The role of proper bookkeeping and accounting services in the success of any company cannot be overstated. Bookkeeping and accounting may seem the identical to individuals without a background in either discipline; this is because bookkeeping and accounting both deals with financial information, demand an understanding of accounting basics, and employ financial transactions to categorise data and produce reports. However, these approaches are fundamentally different from one another and offer various advantages.
What is bookkeeping all about?
The foundation of accounting is believed to be bookkeeping, although accounting is a subset of finance. The systematic recording and classification of a company’s financial transactions are known as bookkeeping.
The bookkeeper keeps track of the books. Accurate bookkeeping is essential for a business since it provides objective data on how well a firm performs. The primary goal of bookkeeping services is to keep a detailed account of all financial transactions made by a company. Major investment decisions are made by companies using this information.
The following steps make up the bookkeeping services process:
- Setting up the trial balance
- Recording a monetary exchange
- A financial transaction’s identification
- Making a ledger account ready
What is included in Accounting Services?
Accounting is about keeping track of money transactions, analysing them, and sharing the results with interested parties. It aids in decision-making now and in the future and signals the company’s dependability to the market. In some sectors of the business world, it is the language of choice.
Accounting facilitates the communication of a company’s financial health to its constituents. Investors, creditors, employees, and government agencies are just some audiences for which financial statements must be written in a straightforward way to understand.
Are Accounting and Bookkeeping services the same?
Accounting and bookkeeping appear comparable at first glance due to their shared focus on a business’s finances. However, there are some significant differences between the two:
The Difference in Responsibilities
Maintaining precise and comprehensive records is essential to analysing a business’s financial health, and bookkeeping performs this task for you with ease. Bookkeeping is the backbone of any accounting system. Commercial transactions are documented via bookkeeping, which is a clerical process. These dealings ought to be transparent and well-organized. This information may be useful to accountants for financial analysis and company insights. If information is lacking or difficult to locate, management may make erroneous assumptions about the company’s health.
Compared to bookkeeping, accounting is more subjective and sophisticated. Accounting professionals create financial reports and statements using transactional data provided by bookkeepers. Business choices are aided by accounting statements, which show a company’s activities, profitability, cash flow, and financial health. Financial projections could impact operations. For state and federal agencies like the IRS, accounting examines transactional data, bank statements, and other financials to produce budgets and annual tax returns (IRS).
The Difference in Credentials
Bookkeepers use a set protocol for recording monetary transactions that ensure consistency and clarity across entries. Even though a four-year college diploma isn’t required to work as a bookkeeper, accuracy and familiarity with financial fundamentals are essential. The most excellent bookkeeper to hire is someone with experience working with small businesses.
Bookkeepers depend on their ledger when it comes to keeping track of money. There will be a distinct column for debits and another for credits. The debit column records the value of assets sold, and the credit column records the value of liabilities taken on due to the sale. A company’s physical assets are its assets, whereas its financial obligations are its liabilities.
Following the bookkeeper’s meticulous recording of financial transactions, an accountant is in a prime position to offer invaluable insights and financial advice to a company’s leaders.
Obtaining a bachelor’s degree in accounting or a related field in finance is typically required for entry-level accounting positions. Accountants can get various credentials, not simply CPA (CPA). If you’re interested in reading about the top five accounting certifications, Crush the CPA Exam has put together a handy list for you.
Impact of digitalization on Bookkeeping and Accounting
There was a time when bookkeeping and accounting were once labour-intensive, paper-based processes. Both bookkeepers and accountants kept books and ledgers. However, as time goes on, technology is altering bookkeeping and accounting roles.
These days, business owners can gain more control and visibility into their operations thanks to hybrid bookkeeping and accounting solutions that use digital technologies to combine elements of the two. On the one hand, bookkeeping is gradually taking over some of the functions traditionally associated with accounting. Meanwhile, what was previously a part of accounting is now a feature of bookkeeping software: the ability to generate financial statements.
Table explanation of the difference between Bookkeeping and Accounting
The following table provides a summary of the critical distinctions between bookkeeping and accounting:
| BOOKKEEPING | ACCOUNTING |
|---|---|
| In bookkeeping, financial transactions are arranged and recorded. The practice of maintaining fiscal records has only recently begun. | Accounting is the process of compiling, analysing, and expressing an organization’s financial data. Accounting can begin when all the books have been balanced. |
| Bookkeeping alone cannot determine a company’s financial health and financial records cannot be used as a basis for managerial decisions. | Accounting can be used to have a better understanding of a company’s financial situation. Using accounting data, management may make informed choices. |
| Bookkeeping is not the time to create financial statements. | The basis for putting up financial statements is the documentation gathered via bookkeeping. |
| A “bookkeeper” is the one responsible for keeping the books. | The person who deals with all the accounting issues is known as “accountant”. |
| No need of high-level education is required for bookkeeping. | Proper education with proper understanding of accounting concepts is a must to provide service. |
Conclusion
Most bookkeeping services Singapore follow conventional formats, making expertise unnecessary. Accountants must be analytical to perform their complex duties. Most firms struggle with category selection. The company should weigh its options before choosing.
Businesses hire bookkeepers and outsource accounting to CPA companies. This financial record-keeping system is more practical and cost-effective.