Differences Between Accounting and Bookkeeping
Both accounting and bookkeeping are essential business functions that serve to report a company’s financial activity, in order to understand the company’s performance and financial condition.
However, it can be tough to distinguish the two, especially if you are not well-versed in financial lingo. In fact, the layman Singaporean would often mistakenly refer to accounting services when they simply mean bookkeeping services.
A bookkeeper’s main job is to record daily transactions in a manner which is truthful and consistent. A bookkeeper is important as the foundation to build the financial records of a business. Besides that, a bookkeeper may be required to process receipts, invoices and payments, managing payroll, and calculating Goods & Services Tax (GST).
An accountant’s work, however, is much less rote and mechanical. An accountant’s role is to help analyse past performance (based on bookkeeping records), and advise a company’s management and stakeholders on the financial decisions they should undertake. They are likely to come up with financial projections for a business, and offer advice on the financial elements that may affect your business. Generally, they take on the role of advisors and analysts, which is vastly different from the clerical work that a bookkeeper takes up.
Note, however, that many accountants also help to record the transactions of the business, though that is not their only function. Bookkeeping services thus can be considered a subset of accounting, as it lays the groundwork for further financial analysis.
In Singapore, accounting services often include filing reports with external financial organisations, such as filing corporate taxes with the Inland Revenue Authority of Singapore (IRAS) and the annual filing under the Accounting and Corporate Regulatory Authority (ACRA).
A bookkeeper, as mentioned previously, is only responsible for ensuring that all financial records from day-to-day operations are dutifully and honestly recorded. As such, a bookkeeper would then know if your company has any residual payments which have not yet been settled. They would also know all information regarding sale invoices, and all sources of income. When it comes to the bare essentials of the transactions in the business, it is a bookkeeper that does the job. A bookkeeper’s work requires meticulousness, as any mistakes in the recording process can lead to incorrect financial decisions when an accountant looks at the books later on.
When deciding which service to hire, consider whether your company has a neat collection of recorded transactions (Also see When You Should Hire an Accountant? ). If you need someone to tidy up your books before financial analysis can take place, consider hiring a bookkeeper. If you need someone to generate clear and accurate financial reports and file them to regulatory organisations, then accounting services may be more important.