What’s the difference between bookkeeping and accounting?

What’s the main difference between bookkeeping and accounting?

So, bookkeeping and accounting, what’s the difference?

• Bookkeeping is the process of recording and organising financial transactions
• Accounting is the next stage in the process, which interprets, analyses, and reports on the financial data

What does bookkeeping involve?

Bookkeeping involves keeping a clear and accurate record of money coming into and out of your business.

This means logging your invoices and payments (money in) and expenses and receipts (money out) on a regular basis.

This information allows you to:

• Manage your finances efficiently
• Easily track payments to help manage your cash flow
• Claim on business expenses to help lower your tax bill
• Simplify the process of submitting your self-assessment tax return to HMRC

What does accounting involve?

What’s the relationship between bookkeeping and accounting? In a nutshell, accounting starts where bookkeeping ends.

The information collated during bookkeeping is used by accountants to summarise, analyse, and report on the data to help you make informed decisions about your business, including:

• Tax efficiency. The accounting process will help to ensure your business is tax efficient
• Business development. Your accounting records will help you to make sound financial decisions around business planning and growth
• Compliance. Accountancy services will help to ensure your business’s compliance with reporting and taxes

Do bookkeepers and accountants need to be qualified?

Another difference between financial accounting and bookkeeping is that all accountants have to be chartered by a regulatory board before they can offer their services to businesses. You can search for a qualified accountant by location on the Institute of Financial Accountants website.

It is possible to do the bookkeeping for your own business without any formal qualifications. However, to offer bookkeeping services to businesses, you must have an AML (Anti Money Laundering) license and the relevant bookkeeping qualifications.

Bookkeeping for small business made simple

The similarities between bookkeeping and accounting

The similarities between bookkeeping and accounting are that both involve recording and classifying financial transactions, and both require basic accounting knowledge and good numerical skills.

The information generated by both bookkeeping and accounting is used to make business decisions.

Do I need a bookkeeper or an accountant?

Now we know the difference between a bookkeeper and an accountant, you probably have a clearer idea of which service you need for your business.

To help make your decision, consider:

• The services you need: do you need help with basic bookkeeping, tax planning, compliance, support with business growth plans and investment, etc.?
• The input you require: would it benefit your business to have a financial professional with knowledge of your industry sector, e.g. the CIS?
• Your budget: bookkeepers and accountants will have different pricing structures; how far does your budget stretch for the services you require?
• Your own capabilities: do you have the time and the know-how to do your own bookkeeping and/or tax return, for example?

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FAQs

Which is better bookkeeping or accounting?

Both bookkeeping and accounting are essential functions for a business. Bookkeeping offers the more basic function of recording and organising financial transactions, whereas accounting offers a broader scope of services, including the interpretation and analysis of financial data to make informed business decisions.

What is the difference between accounting and bookkeeping?

The main difference between accounting and bookkeeping is that bookkeeping records and organises financial transactions. Whereas accounting interprets, analyses, and reports on that financial data.

What comes first, accounting or bookkeeping?

Bookkeeping comes first. Accounting is the next stage in the process.

Should I get a bookkeeper or an accountant?

Wondering whether you should get a bookkeeper or an accountant? It depends on your needs, your own time and capabilities, and your budget.