‘What’s the difference between accounting and bookkeeping?’ is likely something you’ve wondered. The terms appear to be interchangeable, but ‘accounting’ and ‘bookkeeping’ are very different things.
Here, we explain the distinction between the two so that when it comes to your tax, you’ll understand which one you should be doing…
What is bookkeeping?
Bookkeeping is a part of accounting work, and is often referred to as the more administrative side of the profession.
They ‘keep books’, meaning they accurately record financial transactions. Some of the tasks involved include producing and handling invoices, and recording when the business receives income and when it spends money that can be claimed as expenses. Bookkeeping can also involve ‘reconciling’, which is a way of checking that all the transactions in the bank account have added to the bookkeeping records.
A bookkeeper would also be involved in chasing customers that may not have paid their invoice, and ensuring that business expenses are paid in a timely manner.
What is accounting?
Whilst a bookkeeper is responsible for the first stage of recording the figures, accountants analyse, re-classify, summarise and report on them. They take into account all finances, and perform duties which have an impact on the entire accounting process.
Their tasks include tax and financial planning, auditing, and preparing Self Assessment tax returns.
Do I need an accountant or a bookkeeper?
The question may now have been answered for you, but sometimes, it’s a little harder to figure out which one you need.
As an accountant provides a wider variety of services, including taking care of the compliance aspects of running a business, they’re generally more suitable for larger organisations. For small companies or independent professionals, hiring a bookkeeper may be more applicable. There are also a number of other considerations you should make before seeking either service.
When you need a bookkeeper
Getting some help with your bookkeeping can free up time that could be spent on other aspects of your business. A bookkeeper can help you keep on top of your finances by chasing missed invoice payments.
If you have any employees, they can also manage your payroll for you. For those needing further help with anything tax-related, the services of an accountant are required.
When you need an accountant
An accountant can provide you with support for your finances. They will assess your figures, both past and current, using their analytical skills to recommend the best course of action. Accountants are also an ideal choice if you want help finding ways to grow your business.
In addition, they can take on the more complicated sides of accounting (like the Self Assessment tax return) and can prove especially helpful for startups by assisting with creating an effective business plan.
Simplify your finances with tax return software
Even if you choose to outsource your bookkeeping or accounting, you’ll still want complete visibility over your accounts. Self Assessment software, like GoSimpleTax, provides you with exactly this, as well as accurate calculations so you don’t end up paying the incorrect amount of tax.
It also simplifies communication between you and a bookkeeper or accountant, and gives you tax-saving suggestions to reduce your tax liability. To find out how GoSimpleTax could assist you, see its functionality in action by registering for a free 14-day trial.