Bookkeeping and Accounting Services: What’s the Difference?

Every business needs both a bookkeeping and an accounting service. Having both ensures that your financial reports are prepared and helps your business evaluate its worth to make future decisions.

Although the terms are often used interchangeably, they are not the same. Bookkeeping is part of accounting and keeps track of financial transactions. Accounting deals with the interpretation, analysis, classification, reporting, and summarization of a business’s financial data.

Here you will learn in detail about bookkeeping and accounting services and the key differences between them.

Let’s get started.

What Is the Meaning of Bookkeeping?

Bookkeeping is the basis of an accounting process. It keeps a systematic record and maintains all financial transactions in the business’s original entry book. All financial transactions such as payment of taxes, sales revenue, loans, interest income, payroll and other operational expenses, and investments are recorded in the original book of accounts. Not surprisingly, bookkeepers maintain these bookkeeping records. Accurate bookkeeping is essential for a business as it provides a piece of reliable information on a company’s performance.

The bookkeeping process consists of the following steps:

• Identifying a financial transaction
• Recording financial transactions
• Posting debits and credits
• Producing invoices
• Preparing financial statements (balance sheet, cash flow statement, and income statement)
• Keeping subsidiaries, general ledgers, and historical accounts in order and balancing them
• Completing payroll

What Is the Meaning of Accounting?

Accounting is the language of business. It involves preparing a precise summary of financial transactions over a specific accounting period. Business owners often outsource accounting services for strategic tax planning, analyzing their financial position, forecasting, and tax filing.

Unlike bookkeeping, which is more transactional and administrative, accounting is more subjective. It provides insights into your business’s financial health (including its financial position, operations, and cash flow) based on bookkeeping information. Its users, who include investors, creditors, employees, and the government, benefit from a clear view of financial statements, which aids in short- and long-term decision-making.

The accounting process is comprised of the following tasks:

• Preparing adjusting journal entries (i.e. an entry that occurs at the end of an accounting period to record any unrecognized income or expenses for the period)
• Reviewing company financial statements
• Analyzing operation costs
• Completing income tax returns
• Aiding the business owner in understanding the impact of financial decisions

Bookkeeping vs. Accounting: Key Differences

The following are the key differences between bookkeeping and accounting services.

Bookkeeping	Accounting
Bookkeeping deals with identifying, measuring, and recording financial transactions.	Accounting summarizes, analyzes, and interprets the financial transactions that are classified in the ledger account.
Bookkeeping is one part of the whole accounting system.	Accounting begins at the endpoint of bookkeeping and has a broader scope.
Bookkeeping requires no analysis and does not show a business’s financial position. It aims to summarize the effect of all financial transactions on a business for a given period.	Accounting helps give a clear picture of a business’s financial position. Its objective is to interpret and analyze financial information in order to make informed decisions.
No high-level learning is required.	Accounting requires special skills due to its analytical and complex nature.
The data provided by bookkeeping is not sufficient for decision-making.	Accounting analyses data and generates insights that are used to make short- and long-term business decisions.

 

Bookkeeping does not include any analysis, but bookkeepers are required to be accurate in their work and maintain a systematic record of all financial activities and transactions. This is because accounting will use the information provided by bookkeeping to prepare financial reports and statements. So, along with your accounting, you should pay special attention to your bookkeeping.

 

More and more businesses employ remote bookkeeping services. If you are wondering where to find a suitable one for your business, reach out to Virtuous Bookkeeping. There are many advantages to using us as your business’s virtual bookkeeper.

• The first is significant cost savings. We can provide you with accurate high-end services at competitive rates.
• Unlike an in-house bookkeeper, our remote bookkeeping service is flexible and available 24/7 to match your schedule.
• Regular data backup is essential, as is keeping your data accessible and secure. Our remote bookkeeper will take the burden off you by keeping your data secure, accessible, and backed up.
• Our virtual services will manage your bookkeeping so you have the time to shift your focus back onto your business.

Remote bookkeeping makes it easy for you to access up-to-date financial reports when you need them. So, if you want to enjoy peace of mind knowing your bookkeeping is being handled by experts, contact Virtuous Bookkeeping. Request a quote today!