With exception to folks who work directly in the finance industry, most people have no idea what the difference between a bookkeeper and an accountant is. “Aren’t they one in the same?” you ask. It depends. Confused yet? Allow me to elaborate.
The textbook definition of a bookkeeper is someone who is responsible for overseeing the paperwork of a company’s financial transactions. The bookkeeper will record transactions within the company’s general ledger and is required to be knowledgeable about debits and credits, maintaining a chart of accounts, generating financial statements (this includes the income statement, balance sheet & statement of cash flows), accounts payable & accounts receivable procedures, adjusting entries, budget planning and more. Depending on the size of the company, the bookkeeper’s role may vary.
Accountants are sometimes involved in the preparation of an organization’s financial statements. Much of their responsibilities include the same knowledge base that bookkeepers are expected to have (and are mentioned above). The BIGGEST differences are that accountants, 1) typically have a college degree in accounting and 2) will offer annual tax preparation services to individuals and/or businesses. Though some bookkeepers offer this service, annual tax return preparation is usually handled by accountants. Certified public accountants (or CPAs) are accountants who have obtained their certification through the process of passing an exam, much like attorneys who obtain their JD through a state bar exam. Though some accountants offer bookkeeping services at a premium cost, recording daily financial transactions is a service that accountants usually outsource to a bookkeeper.
HOW THEY WORK TOGETHER
Once a bookkeeper has recorded a client’s transactions throughout the year, they will prepare financial statements, and eventually hand them off to an accountant who will use those documents to prepare the client’s tax return for federal & state agencies. The accountant and bookkeeper will sometimes also work together on identifying depreciation & amortization schedules for a client’s assets, if applicable.
The delineation point between the two roles continue to blur over time as accounting software evolves, increasing the skill level and capabilities of bookkeepers that were formerly designated to accountants. Today, new school bookkeepers are just as equipped as accountants with the right tools and skill set to provide in depth insights & analysis to help clients grow their business.