- Even though bookkeeping and accounting are used interchangeably, there is actually an important difference between the two terms.
- Bookkeeping and accounting can be a great start in a business-related career because there are always finances involved.
- If you don't fully understand the distinction between bookkeeping and accounting, then read on to find out.
Bookkeeping is arguably one of the most useful business procedures invented by mankind. Its development has helped business owners keep accurate records of accounts and transactions. Then, it further developed into involving the method of identifying relevant trends to drive business growth, which is called accounting.
The Similarities & Differences Between Accounting and Bookkeeping
Although bookkeeping and accounting are sometimes used interchangeably, they are different in their true functions. We delve into some bookkeeping and accounting facts and trivia to clarify what these two terms actually mean.
1. Bookkeeping Is Mechanical Whereas Accounting is Analytical
Bookkeeping and accounting differ in that the former is mechanical while the latter is analytical. Bookkeeping involves the actual recording of transactions into business accounts. When all these records are taken for financial analysis and preparation of other business results (statements and liabilities), then this is accounting. Another distinction between bookkeeping and accounting is that the first involves a columnar presentation of numbers, while the latter uses reports to present business results.
2. Both Are Important in Different Ways
It's no secret that bookkeeping and accounting are crucial. But why is it so? Bookkeepers ensure that the financial processes of a business are accurate and efficient. Depending on their designation in the company (e.g., accounts clerk, finance officer, payroll officer, etc.), they may be required to handle payroll, invoices, auditing, and government filings. Sometimes, senior bookkeepers or accountants manage the accountants in a mid-size or huge company. Their opinions are consulted by business owners in making crucial decisions.
3. Both Offer a Path to Success
People versed in numbers and gifted with both analytical and management skills can be successful in bookkeeping and accounting. Business owners can also fast-track to success if they have start-up knowledge in bookkeeping, for they will understand the numbers more and their implications.
The industry also awards a competitive salary to these experts, and it is a common practice in business to promote accountants to higher positions because they possess a deep understanding of the organisation's finances.
4. Both Offer Great Career Opportunities
A job in bookkeeping and accounting is a good place to begin for those who want to make it big in any industry. Basic knowledge of money is indeed essential, proven by the fact that some of the world's richest today like J.P. Morgan, John. D. Rockefeller, Arthur Blank, and Phil Knight studied bookkeeping and accounting or started as accountants. An accounting position can also be a good part-time job since there are businesses who only hire experts quarterly in order to do reports and analysis for them.
Fun Facts About Bookkeeping and Accounting
5. Arthur William Fadden, the 13th Prime Minister of Australia, was an accountant. Artie also served in the Treasury and became a member of CPA Australia.
6. Gospel author St. Matthew the Evangelist is the patron saint of accountants, tax collectors, bankers, bookkeepers, and brokers. His feast is celebrated on September 21.
7. Double-entry bookkeeping, an important development in traditional bookkeeping, was popularised by Luca Pacioli, who is known as the father of accounting. A mathematician friend of Leonardo da Vinci, Pacioli published the technique in 1494, but the same idea had been written by Benedetto Cotrugli in 1458. Both are considered important personas in the history of the discipline: Pacioli as the one who codified the book on the accounting process; Cotrugli as the one who invented the double-entry accounting process.
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