A common question is whether there is any difference between accounting and bookkeeping. Bookkeeping is essentially a subset of the larger topic of accounting.
In essence, a bookkeeper is a person who is broadly responsible for the basic functions of the accounting department. The bookkeeper creates financial transactions, as well as financial reports that summarize those transactions. These activities will likely require the bookkeeper to create or record information from a variety of source documents, such as invoices to customers, cash receipts, and supplier invoices.
The bookkeeper is also responsible for the accuracy of the accounting records, which calls for considerable attention to the filing of the accounting records, consistent recording of information, and the examination of accounts to ensure that they are correct. Bookkeeping transactions are mechanical in nature; that is, the bookkeeper follows a prescribed set of procedures on a repetitive basis to record a common activity.
Qualifications of a bookkeeper
There is not necessarily a firm requirement for a bookkeeper to have a university degree in accountant. It is entirely possible that a person has learned a sufficient amount on the job to be quite a competent bookkeeper. However, it certainly helps to have some formal training in accounting.
It is also possible that prospective employers will quire experience with the accounting software that they currently use. We do not believe that this is necessary, since the smaller companies that typically hire bookkeepers operate accounting systems that are quite easy to learn. A competent bookkeeper should be able to learn the essentials of one of these accounting packages within a short period of time.
Here at Tianlong Services, we are competent in most cloud accounting software, such as QuickBooks, Xero, MYOB, Sage, Zoho and Fiskl. Moreover, our staff are trained periodically to ensure competence and efficiency in doing your work.
Qualifications of an accountant
In contrast with a bookkeeper, a university degree is needed to pursue the qualification required to be an accountant. A CA(Singapore), Chartered Accountant (Singapore) is an accountant who has passed all parts of the Singapore CA Qualification examination, as administered by the Singapore Accountancy Commission (SAC), and who has also completed all experience requirements as required by the SAC.
Principal accountabilities of the bookkeeper
Invoicing and cash receipts activities
- Issue invoices to customers
- Collect GST from customers and remit them to the government
- Ensure that receivables are collected promptly
- Record cash receipts and make bank deposits
- Conduct monthly bank reconciliation
Recording and cash payment activities
- Pay supplier invoices in a timely manner
- Take all reasonable discounts on supplier invoices
- Pay any debt as it comes due for payment
- Monitor debt levels and compliance with debt covenants
- Conduct monthly reconciliations of all accounts to ensure accuracy
- Create and issue financial statements
- Notify management of any issues appearing in the financial statements
- Assemble information for the year-end audit
- Provide information to a tax advisor for the creation of tax returns (Form C/CS)
The bookkeeper is not usually considered part of the senior management team. The reason for this exclusion is that the position is essentially clerical – the bookkeeper is not being called upon to actively manage the business, but rather to compile its results.
Some companies give their bookkeepers titles that exceed their actual job responsibilities, such as “accounts executive”, or “controller”. If there is any question about the functional title of a person, the ultimate test is whether the person is solely and individually responsible for all accounting activities. If so, the person is a bookkeeper.
Principal accountabilities of the accountant
Accounting encompasses the following activities:
- Creating the charts of accounts
- Setting up the general ledger
- Designing the financial statements
- Issuing customized management reports to address specific issues
- Altering the classification or recording of transactions to meet certain accounting standards. In Singapore, it is the Singapore Financial Reporting Standards (International) (SFRS(I)).
- Creating a budget and comparing it to actual results
- Compiling tax returns from the financial information
- Creating a set of controls within which the financial system operates
- Designing a record keeping, archiving, and document destruction system
Usually, there is at least one trained accountant responsible for the accounting operations of a medium to large-size business, who sets up the procedures that are then followed by a larger number of bookkeepers or clerks.
In short, the difference between accounting and bookkeeping is that bookkeeping focuses on repetitive business transactions, and so is a subset of the much larger set of tasks that can be encompassed by accounting.
There are also significant differences between the bookkeeper and accountant positions. The bookkeeper role is broad-based, with one person typically handling all of the accounting transactions for a small business. The bookkeeper tends to be very experienced, but is more likely to be lacking somewhat in formal accounting training. Conversely, the accountant is more likely to work exclusively on a specific area, such as the general ledger, and is more likely to have formal training in the accounting function.