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Bookkeeping and Accounting Defined in Plain English

Bookkeeping and Accounting Defined in Plain English

The terms “Bookkeeping” and “Accounting” are often used interchangeably to define a vast amount of tasks associated with business finances. Although these two terms are related, it is important to note that they are very different.

The function of a bookkeeper is to meticulously record an organization’s day-to-day transactions, ultimately creating an in-depth file of the organizations financial information. This is where accountants take over, analyzing the information that has been attained, and creating various reports that showcase the organizations financial status.

Bookkeeping is defined in the Oxford Dictionary as “the activity or occupation of keeping the financial records of a business”. In other words, bookkeepers are responsible for tracking a business’s financial transactions, including: purchases, sales, receipts, and payments. Bookkeepers generally bring the books to the trial balance, which is the stage in which the income statement and balance sheet are built off of.

Accounting, on the other hand, is defined as “the action or process of keeping financial accounts”. Accountants often work closely with the bookkeeper during the bookkeeping process, ensuring that the information is accurate, and answering any questions that may arise. With this being said, the main duty of an accountant is to take the information attained by the bookkeeper, analyze the data, and prepare the various final reports. Accountants are responsible for a great deal of business functions, many of which depend on the organizations corporate structure, industry, and size. Some of the functions of an accountant include preparing adjusting entries, creating financial reports, and offering ideas on how to create a more efficient accounting system for the business.

In conclusion, bookkeepers are the foundation in which accountants base their work. Bookkeepers gather the day-to-day information, allowing for accountants to create a “big picture” of the business’s financial structure. Ultimately, the two work together as a team, ensuring that the picture is accurate, and portrays the business in a legal and professional manner.

 

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Posted in bookkeeping