What are the 10 differences between bookkeeping and accounting? (Part 1)

Based on the above definitions, we can classify the differences between accounting and bookkeeping into 10 basic categories: 1. Order of Events: Bookkeepers record the transactions after they have occurred while accountants must understand how to record those transactions before they actually happen; this is known as accrual accounting

1. Order of Events: Bookkeepers record the transactions after they have occurred while accountants must understand how to record those transactions before they actually happen; this is known as accrual accounting

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This allows organizations to make informed decisions about their future based on what has (or will) actually happened rather than what people think may happen (e.g., the best estimate).

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2. Accuracy vs. Immediacy: Accountants provide information about an organization's financial situation and help managers decide where to take the business in the future, but that information comes with a time lag:

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(... ) quarterly and yearly statements must be assembled and combined into a complete financial picture and then compared against past records and projections.

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Bookkeepers only work current data; there is no concern with the past.

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3. Reliability vs. Relevance: Bookkeepers record and present information as it occurs (e.g., cash received from customers) and do not need to know if those transactions will impact future accounting; they focus on what has happened now, rather than later.

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Accountants must be familiar with how those same transactions impact financial statements at a later date (i.e., relevance).

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Accountants also look at past events as well as current ones since they work with projections as well--which requires looking at trends in previous periods to determine future possibilities.

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4. Legal Basis vs. Duty: An accountant is required to follow GAAP standards and provide their clients with reliable relevant information that helps them make informed decisions.

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Bookkeepers can keep any books they choose and often have no legal obligation to provide correct information about an organization's financial situation.

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5. Single vs. Multiple: In a given period, bookkeepers only record transactions for a single entity (e.g., an employee earns $1,000 in cash for 100 hours of work).

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Accountants must be able to process multiple accounts that come from different sources simultaneously (e.g., one business reports revenue through its income statement while another uses a balance sheet to report revenue).

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That means accountants need to understand how those different accounts interact within the accounting equation across time as well as within the current reporting period (i.e., now).

For more inquiries, you may contact us at 737-931-1413 or email us at info@SimplifiedPB.com.

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What are the 10 differences between bookkeeping and accounting? (Part 1)

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Bookkeeping / Accounting

1. Order of Events: Bookkeepers record the transactions after they have occurred while accountants must understand how to record those transactions before they actually happen; this is known as accrual accounting

Bookkeeping / Accounting

This allows organizations to make informed decisions about their future based on what has (or will) actually happened rather than what people think may happen (e.g., the best estimate).

Bookkeeping / Accounting

2. Accuracy vs. Immediacy: Accountants provide information about an organization's financial situation and help managers decide where to take the business in the future, but that information comes with a time lag:

Bookkeeping / Accounting

(... ) quarterly and yearly statements must be assembled and combined into a complete financial picture and then compared against past records and projections.

Bookkeeping / Accounting

Bookkeepers only work current data; there is no concern with the past.

Bookkeeping / Accounting

3. Reliability vs. Relevance: Bookkeepers record and present information as it occurs (e.g., cash received from customers) and do not need to know if those transactions will impact future accounting; they focus on what has happened now, rather than later.

Bookkeeping / Accounting

Accountants must be familiar with how those same transactions impact financial statements at a later date (i.e., relevance).

Bookkeeping / Accounting

Accountants also look at past events as well as current ones since they work with projections as well--which requires looking at trends in previous periods to determine future possibilities.

Bookkeeping / Accounting

4. Legal Basis vs. Duty: An accountant is required to follow GAAP standards and provide their clients with reliable relevant information that helps them make informed decisions.

Bookkeeping / Accounting

Bookkeepers can keep any books they choose and often have no legal obligation to provide correct information about an organization's financial situation.

Bookkeeping / Accounting

5. Single vs. Multiple: In a given period, bookkeepers only record transactions for a single entity (e.g., an employee earns $1,000 in cash for 100 hours of work).

Bookkeeping / Accounting

Accountants must be able to process multiple accounts that come from different sources simultaneously (e.g., one business reports revenue through its income statement while another uses a balance sheet to report revenue).

Bookkeeping / Accounting

That means accountants need to understand how those different accounts interact within the accounting equation across time as well as within the current reporting period (i.e., now).

Bookkeeping / Accounting

For more inquiries, you may contact us at 737-931-1413 or email us at info@SimplifiedPB.com.