Difference Between Accounting and Bookkeeping : Why Understanding Both Concepts Would Benefit Business Owners

A business is more than making a sale or steaming revenue. A long-term growth need for every entrepreneur is to be numerate and possess a robust understanding of their financial health as a business. Though it is marketing and customer service that often get all the spotlight, we can’t ignore the disparity between bookkeeping and accounting and let alone how knowing about both concepts could be helpful to business owners.

Numbers tell a story. They reveal how efficiently your business is operating, where investments are being made and whether you’re even profitable at all. Business owners who educate themselves on accounting and bookkeeping, make smarter decisions, better control cash flow and market their business more effectively.

What is Bookkeeping?

Bookkeeping is the method of recording financial transactions on a regular basis. It is the bedrock of your business’s financial system.

Key responsibilities in bookkeeping include:

• Posting of sales, purchases, payments and receipts.

• Handling billing and following up on accounts payable/receivable.

• Maintaining financial records in an organized manner, ideal for full tax compliance and auditing purposes.

You can think of bookkeeping as the first layer of financial management, where you make sure all your data is consistently and accurately recorded. Without good bookkeeping, it’s nearly impossible to have good accounting.

What is Accounting?

Accounting is more than recording transactions, it’s about interpreting, analyzing and presenting financial information.

Key responsibilities in accounting include:

• Preparing financial statements including balance sheet and statement of income, and statement of cash flow.

• Understanding Profitability:- It just reflects the capability of the business to earn profits, while Gross profit margin is a more accurate indicator of profitability which includes both cost and overheads.

• Providing support during tax returns and compliance.

• Providing insights for strategic decision-making.

In other words, accounting takes the information in bookkeeping and builds on it so that business owners can make a sense of where their finances stand, as well as what they mean for the future.

Accounting vs. Bookkeeping

While the two are commonly interchanged, there is a clear difference:

Bookkeeping

• Documents financial transactions on a daily basis

• Interprets and summarizes financial data

• Concentrates on details and organization

• Focuses on the big picture

• Encompasses all processes by which financial information is recorded

• Tasks done by bookkeepers or assistant accountants

Accounting

• Tasks performed by accountants

• Forms primary purpose of accounting

• Opportunity for interpretation, managerial decision-making

• Helps maintain a record

• Prepares report/analysis.

Basically: Bookkeeping is recording the data, Accounting is interpreting from the data.

How Business Owners Benefit by Understanding Both Concept

Understanding both accounting and bookkeeping has its benefits for business owners:

Better Financial Decision-Making

Understanding these two concepts helps business owners understand where the money is coming from and where it is going. This is useful for budgeting costs and managing growth.

Improved Cash Flow Management

Accounting offers up-to-the-minute information about the money that is flowing in and out of a business, bookkeeping uses that data to help keep tabs on the company’s success over time. That way businesses aren’t surprised by running out of money.

Compliance and Tax Readiness

Keeping clear records means easier tax filing, while accounting makes sure you’re complying with the law and making the most of all those deductions. – This is a lowered risk of fines.

Strategic Growth and Planning

Numbers don’t lie. Key accounting indicators from the books help in citing gainful avenues, inefficient sectors and also potential investments.

Competitive Advantage

Entrepreneurs who understand both are ahead of the game. They can pitch investors with certainty, negotiate loans and scale in a responsible way.

Real-World Example

Imagine two business owners:

Owner A tells Owner B that he only concentrates on the sales and not tracking. Months later, they discover that expenses have outgrown profits.

Owner B utilizes bookkeeping for daily transactions and accounting to review reports. They identify overspending quickly, move budgets around and invest in marketing campaigns that deliver real growth.

Who do you think will live longer? "Owner B because they know the difference between bookkeeping and accounting, and why they'd want to learn both."

How Amazigra Business Solutions Inc. Can Help

And, as much as business owners should grasp these concepts they should not have to get bogged down in the nitty gritty of day-to-day accounting and bookkeeping. With Amazigra Business Solutions Inc. this is now possible.

Amazigra provides: Trusted accounting and bookkeeping solutions

• Use professional bookkeeping​ to keep your records straight and accurate!

• Accountancy support to generate and maintain financial data and reports.

• Help with tax conforming and filing.

• Business advisory services designed to assist owners in being smarter about what they’re doing.

Working in partnership with Amazigra Business Solutions Inc., owners can concentrate on expanding their business while leaving the financial aspect in trusted hands.

There’s more to business than making money. It’s about getting under the numbers in the revenue. Bookkeeping and accounting may sound like back-office tasks, but they are really at the core of making informed decisions.

Learning both, and applying both to their own business, owners have a clear path; they avoid bad decisions or costly mistakes (and put off the chaos of burning out), and create an enterprise that isn’t just surviving but thriving.

And if it’s a dependable company you’re after to manage your financial records and offer professional accounting advice, Amazigra Business Solutions Inc. is the ultimate destination for all your accounting and bookkeeping needs.

Because when all is said and done, that’s really what it comes down to: understanding the numbers and having the right team to help keep you on track.