Bookkeeping VS Accounting: What’s the Difference?  - Molen & Associates

Stay Ahead of Law Changes & Protect Yourself Against Being Audited: Corporate Transparency Act and Reasonable Compensation

Bookkeeping VS Accounting: What’s the Difference? 

There is often a misconception that bookkeeping and accounting are the same thing. While bookkeeping and accounting are both essential functions, there are some important distinctions between the tasks of a bookkeeper and an accountant. Accounting is the process by where a company’s financials are recorded, summarized, analyzed, consulted and reported on. Bookkeeping is the recording part of this process in which all financial transactions of the business are entered into a database. Overall, bookkeeping is responsible for the recording of financial transactions, while accounting is responsible for interpreting, classifying, analyzing, reporting and summarizing financial data. The biggest difference between accounting and bookkeeping is that accounting involves analysis and interpretation of financial data and bookkeeping does not. However, it is important to understand that that both bookkeepers and accountants are integral parts of your business. 

In order to understand more comprehensively the benefits that bookkeepers and accountants can offer to your business, it can be helpful to be acquainted with the tasks that each could be expected to undertake. 

What are the roles of a bookkeeper? 

Bookkeepers aren’t required to be certified to handle the books. They generally have taken a few accounting courses and developed a basic understanding of accounting. Bookkeepers, as previously stated, are instrumental in the ongoing upkeep of your business. Bookkeepers record and classify all transactions of financial nature for a business. They also lay the groundwork for accountants to analyze the financial data. In smaller companies, bookkeepers often handle more of the accounting processes than simply recording transactions. You will realize that they also generate reports using the financial transactions recorded. 

The following are tasks that are regularly undertaken by a bookkeeper: 

  • Processing invoices, receipts, payments and other financial transactions 
  • They process and maintain payroll 
  • Preparing initial financial statements 
  • Reconciling accounts and preparing reconciliation reports 
  • Managing accounts receivable and accounts payable, i.e. amounts owed by debtors, and amounts owing to creditors 
  • Preparing and handling deposits 
  • Maintaining records and backup 

What are the roles of an accountant? 

Accountants look at the big picture. An accountant analyzes the financial data recorded by the bookkeeper and provides business owners with important business insights and financial advice based on that information. The accounting process produces reports that bring key aspects of your business’s finances together to give you a complete picture of where your finances stand and what they mean, what you can and should do about them, and where you can expect to take your business in the near future.  

Accountants generally must have a degree in accounting or in finance to earn the title. They may pursue additional certifications, like the Certified Public Accountant. To become an accountant, the individual must earn a bachelor’s degree from an accredited college or university. So, if your accountant does your bookkeeping, you may be paying more than you should for this service, as you pay more per hour for an accountant than a bookkeeper. 

Now let’s take a look at some typical accounting tasks: 

  • Verifying and analyzing data for advice 
  • Generating reports, performing audits, preparing financial reporting records like tax returns, income statements and balance sheets required by businesses and the IRS 
  • Providing taxation advice and planning 
  • Providing information for forecasts, business trends and opportunities for growth 
  • Helping the business owner understand the impact of financial decisions 
  • Adjusting entries 
  • Providing regulatory compliance 

Do I need both a bookkeeper and an accountant? 

Given that there are substantial differences between the services offered by bookkeepers and accountants, it can be seen that both are important to the growth of your business. Instead of viewing them in a ‘bookkeepers vs accountants’ situation, it is important to understand that your accountant and bookkeeper work best together to serve the financial requirements of your business. Accountants are qualified to handle the entire accounting process, while bookkeepers are qualified to handle recording financial transactions. To ensure accuracy, accountants often serve as advisors for bookkeepers and review their work. 

Other than the level of expertise, there are rules and regulations that determine what a bookkeeper or an accountant can do. Though the difference in areas of expertise sometimes overlap and it’s up to the entrepreneur to tell when they need the services of either. It’s not cost effective to hire an accountant to handle what a bookkeeper can comfortably do at much lower price. On the other hand, a bookkeeper is also limited by licensing which a CPA has for the issuing of audited statements or when dealing with financial management advice. 

Knowing when the professional understanding of either a bookkeeper or an accountant is needed, either separately or together, will depend on factors such as: 

  • The type of business the company is involved in 
  • Size of the company’s inventory 
  • Size of the company’s staff 
  • The variety of services the company offers 
  • Level of expertise that the company operates under 
  • Whether or not the company needs financial support 

Some small business owners do their own bookkeeping on software their accountant recommends or uses, providing it to their accountant on a monthly or quarterly basis for action. Other small businesses employ a bookkeeper or have a small accounting department with data entry clerks reporting to the bookkeeper. When looking for a certified bookkeeper, you can ask for referrals from friends or colleagues, your local chamber of commerce, or search online social networks liked LinkedIn. It may take more background research to find a suitable bookkeeper, because they are not required to hold a professional certification like accountants, so a strong endorsement from a trusted colleague or years of experience are important factors to consider. 

