How Is Accounting Different Than Bookkeeping?

How Is Accounting Different Than Bookkeeping? | Accounting Smarts
Charles Hall

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Charles Hall

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June 10, 2022

Bookkeeping and accounting may be considered interchangeable concepts to people outside of the financial industry, but in truth, these are two very different function of financial management. Both are important in the success of a business.

Bookkeeping and accounting may be considered interchangeable concepts to people outside of the financial industry, but in truth, these are two very different function of financial management. Both are important in the success of a business.

Accounting is different than bookkeeping because it involves analyzing and reporting of financial transactions in a business; whereas, bookkeeping involves the recording and tracking of financial transactions.

Business owners can benefit from both a bookkeeper and a good accountant.  In a small business, an accountant may perform both roles.  Read on to learn more about the differences between the two.

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Accounting vs. Bookkeeping

Accounting is the process of analyzing financial documents to assemble financial statements. This can be a very complex process that requires specialized knowledge and training, so smaller business owners often outsource their accounting work to a private firm that prepares their financial statements and tax paperwork for them.

In contrast, bookkeeping is the process of keeping track of financial transactions in the daily operations of a business. Bookkeepers are the people responsible for entering and recording the financial data transactions into “the books”.  The accountant uses the books to prepare financial statements.

These are some of the main differences between accounting and bookkeeping:

  • Timing: Bookkeeping is a drawn-out process that is performed every day as part of normal business operations. Recording information such as payroll taxes paid out or retail sales is all part of being a bookkeeper. In contrast, accountants usually only handle financial data a few times a year, usually at each fiscal quarter so they can reconcile income and prepare taxes.
  • Data: Both accountants and bookkeepers are responsible for generating data, but they generate very different kinds of data. A bookkeeper is meant to keep a record that is as accurate and complete as possible. This data is then transferred to the accountants to summarize into balance sheets, income statements and other financial documentation for analysis and interpretation.
  • Price: Accountants are more expensive to hire than bookkeepers. This is because accountants have to have a college degree in accounting and bookkeepers are usually able to perform a wider range of clerical duties. Because of their specialized knowledge, some business accountants can be quite expensive. Bookkeepers are generally along the lines of an office clerk.

Even though bookkeepers and accountants end up handling a lot of the same information, the two roles are designed to look at it and collect it in completely different ways. The two roles together can form a complete financial picture of a company that allows them to both move forward with business-related decisions and also report their income accurately to government tax divisions.

Duties of a Bookkeeper


Bookkeepers can be responsible for many different kinds of finance-related duties when they’re on the clock, and these duties can vary from industry to industry depending on the kind of assets, liabilities, and revenue streams they have to deal with.

Here’s a list of some of the duties you can expect a bookkeeper to undertake:

  • Managing assets and liabilities: Bookkeepers keep track of both money coming into the business and money going out in the form of bills or services. With regard to business bills, bookkeepers are often responsible for writing out checks to keep vendor accounts paid up.
  • Payroll: A payroll is a complicated form of financial information because the taxes involved with paying out payroll have to be precise for the books to balance at the end of the month during bank reconciliation. The bookkeeper is also responsible for making sure there are enough cash funds available to make payroll each week.
  • Creating invoices: Bookkeepers are sometimes responsible for writing out invoices for resources or services and making sure that they’re paid up. In this responsibility, they somewhat overlap with the role of a collections department.
  • Accounts payable and receivable: Bookkeepers track accounts payable (the accounts that the business is responsible for paying off) as well as accounts receivable, which records all transactions where the business takes money in. This is also where the bookkeeper keeps track of all outstanding debts when they’re due to be collected, and any associated late fees.
  • General ledger: The bulk of a company’s business transactions are recorded in what is known as a general ledger, which is typically a digital document or software that keeps track of all financial interactions within the business. General ledgers are often cross-indexed in multiple ways according to vendor contracts, dates, or other factors to make data more searchable.  
  • Bank deposits: In some cases, bookkeepers may also be responsible for making daily bank deposits of the company as part of their work duties. This is especially likely if the bookkeeper works for a small business and has to take on a broader office manager role.

