Too many people make the mistake of thinking that bookkeeping and accounting are the same profession. Bookkeepers are often mistaken for accountants, and vice versa. The truth is that both professions have similar principles, but they are different in their educational requirements, job descriptions, and the types of employment that they can seek. Here is an overview of both bookkeeping and accounting, the similarities and differences, and the educational requirements for each profession.
Bookkeeping is a subset of the accounting profession, and one of the most important aspects of the field. Bookkeepers will accumulate, organize, and store various financial information for a business. They will assess this financial data in an attempt to ensure that day to day operations are running smoothly. Most bookkeepers also find themselves in charge of creating financial statements, filing tax returns, and giving out internal reports to those who are in charge.
Most companies will hire independent bookkeepers. Some hire them on a full time basis, while other bookkeepers will work part time at various companies during particular times of the year. Tax season would be a time where almost every company will require a bookkeeper to go over their financial records for the past year.
Accounting is a much deeper and broader profession. Accountants do not simply overview the finances of a company. They will redesign the entire bookkeeping system, establish certain controls to ensure the system runs efficiently, and they will analyze all recorded data. Accountants are the ones who give out orders, while bookkeepers simply follow them.
Think of accountants as generals of the army. They will prepare complex reports to show how a business is losing money. They will solve the problems that bookkeepers identify. Bookkeepers are merely the front line soldiers. They may do a lot of the grunt work, but they are not innovative and do not have the solutions. They will handle payroll, preparing simple reports, and recording transactions. The information they gather is vital for accountants, who will use their greater education and knowledge of finances to sort out the problems.
Bookkeepers do not need to have much of an educational background. A high school diploma is usually enough, with most training taking place on the job. Some may have associate’s or bachelor’s degree, but that is rare.
On the flip side, accountants must have a bachelor’s degree in accounting. They may even get a Master’s in Business Administration or a CPA qualification. This greater education shows how much more accountants know about finances. Many make the mistake of thinking that accountants simply crunch numbers and prepare basic reports. That is what bookkeepers do, not accountants.
Bookkeepers can earn around $25,000 to $35,000 a year, while accountants will make at least $60,000. Accountants have a much higher salary ceiling, with many making over $100,000. On the other hand, bookkeeping is a relatively fixed income with little opportunity for upward mobility. Many bookkeepers eventually get more education and become accountants.
Bookkeepers can work for any type of business, whether it is a two man shop or a multi-national corporation. They work at doctor’s offices, restaurants, grocery stores, clothes retailers, or any type of business that needs their books looked over from time to time. Many accountants work as consultants to various businesses, while others may have full time contracts with one or two companies.
Accountants will typically work for larger companies. There are many top accounting firms around the world, and the best accountants strive to work there. While they start off at the bottom, they can work their way up to being partners at the firm. If accountants wish to live in smaller towns or cities, they may open their own business and cater to the accounting needs of the community.
Being a bookkeeper is like having enough knowledge for 10% of the accounting field. Bookkeepers perform important tasks, but their knowledge of the field and skill set are relatively limited.