Still not sure if you need to hire someone to help with your books?

Here are three examples that indicate that it is time to hire a financial professional. 

  1. Your taxes are complex: If your taxes have become too complex to manage on your own it’s time to hire an accountant. An accountant can save you hours of time and help you stay on top of important matters such as payroll, tax deductions and tax filings. 
  2. When you are spending more time on accounting tasks than growing the business: If you are spending so much time taking care of accounting tasks that you’re not able to work on growing your business or keeping existing customers happy, you’re doing your business a disservice. You may be able to make more money long term if you leave the accounting to the experts and focus on your growth prospects. 
  3. Your business is experiencing growth: Doing accounting yourself may be fine when your business is small, but when your business begins to grow it may be a sign that it’s time to bring on someone to help. You could start by contracting with a bookkeeper who reconciles the books once a month and an accountant who handles your taxes. Then as your bookkeeping needs increase, you could bring someone on staff. 

In conclusion, there are multiple companies that offer services for bookkeeping and accounting, either separately or together. At Molen & Associates we provide bookkeeping and accounting, as well as tax and financial advisory services to assist in the growth of your business by keeping you up to-date on financial data and ensuring that your company is following industry standards. 

Susan Claybrook
Client Liaison, Accounting


The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Credits vs Deductions: What is the Difference?

When it comes to filing taxes, understanding the difference between tax credits and tax deductions is crucial. Both can significantly reduce your tax liability, but they work in different ways. This article will delve into the distinctions between tax credits and...

IRS Audits: Understanding the Process, Red Flags, and Preparation

Navigating the complexities of the U.S. tax system can be daunting, and one of the most anxiety-inducing aspects for taxpayers is the possibility of an IRS audit. Understanding the audit process, recognizing potential red flags, and knowing how to prepare can...

Energy Tax Credits: Tax Incentives for Energy-Efficient Home Improvements and Renewable Energy Installations

In an era where environmental sustainability is becoming increasingly critical, energy tax credits offer homeowners a financial incentive to make energy-efficient home improvements and invest in renewable energy installations. These tax credits not only help reduce...

Foreign Income and Taxes: Understanding the Foreign Earned Income Exclusion and Tax Implications for Expatriates

Foreign Income and Taxes: Understanding the Foreign Earned Income Exclusion and Tax Implications for Expatriates Living and working abroad can be an exciting adventure, but it also comes with unique tax challenges. One of the most significant considerations for U.S....

Understanding the Alternative Minimum Tax (AMT): Who It Affects and How It Works

The Alternative Minimum Tax (AMT) is a crucial component of the U.S. tax system, designed to ensure that individuals with higher incomes pay a minimum amount of tax, regardless of their deductions and credits. This article explores the concept of AMT, its implications...

Tax Implications of Inheritance: Understanding Estate Taxes, Inheritance Taxes, and Step-Up in Basis Rules

Inheriting assets can be a complex affair, especially when it comes to understanding the tax implications involved. This article delves into the intricacies of estate taxes, inheritance taxes, and the step-up in basis rules, providing a comprehensive overview for...

Healthcare and Taxes: Navigating Health Savings Accounts (HSAs) and Medical Expense Deductions

Healthcare costs can be a significant financial burden, but tax-advantaged accounts like Health Savings Accounts (HSAs) and deductions for medical expenses can help mitigate these costs. Understanding these benefits can lead to substantial tax savings and financial...

Tax Credits for Families: Navigating the Child Tax Credit and the Child and Dependent Care Credit

Tax credits are essential tools for reducing the tax burden on families, helping to increase disposable income and financial stability. Among these, the Child Tax Credit (CTC) and the Child and Dependent Care Credit (CDCC) are particularly beneficial for parents and...

Retirement Contributions and Taxes: Understanding the Tax Implications of Contributing to IRAs and 401(k)s

When planning for retirement, understanding the tax implications of contributing to retirement accounts such as Individual Retirement Arrangements (IRAs) and 401(k) plans is crucial. These accounts offer valuable tax benefits, which can significantly impact your...

Texas has been declared a Federal Disaster. What does this mean?

With the storm and power outages last week, Texas has been declared a Federal Disaster. What does this mean? When a state is declared a federal disaster area by the President of the United States, it triggers a series of federal assistance measures under the Robert T....

Request an Appointment Today

1 + 2 =

Call us at

Pin It on Pinterest

Share This