What would be your answer if you were asked to differentiate between accounting and bookkeeping? For most people, especially those outside of the industry, the answer to the question would not be obvious. With this in mind, to help you understand the functional differences between accounting and bookkeeping and to choose whether you’d prefer to be an accountant or a bookkeeper, we’ve created a handy guide which should leave you in no doubt as to which career to choose.
Before delving further, you should understand that bookkeeping and accounting have common goals but make up different stages in the financial cycle. Bookkeeping comes before accounting but their functions may overlap. Let us start by looking at the functions of each of the two careers.
What Bookkeeping Entails
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. Just to summarise, here are the key functions of bookkeeping in a financial cycle:
- Recording of the financial transactions of a business
- Posting a company’s debits and credits
- Balancing as well as maintaining general ledgers, subsidiaries, and historical accounts
- Producing invoices as well as completing payroll.
At the centre of bookkeeping is maintaining the general ledger. This is a basic document in which the bookkeeper (a professional in the field) records the details of day-to-day financial transactions from the sale and expense receipts. The size of the ledger will depend on how many sales are completed before the end of the accounting cycle, which can be daily, weekly or monthly. Although early ledgers were done on paper, you’ll already know that much of this work is now computerised, through which can make it much easier to perform the tasks needed to update the ledger.
Don’t forget though, although the use of technology makes things easier, a good business practice requires that certain transactions must have supporting documents. The information on business transactions that require supporting documents is available at the ATO (Australian Tax Office).
What Accounting Entails
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 the following:
- Preparing and adjusting entries (searching for and recording transactions that were not recorded in the books).
- Carrying out the analysis of the operational costs of the establishment
- Preparing the financial statements of the business
- Completing tax returns including income tax returns
- Helping the business owner to understand the impact of financial decisions
Accounting seeks to provide reports that put together the financial indicators of a business. The main aim of accounting is therefore to deliver a better understanding of a firm’s profitability as well as the awareness of cash flow. It uses the information availed by bookkeepers in the ledgers. Accountants also help business owners with financial forecasting, strategic tax planning as well as tax filing.
Which Should You Be?
Now that you have a clear understanding of what bookkeeping and accounting entail, it’s likely to throw up the questions of which career you’d prefer. There are many considerations to take into account when choosing your career, and we’ve listed some below, to help you make up your mind.
To be a bookkeeper, you need to have the right skills and qualifications. The Certificate IV in Accounting and Bookkeeping (FNS40217) is designed to help you gain the knowledge that employers are looking for in this field. The course is nationally accredited and 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 work is under supervision by an accountant or the owner of a small business whose financial books they are keeping.
An analytical mind and an appetite for problem solving are attributes for success in the field of accounting. The Diploma of Accounting (FNS50217) is designed to give you 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 you some of the educational units required to become a registered Tax Agent.
From the above information, you should be able to make an informed decision on which career path to take. Accountants rank higher in the job scale compared to bookkeepers but remuneration may depend on the size of the business. The undeniable fact is that both of the professionals are needed by any serious business owner.
To make your start in a career in Accounting or Bookkeeping, check out the courses offered by Kangan Institute. If you have any questions, drop us a line here.
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