What are the key differences between accounting and bookkeeping?
While bookkeeping and accounting both fall under the accounting umbrella, the biggest differentiator is bookkeeping doesn’t involve the analysis of financial data.
Accountants form an integral part of any business by ensuring all fiduciary responsibilities are adhered to. Basically, an accountant will analyse all financial transactions evident in statements and business reports, ensuring that they meet all necessary accounting standards and principles. Using financial analysis, accountants are able to provide a full report on the financial performance of any business, empowering business owners to make informed financial decisions.
An accountant will have many day-to-day activities to meet all financial needs but there are four main accounting duties in any organisation:
- Financial analysis and consultation
The company’s financial data will be assessed and advice shared on the correct measures to be taken to ensure financial stability and growth.
- Data management
The accountant is responsible for the storage and management of all financial data, constantly researching new techniques and products for effective data storage, then updating where necessary. An accountant has the final say on which accounting system will be used within a business.
- Compiling financial reports
All necessary SARS-related business reports and statements will be compiled by the business’s accountant.
- SARS regulatory compliance
There are constantly new tax regulations and tax procedures that need to be followed to ensure a business is SARS compliant. An accountant is responsible for maintaining communications with SARS, and ensuring the business is up-to-date with all tax requirements.
How to qualify to be an accountant
Becoming an accountant requires more than just having a good idea of how everything works. To qualify as an accountant, the minimum requirement is attaining a Bachelor’s Degree in accounting or a related field, but there are many more levels beyond this. In South Africa, an accountant will ideally have completed a Bachelor of Commerce followed by a three year learnership at a SAIPA-accredited training centre. This is followed by a SAIPA Professional Evaluation exam which is a four-hour competency exam.
Becoming a Chartered Accountant (CA) requires further qualifications and these positions are generally found in the commerce, industrial or non-profit sectors. A CA will undergo more training than an accountant including an academic post-graduate programme followed by at least three years under a mentorship. The work’s focus is generally the provision of accurate records of all financial transactions for an individual or business.
Bookkeeping doesn’t require the same level of qualification as an accountant; however, bookkeepers are still responsible for the financial aspects of a business such as monitoring the chronological order of all financial transactions, as well as summarising financial data in reports. Fortunately, there are a number of software options available to assist with bookkeeping these days.
Depending on the particular company or industry, a bookkeeper’s duties will vary, but there are certain elements that could be associated with the job description. These include:
- Maintaining best bookkeeping practices and ensuring compliance with the company and SARS
- Maintaining records and all backup data
- Training staff on all bookkeeping activities
- Developing credit and debit accounts
- Assigning expense categories
- Entering income and expense information into bookkeeping software
- Payments in the form of cash
- Handling of banking activities such as new deposits
- Recommending and managing accounting software, bookkeeping policies, and procedures
- Checking the accuracy of information
- Balancing accounts
- Flagging financial discrepancies and assisting with company auditsProviding assistance to the accountant for duties such as payroll
How to qualify as a bookkeeper
Unlike an accountant, a bookkeeper will not need a tertiary education, rather a matric or equivalent will suffice for a job in bookkeeping. However, the best way to succeed as a bookkeeper is by completing a course, of which there are many available. For entry-level bookkeeping positions, there is often no previous experience needed, although knowledge of standard bookkeeping practices and bookkeeping software will be necessary. Certain organisations might be looking for candidates with either experience or a relevant Bachelor’s Degree.
What are some of the similarities between bookkeeping and accounting?
To the untrained eye, bookkeeping and accounting appear to be the same profession – or extremely similar at the very least. And while this is not completely correct, there are some overlaps between accounting and bookkeeping. Both job descriptions:
- Work with financial data
- Require at least a basic knowledge of accounting
- Classify and generate reports using financial transactions
What are some of the differences between bookkeeping and accounting?
- One of the main differences between bookkeeping and accounting is that accounting involves the analysis and interpretation of financial data while bookkeeping does not.
- Bookkeeping includes financial record-keeping, which is the basis of accounting, while pure accounting includes the use of these financial records for report preparation and financial analysis.
- A basic understanding of accounting is the qualification for a position in bookkeeping while tertiary education and a higher level of expertise are needed for accounting.
Advantages of bookkeeping for a business
There are many ways that bookkeeping can assist a business. These include:
- Sars Compliance
Businesses can be assured that they’re meeting all legal obligations by recording and tracking the income and expenses, as well as paying the correct tax amounts on time.
- Business Accountability
Through the process of bookkeeping, businesses are able to keep on top of all transactions as well as pick up any transgressions swiftly. This ensures complete business transparency.
- Internal Control
With modern bookkeeping software, business owners are able to pick up on fraudulent activity within the company themselves rather than relying on a lower-level employee.
- Improved Investment Opportunities
Bookkeeping allows for improved transparency which makes securing investment from other organisations much more likely.
- Informed Decision-making
Through bookkeeping, business owners have access to hard data on the business’s financial position. This allows business owners to make informed decisions for enhanced business growth.
Although there is a distinction between bookkeeping and accounting, smaller organisations might require bookkeepers to perform accounting duties and vice versa. With the support of high-quality bookkeeping and accounting software, the job duties can be administered with much more ease and efficiency.