Bookkeeping vs accounting: a comparison

The terms bookkeeping vs accounting, and bookkeeper vs accountant, are often used interchangeably. While there’s plenty of overlap between the two professions, there are also some key differences to be aware of – whether you’re a business owner seeking financial expertise or someone looking to pursue a career in finance. 

In this article, we’ll compare both in detail to help you understand the similarities and differences. Plus, we’ll look at which one might be most suitable for you. 

What is the main difference between bookkeeping and accounting?

The easiest way to think about bookkeeping vs accounting is that bookkeeping focuses on the day-to-day details, while accounting focuses on the bigger picture. There may well be some overlap, especially as both professions have grown their remits to offer a greater variety of services. But the essential difference remains the same. 

Bookkeepers and accountants both deal with the financial matters of a business. They’re good with numbers and maths. But while bookkeepers specialise in the facts and details of transactions, accountants specialise in financial strategy and advice.

You can also think about it in terms of cycles and timelines. Bookkeepers tend to deal with the earlier stages of financial processes, while accountants tend to deal with the later ones. 

Let’s look at both roles in more detail… 

What is bookkeeping?

Bookkeeping is about recording the financial information and transactions of a business – money coming in and money going out. It’s important for businesses to have detailed, accurate, and organised records they can look back on. 

Bookkeeping also involves running the day-to-day financial processes of a business, such as invoicing customers and paying staff. It’s a role all about administrative work. 

Bookkeepers’ tasks tend to happen more frequently than accountants’ tasks. For example, recording financial transactions can happen daily. 

What do bookkeepers do?

Exactly what bookkeepers do will vary from service to service and from business to business. But it’s common for bookkeepers to carry out the following:

• Recording all financial transactions. 
• If using a double-entry system, posting all debits and credits in the relevant accounts and the general ledger. 
• Issuing invoices to clients and customers, as well as chasing any late payments. 
• Paying bills. 
• Managing cash flow. 
• Submitting VAT returns. 
• Running payroll. 
• Completing bank reconciliations. 
• Producing regular financial reports. 
• Contributing to the end-of-year financial statements. 

What is accounting?

Accounting is about providing a business with expert financial analysis and advice. This includes things like strategic planning, assessing financial health, and ensuring regulatory compliance. 

Accountants will use the information recorded by bookkeepers to evaluate what’s going on financially. They’ll draw conclusions about financial risks, cost savings, and ways to improve performance. 

Of course, that’s not to say that accountants don’t sometimes deal in the details too. But it’s not their primary focus, as their specific skills are better used elsewhere. 

Accountants’ tasks also tend to be less regular than bookkeepers’, for example producing monthly reports or annual accounts. 

What do accountants do?

As with bookkeeping, different accounting services will have slightly different offers. And what’s required of accountants will differ depending on the business, for example its size and complexity. But as a general rule of thumb, accountants are responsible for the following:

• Preparing and analysing the end-of-year statutory accounts and financial statements. Examples include the Balance Sheet and the Profit and Loss Statement.
• Preparing and adjusting entries. 
• Filing tax returns, providing tax advice, ensuring tax compliance, and carrying out tax planning. 
• Preparing and analysing regular internal management accounts to track performance. 
• Advising on business decisions and strategy. 
• Advising on other financial matters such as investments and acquisitions. 
• Carrying out audits. 
• Monitoring and assessing the financial health of the business. 
• Using financial data to carry out forecasting and modelling. 

Read more: What to know about your business tax account

What can an accountant do that a bookkeeper cannot?

There are a lot of similarities between the roles and growing overlap between the two professions. But there are certain things that only an accountant is qualified to do.

• Finalising statutory accounts. Of course, end-of-year statements rely on all the financial data captured by bookkeepers. But accountants are ultimately responsible for preparing and finalising them. 
• Advising on tax issues. Bookkeepers will often file VAT returns and may well contribute to tax documents. But only accountants are qualified to file annual tax returns and provide tax advice.

• Auditing. Accountants are responsible for ensuring that business finances are being recorded properly and managed according to best practice. Often, bookkeepers will report to accountants as their line manager. 

• Forecasting. Bookkeepers are focused on past and current transactions. This means accountants are the ones who look ahead and plan things like budgets, strategy, future cash flow, business growth, and so on. 

