7: Bookkeeping vs. Accounting
What is the difference between Bookkeeping and Accounting?
Whether you will be keeping your own books or hiring an account, it is important to know the basics. As always, I have given you a wealth of information that you can delve deep into or just learn the basics. Regardless of how much you learn about keeping your books, every business needs an accounting system. Why? To see if you are really making money and where you are spending or not charging enough and ultimately, what you report to the IRS and how much quarterly payments you need to pay. It will also help you manage your obligations when you have employees and whether you need to report sales taxes.
Bookkeeping is a transactional and administrative role that handles the day-to-day tasks of recording financial transactions, including purchases, receipts, sales, and payments.
Accounting is more subjective, providing business owners with financial insights based on information gleaned from their bookkeeping data.
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What does a bookkeeper do? Bookkeeping, in the traditional sense, has been around as long as there has been commerce – since around 2600 B.C. A bookkeeper’s job is to maintain complete records of all money that has come into and gone out of the business. Bookkeepers record daily transactions in a consistent, easy-to-read way. Their records enable accountants to do their jobs. |
What does an accountant do? An accountant analyzes the financial data a bookkeeper records and provides business owners with important business insights and financial advice based on that information. These are some typical accountancy tasks:
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What does a bookkeeper charge? The salary or rates you’ll pay a bookkeeper depend on your business and its bookkeeping needs. Three main factors affect your costs: the services you want, the expertise you need, and your local market. Your business’s location can also influence how much you pay for a bookkeeper. If you live in a high-wage state like New York, you’ll pay more for a bookkeeper than you would in South Dakota. According to the Bureau of Labor Statistics, the national average salary for bookkeepers in 2020 was $42,410, or $20.39 per hour. |
What does an accountant charge? According to the U.S. Bureau of Labor Statistics, the median salary for an accountant in 2020 was $73,560 per year or $35.37 per hour. However, their years of experience, your state, and the complexity of your accounting needs affect the price. Accountants will either quote a client a fixed price for a specific service or charge a general hourly rate. Basic services could cost as little as $20 an hour, while advanced services could be $100 or more an hour. |
To learn more check out these titles in your LinkedIn Learning Path Videos on Bookkeeping and Accounting: