The big difference between bookkeeping and accounting explained

June 10, 2021

Differences between bookkeeping and accounting

We bet that you are here because you are wondering what is the difference between bookkeeping and accounting. Or at least at some point, you did. Nevertheless, Benjamin Franklin wasn’t wrong when he said that knowing is better than wondering. That’s where we come in. We are here to explain once and for all the difference between bookkeeping and accounting.

Let’s begin by explaining why people, even business owners, have trouble differentiating between the two. It’s because they both deal with financial data. Or maybe it’s all the finance movies we’ve seen throughout the years that got us all confused. The main thing you have to understand is that there isn’t just one difference between bookkeeping and accounting, there are many. But don’t worry, we’ll explain them all.

Uncovering the differences between bookkeeping and accounting

Whether you are here out of sheer curiosity or you are looking for some financial management tips or even searching for ways to finance your business, it’s pivotal to first gain comprehensive knowledge about the difference between bookkeeping and accounting.

As we mentioned earlier, there are many differences between bookkeeping and accounting that you should know about. Without further ado, let us meticulously describe them all.

Bookkeeping micromanages transactions, accounting macromanages transactions

And what do we mean by that? Generally speaking, bookkeeping and accounting manage transactions differently and for different reasons. Yes, they are both in charge of taking care of the money, they just go about it differently. The accountants are responsible for the big financial picture of the company. While the bookkeepers are responsible for the day-to-day activities. That’s the bluntest difference between bookkeeping and accounting.

The accountants are submerged in thinking about what’s ahead, the bookkeepers make sure that everything that was done in the past and everything that is going on in the present is done correctly. Although thoroughly different, one business can’t function properly without having the two.

Accounting requires certification, bookkeeping does not

This explains the educational difference between bookkeeping and accounting. But in no way this means that bookkeepers are less valuable, let’s get that out of the way. They just require different skill sets.

Accountants need a certain level of education. To practice accounting, accountants require formal education and relevant work experience to qualify for the CPA title (Certified Public Accountant). It encompasses an understanding and management of the entire financial operation of a business. Sometimes even a financial degree or a law degree can come in handy.

In contrast, bookkeeping is primarily focused on accurately recording financial transactions and making sure there are no discrepancies. No formal education is required for bookkeeping, but it requires keen attention to detail since they’re responsible for detailing where the money comes from and where it goes to. It’s also of utmost importance that the bookkeeper knows all the things a bookkeeping system should have and how to properly use the software.

Bookkeeping entails data interpretation, accounting entails decision making

What does data interpretation mean? It means that bookkeepers are responsible for accurately reading and recording the numbers. But they also have a ton of another thing on their to-do list, some of them are:

  • To process and also maintaining the payroll system of the company,
  • To process invoices.
  • To process expanse claims.
  • To process receipts or payments.
  • To prepare initial financial statements.
  • To prepare and fill out VAT returns.
  • To fill out and manage documents.
  • To track customers for payment.
  • To post journal entries.
  • To manage accounts receivable and accounts payable.
  • Sometimes to provide basic tax advice

And why are the accountants the decision-makers in the company? Because they have all the analyzed data and are equipped to do so. This may be the biggest difference between bookkeeping and accounting. You’ll be amazed to know that accountants have a hand in deciding even the smallest details of a business based on their analyses, like choosing between a coworking space and a traditional office or should the company buy or lease IT equipment. Here is a detailed list of what their job description entails:


  • To do financial analysis and a financial strategy.
  • To do cash flow forecasts.
  • To do a tax strategy.
  • To adjust entries.
  • To prepare the final financial statements and reports.
  • To organize the budget.
  • To analyze business performance.
  • To complete income tax reports.
  • To do audits
  • To give out financial management advice to the business owner and the other employees.

Accounting gives advice to bookkeeping

When it comes to giving out advice, even a small business owner should know some accounting tips to help out the accounting department. Usually, that is not the case. The accountants are the ones who are the most informed and educated that’s why the financial decision-making is left up to them and owners or CEOs just have to give the final okay. Whether that objective is to reduce operating costs or to determine how much to increase employees’ salaries – accountants are the ones that figure out the money to make it happen or if it can happen at all.

When we say that accounting gives advice to bookkeeping, we mean that accountants can tell bookkeepers to prepare a specific report or to do all the reports differently, what to include and what to exclude – so accountants could do their job more efficiently. So if we looked at it from another angle, the bookkeeping department is the one helping the accounting department. And the accountant department is the one helping the whole company. Talk about a difference between bookkeeping and accounting that actually makes sense.

Bookkeeping is an administrative process, accounting is a high-level analyzing process

This means that the difference between bookkeeping and accounting is that bookkeeping keeps track of all financial records while accounting analyses them.

The purpose of bookkeeping is to keep or record financial data and the records of bookkeeping are used for tracking the financial stability of the company. In their hands is the whole finance organization of the company. 

Accounting-generated financial reports are indeed based on the bookkeeping reports but analyzed in a special way depending on the objective. The analyzing process is complexed and often depends on business trends. The key goal that accountants want to achieve with their analysis is to check if the business is financially ready to seek out new opportunities and what opportunities should the business seek.


The bottom line is that if you want to enhance your business’s efficiency you need to grasp the difference between bookkeeping and accounting because you need the expertise of both. It is up to you if you’ll hire one person for each job, or form departments, or even do it yourself. The important thing to remember is that every business needs to have its financial ducks in a row.

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