Bookkeeping and accounting share certain similarities. They both involve working with financial data. They both require accounting knowledge and they both generate reports based on financial transactions. Yet there are vast differences between the two!
This list that we have created will help clarify the blur and explain why you should be outsourcing your accounting and bookkeeping requirements.
Outsourcing Bookkeeping and accounting differ in the objectives they stand to achieve.
By definition, bookkeeping refers to the recording and maintaining of financial records. Accounting, in comparison, refers to the interpretation of these records. In a sense, bookkeeping is the basis on which accounting is practiced.
- Business Growth
While both are needed for a business to grow and expand, decision-making is based on accounting.
The information collected through bookkeeping is just a record but based on this record, accountants can present the financial situation of the company in a comprehensive manner. Management decisions on the future of the company are based on this.
- Nature of Work
A bookkeeper records the company’s daily transactions like income, expenditure, dues, debts, invoices, employee payments, payments of accounts etc. in a ledger.
An accountant will analyze this data to group and classify transactions of a similar nature. S/he will then summarize them by creating financial reports, profit and loss statements, auditing documents and ensure that all financials comply with federal, state and local legalities.
There are two methods of bookkeeping – a single entry system and a double entry system. The double entry system maintains a record of changes in two accounts. Due to its detailed approach, the double entry system is more acceptable with the Generally Accepted Accounting Principles (GAAP).
Outsourcing Accounting also involves two methods. Cash-basis accounting is when a company records financial expenses only when the cash is credited or debited. While accrual accounting is when a company records revenue when the transaction is complete (irrespective of having received the cash or not) The method a company chooses depends on their structure.
Accounting also covers a wide range of areas from Financial Accounting to even Social Responsibility Accounting. Most accountants tend to specialize in a particular field.
- Skill Sets
A bookkeeper is required to have an eye for detail. S/he must possess the ability to understand daily concepts like the workings of journals and ledgers.
An accountant requires analytical skills. S/he needs to be able to look at the big picture and make suggestions based on experience, knowledge and out of the box thinking. Most often, the work of a bookkeeper is overseen by an accountant.
On a daily basis, a bookkeeper works with journals and ledgers with the help of MS-Excel and accounting ERP programs.
An accountant works with balance sheets and cash flow statements by using advanced MS-Excel, MS-PowerPoint and accounting ERP programs.
- Financial Statements
Bookkeepers have no role to play in preparing financial statements as these are prepared by accountants. They are the basis for accountants to determine the financial position of the company.
Keeping Pace with Technology
Technology has brought about the outsourcing of both, accounting and bookkeeping services. Companies stand to save costs by outsourcing their accounting and bookkeeping, allowing them to focus their energies on the running of their business.
We at OHI (OutsourcingHubIndia) specialize in bookkeeping and accounting outsourcing. Over the last 12 years, we have helped businesses from USA, UK, and Canada with their outsourced accounting services. So sign up with us and watch your business grow!