Bookkeeping vs Accounting: What is the Difference?

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A look at the accounting process as a whole:

Accountants and bookkeepers both play a vital role in the accounting process. If you ever find yourself deciding on a career between the two, it is important to understand exactly what services each profession provides. Bookkeepers are record keepers; they monitor and keep track of the daily transactions a business will encounter. Accountants, on the other hand, are less about the small details and more about what the information means as a whole.

Bookkeeping can be viewed as a tedious process. It requires absolute attention to detail and utmost accuracy. The data they compile is then sent over to an accountant. When an accountant takes over, they use the information the bookkeeper recorded to make financial statements. They dissect it to be able to help the business owner better understand their overall financial status and predict what the business may need in the future. Accountants also have the ability to perform audits.

Bookkeepers and accountants are expected to have similar abilities and qualities. They collaborate with one another, working towards the same goal – guiding your business through the accounting process. With this in mind, there are also important distinctions between the two professions. Some key differences between the two include educational requirements, earning potential when starting out, and overall job prospects.

It is actually common for an accountant to have started out as a bookkeeper, and then take the steps to move into accounting.

Overview:

  • Many people think bookkeepers and accountants do the same thing, however they tackle separate roles and have different requirements.
  • It is easier to become a bookkeeper than an accountant, which is why it is commonly used as a steppingstone towards becoming an accountant.
  • Although it is not always required, most accountants choose to become certified public accountants (CPAs) and earn their master’s degree.
  • A bookkeeper gathers the financial data, while the accountant looks at the information as a whole to make decisions about it.
  • Accountants are required to complete a certain amount of education. While a bachelor’s degree could get you started, it is common to need a master’s degree and a CPA license for many jobs.

About Bookkeeping

The requirements to become a bookkeeper are much less than what is needed to be an accountant. All one needs is a keen eye for detail and to be comfortable with doing math. It is not unheard of to start as a bookkeeper while simultaneously completing the educational requirements necessary to become an accountant. It is also possible to be a bookkeeper and be offered some accounting duties due to your experience.

A business owner hires a bookkeeper to complete duties including recording transactions and performing bank reconciliations. A bookkeeper may be hired on full time, part time, or even as just a consultant. It is important that your bookkeeper be able to find even the smallest of inaccuracies.

A Look at Accounting

While you also need to have mathematical abilities as an accountant, there are other skills that you must possess. An accountant must be an analytical person and a logical thinker. Bookkeepers gather the small information, and accountants use that information to make predictions and conclusions.

There are many job prospects for an accountant. They can work for themselves or a business, big or small. They can work for law offices, or insurance companies, and even in hospitals. It is also quite common for accountants to choose to work in tax firms.

Accountants work with math all day, so it is appropriate to assume that if you do not enjoy math, or find it difficult to do, this is probably not the job for you.

Educational Differences

Although there are educational degrees and certificates that both accountants and bookkeepers can attain, they are not necessarily always required. The state does not define how much education one needs to become an accountant or bookkeeper, that is left up to the companies that need them to lay out their own requirements. A person can become a bookkeeper technically right after they graduate high school, but it is usually preferred by most employers that they hold some type of college degree or certificate.

It is possible to start working as a bookkeeper to get some experience, and then decide to return to school for an accounting or finance degree.

If your goal is to be an accountant, it is recommended to also earn the title of certified public accountant (CPA). There is a separate exam to become a CPA, but it opens up a lot of opportunities. To be able to take the exam you need 150 postsecondary educational hours (which equals a bachelor’s degree) in accounting and 30 more hours of graduate work. Many people with the goal of taking the CPA exam choose to earn their master’s degree to fulfill the qualifications.

There are a vast number of career opportunities for accountants and even some bookkeepers. A few examples of these job opportunities include a financial auditor, an enrolled agent, or a forensic accountant. Let’s dig in a little deeper on these three careers.

Financial Auditor

There are two types of financial auditors – internal and external. An external auditor requires significantly more education than internal.

To be an external auditor, you need to have a CPA license and most likely a master’s degree. These types of financial auditors work for public accounting firms most of the time.

An internal auditor on the other hand does not always require a CPA license. Most internal auditors only need an accounting/finance bachelor’s degree and some experience in their field. Internal auditors work for smaller companies, maintaining the books and evaluating the financial procedures.

Enrolled Agent

An enrolled agent (EA) is a professional who represents taxpayers and is authorized by the United States government. To become an EA, one must either pass a test covering individual and business tax returns or gain the necessary experience working as an IRS employee. An EA supports and helps taxpayers who have any type of problem with the IRS.

