Typically, when running your company, your ability to develop and prosper is hooked on how your financial records are structured. Yet handling the finances of your company is just the recording and accounting of your financial transactions. For your business to expand. Bookkeepers and accountants manage your business's financial reports but undertake specific roles during the financial process of your business.
To the untrained eye, bookkeeping and accounting may tend to be the same discipline. This is how accounting and bookkeeping work with financial records, necessitate simple accounting skills and use financial transactions to identify and produce reports. Around the same time, all of these methods are fundamentally different and provide distinct benefits which is mostly provided by accounting and bookkeeping services. Read on to know the differences between both and how to choose the right method when it comes to applying the same on business.
Bookkeeping: Bookkeeping is described as "the process of collecting, organising, storing and accessing an entity's financial database." It is essential for day-to-day business operations and the basis for preparing financial statements, tax returns and other important reports. In short, bookkeeping is documenting financial transactions.
A bookkeeper's primary goal is to document all financial transactions correctly and logically. Bookkeepers usually document these financial activity chronologically. We use one of two big record-keeping schemes, which we will address more later.
3. THE FUNCTION OF BOOKKEEPING
Bookkeeping involves the activities required during the primary accounting process. This requires reliable, timely and precise reporting of financial transactions in chronological order. Bookkeeper's duties include:
Maintaining a complete and organised collection of books, consisting of the total ledger and sub ledger (i.e., fixed assets, inventories, assets, accounts payable, currency, tax, costs, and sales) through which to post financial transactions.
Create and file customer invoices.
Recording invoices of vendors.
Logging consumer cash receipts.
Record shifting inventory.
Employee payroll collection.
Manage fund transactions.
Preserving all relevant documentation for all transactions.
A bookkeeper follows specified protocols to perform these duties repeatedly. The sophistication of a company's bookkeeping method depends on business dimensions and how many transactions are done every day, weekly, and monthly.
Nevertheless, it has a broader reach than bookkeeping. Accounting is described as the "systematic method of defining, tracking, calculating, classifying, checking, summarising, explaining and communicating financial information." In other words, accountants are able to do more than report transactions; they are often qualified to clarify what financial data actually means to key stakeholders inside the organisation.
An accountant's primary objective is to assess the company's financial position or well-being and transfer this knowledge to key stakeholders. Thus, accountants are not mainly concerned with the day-to-day activities of bookkeeping (although these are essential), but are concentrated on evaluating and interpreting all the financial data collected. Usually, an accountant or the small business owner supervises the bookkeeper's job as they understand the significance of accounting and bookkeeping for businesses.
3. THE FUNCTION OF ACCOUNTING
Accounting includes the process by which the bookkeeper or business owner analyses, interprets, records, and analyses financial data. A number of an accountant’s responsibilities include:
Preparing adjusted entries (i.e. income received or expenditures incurred not reported during the bookkeeping process).
Preparing financial statements on organizational status and results.
Creating executive reports to fix particular problems.
Costs monitoring processes.
Making a corporate budget.
Compiling financial details tax returns.
Helping the business owner grasp the financial details of the company and thus its financial decisions.
The Changing Faces in Accounting and Bookkeeping
Bookkeeping and accounting have been around for a long time, and both have undergone a significant amount of improvement in the way procedures are carried out. This pattern is likely to persist in the future as well.
The below are some of the upcoming accounting and bookkeeping trends:
I. Accounting and bookkeeping functions are being merged.
The distinction between accounting and bookkeeping is gradually blurring. Any accounting elements are increasingly being absorbed into the bookkeeping process due to the introduction of accounting and bookkeeping tools. Simultaneously, bookkeeping tools will also produce financial statements, which were historically part of the economic cycle.
II. Slowly but steadily, bookkeeping would become obsolete.
While most companies will also need a bookkeeper to manage the accounts, bookkeeping will evolve to include much more than record entry, bank register balancing, and bank statement reconciliation. These duties will gradually dwindle and become redundant in the coming years when much of the activities will be performed by bookkeeping tools.
III. Growing the Range of Services
Bookkeepers and accountants have been persuaded to remain open to technology developments and pursue evolving computing possibilities due to newer innovations. It is an incentive for bookkeepers to assist their customers through this transition by offering value-added services like payroll processing and credit card reconciliation, among other things, using the most up-to-date tools.
IV. Enabling the use of smartphones
As phones and handheld devices becoming more intuitive and accessible, a growing number of companies are taking their activities online. Business owners expect to view data on a variety of computers from anywhere in the world, and accounting and bookkeeping experts are ensuring that properly produced records are still accessible online for their customers.
V. More effective products
Due to the advent of computational methods, consulting and advising firms are taking full advantage of these emerging technology and resources, making bookkeeping and tax planning services more effective and substantially less expensive.
The accounting process helps you understand where your business is financially at any point in time by calculating your company's growth and financial performance. Additionally, the financial data generated enables you to shape informed business decisions, so you plan for your business's roadmap.