If you’re interested in a career in accounting, you’ve probably heard about opportunities in both bookkeeping and accounting. While there is some overlap, they are both distinct professions with different responsibilities and career progression. We’ve put together everything you need to know about the difference between bookkeeping and accounting, and the key bookkeeping and accounting qualifications that will help you advance into your chosen career.
What is bookkeeping?
The dictionary definition of bookkeeping is defined as “the skill or occupation of maintaining accurate records of business transactions”.
The main function of a bookkeeper’s role is to accurately record financial data, ensuring that entries are correct on a daily basis, keeping a log of all transactions in the day books. They record and calculate income and expenses, raise purchase invoices, make bank transactions, and create sales invoices.
Bookkeepers also ensure that the accounts balance using a trial balance. Another key responsibility is providing a range of information in report formats, such as daybooks, nominal analysis reports, and aged debtor reports. Bookkeepers will have the skills and knowledge to explain financial information to business owners and make clear the meaning of these reports based on this information.
What is accounting?
The dictionary defines accounting as “the skill or practice of maintaining and auditing accounts and preparing reports on the assets, liabilities, etc, of a business”.
Accountants are responsible for overseeing accounts, producing statutory accounts and tax returns in compliance with the law. They must maintain a good knowledge of current financial legislation and ethical issues. This is because a part of their role is interpreting data, and providing advice about financial decisions that could affect an organisation.
Accountants working for an accounting firm will usually work with a variety of businesses, sometimes only meeting with each client once a year. However, some accountants go down the management accounting route, working in-house at an organisation. There they will contribute to strategic decisions and have a large impact on business growth.
At the end of each financial period, accountants will adjust the entries made by bookkeepers, to ensure that they follow the relevant accounting concepts, principles, and rules. They use the trial balance to create financial statements, including the profit and loss and balance sheet reports.
Accountants provide complete reports and analyse the costs of running the organisation. Based on these reports, they assess whether the company is profitable, as well as its individual products and services. They then use this information to help managers and directors to make informed business decisions.
Accountants often choose to specialise in different areas of finance such as tax or forensic accounting, which means specific responsibilities, as well as pay, can vary greatly.
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Bookkeeping vs. accounting
Bookkeeping is primarily concerned with accurately recording financial data, while accounting involves interpreting and reporting on that data. Bookkeepers lay the groundwork for accountants, providing data that is essential to the performance of their role.
As bookkeeping and accounting are so closely related, many finance professionals will do both at some point in their careers. For example, some find they are able to begin in a bookkeeping role, and then later progress into accounting roles where they can build on the skills and knowledge they have gained so far.
Which is for you?
If you like the idea of working with data on a day to day basis and have great attention to detail, you may enjoy being a bookkeeper. Bookkeepers must be highly organised and efficient, be able to focus on numerical data for long periods of time. If this sounds like you, a career in bookkeeping might just be the answer.
Accounting is normally both more analytical and strategic in its focus, and senior accounting roles are often more about making key business decisions based on financial data, than about processing data yourself. Accounting offers a broader choice of career paths and a broad split between financial and management accounting. If you love choices and variety, a career in accounting could be for you.
An accountant can choose two main paths; become a management accountant or a financial accountant. Management accountants tend to work in one company and focus on taking a strategic view of finances to ensure the company’s success. Financial accountants will focus on auditing and finance (though not exclusively). The difference between the two is covered in more detail here.
Whichever route you choose to take, you will need to gain the appropriate qualifications so that you can demonstrate your expertise to employers.
Now you know the overall differences between bookkeeping and accounting, you might be wondering what qualifications you would need.
Bookkeepers aren’t required to have any formal education, but the right qualification can certainly help you demonstrate your expertise throughout your career. The Association of Accounting Technicians (AAT) provides a well-regarded bookkeeping course to kick-start your career.
Accountants will need to prove their ability through qualifications, and which ones you choose depends on your previous experience, as well as where your ambitions lie. Those just embarking on their accounting education often begin with AAT courses. Slightly more advanced are the ACCA courses, which are internationally recognised. For those with an interest in management accounting, CIMA courses are a popular choice.