As you can see, there are many different financial aspects of a business that a bookkeeper is responsible for keeping track of. However, recording this data is not as complicated and nuanced as having to use accounting for general financial statements.

Duties of an Accountant


In contrast to a bookkeeper, an accountant receives financial information from a company when the documentation has already been gathered up. Periodically throughout the year, accountants will pour over the company’s general ledger and generate a range of financial statements related to it, from projected profit margins to balance sheets.

While it is a bookkeeper’s job to keep track of numbers accurately and thoroughly, it is an accountant’s job to verify those numbers. Accountants will double and triple check financial transactions to ensure that all information required for tax documentation is present and correct.

Accountants aren’t just responsible for gathering business financial documentation for tax returns. Accountants also play the role of guide to business executives to give them an explanation of how the business is doing and how it is expected to perform based on past operations. Using this knowledge, business owners and executives can make better investment and spending decisions.

Here are some of the duties that accountants are usually responsible for:

  • Audits: One of the biggest responsibilities of an accountant is to audit all financial information generated within a company to make sure that all of the numbers add up. Since the federal tax division must be able to account for every dollar that comes in and out of a company, the books have to be checked to make sure that none of the transactions are missing.
  • Analysis: In addition to auditing financial information, accountants are also responsible for putting together financial statements, budgets, financial reports, and financial counsel for businesses so that they can make financial decisions moving forward.

Accountants are required to know how to analyze data but also understand how the bookkeeper tracks and safeguards the financial data. They also have to be able to read that data almost like a second language to find the business implications between the lines. The larger and more complicated a business or industry is, the more analysis an accountant has to do to interpret the books.

Skills and Education for Bookkeeping


There are certain skills that bookkeepers need to have to do the job well. While a college degree isn’t required for bookkeeping, several credentials are helpful for a bookkeeper to have, such as the bookkeeper’s credential from the American Institute of Professional Bookkeepers. This can give potential employers confidence that a bookkeeper is versed in the basics of the craft.  

Even though a degree isn’t technically required for bookkeeping (and many bookkeepers choose not to get one if they’re bookkeeping as part of a more general office role) for specialized bookkeepers it can be useful to get at least an associated degree in either accounting or bookkeeping. There is also not a license required to be a bookkeeper.

These courses can help bookkeepers get some background experience in working with different documents such as ledgers.

Along with education, there are also certain skills and personality traits that make a person a good fit for bookkeeping as a career. Here are some skills necessary for being a bookkeeper.

  • Attention to detail: In any kind of financial activity, making sure that all of the financial information is reconciled and documented correctly is a large part of the job. Mistakes in bookkeeping can send up red flags that may trigger a tax audit.
  • Punctuality: Bookkeepers are responsible for getting financial data logged each day since falling behind on any aspect of financial documentation can make accounting very confusing. It can also be difficult to backdate transactions with government-accepted accounting software, so being sure to enter data in a timely fashion is vital for bookkeepers.
  • Math prowess: Even though calculators are commonly used in bookkeeping, it still helps to have sharp basic arithmetic skills. Even though accountants still have to use a calculator to go back in and double-check their work, being able to do mental math quickly can be a major advantage when it comes to quickly processing financial data.
  • Organization: Bookkeeping means going through tons of paperwork and files, and this can get overwhelming without a strong sense of organization. Bookkeepers have to know how to organize their physical documentation so that it can be read easily, and they also have to know how to organize the information within it so that business executives can understand.
  • Honesty: Bookkeepers are trusted to work with a lot of money at any given time, and being in charge of other people’s money is a huge responsibility in trust to take on. Because of this, accountants have to be honest and transparent with the way they operate their business to avoid scrutiny or suspicion.
  • Communication: Along with being able to manage the books, a bookkeeper also has to have good communication skills. The bookkeeper often acts as a go-between with the business management and accounting, and has to work as a liaison between the two to prepare financial documentation. Good communication reduces mistakes.  
  • Technical ability: Much of modern-day bookkeeping is done on software and computers, so having good computer skills is always a good idea for a modern bookkeeper. One way that a bookkeeper can make themselves more viable in the workplace is to become familiar with as many different types of bookkeeping software as possible.

