We’re always a little surprised that some people think that bookkeeping and accounting is the same thing, and some people think they’re entirely different. The truth is – they are similar and overlap in many places. Many bookkeepers do accounting and many accountants do bookkeeping. At Burch’s Bookkeeping we do both; we specialize in the small business owner, but we also specialize in accounting and tax preparation for individuals and families, so I guess we’re multi-tasking specialists! However, here is our basic breakdown of the differences between the two:
“Bookkeeping” refers to the recording of daily transactions in a defined way, and it’s done in a recurrent and regular manner. Bookkeeping can be broken down into 1) Accounts Payable (money going out), 2) Accounts Receivable (money coming in), and Payroll (wages or salaries, again money going out). Think of bookkeeping as the foundation of your business; a bookkeeper keeps track of all your financial data. Bookkeeping is more day-to-day, and often more hands-on. The bookkeeper for a business may also prepare all the financial statements, tax returns, and internal reports for a business.
“Accounting”, is a broader field; an accountant designs the bookkeeping system that the bookkeepers then use to record the transactions of a business. An accountant also installs the internal controls in a bookkeeping system. “Internal controls” minimize errors and detect theft, embezzlement, and fraud. They also prepare financial reports, but those reports often include a broader overview of the business, because an accountant analyzes the information the bookkeeper records, and measures the financial effects of the economic activity on a business. Sometimes accountants like to think that -“accountants give orders, bookkeepers follow them”. At Burch’s Bookkeeping, this is somewhat true, but the fact is that we do both, and we like it that way. We care about our client’s needs here in Medford, and we understand that hiring two separate specialists isn’t always a cost-effective strategy for a small business owner. Plus, it’s good to have an accountant/bookkeeper that knows you and your business well, and can advise you on financial matters or answer questions from a place of knowing you – and your company’s financial situation – well.