activity. Bookkeeping does not involve analysis and is considered a more mechanical job than accounting. It is considered to be the first part of the accounting process; however, it is only one part.
Accountants’ duties consist of handling all parts of the accounting process or specializing in one area of it intensely. An accountant may be tasked with analyzing, interpreting, classifying, reporting and/or summarizing information. An accountant’s job duties may also include creating budgets and tax returns, issuing management reports on specific issues, designing financial statements and establishing ledgers. Critically, they monitor a company’s profits and losses, as well.
Accountants may also be tasked with managing bookkeepers or other accountants, specializing in certain aspects of accounting, advising executives, designing a financial system’s controls and designing recordkeeping systems. Accountancy requires a high level of financial knowledge and responsibility.
Bookkeepers vs. CPAs: Different Skillsets, Different Salaries
Bookkeeping and accounting require different levels of education and different skillsets. Though some bookkeepers may have extensive experience, they generally lack formal accounting education. Still, new accounting software is putting more functions generally associated with accountancy jobs into the bookkeeper’s domain. Some classes and a good familiarity with accounting principles can be helpful when performing a bookkeeping job. This is especially true in smaller businesses, where full-charge bookkeepers could be expected to handle all of the business’s accounting duties, including preparation of financial statements.
Accounting jobs, though, usually require a bachelor’s degree. Accountants are generally expected to have a broad knowledge of all the crucial aspects of accounting. Many states have a certification system for accountants who offer auditing services to public companies. To become a Certified Public Accountant, accountants must pass a test called the Uniform CPA Exam. They must also have gained experience in the accountancy field and met educational requirements.
According to the U.S. Bureau of Labor Statistics, the median salary for an accountant in May 2016 was $68,150. The median salary for a bookkeeping clerk was $38,390.
Both bookkeepers and accountants serve crucial roles in their companies. They are responsible for ensuring companies maintain good awareness of their financial stability.