Differences: Accounting versus Bookkeeping
Although the two are mistaken for each other by most people, there is a difference between accounting and bookkeeping. However, there are some similarities too, but the differences outweigh the similarities. In non-technical terms, we can say that accounting is the bigger picture and bookkeeping is the smaller picture that must be conjoined with other smaller pictures to make the bigger picture. What do you do in bookkeeping and what do you do in accounting?
Simply put, when you are a bookkeeper, your work will be to record the daily transactions, that is, the daily sales and expenses of the business in chronological order or where you enter the daily transactions in a ledger.
The most important thing when doing bookkeeping is to collect and sort the source documents, record them and keep them safely for later use. By source documents, we mean the evidence that a transaction occurred. For example, if you run a café in Singapore, did you buy flour to make pastry? If you did, where is the receipt for the same? And so forth.
When the month is over, all the transaction for that month are going to be transferred to the main ledger which will then be broken down to relevant accounts. Usually, the company accountant or outsourced accounting firm will have created several accounts. Some of them could be for expenses like payroll, bills/utilities, supplies, and so on.
Bookkeeping records daily transactions
A bookkeeping ledger will have two accounts that must always balance. You must have heard people say that they are having trouble balancing accounts. It follows a very simple concept. In the ledger, you have a double entry, one for debits and the other for credits. For example, if you bought supplies worth $2000 for June, then you must put that down in the debit side of accounts and on the creditors’ side so that the ledger is balanced. Thus, in our example here, you will go to the right account, debit it $2000 and then credit the supplier’s account with $2000, thus balancing the math.
So much about bookkeeping, but what is the main difference between accounting and bookkeeping? Accounting is really a system where you record, analyze, classify, report, and most importantly, determine the financial health of a business.
Bookkeeping is just a small part of accounting; actually, it is a small part of the entire process. For example, as we have said in the preceding paragraph, in the system of accounting, there is classifying, reporting, analysis, summary, recording and interpretation of data. Now, Bookkeeping is the recording part in the accounting system.
Which is the most important process between accounting and bookkeeping? Both are equally important, since we have seen that bookkeeping is the recording part of the accounting system and therefore the latter would not be complete without the former.
Bookkeeping and accounting professionals
While accounting requires a professional, licensed and certified person who could specialize in one or other types of accounting like auditing, financial accounting, managerial accounting and tax, bookkeepers are usually just an admin person who are non-members of accounting bodies like the ISCA, ACCA and SIATP.
Before you engage an outsourced accounting firm, always keep a lookout for these credentials, i.e. ISCA (The Institute of Singapore Chartered Accountants), ACCA (Association of Chartered Certified Accountants) and SIATP (Singapore Institute of Accredited Tax Professionals).
If you need help in your bookkeeping or accounting matters, do contact professional accounting firm who are accredited with the professional bodies like the ISCA, ACCA and SIATP. Visit their website: www.J-AccountingServices.com for more information.