Bookkeeping isn’t a job for everyone, and many people may find the work to be tedious or hard due to the mathematics involved. But for others, it can be a rewarding white-collar career.

Skills and Education for Accounting


An accountant utilizes many of the same skills as a bookkeeper, but they’re required to have a deeper knowledge of statistics, ratios, and other mathematical formulas that bookkeepers usually aren’t required to use.

Unlike bookkeepers, accountants are required to be certified to produce paperwork for the Internal Revenue Service. Most accounting positions only require a bachelor’s degree in Accounting, but some higher-level accounting positions may require a master’s degree as well.

Here are some of the other skills that are necessary to be a skillful accountant:

  • Time management: Tax returns prepared according to strict deadlines set by the government. This means that an accountant must have the time management skills to make sure that financial statements are put in order on time and mailed off to avoid heavy tax penalties.
  • Communication: Communcation for accountants is an even more important skill for accountants than it is for bookkeepers since they have to be able to explain complicated financial information to people who may not be familiar with the economics behind the numbers. This allows different corporate departments to stay on the same page.
  • Spreadsheet management: Being an accountant requires being able to organize information into complicated spreadsheets and being able to cross-index it effectively so that those who need to access it for financial information can pull the data with no trouble. Accountants should be proficient in accounting software such as Quickbook.
  • Regulatory knowledge: Unlike bookkeepers, accountants have to have a strong, wide knowledge base to keep financial documentation within the legal confines of corporate and federal bureaucracy. An accountant’s knowledge may vary depending on their role—an accountant for a corporation is held to different rules than a government accountant.

The fact that accountants have to have all of the mathematical and organization skills of bookkeepers along with the sharp eye of a financial analyst and economist means that a skilled accountant is one of the best assets a company can have.

How Much Do Bookkeepers and Accountants Make?


A bookkeeper generally doesn’t get paid as much as an accountant because they aren’t required to have credentials or a college degree. The salary of a bookkeeper in the tenth percentile (on the low end) is only $44,123 compared to $46,053 for an accountant. However, these salaries are what bookkeeping and accounting positions start at.

Many more experienced bookkeepers and accountants with college degrees in finance or multiple credentials are able to demand more for their services. This means for someone looking to go into either field, expanding their knowledge of economic and financial concepts is crucial to staying competitive in the field.

The best-paid professionals in the bookkeeping and accounting careers are accounting professors. Compared to working accountants, these professionals can earn over ninety-four thousand dollars a year.

When to Hire a Bookkeeper

Smaller businesses may be able to get along without having a dedicated bookkeeper if they have an office manager with enough downtime to manage recording daily financial transactions on top of their other office duties, but larger companies and corporations will usually have to have a dedicated bookkeeper.

Think you might need a bookkeeper? Here are some of the signs you might need to get someone dedicated to the craft:

  • You don’t have enough time. Many people are capable of mastering the skills necessary to be a bookkeeper, business owners are often busy trying to make executive decisions for the business and keep the ball rolling in other areas of the company. Hiring a bookkeeper can allow you to ensure that the books stay straight without any mistakes made from stretching too thin.
  • The books are always behind. One trap that business owners fall into is trying to do their own books on top of everything else, only to have the books fall hopelessly behind. This can complicate the ledger when it comes to doing taxes and can make life harder for your accountant, who will then be tempted to pass the cost for additional time spent to you.
  • You have your accountant do your books. This makes your bookkeeping much more expensive than it needs to be, you also don’t get the benefit of generating regular financial statements to monitor the financial health of your business. Accounting is a much easier and shorter process when the ledger is reconciled regularly before it goes to an accountant.
  • Tax season is a nightmare. If you often find yourself caught in a constant game of phone tag with your accountant during tax season as you try to reconcile a badly-kept book, it could be worth your trouble to look into a certified bookkeeper. Hiring a subject matter expert means you’ll end up with a ledger that is air-tight and easy to reconcile with your accountant.
  • You don’t know how to keep track of write-offs. One of the best things a bookkeeper can do for a company is keeping track of expenses that would otherwise be hard for employees or the owner to keep up with, such as mileage for expense reports or other tax deductions levied at small businesses.
  • You’re not good with math. Keeping a business ledger requires some strong arithmetic, and for people who have dyscalculia or other math-related difficulties, keeping a straight book on top of running a business can be nearly impossible. Bookkeepers can go a long way towards making this process less of a hassle.

