The difference between accounting and bookkeeping

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What is Accounting?

Accounting is the systematic recordation of the financial transactions of a business. The recordation process includes setting up a system of record keeping, tracking transactions within that system, and aggregating the resulting information into a set of financial reports. This definition includes all aspects of the accounting function, from transaction recordation through to the preparation of financial statements. In addition, accounting involves the examination of financial information to discern patterns, spot variances, and find other actionable information that can be used to enhance the operations of a business; this provides high-level strategic and tactical information to management.

What is Bookkeeping?

Bookkeeping involves the recordation of basic business transactions in a recordkeeping system. In essence, the term implies that an individual is tasked with the most common ongoing accounting transactions.

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Accountants’ Guidebook

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Bookkeeping Guidebook

Comparing Accounting and Bookkeeping

There are multiple differences between accounting and bookkeeping, which are as follows:

  • Responsibility level. The accountant has more responsibility than the bookkeeper.

  • Reporting relationship. The bookkeeper typically reports to the accountant.

  • Training level. The accountant is significantly more highly trained than the bookkeeper.

  • Activities covered. The bookkeeper is largely focused on recording transactions, while the accountant engages in a much broader range of activities.

  • Level of analysis work. The accountant engages in more analysis work than the bookkeeper.

  • Systems design. The accountant designs accounting systems, which is not a bookkeeping task.

  • Certification level. The accountant may be a CPA, while a bookkeeper is unlikely to qualify for it.

Thus, the bookkeeper role is broad-based, with one person typically handling all of the accounting transactions for a small business. The bookkeeper tends to be very experienced, but is more likely to be lacking in formal accounting training. A bookkeeper with a great deal of responsibility may be referred to as a full-charge bookkeeper. Conversely, the accountant is more likely to work exclusively in a specific area, such as fixed assets or the general ledger, and is more likely to have formal training in the accounting function. There is also a career path for accountants, which leads to the assistant controller and controller positions.