How does accounting differ from bookkeeping

A bookkeeper, though, is not an accountant, nor should they be considered to be an accountant. Key takeaway: Bookkeepers can record financial transactions, post debits and credits, create invoices, manage payroll, and maintain and balance the books.

Bookkeepers aren't required to be certified to handle the books for their customers or employer, but licensing is available. AIPB certification requires bookkeepers to have at least two years of full-time work experience and pass a national exam. To maintain the credential, bookkeepers are required to engage in continuing education. The NACPB offers credentials to bookkeepers who pass tests for small business accounting, small business financial management, bookkeeping and payroll.

It also offers a payroll certification, which requires additional education. To earn the certified public bookkeeper license, bookkeepers must have 2, hours of work experience, pass an exam and sign a code of conduct. They must take 24 hours of continuing education each year to maintain their license.

A bookkeeper with professional certification shows he or she is committed to the trade, possesses the skills and expertise required, and is willing to continue learning new methods and techniques. Key takeaway: Bookkeepers aren't required to be licensed or have certifications, but accreditation and licensing are available from the American Institute of Professional Bookkeepers and the National Association of Certified Public Bookkeepers.

The salary or rates you'll pay a bookkeeper depend on your business and its bookkeeping needs. There are, though, three factors that affect your cost:. Key takeaway: The rate a bookkeeper charges is based on a handful of factors, including how much work you need done, the level of expertise you are seeking and the state you reside in.

An accountant analyzes the financial data recorded by the bookkeeper and provides business owners with important business insights and financial advice based on that information. These are some typical accountancy tasks:. Tracy in his book Accounting for Dummies. Tracy explains, "[They] step and back and say, 'We handle a lot of rebates, we handle a lot of coupons. How should we record these transactions? Do I record just the net amount of the sale, or do I record the gross sale amount, too?

The accounting process produces reports that bring key aspects of your business's finances together to give you a complete picture of where your finances stand and what they mean, what you can and should do about them, and where you can expect to take your business in the near future.

There is a difference between an accountant and a certified public accountant CPA. Although both can prepare your tax returns, a CPA is more knowledgeable about tax codes and can represent you before the IRS if you're audited. Accountants generally must have a degree in accounting or in finance to earn the title.

They may then pursue additional certifications, like the CPA. Accountants may also hold the position of bookkeeper. However, if your accountant does your bookkeeping, you may be paying more than you should for this service, wrote Bryce Warnes in a Bench blog post , as you pay more per hour for an accountant than a bookkeeper. Key takeaway: Accountants verify and analyze data, generate reports, spot trends and provide business owners with insights from the financials. Accountants have varying qualifications depending on their experience, licenses and certifications.

To become an accountant, the individual must earn a bachelor's degree from an accredited college or university. They must also meet ongoing education requirements to maintain their accreditation.

When you're interviewing for a CPA, look for an accountant who understands tax law, accounting software and has good communication skills. They should understand the industry you operate in and the special needs and requirements of small businesses. According to the U. However, years of experience, the state you are in and the complexity of your accounting needs affect the price. Key takeaway: The rates an accountant charges may vary depending on their expertise and your needs, location, and the complexity of your financials.

It can be difficult to gauge the appropriate time to hire an accounting professional or bookkeeper, or to determine if you need one at all. While many small businesses hire an accountant as a consultant, you have several options about how you handle bookkeeping tasks.

For example, some small business owners do their own bookkeeping on software their accountant recommends or uses, providing it to the accountant on a weekly, monthly, or quarterly basis for action.

Other small businesses employ a bookkeeper or have a small accounting department with data entry clerks reporting to the bookkeeper. When looking for a certified bookkeeper, you must first decide if you want to hire an independent consultant, a firm, or, if your business is large enough, a full-time employee.

While accounting and bookkeeping seem like interchangeable terms, each serves a different purpose: Bookkeepers record financial transactions, and accountants interpret what this information reveals about the business. Understanding the difference between bookkeeping and accounting is important for the small business owner, as both are essential for informed decision-making. According to Inc. Bookkeeping is the foundation of the accounting process that produces the data used by accountants for financial analysis and preparation of reports.

Business owners rely on the integrity of these financial statements to make decisions. Our bookkeepers take care of your tax preparation so that your accountant has less to do which is a good thing, because bookkeepers are less expensive than a CPA. Learn more about our services. Organized financial records and properly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate tax filing by the accountant, contribute directly to the long-term success of every business.

Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love. Whichever option you choose, investing—whether it be time or money—into your business financials will only help your business grow.

We're an online bookkeeping service powered by real humans. Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. Get started with a free month of bookkeeping. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice.

Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

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