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.”

The Ultimate Guide to Streamlining Your Small Business Finances

Streamlining your small business finances doesn't have to be a complex puzzle. Running a small business is a thrilling endeavor, but it often comes with a multitude of financial responsibilities that can leave even the most passionate entrepreneurs feeling...

Navigating Self-Employment Taxes with Molen & Associates

Embarking on the path of self-employment is a dream many aspire to, and you're one step ahead with both the vision and resources to make it a reality. To ensure your entrepreneurial venture thrives without being encumbered by tax-related complications, Molen &...

Maximizing Tax Benefits for Your Home Office

How to maximize your tax benefits for your home office? For over four decades, Molen & Associates, a trusted tax and accounting firm established in 1980, has been aiding small-business proprietors and entrepreneurs in optimizing their tax advantages through the...

2024 Tax Updates

Navigating the 2024 Tax Landscape: What You Need to Know   Introduction: As we gear up for the upcoming tax season, it's crucial to stay ahead of the curve and be aware of the changes that will shape the 2024 tax landscape. In this blog post, we'll explore key...

Mastering the 199A Deduction: Your Ultimate Guide

How to master the 199A Deduction? Tax season often resembles a maze, with twists, turns, and seemingly endless complexities. But fear not, fellow entrepreneurs, for we're about to shed light on a powerful tool that can guide you through this intricate terrain—the 199A...

Cruising to a write off

How to cruise a write off? First things first, let’s remember our general rules that before we can deduct a business expense it must be ORDINARY and NECESSARY, meaning “An ordinary expense means it’s typical in your business, both [in terms of] amount [as well as in]...

Shielding Your Business: The Power of IRS Representation in Tax Matters

Tax matters can be a labyrinth of complexities, especially for small business owners juggling a multitude of responsibilities. The mere thought of facing the Internal Revenue Service (IRS) can send shivers down the spine. But fear not – there's a potent guardian in...

Corporate Transparency Act – Beneficial Ownership Reporting: Are You Prepared?

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduces significant changes in beneficial ownership reporting requirements for certain entities operating in the United States. These regulations, set to take effect on...

The IRS is Cracking Down on S-Corp Salaries: How To Ensure Your Reasonable Compensation is Safe

The IRS is turning its attention to S-Corporations (S-Corps) and the salaries paid to shareholder-employees. Ensuring that you are paying yourself a "reasonable compensation" is crucial to staying compliant with the law and avoiding potential financial consequences....

Should You Be Making Quarterly Payments?

Tackling your taxes as a small business owner can often feel like a high-stakes game of strategy and a little guesswork. One of the key moves in this intricate game is mastering the art of quarterly tax payments. If you're looking to stay ahead in the tax arena and...

Request an Appointment Today

6 + 1 =

Call us at

Pin It on Pinterest

Share This