Bookkeeping vs. Accounting

We're often asked what is the difference between bookkeeping and accounting?

Bookkeeping and accounting are related but they are separate disciplines within the field of finance.

Bookkeeping refers to the process of recording and maintaining financial transactions, including sales, purchases, and payments. This typically involves creating and updating financial records such as invoices, receipts, and ledgers. The goal of bookkeeping is to ensure that all financial transactions are recorded accurately and in a timely manner.

Accounting, on the other hand, is the process of interpreting, classifying, analysing, and reporting financial information. This typically involves creating financial statements such as the balance sheet, income statement, and cash flow statement. The goal of accounting is to provide a clear and accurate picture of a business's financial performance and position. These financial reports for a small business are usually prepared at 'tax time' and the information is used to inform your tax return and report your financial information to the Australian Taxation Office (ATO) and other government agencies as required. 

You may find some overlap between accountants and bookkeepers, for example a bookkeeper who is also a registered BAS agent can prepare and lodge your activity statements to the ATO as well as do all the bookkeeping. They may also prepare reports from your accounting software. You may find your accountant also offers bookkeeping services and may offer you the full suite of services from bookkeeping, activity statements and accounting services. There are pros and cons of working with just an accountant or both an accountant and bookkeeper. We'll explore these in another post!

In summary, bookkeeping is the process of recording financial transactions and providing the data for accounting. Accounting uses the data from bookkeeping to prepare financial statements, analyse and report on a company's financial performance.