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Updated by Albert Fang
Bookkeeping and accounting are two vital functions of any business. They might seem similar to many, but they have subtle critical differences in their overall functionality. For example, bookkeeping involves a day-to-day record of all the purchases and sales. On the other hand, accounting is a more pragmatic and subjective approach to financial data and involves interpreting, organizing, evaluating, reporting, and summarizing it for decision making.
As a business grows, it becomes increasingly hard to carry out these two functions without any assistance, and most organizations hire professionals and financial experts. It would be best to decide whether you want to pursue bookkeeping or a detailed accounting degree based on your future goals and market demand. These terms often overlap and can create confusion if taken lightly.
Money is the backbone of any business. The people responsible for all critical organizational and financial functions are always adequately compensated and awarded, motivating students to adopt this field. However, many students deviate from financial careers because of the competition, harsh environment, and monotonous nature of advanced qualifications such as the CPA. Moreover, the competitive and lucrative nature of the coursework makes it tiring. You must have the proper guidance to proceed with it. Course guidance by Wiley CPA Review is one of the best resources on the market with comprehensive material and a high success rate.
No matter their trying nature, these are the most rewarding careers in the market. According to the Bureau of Labor Statistics, accounting and finance jobs are expected to grow 4% from 2019 to 2029. On the other hand, the Bureau of Labour Statistics indicates that bookkeeping and accounting clerk jobs are expected to undergo a 6% decline from 2019 to 2029. This is due to the increasing incorporation of technology and automation in most businesses.
Financial schools must ensure that the environment is encouraging, positive, and safe for students. Accounting and other financial fields revolve around accuracy. For that, institutions must ensure that students aren’t victims of any mental or physical stress because it increasingly affects their productivity and effectiveness.
Accounting professionals have access to many benefits regarding their overall compensation; these include vacations, health benefits, insurance benefits, etc. In addition, accounting allows autonomy and hands power to the employees to contribute towards the company’s executive decisions.
Before you go ahead and decide on what career has greater importance, you must know the critical differences between the two:
| Bookkeeping | Accounting | |
| Frequency Of Data Analysis | Recording day-to-day purchases and sales | A pragmatic and subjective approach for interpreting, organizing, evaluating, reporting, and summarizing financial data monthly, quarterly, semi-annually, or annually. |
| Functionality | Issues and sends client invoices and receipts and records payments received. | Prepares to adjust entries and analyzes the overall cost of operations. |
| Role In Decision Making | Management makes short-term decisions based on the data provided by the bookkeeper. | Management takes long-term and critical decisions based on the data provided by an accountant. |
| Objective | The key objective of bookkeeping is to keep transaction records organized and proper. | The key objective of accounting is to deduce what the financial data indicate and communicate the information to higher management. |
| Financial Statements | Financial Statements are not prepared while recording transactions. | The accounting process entails preparing financial statements. |
| Qualifications | Bookkeeping doesn’t require any special qualifications or skillset. | Accounting requires special qualifications, certifications, and even skills due to its intricate nature. |
| Breakdown | A bookkeeper engages in both single entry and double-entry bookkeeping and is usually overseen by an accountant | An accountant prepares company budgets and loan proposals, among other monetary functions, and if they have sufficient experience and education, they can pursue higher qualifications like CPA, CFA, etc. |
Salaries and Benefits:
Accounting:
Any accountant fresh out of college can place their bet on Public Accounting. It is the highest paying domain, primarily if you work for one of the Big Four (Ernst, Young, Deloitte, KPMG, and PwC), the best accounting firms globally. You can easily earn $40,000 to $60,000 if you work for either of these firms, in addition to numerous other benefits.
Bookkeeping:
Bookkeepers get paid hourly wages rather than monthly salaries. The average wage is $20/hour, almost $40,000 annually if a bookkeeper works 40 hours a week. This hourly wage system is advantageous for bookkeepers because they can quickly put in extra hours in busier seasons and make 1.5 times their regular pay.
Considerations:
If you have to choose between accounting and bookkeeping, choosing accountancy might be better because it has greater upward mobility and income potential than bookkeeping. The overall education requirement might be more demanding for it; however, it will pay off greatly in the future. However, if you’re someone who wants to adopt a career with decent security and a respectable flexible wage without the fuss of college classes and grueling tests, bookkeeping is your answer. It offers low if not negligible barriers to entry, and the overall job market is less competitive.
Reviewed and edited by Albert Fang.
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Article Title: Accounting vs. Bookkeeping: 8 Key Differences
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