Who Should I Hire for My Company, an Accountant or a Bookkeeper?
Although there is a difference between accounting and bookkeeping, they are often used interchangeably. Anyone new in business would always hear the words accounting and bookkeeping. Because they are synergistic, small companies typically have both accounting and bookkeeping functions.
In bookkeeping, a general ledger is used to post every business transaction. The ledger includes all the financial transactions of a business from its beginning.
In accounting, all the details in the ledger are used as insights to develop financial strategies and decisions.
Bookkeeping is a daily record-keeping of all the financial transactions of a business. Small business accounting and bookkeeping are crucial; it has to start even if your company is just a start-up. Do not wait until your firm becomes a big corporation before considering small business accounting and bookkeeping solutions.
Posting is the term for recording all financial transactions or accounts. Bookkeeping tracks all the following accounts for financial statements and tax functions.
- Asset Accounts – consist of tangible and intangible items that your business owns. Tangible assets may contain laptops, vehicles, machinery, property, or buildings. While intangible assets may consist of copyrights, logos, or trademarks.
- Expense Accounts – can consist of business purchases to help produce extra revenue. it could be services or products. Additionally, expenses might be leases, promotions, and staff member incomes.
- Income Accounts – or revenue, records all the money gained from selling your product and services. It might also count the dividends from other investments.
- Liability Accounts – can include business loans, overdue utility bills, outstanding debts, payment obligations to creditors, and other payables.
- Equity Accounts – shows the current worth or company or business valuation. A simple formula is subtracting a company’s liabilities from its assets.
A quality that stands out in bookkeeping is a stickler for precision. Even the most extensive bookkeeper can commit errors; that’s why they typically work under an accountant’s supervision unless the business is very small. Studies found that having external accounting or bookkeeping in Ontario services is such a big help with your company.
The two bookkeeping methods are:
- Single-Entry System – includes a single entry of all company transactions in the general ledger. This system works best with small firms with less revenue.
- Double-Entry System – is the golden standard of record-keeping generally used by most business owners, accountants, and bookkeepers. This system is more thorough and complicated than single-entry.
Accounting provides the business owner with essential data regarding the firm’s financial standing. It is a process that consists of measuring, processing, and communicating financial information. Additionally, accounting also takes care of tax preparation and other financial materials necessary.
The accounting function can be outsourced to a private accounting firm. Even in some local businesses, outsourcing accounting and bookkeeping functions is very common.
- Cash Accounting – this type is prevalent among small business proprietors. The only transactions posted in cash accounting are cash spent or cash received. A sale is posted when the payment is received, and an expense is posted when the bill is paid.
- Accrual Accounting – under this process, transactions are posted when they are incurred rather than awaiting payment. The same goes with expenses, even if no payment is made yet.
Although accounting and bookkeeping are different, there are more resemblances than distinctions. They work on a common goal of boosting the business’ financial situation. Both are tax compliant and have many overlapping functions, specifically in small businesses.
Accountants can take the role of bookkeepers, but bookkeepers can not be called accountants unless there is appropriate education and accreditation. However, accounting knowledge is needed in both disciplines.
Finally, a business of any size can considerably benefit from the services of an accountant or bookkeeper.