Accounting and bookkeeping have a specific difference between them sharing the same objective of improving the company’s financial condition. However, both of them are employed in the same manner. Any business novice will often hear the terms bookkeeping and accounting. Since they work together small-sized businesses usually employ both bookkeeping and accounting tasks.
In bookkeeping, the general ledger is used to record every transaction in a business. The ledger is comprised of all financial transactions for a business since its inception.
In the accounting field, all data in the ledger are utilized to formulate financial strategies and make decisions.
Bookkeeping
Bookkeeping is the daily recording of all financial transactions that a company makes. Bookkeeping for small business and accounting are essential and must be implemented regardless of whether your business is still a start-up. Don’t wait until your company grows into a large company before you think about small-scale business bookkeeping and accounting solutions.
Posting is the term used for recording every financial transaction or account. Bookkeeping records all of the following accounts to ensure financial statements and tax purposes.
- Asset accounts – comprise of intangible and tangible items belonging to your company. These assets can include laptops, vehicles properties, buildings, or property. Intangible assets can comprise logos, copyrights or trademarks.
- The expense accounts can comprise of business purchases that help earn extra income. It could be products or services. In addition, there could be expenses such as leasing, promotions, or the salaries of staff members.
- Income Accounts or revenue is a record of all the cash generated from the sale of your products or services. It could also include dividends of other investments.
- Liability accounts – may include business loans, late utility charges, unpaid debts payments to creditors, and any other payables.
- Equity Accounts are used to show the value of the business or company. A simple formula involves subtracting the liabilities of a business and assets.
Bookkeeping Methods
A characteristic that stands from the rest in accounting is the need for accuracy. Even the most experienced bookkeeper can make errors, which is why they are usually under the supervision of an accountant, unless the company is small. The research has found that using an external tax accountant and bookkeeping services can be an enormous benefit to your business.
Two bookkeeping methods exist:
- Single-Entry System: This system allows for the single entry of every transaction of the company in the ledger general. This method is best suited to smaller companies with less revenue.
- Double-Entry System is the gold standard in recording that is widely used by tax accountants, business owners, and bookkeepers. The system is more extensive and complex than single-entry.
Accounting
Accounting is a procedure that involves recording, processing and distributing financial data. In addition, accounting manages tax preparation as well as other financial tools that are needed. This will provide the business owner with vital aspects of the financial aspects of your company.
The accounting process is able to be outsourced to an independent accounting service. In local businesses, too outsourcing bookkeeping and accounting tasks is quite popular.
Accounting Methods
- Cash Accounting – this kind of accounting is popular among small business owners. The only transactions recorded in cash accounting is cash earned as well as cash receipts. A sale is reported when the purchase is made and the expense is reported after the bill has been paid.
- Accrual Accounting: under this procedure the transactions are recorded at the time they are made instead of waiting for the payment. This is the same for expenses, even when no payment has been made.
Conclusion
Accounting and bookkeeping may be distinct, they share more similarities than distinctions. Both are tax-compliant and perform a variety of roles, particularly in small companies.
Accounting professionals can play the title of bookkeepers, but bookkeepers are not classified as tax accountant without an appropriate level of education and accreditation. Accounting knowledge is required in both fields.
A business of any size could benefit by the services of a bookkeeper or tax accountant in Canada.
