What are the 10 differences between bookkeeping and accounting? (Part 2)
Based on the above definitions, we can classify the differences between accounting and bookkeeping into 10 basic categories:
1. Real vs. Nominal Unit of Measure: An accountant deals with nominal accounting, which means that all transactions are recorded at face value (i.e., the actual amount of money received or paid for something).
Bookkeepers deal with real accounting, which means that accounts are adjusted to recognize inflation/deflation of the currency used.
2. Revenues vs. Expenses: Bookkeepers only work with revenues and expenses while accountants may need to separate those two types of transactions into distinct accounts depending on what is being purchased or sold.
For example, property tax is revenue that appears on the income statement while interest expense would be listed as an operating expense on the income statement.
3. Assets vs. Liabilities: Rather than recording transactions on both sides of the balance sheet as they occur, bookkeepers only record those transactions on the left-hand side (i.e., the assets section).
Accountants must be able to work with both sides of a company's ledger and understand how those different accounts interact within the accounting equation across time as well as within the current reporting period.
4. Fundamental vs. Technical Analysis: Accountants analyze financial information using both fundamental and technical analysis techniques; (new slide)
(...) this allows them to assess a company's value based on what is currently happening now as well as what has happened in the past.
Bookkeepers make no use of either technique since their focus is only on current events rather than future ones.
5. Formality vs. Informality: In order to make sure that all accounting standards are met, accountants must have a formal structure for their work.
Bookkeepers do not have the same requirement since they only record transactions as they occur.
In summary, a bookkeeper is a person who records the financial transactions of a single company while an accountant works with multiple companies and needs to be able to analyze a variety of accounts that come from different sources.
Accountants focus on what happened in the past, while bookkeepers concern themselves with what is going on currently.