The difference between accounting and bookkeeping is confusing for a lot of outside of the industry. The team at Datec Media have put this together to answer this question.
Bookkeeping comes before accounting but its function may overlap that of an accountant’s work. Let us start by looking at the functions of each.
What Is Bookkeeping
Bookkeeping can be defined as the process of recording financial transactions including purchases, sales, payments and receipts by or for an individual or a business organisation.
In a financial cycle, here are the key functions of bookkeeping:
- Posting a company’s debits and credits
- Recording of the financial transactions of a business
- Balancing & maintaining general ledgers, subsidiary accounts
- Producing invoices as well as completing payroll.
At the centre of the bookkeeper’s work is maintaining the general ledger. This is a basic document in which the bookkeeper records the details of day-to-day financial transactions from the sale and expense receipts.
The size of the ledger depends on how many sales are completed before the end of the accounting cycle, which can be daily, weekly or monthly.
Early ledgers were done on paper, but in 2019 much of this work is now computerised, through which can make it much easier to perform the tasks needed to update and maintain the ledger.
The use of technology makes things easier, but good business practice still requires that certain transactions must have supporting documents. The information on business transactions that require supporting documents is available from the Australian Tax Office, often referred to and known as the ATO.
What Is Accounting
Accounting can be defined as the action or process of recording, sorting, storing, summarising, retrieving and presenting financial transactions in a manner that can help a business or any other commercial establishment make informed decisions.
The accounting process may include some or all of the following:
- Preparing and adjusting entries
- Carrying out the analysis of the operational costs
- Preparing the financial statements of the business
- Completing tax returns including income tax returns
- Helping the business owner with financial decisions
The Accountant provides the reports that put together the financial indicators of a business. The main aim of accounting is to deliver a better understanding of a firm’s profitability as well as the awareness of cash flow.
It uses the information made available by bookkeepers in the ledgers. Using this, accountants also help business owners with financial forecasting, strategic tax planning as well as tax filing.
To be a bookkeeper, they need to have completed Certificate IV in Accounting and Bookkeeping (FNS40217) This qualification gives the bookkeeper the knowledge and is nationally accredited. It meets the qualification requirements needed to become a registered Business Activity Statements (BAS) Agent.
The attributes of a good bookkeeper include high levels of accuracy, knowledgeable about various financial topics, and highly attentive to detail. A bookkeeper’s works under the under supervision by a business accountant or the owner of a small business whose financial books they are keeping.
An accountant needs an analytical mind and an appetite for problem solving. They need to have successfully completed Diploma of Accounting (FNS50217) This qualification is designed to give the training and knowledge for a range of career pathways in the accounting, business and finance sectors. The course is nationally accredited and will give some of the educational units required to become a registered Tax Agent.
If you are looking for a Sydney Bookkeeper or Accountant, the Datec Media team recommend Sydney based All That Counts. You can read more about them and their range of services here: https://www.allthatcounts.com.au/