bookkeeping and accounting

What’s the Difference between Bookkeeping & Accounting in Small Business?

You’ve probably heard the terms “bookkeeping” and “accounting” used interchangeably. In some ways, they are very similar. But, there is a difference between the two and if you are looking into small business bookkeeping or accounting, it’s important to know where the similarities begin and end.

Small Business Accounting vs. Small Business Bookkeeping

Although small business accounting and small business bookkeeping are a lot alike, the differences are great enough that your small business may require both. They work together synergistically.

A small business bookkeeper keep track and record of all the business transactions of your company and put them into a general ledger and enter the figures into a long-term software program. Sales, expenses, bank transactions, cash exchanges and any other financial moves are among the information a small business bookkeeper deals with.

The ledger serves as a central location for your business’ finances. Payroll invoices, tax payments, accounts payable, and accounts receivable all go into the records. Very small businesses may only have one or two entries a day, or even per week, while larger ones may have multiple listings charted each hour.

A small business accountant actually analyze the information in the ledgers, so they can create insight that helps you make wise financial decisions. By taking an informative look at how money is coming into and going out of the business, a seasoned accountant can let you know any areas in which improvements can be made. Accounting is considered the language of bookkeeping. It requires knowledge in the field and a sharp eye. While a regular employee is often able to record your financial transactions, having a professional accountant will actually help you grow your business.

When a regular employee is in charge of keeping the books rather than a trained professional accountant, many areas go unattended. Often times, it is not obvious when a service or product is costing more than it makes which can put a company right out of business. A professional knows how to discover such areas that can easily be overlooked.

There are two basic small business accounting methods that are typically used – cash vs. accrual. The methods are also referred to as single and double entry. Cash basis accounting involves income being recorded as it is received or when company expenses are paid out. Accrual based accounting records income as it is earned and takes into consideration the expenses that are incurred. Accrual based accounting is a more thorough and realistic look at the numbers, in other words because not all money taken in is profit. That which is left from expenses incurred is called profit revenue. By distinguishing the amount that is profit, a business owner is able to see what he or she actually has to work over the expenses his business is costing him or her.

Are you looking for advisors experienced in your industry? If you see that you could benefit by adding a small business accountant to your company, consider the services of Complete CPA near your area in Sarasota, Florida. Hire Complete Small Business Solutions today and get help for your business from our experienced, local accountant or bookkeeper.