Bookkeeping vs Accounting: What’s the Difference?
In 2020, the United States’ accounting industry produced over $110 billion in revenue, employing over 1.39 million accountants and 1.62 million bookkeepers. There were a record-setting 5.4 million new business applications in the U.S. in 2021, and this growth fuels the need for corporate financial assistance.
While accounting and bookkeeping are closely connected, there are distinctions between these two functions. Bookkeeping is just one piece of the entire accounting process.
In short, a bookkeeper prepares financial data for submission to accountants for reporting and analysis. Below, we compare bookkeeping vs. accounting in greater detail, including common duties for each role and the primary differences between the two professions.
What is Accounting
Accounting, or accountancy, involves tracking and reporting on a company’s financial records and making operational decisions based on this data. A business’ accounting cycle consists of eight steps, beginning with tracking transactions and ending with closing the books. Accountants utilize the financial data recorded by bookkeepers to complete this process.
Accounting duties typically include:
- Preparing financial statements according to generally accepted accounting principles (GAAP), used by corporations in the United States, or International Financial Reporting Standards (IFRS), used in other locations globally. This encompasses the income statement, also known as profit and loss (P&L) statement; balance sheet; cash flow statement; and equity.
- Assisting with month-, quarter- and year-end close processes, which includes reconciliation to ensure all payments and earnings for each time period are recorded.
- Analyzing and interpreting financial data to help inform business decisions.
Employees working in accounting will find it necessary to familiarize themselves with many common accounting terms, from accrual accounting, required by GAAP, to trial balances, a summary of balances prepared for internal purposes.
In recent years, there have been dramatic changes to the accounting profession. Artificial intelligence (AI) is helping to shape the future of the industry. The ability of AI to assist with data entry tasks means accountants can focus more on strategic decision making; they will be expected to have knowledge of both accounting theory and practice and to use critical thinking skills to formulate the types of insights that AI cannot.
According to a 2020 report from Sage, 79% of accountant respondents in the United States noted that clients expect more of them than they did previously, including requesting business and finance consulting; 78% of those surveyed were comfortable offering this guidance. Throughout the profession, there’s growing recognition of the importance of technology skills; just over half of accountants surveyed believe this change will have the biggest influence on accounting by 2030.
U.S. News & World Report ranks the role of accountant among the best business jobs for 2022, considering aspects like projected employment growth, median salary and work-life balance. While a career as an accountant is one option for professionals interested in the field, other common roles include tax director and auditing manager.
Preparing for the CPA Exam
Professionals in accounting roles may seek to become Certified Public Accountants (CPAs), as it increases their earning potential and can improve job prospects. Currently, approximately 30-45% of accountants in the United States hold a CPA license.
To become a CPA, individuals must pass the CPA exam, a 16-hour, computer-based test. The four sections of the exam, each consisting of five “testlets,” are completed separately:
- Auditing and Attestation (AUD)
- Business Environment and Concepts (BEC)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
Graduate programs like the DePaul University online Master of Science in Accountancy prepare students with the skills and knowledge they need to successfully complete the exam, covering topics like accounting information systems, auditing, financial accounting and managerial accounting.
What is Bookkeeping
Bookkeeping is one of the main components in the accounting process. Bookkeepers, also known as accounting clerks, are responsible for the first steps in this cycle, which include documenting an organization’s financial transactions.
Bookkeeper duties involve:
- Organizing a business’ financial information, including keeping track of invoices and receipts, and noting specific details, such as the date and purpose of a transaction.
- Recording a business’ transactions and posting them to the general ledger.
- Processing payroll for employees each pay period.
An analysis of job postings from Burning Glass Labor Insight™ showed that the top baseline skills for bookkeepers are:
- Microsoft Excel
- Attention to detail
- Microsoft Office
WIth experience, bookkeepers can move into a supervisory position. They also may opt to apply for an accountant role after gaining experience and earning a bachelor’s degree.
With advances in technology comes a decrease in the need for bookkeepers. Software solutions like QuickBooks Online and Xero can handle tasks that bookkeepers historically needed to perform manually, including expediting the payroll process and tracking deposits and payments. While employing a bookkeeper is still essential for most businesses, technological advances have reduced the number of bookkeepers required at larger companies.
Preparing for the CPB Exam
Bookkeepers may elect to pursue their Certified Public Bookkeeper (CPB) license, which is accredited by the National Association of Certified Public Bookkeepers (NACPB). There are four parts to the exam, each two hours in duration:
- Accounting Fundamentals
- Accounting Principles
- Payroll Fundamentals
- QuickBooks Fundamentals (Desktop) or QuickBooks Online Fundamentals
Educational requirements include an associate or bachelor’s degree in accounting; professionals may also choose to complete the “Education Alternative” option, consisting of four courses offered by the NACPB.
Another option for bookkeepers is the Certified Bookkeeper (CB) designation, which does not require a minimum level of education.
Differences Between Bookkeeping and Accounting
Both accountants and bookkeepers work with financial data, and in both roles, accounting knowledge is important. Beyond that, there are contrasts. Here’s a quick look at the key similarities and differences between the bookkeeping and accounting professions:
|Overall||Keeping a complete record of a company’s financial data, including accounts payable (AP) and accounts receivable (AR).||Reporting on and analyzing financial data to help businesses understand their current position and identify opportunities.|
|Education||Typically at least some higher education, though certain positions may only require a high school education.||A minimum of bachelor’s degree in accounting or similar field. A master’s degree may be requested by some employers.|
|Licenses||Certified Public Bookkeeper (CPB) or Certified Bookkeeper (CB)||Certified Public Accountant (CPA)|
Varies with experience and certifications
|Bookkeeper: $42,410||Accountant: $73,560|
|Employment outlook 2020-2030||3% decline for bookkeeping, accounting, and auditing clerks as a result of technological advancements.||7% growth for accountants and auditors due to economic growth and globalization.|
Specialized skill information is from Burning Glass.
Education, employment outlook and average salary information is from the U.S. Bureau of Labor Statistics.
About DePaul’s Online M.S. in Accountancy
DePaul’s online M.S. in Accounting is designed to be both practical and forward-thinking. By developing the skills to be successful as accountants from day one, our graduates can immediately advance their careers or enter into highly competitive jobs. Our program is taught by faculty who have achieved the highest levels of education in accounting, finance and law, and are experienced accounting practitioners themselves.
In addition to building high-demand accounting skills such as auditing, our program offers students the opportunity to develop critical thinking skills and knowledge of accounting principles. This empowers our graduates to take on more strategic roles within their organizations, offer more value to their clients and adjust to industry disruptions like those caused by technology.
We leverage our connection to industry leaders and promote an environment where students can find mentors, build their networks, leverage leading CPA prep services and graduate with skills they can use to push themselves further.