The Difference Between Accounting And Bookkeeping Explained

Accounting and bookkeeping are both essential components to every business, no matter the size. They are services necessary for businesses to grow, thrive, and survive. But, what’s the difference between them? Although accounting and bookkeeping share similar goals, they each help you during different stages of your financial cycle.


Bookkeeping involves recording daily financial transactions that your business makes. Some tasks that are typically done by bookkeepers involves recording transactions, creating invoices, completing payroll, and maintaining accounts for balance.

The complexity of bookkeeping depends on the size of a business, as well as how many transactions they make. Your business’ transactions will be posted on a ledger by your bookkeeper based on your receipts of sales and expenses. Bookkeepers supply accountants with the necessary information to do their job.


Now, what is accounting? Accounting takes things a step further by interpreting, analyzing, and summarizing your business’ financial data. An accountant uses all the information the bookkeeper compiled, but their process isn’t nearly as transactional as the bookkeeper’s.

Accounting involves preparing financial statements, analyzing cost of operations, completing income tax returns, and helping business owners understand the impact of their financial decisions. It brings together all the financial information for an understanding of how profitable a business is, and informs the business to be aware of how their financial decisions are influencing their company.

Although these services are similar, they are also entirely different. Both functions are needed because they build off each other to better understand a business’ financial life. While bookkeeping gathers the data and records the transactions, accounting takes it a step further by analyzing what this data means for a business. Both are important and necessary functions for a business to grow financially.

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