Are you interested in hiring a bookkeeper or accountant who can handle your business matters? Then it is important to understand the difference between bookkeeping & accounting. Both these services are part of a company’s financial cycle. For example, in bookkeeping, the main goal is to track and record financial transactions systematically. On the other hand, accounting services surround many more aspects of business management, such as budgeting, financial analysis, and planning.
As an entrepreneur, you only want to ensure that your company’s financials are always in check. No matter what industry you choose to work further into, a well-managed business is crucial to running smoothly and profitably. If you are a business owner looking for an expert bookkeeper or accountant in Mississauga, Ontario, you have come to the right place. Because our expert accountant guides business owners in managing their tax returns and accounting needs. And in this blog, we will explain the basic concepts of bookkeeping & accounting and the difference between bookkeeping & accounting. So you can easily choose the right individual for your business matters. Let’s begin!
Difference between Bookkeeping & Accounting: An Essential Guide
What is Bookkeeping?
Bookkeeping is a part of accounting that involves recording, categorizing, and reconciling all financial transactions of a business every day. Bookkeepers use accounting software to perform their tasks. Furthermore, bookkeeping helps a business keep track of its accounts, analyze them, and ensure they are accurate.
Bookkeepers also help businesses manage their finances by recording all transactions made within their company. In addition, bookkeepers will help with tax preparation for their clients as well as helping with other accounting matters such as payroll and bank accounts management.
What are the responsibilities of a Bookkeeper?
With the amount of information and data, businesses need someone who can keep track of all the information, someone who can make sense of it all. A bookkeeper can perform such tasks. Because the bookkeeper is an essential cog in the modern-day corporate machine. Thus, a bookkeeper’s responsibilities include:
- A bookkeeper’s primary function is to help make financial statements for the organization by recording transactions in the company’s accounting records. Bookkeepers also ensure that all financial transactions are correctly recorded and that appropriate support documentation is provided to support those transactions.
- The bookkeeper posts the debit and credit entries in the general ledger. The general ledger is a list of all transactions that have taken place during a specific period, for example, for one year. This helps maintain proper records when auditing purposes and prepare financial statements such as profit and loss accounts, cash flow statements, etc.
- A bookkeeper is also responsible for producing the invoices for purchases and payments.
- He/she manages the payroll. This includes preparing and maintaining payroll records, creating reports and statements, reconciling accounts, and ensuring that payroll taxes are paid on time.
- Lastly, the bookkeepers are responsible for maintaining the books of account, such as the cash book, trial balance, etc.
When do you need to hire a Bookkeeper?
Bookkeeping is an essential aspect of any business. It helps keep track of all financial transactions, prepares tax returns and other financial reports, etc. So when it comes to hiring a bookkeeper, the first thing that you need to do is find out what type of bookkeeping services your business requires. It would help if you also considered whether you want to outsource the bookkeeping task or take on the responsibility yourself.
If you run an independent business and are looking for someone who can help you with accounting tasks, then it’s best if someone who has worked in accounting before takes up this role. When hiring a bookkeeper for your new or existing business, there are many options available for free software and online services as well as paid platforms that offer full-fledged services like QuickBooks, for example. These platforms provide invoicing, expenses, payrolls, and more. However, depending on your needs, there may be some limitations associated with these platforms, so it’s best to hire an expert bookkeeper.
Making good judgements when one has complete data, facts & knowledge is not leadership, it’s bookkeeping.” – Dee Hock
The Benefits of Bookkeeping:
Bookkeeping offers the following advantages:
1. It helps to increase your profits by keeping better track of expenses and income. By knowing exactly how much you spend on each of your business’s expenses, you can rest assured that you aren’t losing money, even a tiny amount.
2. Bookkeeping also helps you manage your cash flow by allowing you to make sure there is enough money in the bank to cover upcoming expenses. In addition, it informs you about late or incorrect payments and sales fluctuations.
3. Bookkeeping acts as a time-saver when it is time to file taxes. It is due to the reason that a bookkeeper keeps a record of all your professional expenses. So you don’t have to burden your brain to remember the old bills.
4. The most crucial benefit of bookkeeping for filing taxes on time is the assurance that your information is ready for an audit by the Canada Revenue Agency (CRA).
What is Accounting?
