What’s the Difference Between an Accountant and a Bookkeeper?
People use accounting and bookkeeping interchangeably, and it’s easy to see why. They both handle financial matters within small companies.
Although the roles sometimes overlap, there are some key differences to understand if you want to hire the right professional for your business. Otherwise, you may waste money and not get what your business needs.
Below, we’ll explain the differences between accounting and bookkeeping and explore some educational and credential distinctions between the two roles. We’ll conclude by recommending which one you should hire, depending on your situation.
The Fields: Accounting vs. Bookkeeping
Accounting and bookkeeping both play significant roles in the accounting cycle. However, each field has some differences.
What is Bookkeeping?
Bookkeeping is the process of recording the daily transactions in a firm’s books or accounting software. It’s an “on-the-ground” role, dealing with the minutiae of day-to-day finances — especially gathering financial data.
Some bookkeeping tasks include:
- Recording transactions in the general ledger[a] and other journals/ledgers with journal entries
- Reconciling accounts
- Producing invoices
Sometimes, bookkeepers will generate basic financial statements as well. However, as you’ll see, that’s more of an accounting function.
Overall, the bookkeeper is essentially a financial recordkeeper.
What is Accounting?
Accounting involves keeping and reporting financial information for an organization. It’s a higher-level role that involves more advanced tasks than bookkeeping — although some accountants also do the bookkeeping at organizations.
An accountant’s main role begins where a bookkeepers’ ends. They build on the bookkeeper’s work using critical thinking and analysis to interpret the data and improve the business.
Accountants may perform the following tasks:
- Producing financial statements
- Completing income tax returns
- Performing tax planning
- Interpreting data for the business owner
- Analyzing financial data to recommend certain actions
- Creating financial models
Ultimately, accountants’ biggest contribution comes in translating the raw financial data the bookkeeper collects into actionable advice the business owner can use to run the business better — whether that’s identifying profit opportunities, cutting expenses, making investments, or saving on taxes.
The Professionals: Accountant vs. Bookkeeper
Bookkeepers: Education and Credentials
Bookkeeping doesn’t have formal education requirements in the US. People can start a bookkeeping career right out of high school, as long as they have the skills and drive required to land work.
That comes back to bookkeeping being a transactional job. The most important things bookkeepers need to have are sharp attention to detail, some technical financial knowledge, and a bit of experience with accounting software to ensure the books are clean and correct.
In fact, accounting students often find bookkeeping work to gain experience and make some income while studying for their degree. They may also be able to earn promotions to full-time accounting roles with enough experience and skill too.
With all this in mind, many pursue a 2-year associate’s degree or certificate in bookkeeping to improve their knowledge and marketability.
Additionally, many organizations award certifications to bookkeepers for passing exams and fulfilling other requirements. For example, the National Association of Certified Public Bookkeepers (NACPB) awards the Certified Public Bookkeepers (CPB) to bookkeepers that do the following:
- Pass the 4-part Uniform Certified Public Bookkeeper Exam
- Have an associate or bachelor's degree in accounting or complete its Education Alternative
- Have 1 year (2,000 hours) of bookkeeping or accounting experience
- Agree to abide by its Code of Professional Conduct
- Maintain 24 hours of continuing professional education (CPE) each year
Accountant: Education and Credentials
Accountants can come with a much broader range of education, experience, and credentials. That said, minimum education levels are higher than in the bookkeeping field.
All accountants need a 4-year bachelor’s degree (usually in accounting) at the very least — except for in the rarer cases of bookkeeper-to-accountant promotions. Many go further and get master’s degrees to further their knowledge and specialize. They also often do so to fulfill the Certified Public Accountant (CPA) requirements.
Speaking of, the CPA — awarded by the American Institute of Certified Public Accountants — is the gold standard accounting credential. Accountants have to pursue extra education beyond the typical bachelor’s degree, obtain qualifying work experience, and pass the rigorous, 4-part CPA exam to become a CPA.
CPAs often specialize in certain areas. For example, one CPA might focus on small business taxes; another may pursue a specialization in business valuations. Yet, another may decide they want to do corporate financial or cost accounting. The AICPA offers additional certifications for CPAs that want to demonstrate their specialized expertise.
Not all accountants become CPAs, though. Some accountants who want to do taxes get the IRS Enrolled Agent (EA) certification. EAs are tax specialists and tend to cost less than a CPA if you need taxes done.
Do I Need an Accountant or a Bookkeeper?
Ultimately, an accountant’s work begins where the bookkeeper’s ends. The bookkeeper handles the on-the-ground recordkeeping tasks, while the accountant takes that material and uses it for higher-level matters.
So which do you need?
If you’re smaller and just need someone to deal with the constant transactions and other data gathering, a bookkeeper might be your best bet. However, if you’re growing fast and need someone to handle more complex financial decision-making, you may want to consider an accountant.
In either case, however, you’ll need to equip them (and yourself) with cloud accounting software like ZarMoney to stay ahead of the game. Try ZarMoney free for 14 days to see what it’s all about.