Many people use the terms "bookkeeper" and "accountant" interchangeably. While the two professions do share some similarities, they are not identical and should not be grouped together as one. To give you a better understanding of how the two professions differ, below is an explanation of each.
A bookkeeper is usually a person without a college degree in accounting. This person is in charge of basic data entry tasks, and other day to day business transaction duties such as: paying bills, collecting payments from customers, preparing invoices, sending out statements to customers, processing payroll information, and keeping track of expenditures. These professionals keep journals that record every transaction that goes on within a business. Bookkeepers play a critical role for businesses as they must keep and maintain accurate records, which are used to provide important information that reflects the overall financial health of the company.
An accountant usually has a college degree in accounting, and takes the process of bookkeeping a step farther. An accountant prepares detailed financial records to further explain the entries of the bookkeeper. A couple of examples of such reports include: wages earned by employees for future payroll periods, and interest charges on loans that occur since the last loan payment has been posted. Other common accounting reports include: allowances for accounts that have been deemed uncollectible, and calculating and recording depreciation.
Once these reports, sometimes referred to as "adjusting entries", have been made, the accountant is then responsible for preparing financial statements. These statements include cash flow statements, income statements, and balance sheets. An accountant may also meet with management members of a business in order to explain the impact of current, past, and future operations on finances. Accountants are usually in charge of handling all tax preparation and filings as well.
It is very important to understand that both accountants and bookkeepers are needed to keep a business running smoothly. Knowing the differences between the two, as well as the services each type of professional provides, will help you to get the very best of both worlds. You will be able to harness the unique knowledge that each possesses, which will put you on the right path to making the best possible financial decisions. In the long run, utilizing the services of both can save your business hundreds, if not thousands, of dollars in unnecessary fees and expenses each year.
Anthony Piggins is a professional accountant and bookkeeper helping small business.
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