Accountants are professionals who specialize in bookkeeping, tax preparation, etc. They prepare financial statements and other reports for clients. Accountants are also responsible for the accounting and tax compliance of many businesses.
Bookkeepers record data from transactions or receipts into a single document. Accountants turn that data into insights using accounting software or spreadsheets – analysis tools that allow them to perform calculations and present financial information in tables that are easy to read.
Top 5 Small Business Accounting Tools to Use Online
1. Quickbooks Online
4. Zoho Books
5. Sage One
What are the responsibilties of an Accountant?
The role of an accountant is different from the role of a bookkeeper. An accountant is essentially a business manager, and his job is based on the work done by the bookkeeper. However, in essence, the accountant has a more analytical job. An accountant’s responsibilities are as following:
- The accountant is responsible for the review and analysis of the financial statements and other related documents prepared by the bookkeeper.
- Accountants also analyze cost centers and revenue centers for insight into the profitability of their business.
- An accountant also assists in making decisions on how to manage the business and make sure that it continues to be profitable.
- He/she prepare tax returns for individuals and businesses. They ensure that all of the information required for filing taxes is included in a timely fashion, and that any required forms have been properly filled out.
- An accountant provides advice to both small businesses and large corporations on how to manage their finances effectively. This includes helping them understand how certain accounting practices impact their bottom lines.
The Benefits of Accounting:
Accounting offers the following advantages:
1. The accounting process is used to record and track the performance of a business. Accounting is a valuable tool for businesses because it provides them with insight into the financial health of their business.
2. It helps to plan appropriately for reorganizing your budget and assists in investing more money to prepare for the future.
3. Accountants are essential in helping companies get their finances in order so they may be able to secure loans, contracts, or other funding from banks or investors.
4. They also help assess risk for businesses seeking debt financing by creating their financial projections, balance sheets, and income statements.
5. Accountants are a critical part of the business owner’s team, and they can help you remember the tax deductions and save you from the penalties that the CRA might impose.
When to hire an Accountant?
If you have a small business and you’re not sure about the financial health of your business, hiring an accountant can help prevent problems later on down the road. Here are some signs that it’s time to hire an accountant:
1. Looking for keeping track of business expenses:
If you want to keep track of your business finances, it’s essential to hire an accountant. An accountant will ensure that your company is prepared for tax season and can help you make informed decisions about how to allocate resources.
2. Your books are messy
You might think that running a small business means keeping track of everything and filing all the paperwork. But this isn’t always possible if your accounting system is outdated or doesn’t work well enough to support all your needs. And even with a solid strategy, bookkeeping can still get messy over time — especially when there are more transactions than ever and less time available to handle them properly.
3. When you start a new business
To help you get through your first few years in business, it’s vital to hire an accountant. Your accountant will help you make better business decisions by helping you understand the financial side of your business. He/she will also be able to guide you through complicated tax laws and regulations that can affect your bottom line.
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Difference between Bookkeeping & Accounting:
The following table will explain the difference between bookkeeping & accounting:
|Purpose||Bookkeeping involves keeping records of how money flows through an organization.||Accountants provide more detailed information about revenue streams and profitability ratios; they also help determine how much cash should be held on hand to cover potential expenses in an emergency.|
|Creating the financial statements||Bookkeepers sometimes prepare financial statements, which are reports of a company’s financial condition and performance.||
Preparing and reviewing the financial reports and the final books of account is the primary duty of an accountant.
|Skills Required||A bookkeeper can multitask, make quick decisions, and deal with unexpected events quickly and efficiently. He/she understands the complex financial statements.||An accountant has strong logic skills, critically analyzes the problems logically, and makes sound decisions based on the facts.|
We are here to Guide You!
We hope this article has helped you to provide authentic information about what is the difference between bookkeeper and accountant. As you know, you must keep track of your entire business. And when your business is growing, you need to hire more workers and keep more records. This can become extremely time-consuming and a large hassle for small business owners. That’s why it’s always best to hire a professional bookkeeper or accountant to assist in your financial management. Whether you need to handle record keeping, bookkeeping, or accounting in Mississauga, there is no one better than Yogi & Associates to trust. We’ll help you keep your business information safe and sound so that you can focus on what matters. So contact us today and hire our professional bookkeeper or accountant to sort out your business matters.