The Difference Between Bookkeepers and Accountants: Key Distinctions Explained

If you’re considering purchasing new equipment or taking out a line of credit, for example, your accountant can help you determine the financial ramifications your decision can have. Industry newcomers tend to use the terms “bookkeeper” and “accountant” interchangeably, but there are a few important distinctions between the two. Julia is a writer in New York and started covering tech and business during the pandemic. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications.

What are the primary responsibilities of a bookkeeper versus an accountant?

Although they both have a hand in your company’s finances, their skill sets and purposes vary. When choosing accounting software, consider your budget and business accounting needs. Many accounting programs have free versions that cover the basics, such as tracking income or generating financial reports. Trying a free solution can help you test an accounting platform and determine if an investment in a full-featured version is worthwhile. This platform offers most of its services for free and allows unlimited how many shares are in a startup company users to collaborate on financial projects. Not all businesses need, or can afford, the in-depth expertise of a hired accounting professional.

Choosing the Right Professional for Your Business

Bookkeepers make between $50,000 to $81,000 annually; significantly less than accountants. While accounting can be a lucrative long-term career, most accountants, unlike corporate attorneys or investment bankers, do not command huge salaries during the first few years. You must have a minimum of 150 postsecondary education hours, or what amounts to a bachelor’s degree in accounting, and an additional 30 hours of graduate work.

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In situations where financial strategy and analysis are critical, the skill set of an accountant would be most useful. However, for day-to-day financial management, such as accounts payable/receivable or payroll, a bookkeeper would be the most practical choice. While both accountants and bookkeepers work with financial data, the scope of their work and the responsibilities they carry are quite different. Contrasting with accountants, bookkeepers are professionals who focus more on the details of financial transactions. They are tasked with the responsibility of preparing, analyzing, and maintaining financial records. Their role is to analyze financial data, and they do this by identifying key financial indicators to reveal the big picture and show how the business is progressing.

When deciding whether you should hire an accountant vs a bookkeeper, the answer will depend on what kind of help your business needs. A bookkeeper usually performs these steps, however, an accountant may step in to complete these tasks, or oversee them as they’re completed by the bookkeeper. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. For information pertaining to the registration status of 11 Financial, please contact the state securities regulators for those states in which 11 Financial maintains a registration filing.

1. Typically, bookkeepers don’t need to have a degree, while accountants are expected to have at least a bachelor’s degree.
2. Bookkeepers who are interested in switching jobs but do not have a college degree might consider becoming an EA after a stint with the IRS.
3. They handle various aspects of taxes, including deciphering complex tax laws, strategizing to minimize tax liability, and understanding deductions.
4. We’ve listed some of the key differences when it comes to the requirements and job market for each.

Bookkeeping vs Accounting: Key Differences

As an accountant, you must pay attention to figures and financial details, but it is more essential to possess sharp logic skills and big-picture problem-solving abilities. While bookkeepers make sure the small pieces fit correctly into place, accountants use those small pieces to draw much more significant and broader conclusions about a company’s finances. However, bookkeeping and accounting clerk jobs are expected to decline, with the BLS projecting a 6% fall in jobs over the same period. The BLS notes that job growth for accountants should track fairly closely with the broader economy. However, bookkeepers will face pressure from automation and technology that will reduce the demand for such workers. how to get an employer identification number However, significant differences exist, like the work conducted in each career and the skills needed to be successful.

If you are already a CPA, you can act as an enrolled agent without passing the exam. If you are interested in becoming an accountant, it may be beneficial to your career to become a certified public accountant (CPA), which has its own exam. We’ve listed some of the key differences when it comes to the requirements and job market for each. Bookkeepers are commonly responsible for recording journal entries and conducting bank reconciliations. A bookkeeper must be able to shift focus easily and catch tiny, hidden mistakes in a budget or invoice. Bookkeepers often work a few jobs for various clients if they work as consultants.

Working with a bookkeeper can also help ensure your books stay clean and up to date so you’re always ready when tax season rolls around. Regardless of the type of bookkeeping a company chooses, recording the day-to-day business financial transactions is an integral part of accounting. Both bookkeepers and accountants need to be comfortable working with numbers all day. Bookkeepers especially should be able to spot issues with daily expenses and make sure all the data points are tracked correctly. Sure, most small-business owners don’t start businesses because they’re accounting experts. But keeping accurate books and understanding what the numbers mean can spell the difference between business success and failure.

In essence, bookkeepers lay the groundwork for accountants to examine and interpret a company’s financial data to provide meaningful insights for business decisions. In summary, both bookkeepers and accountants provide essential services to businesses, fulfilling different but complementary roles. Bookkeepers focus on managing everyday financial tasks and maintaining accurate records, while accountants provide strategic guidance on what is gross profit taxes, investments, and financial planning. In conclusion, both bookkeepers and accountants play significant roles in financial reporting and analysis. Bookkeepers play a crucial role in maintaining accurate financial records, which serve as the foundation for financial decision-making. Accountants, however, are responsible for interpreting the financial data and advising business owners on financial performance, strategies, and legal compliance.