It can be a big decision for a small business owner to hire a bookkeeper, but the investment can make a big difference in how efficiently and effectively a business runs. It also gives the business owner or office manager more time to take charge of other projects around the company.

Many small business owners make the mistake of taking on too much to try and save money, only to make significant accounting errors. Delegating tedious paperwork in the company to someone who is geared towards analyzing and documenting it can make life easier for everyone around the office.

When to Hire an Accountant

While many people may learn how to file their personal income tax returns at home due to the relative simplicity of using accounting software, filing taxes and financial statements for a business is usually a much more complicated process and should be left to a certified accountant.

Analyzing collected financial data and preparing it for taxation is usually above the head of many business owners who didn’t specifically specialize in finance. Since the penalties for messing up your tax returns with a business can be stiff, having an accountant prepare the books helps take a lot of the guesswork out of the process.

Here are some ways to know that it’s time to hire an accountant:

  • You’re trying to write a business plan. Accountants are able to give financial guidance on how to manipulate and grow a company based on the revenue and income streams generated by it. Based on your starting capital and other factors, an accountant can help you build the documentation you need to get a business running.
  • You need to figure out how to structure your company. Companies can be legally structured into several different categories such as corporations, sole proprietorships, or limited liability partnerships. The differences between these categories can be confusing. An accountant can look at a business plan and determine what type of legal structure would benefit the most.
  • You’re worried about being audited. A tax audit is one of the most stressful things that a business owner can go through, and it’s made even worse if you don’t have good paperwork for your financial statements and ledger. Hiring an accountant can make the process of a tax audit go much more smoothly since they’re trained to make sure all the correct info is available.
  • You’re working as a contractor with the government. Government contracts are a little more complex than business on business contracts and the accounting needs to be absolutely air-tight when you’re working with government funding. An accountant can take the brunt of the effort of dealing with government bureaucracy off your shoulders when it comes to the books.
  • Your company is growing. An expanding business can be great for business owners, but it can also put strains on assets and outstanding liabilities. Hiring an accountant can help business owners know how their financial health stands in the company. This allows the business owner to then go and make informed investments to help the company grow.


Not all businesses are big enough to need an accountant full-time. But even for smaller businesses, it’s a good idea to invest in one at least around tax time so that you don’t get hit with any audits or penalties. Many businesses will keep an accountant on retainer throughout the year to handle any unusual financial transactions or to consult for financial advice.

How Are Financial Services Changing?

Accounting and bookkeeping have both been greatly changed as time goes on. Just in the past decade or so, these industries have evolved at a rapid pace. Below you’ll find just a few of the trends that have swept through the bookkeeping and accounting fields:

  • Digitalized banking. The digitalization of banking has made life much easier for both bookkeepers and accountants, but it also comes with its own set of challenges. Cybersecurity is crucial to operations when dealing with digital finance. Accountants and bookkeepers need to have redundancy measures in place for issues like data loss.  
  • Aggregated consumer data. One of the great things about customers having all of their information on the Internet is that it makes it easier for banks and other financial services to access their personal information easily without forcing them to answer the same long tedious answers each time they need to take out a loan or perform some other business transaction.


The rise of technology in finance has made a big impact on how bookkeepers and accountants fulfill their roles in a business. In many ways, technology has made things easier for both trades. The adoption of new technology means accountants and bookkeepers have to stay up to date on the most current accounting software available.

Accounting and Bookkeeping Are Both Important in Finance

Accounting and bookkeeping are vital parts of finance and business—without them, there’d be no way to keep up with the money going in and out of the company. Even though they hold different responsibilities for a company’s finance, they both contribute to the accuracy of the financial statements that the business generates.

Charles Hall

Charles Hall

Charles has spent 25 plus years in the world of accounting and business. His experience includes working as a CPA/Auditor international accounting firms. He has worked as a controller and as a COO for small to medium sized companies.

Learn more about Charles Hall