What Is the Difference Between a Bookkeeper and an Accountant?
Companies outside of the financial sector employing or contracting a finance professional may confuse the roles of bookkeeper and accountant - they are different positions yet have some crossovers in the daily tasks you would expect to be carried out.
Bookkeepers are responsible for recording financial transactions correctly, whereas accountants take a broader view of the organisation's performance, environment and market conditions.
A bookkeeper is more of a financial administrator. Accountancy is a much wider field, looking at performance analysis, overall financial health, and interpreting the information that a bookkeeper inputs.
Accountants and bookkeepers often work side by side, and the skills required for each profession are similar. However, the qualification level, expertise and salary will differ considerably.
What Is a Bookkeeper?
The basic bookkeeping role is to input transactions consistently and accurately and can involve a large proportion of data entry. Bookkeepers may also produce documents or run reports, although these are not normally created by the bookkeeper but by the accounting system or database they manage.
Typical bookkeeping tasks include:
- Recording transactions such as sales, receipts, purchases or expenses.
- Preparing invoices for customer transactions.
- Posting debit and credit transactions into an accounting ledger.
- Running financial statements from the system, such as a balance sheet, profit and loss account and cash flow statement.
- Balancing general ledgers, balancing accounts and maintaining accounting archives.
- Running monthly payroll and producing staff payslips.
The general ledger is almost always computerised and central to your accountancy system. A ledger records all the income, expense, asset and liability accounts that make up your financial statements.
Bookkeepers must balance the debits and credits by posting transactions or adjustments. Both sides of the ledger column need to balance, so this can be a fairly technical task, where a bookkeeper needs to check that every journal is correct.
For example, a sale creates income and reduces the available stock. Paying staff reduces the bank balance and increases the salaries expense account in the profit and loss.
Some larger organisations can have very complex bookkeeping systems, especially if thousands of transactions are processed daily.
Experienced bookkeepers can manage larger ledgers, whereas a junior professional will often handle the accounts for a smaller business.
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What Is an Accountant?
Accountancy is at a level above bookkeeping, meaning that a qualified professional will use the data or reports produced by the bookkeeper for various tasks, such as financial modelling and forecasting.
There are several types of accountancy, but the difference from bookkeeping is that the process is subjective and reliant on the skill and knowledge of the accountant.
Examples of an accountant's day-to-day tasks include:
- Analysing performance metrics and forecasting profitability.
- Adjusting bookkeeping entries and accounting for accruals and liabilities.
- Reviewing financial statements and preparing management accounts.
- Completing tax returns and submitting reports to HMRC.
- Supporting business management in making financial decisions.
- Advising on the correct tax treatment of transactions or events.
Analysis is one of the most important parts of accountancy that goes beyond the transactional nature of bookkeeping. Accountants analyse data to draw conclusions, make recommendations, highlight problems or inefficiencies and extract meaningful performance metrics.
Business owners use this knowledge to make informed decisions and understand things like the contrast between cash flow and profitability.
An accountant uses the information within the general ledger to develop business insights that demonstrate the bigger picture and can help companies to grow.
They can also provide strategic tax planning advice and ensure that clients take advantage of tax reliefs or allowances that could reduce their overall liabilities.
What Responsibilities Do Bookkeepers and Accountants Have in Common?
We have discussed the variances between a bookkeeper and an accountant, and in some cases, a smaller company might have one in-house accountant who performs both roles.
Accountants provide consultation services and are qualified to advise companies on matters around tax, company law and market conditions, but bookkeepers cannot deliver strategic analyses or make recommendations.
What Is the Difference Between an Accountant and a Bookkeeper?
Bookkeepers don't necessarily need a formal qualification, although many will hold a bookkeeping certification or attend a college course.
The key requirement is accuracy and basic knowledge about financial topics such as general ledgers and how credit and debit accounts work.
Most bookkeepers work underneath an accountant or business owner who will review their work and address any queries they may have.
How Do Accountancy and Bookkeeping Qualifications Compare?
In contrast, accountants must have a minimum of a BSc in Accountancy and accreditation with a recognised accountancy body. In the UK, that might be through one of several professional organisations with designations of:
- AAT: Association of Accounting Technicians
- CIPFA: Chartered Institute of Public Finance and Accountancy
- ACA: Association of Chartered Accountants
- CIMA: Chartered Institute of Management Accountants
- ACCA: Association of Chartered Certified Accountants
ACA is an entry-level accountancy qualification, which takes around three to five years to qualify for, usually with accounting juniors studying while working to gain practical experience.
An accounting technician is the middle ground between a bookkeeper and an accountant. They often carry out the same tasks as a bookkeeper but can also prepare adjusting schedules and journal entries, typically working as an assistant to a fully qualified accountant.
Chartered, certified accountants with ACCA qualifications study for at least two years. Still, they need to have three years of real-world experience before becoming a full ACCA member and can only then use the ACCA designation and refer to themselves as qualified accountants.
ACCA accountants may become eligible for FCCA status (ACCA Fellowship) if they provide five years of annual reports showing a minimum level of continued professional development.
Average Pay for a Bookkeeper vs Accountant
As with all roles and professions, a newly qualified accountant will earn less than an accomplished professional with years of expertise.
New bookkeepers will also usually charge lower fees until they have built up experience and a client portfolio and can charge more for a higher level of efficiency.
In the UK, the average salary for a chartered accountant is £85,000 compared to £27,000 for a bookkeeper.
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