Bookkeeping vs Accounting – Which to Choose?
How is Bookkeeping different from Accounting?
Bookkeeping and accounting are closely related fields in financial services. They perform almost identical functions in a company, and, if you are not familiar with the field, it’s easy to confuse bookkeepers with accountants and accountants with bookkeepers.
As similar as they may seem though, there are key differences that set them apart. This blog is an attempt to differentiate the two to help you make your career decision.
Dictionary.com defines bookkeeping as the skill of keeping account books or systematic records of financial transaction. They consider it a skill and not just a job function.
Bookkeeping focuses on the details of every transaction—systematically recording the amounts, the dates, and the sources of every revenue and expense generated by the business.
Bookkeepers collect and create the basic financial data of a business and bring books to the ‘trial balance’ stage, where the sum of a business’s debits is compared to the sum of its credits.
This trial balance will then be used by the accountants to form the basis of financial statements.
Unlike bookkeeping, accounting is considered as an art instead of a skill. According to the same source, it is the art of analysing the financial position and operating results of businesses based on a study of its sales, purchases, and overhead costs, among others.
In short, accounting is the careful analysis of a company’s financial activity and using the findings to guide business decisions and overall operations.
It encompasses payroll, taxes, and government compliance, but its primary function is to create an accurate financial ‘picture’ of the business so stakeholders can make well-informed decisions.
The Bookkeeping Difference
By looking at these definitions, it seems easy to differentiate bookkeeping from accounting, at least in theory. However, the line between the two even becomes thinner when put in practice, as most of their functions sometimes overlap.
For one, accountants typically learn bookkeeping as part of their training course or university degree. They undergo formal training to be able to perform such tasks.
Bookkeepers on the other hand need to undertake dedicated certification courses to get qualified. There aren’t a lot of bookkeeping courses in unis, so those who want to be bookkeepers simply “learn-as-they-go” during employment or look for courses from registered training organisations (RTOs) or other learning institutions.
Of course, bookkeeping and accounting roles may be more defined in multinational companies. They may have an in-house team of bookkeepers who will take care of recording and a team of accountants who will handle reporting. After all, they have the resources to do so.
Which Should I Choose?
Bookkeepers and accountants will stay in demand as more businesses pop up. Often, after completing their respective certification courses, bookkeepers take on freelance jobs while accountants apply go for bigger corporations.
Moreover, in many cases, bookkeepers are able to register as BAS (business activity statement) agents and even tax agents, allowing them to prepare reports for the Australian Taxation Office (ATO) on behalf of small business owners and private individuals. This is typically known as Contract Bookkeeping, and many bookkeepers can run their own successful small businesses from home or office as one.
Bookkeepers and accountants can also set up their own financial services firms with their colleagues as partners.
Bookkeeper and/or Accountant?
One benefit of bookkeeping and accounting being almost identical is the ease and flexibility of moving to and from either field.
Accountants typically enrol into bookkeeping courses to work as certified bookkeepers, and many of them started their careers through entry-level bookkeeping roles. They can also register as BAS and tax agents, provided that they meet the qualifications set by the Tax Practitioners Board (TPB).
On the other hand, bookkeepers can enrol in courses that will help them fulfil accounting functions. If you are a bookkeeper in a big company, then this is a step towards the right direction because it opens opportunities for taking on senior roles.
Someone wanting to start a career in bookkeeping without any experience would have an edge by studying a dedicated bookkeeping course like the FNS40217 Certificate IV in Accounting and Bookkeeping. Even experienced bookkeepers enrol in bookkeeping courses like this to gain formal qualifications.
In case you’re wondering, yes, you don’t necessarily have to be formally qualified to start a career in bookkeeping. Many bookkeeping functions can be learned in other roles, such as in administration and reception duties. Keep track of these work experiences as they may come handy once you actually enrol in a bookkeeping course.
In the end, whichever path you choose—be it bookkeeping or accounting, it’s possible to have a rewarding career in financial services.
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