Read more: Making Tax Digital: everything you need to know

What are the similarities between bookkeeping and accounting?

We’ve covered the differences between bookkeeping and accounting, but there are also a couple of similarities to keep in mind. 

• Software and services. Many software and service providers will offer both bookkeeping and accounting. It’s increasingly common to receive a comprehensive package that covers all aspects of the financial cycle. This means you don’t have to worry so much about separating out the two. 

• Providers, freelancers, and in-house. Bookkeepers and accountants can work for providers that offer these services to businesses, or they can be self-employed. Either way, it’s likely they’ll be working for multiple clients at once. On the other hand, larger companies might need (and have the budget for) full-time bookkeepers and accountants working in-house.

Does your business need a bookkeeper or an accountant?

If you’re looking to bring more financial expertise into your business, it can be hard to know whether to choose a bookkeeper or an accountant. Of course, in an ideal world you’d have both! But money doesn’t always allow for that, especially in small businesses. 

So, here are some questions to help you decide…

• Does my business deal with simple or complex transactions? If your business transactions are straightforward, a bookkeeper might cover what you need. If your finances are more complicated, you might need the advice of an accountant. 

• Do I need help with recording information or analysing it? If you’re struggling to keep up with tracking everyday transactions, a bookkeeper could be just what you’re after. If you have complete financial records at your fingertips but aren’t sure what to make of them, you could benefit from analysis by an accountant. 

• Do you have a small or large budget? If you can’t offer much by way of salary or service fees, it’s worth noting that accounting tends to cost more than bookkeeping. 

Should you pursue a career in bookkeeping or accounting? 

If you’re considering a career in finance but you’re not sure where to start, think about your skillset and the type of tasks that interest you. And consider how you see your career progressing. 

Keep in mind that it’s common for bookkeepers to progress to accounting roles. So just because you start off on one career path doesn’t prevent you from pursuing the other.

What skills do bookkeepers need?

There are various attributes bookkeepers need to perform their role well:

• Numerical skills. It goes without saying that bookkeepers should have strong maths skills and be comfortable dealing with lots of numbers. 

• Attention to detail. Bookkeepers need to record financial information – often large and complicated amounts of it – completely and accurately. They also need to spot errors, for example if the company’s total debits and total credits don’t balance. 

• Organisation. Bookkeepers need to translate lots of financial data from various sources (invoices, bills, receipts, and so on) into clear and tidy records.  

• Versatility. Bookkeepers must turn their hand to a wide variety of tasks, often for multiple clients. 

What skills do accountants need?

Here are a few examples of the kinds of skills accountants will have:

• Strong maths skills. As with bookkeepers, accountants must be good with numbers. 

• Strategic thinking and decision making. Accountants need to be able to take a step back and look at the bigger financial picture. They should feel confident making recommendations about how to improve business performance.

• Interpretation and evaluation. Accountants must have strong analytical skills, able to assess lots of data and draw insightful conclusions. 

• Problem solving. Accountants should be able to use their expertise to resolve complex and tricky issues. 

Are bookkeeping and accounting hard to learn?

Bookkeepers don’t need any specific credentials and can often start their careers straight out of school. For example, they might complete an apprenticeship. There are also bookkeeping qualifications available, for instance through the AAT. 

In comparison, many accountants have a degree in finance or a similar subject. And most work towards professional certifications, for example becoming chartered. What’s more, accountants looking to specialise in certain areas – for example taxation or auditing – usually need to pass qualifications specific to that discipline. 

Other differences between bookkeepers and accountants

• Salaries. It’s worth noting that accountants generally earn higher salaries than bookkeepers. In fact, they tend to earn around £10k more per year on average.

• Demand. It’s anticipated that demand for accounting will continue to grow for the foreseeable future. On the flipside, the demand for bookkeeping is unfortunately expected to decline. This is because of the rise in software and other technologies that can automate more administrative tasks. 

Quickfire summary

While there’s plenty of overlap between bookkeeping and accounting, there are important differences. Bookkeeping focuses on the day-to-day details, while accounting looks at the bigger picture. And there are certain things that only accountants are qualified to do. 

Whether your business needs a bookkeeper or an accountant will depend on your needs. Similarly, if you’re looking to pursue a career in finance, bookkeepers and accountants have different skillsets and career prospects to consider.