Bookkeeping vs Accounting – Which to Choose?

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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.

Bookkeeping

Dictionary.com defines bookkeeping as the skill of keeping account books or systematic records of financial transactions. 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.

Accounting

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.

Difference between Bookkeeping and Accounting

By looking at these definitions, it seems easy to differentiate bookkeeping from accounting, at least in theory. The line between the two even becomes thinner though when put in practice, as most of their functions sometimes overlap.

Compared to bookkeeping, accounting in general is more extensive and deals with more areas of responsibility. Accountants work closely with business owners, CEOs, and shareholders, and help businesses grow by analysing financial data and presenting them through various reports that help company stakeholders make financial decisions. They also assist businesses with their annual budgets, financial forecasting, and filing taxes.

They learn all these through their formal training in unis and other learning institutions. Most of the time, their courses already include bookkeeping concepts and activities.

On the other hand, bookkeepers 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.

In short, bookkeepers collect and prepare the ‘books’ on company transactions, while accountants analyse the data to help review business performance and influence business decisions; and both functions are critical to organisations.

Now that you have a clearer picture of what bookkeepers and accountants do, you may be wondering which career path is best for you.

Which Should I Choose?

Bookkeeping vs Accounting infographic

 

The choice depends on the tasks you’re comfortable doing and the responsibilities you want to take on.

Whichever you 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 and accountants go for bigger corporations.

In many cases, bookkeepers are also able to register as BAS (business activity statement) agents and 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 start 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).

Bookkeepers meanwhile 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.

Certification

Someone wanting to start a career in accounting and 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.

Of course you can also start by taking up a Bachelor’s Degree in a uni. Getting qualified helps you get professional accreditation as a member of accounting and bookkeeping organisations such as CPA Australia (CPA), the Institute of Public Accountants (IPA), Institute of Certified Bookkeepers (ICB), and the Institute of Charted Accountants of Australia (ICAA).

In the end, whichever path you choose—be it bookkeeping or accounting, it’s definitely possible to have a rewarding career in financial services.

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