While bookkeeping and accounting are both crucial to the financial success of your business, it is a common misconception that they are the same thing. Bookkeeping is essentially data entry and record keeping of financial events in your company. Accounting is much more strategic. Accounting requires the accountant to interpret, analyze, classify and report based on the data and records kept in the bookkeeping process. Often in smaller companies, these two processes are done by the same person.
In larger companies, however, they can be separated.
While accounting is generally considered to be the more important of the two, accountants cannot do their jobs without accurate, thorough and timely bookkeeping. The reports that accountants generate and the decisions they make are based predominantly on the data they get from "the books."
Financial analysts use these reports and this data to project the future success of the company, to set budgets and manage the expectations of owners or shareholders.
Considering all of the people and processes that are dependent on bookkeeping, it is something that you can overlook at your own risk. Bookkeeping is made up of recording financial transactions, recording cash receipts and disbursements, producing invoices and completing payroll, as well as, several other important business functions.
Bookkeeping ensures you have a clear history of the financial shape of your company, while accounting analyzes that history to plan for the future.