Forensic Accountant

If you are interested in focusing on a more particular area in accounting, one option is forensic accounting. A forensic accountant can be considered a detective of sorts. They use investigative skills to examine  the finances of an individual or business. Forensic accountants tend to be brought in when legal issues arise. There are a number of industries where forensic accountants are needed including law firms, law enforcement agencies, insurance companies, and even large corporations.

This specialized form of accounting requires a CPA license most of the time and also one must pass a certified fraud examiner (CFE) exam. This exam goes over four major areas: (1) Financial Transactions and Fraud Schemes, (2) Law, (3) Investigation, and (4) Fraud Prevention and Deterrence.

Lastly, to become a forensic accountant, you must also be a member of the Associate of Certified Fraud examiners.

Skill Requirements

Before becoming an accountant or bookkeeper, you should be proficient in mathematics. These professionals work with numbers on a regular basis; if math is a struggle or boring, this work is probably not for you.

A bookkeeper must have a keen eye for detail and be able to catch even the most minute inconsistency. Missing even a small detail can lead to bigger, more expensive problems in the future. Most bookkeepers excel at multitasking, as they must handle several different tasks throughout their day.

An accountant also requires an eye for detail, but they must also have the ability to examine, analyze, and problem solve. They use the information a bookkeeper gathers and maintains to come to an overall conclusion about a company’s financial wellbeing.

Starting out: A look at Income and Benefits

Both accountants and bookkeepers have a large expanse of possible starting incomes. While accountants can end up making a decent living, in the beginning with little to no experience, their salaries tend to be much less than a seasoned accountant.

Another thing you have to consider is the field of accounting you are in. If you went through all of your schooling and earned a CPA license, you can expect a higher starting salary. In particular, public accounting firms tend to pay the most to those fresh out of school. The “Big Four” accounting firms – Deloitte, EY, KPMG, and PwC – have offered recent candidates that passed the CPA exam $45,000-$60,000/year as a starting salary.

Keep in mind, your income is not the only thing you should be focused on when looking for an employer, benefits should be taken into consideration. Paid vacation days, health insurance, and the ability to work from home are some of the benefits that may be important to you.

Smaller public accounting firms tend to pay about 10% less than the “Big Four” for a beginner’s salary. Accountants that choose to work for private companies also usually make less starting out compared to the “Big Four”.

Bookkeeping usually doesn’t earn a salary, rather it is an hourly wage occupation. A bookkeeper can expect to earn about $20/hour, or about $40,000 a year full-time. The advantage to working an hourly wage is the opportunity for overtime. Overtime is time and a half, or your hourly wage times 1.5, for every hour worked beyond 40 hours a week. This is especially relevant during tax season when bookkeepers are busiest.

Job Outlook

Accountants and bookkeepers not only have a vast difference in starting salary, but they also have differences in job growth. According to the Bureau of Labor Statistics (BLS) the employment of accountants and auditors is projected to grow 7 percent from 2020 to 2030.

On the other hand, the BLS states the employment of bookkeeping, accounting, and auditing clerks is projected to decline 3 percent from 2020 to 2030. While the need for accountants will always exist, bookkeepers and auditing clerks are facing technology advances that can do the same tasks they tackle.

Factors to Consider

If you are looking for a long-term career with opportunities to grow and move up, accounting might be the best route for you. Although the educational requirements are more vigorous, the potential earnings once you are established are quite high.

If you are content with an hourly wage job, or looking more short-term, bookkeeping might be the best choice. It is also a great way to test out the field before committing the time to the educational requirements of an accountant. Bookkeeping is much less competitive and has lower qualifications than accounting.

Also, keep in mind that bookkeeping involves using accounting software and databases, so you may need to learn new technology.

FAQS

How to you go from bookkeeper to accountant?

Bookkeepers produce financial records for organizations. They are tasked with keeping track of financial data, including checks, invoices, costs, and revenue.

When a bookkeeper wants to change careers and become an accountant, they will need to decide on how much education they are willing to complete. While a bachelor’s degree could get you started, earning a CPA license and even a master’s degree can be extremely beneficial.

Is it hard to become a bookkeeper?

If you consider yourself skilled in mathematics, are highly organized and detail oriented, learning how to maintain the books for a company is pretty straightforward. Any previous knowledge or experience in accounting will also help jumpstart the process.

What are the jobs that are in demand for accountants?

Northeastern University in Boston has named the following as the five most in demand finance and accounting jobs: Controller, Financial Manager, Management Consultant, Personal Financial Advisor, and Financial Analyst.

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