An accountant and a bookkeeper working at their desks.

The Difference Between Bookkeeping and Accounting

When most people think about the difference between bookkeeping and accounting, they are hard-pressed to nail the distinction between each process. While bookkeepers and accountants share common goals, they support your business in different stages of the financial cycle.

Simply put, bookkeeping is more transactional and administrative, concerned with recording financial transactions. Accounting is more subjective, giving you insights into your business’s financial health based on bookkeeping information.

In this guide, we’ll explain the functional differences between accounting and bookkeeping, as well as the differences between the roles of bookkeepers and accountants.

IMG / Blog / Bookkeeping versus accounting infographic

The function of bookkeeping

Bookkeeping is the process of recording daily transactions in a consistent way, and is a key component to gathering the financial information needed to run a successful business.

Bookkeeping is comprised of:

  • Recording financial transactions
  • Posting debits and credits
  • Producing invoices
  • Preparation of financial statements (balance sheet, cash flow statement, and income statement)
  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts
  • Completing payroll

Maintaining a general ledger is one of the main components of bookkeeping. The general ledger is a basic document where a bookkeeper records the amounts from sale and expense receipts. This is referred to as posting. The more sales that are completed, the more often the ledger is posted. A ledger can be created with specialized software, a computer spreadsheet, or simply a lined sheet of paper.

The complexity of a bookkeeping system often depends on the size of the business and the number of transactions completed daily, weekly, and monthly. All sales and purchases made by your business need to be recorded in the ledger, and certain items need supporting documents. The IRS lays out which business transactions require supporting documents on their website.

The function of accounting

Accounting is a high-level process that uses financial data compiled by a bookkeeper or business owner to produce financial models.

The accounting process is more subjective than bookkeeping, which is largely transactional.

Accounting is comprised of:

  • Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
  • Reviewing company financial statements
  • Analyzing costs of operations
  • Completing income tax returns
  • Aiding the business owner in understanding the impact of financial decisions

A key part of the accounting process is analyzing financial reports to help you make business decisions. The result is a better understanding of actual profitability and an awareness of cash flow in your business. Accounting turns the information from the general ledger into insights that reveal the bigger picture of the business, and the path the company is progressing on. Business owners will often look to accountants for help with strategic tax planning, analysing their financial position, forecasting, and tax filing.

The roles: bookkeeper vs accountant

Bookkeepers and accountants sometimes do the same work, but have a different skill set. In general, a bookkeeper’s role is to record transactions and keep you financially organized, while accountants provide consultation, analysis, and are more qualified to advise on tax matters.

Bookkeeper credentials

Typically, bookkeepers aren’t required to have any formal education. To be successful in their work, bookkeepers need to be sticklers for accuracy, and knowledgeable about key financial topics. Usually, the bookkeeper’s work is overseen by either an accountant or the small business owner whose books they are doing. So a bookkeeper can’t call themselves an “accountant.”

Accountant credentials

To qualify for the title of an accountant, generally an individual must have a bachelor’s degree in accounting. For those that don’t have a specific degree in accounting, finance degrees are often considered an adequate substitute.

Accountants, unlike bookkeepers, are also eligible to acquire additional professional certifications. For example, accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA), one of the most common types of accounting designations. To become a CPA, an accountant must pass the Uniform Certified Public Accountant exam and possess experience as a professional accountant.

Additional Resources:

How Bench can help

Bench is an online bookkeeping solution that connects you with a team of bookkeepers, who do your books for you. We’re similar to a bookkeeping firm, except more affordable, since software automation cuts the bulk of manual work. Our bookkeepers take care of your tax preparation so that your accountant has less to do (which is a good thing, because bookkeepers are less expensive than a CPA). And if you don’t have an accountant, we can handle your tax filing too. Learn more about our services.

Bookkeeping vs accounting summary

Bookkeeping Accounting
Recording and categorizing financial transactions Preparing adjusting entries
Posting debits and credits Preparing financial statements
Producing and sending invoices Completing income tax returns
Maintaining and balancing subsidiaries, general ledgers, and historical accounts Financial analysis and strategy
Completing payroll Tax strategy and tax planning
Recordkeeping Financial forecasting

The bottom line

Organized financial records and properly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate tax filing by the accountant, contribute directly to the long-term success of every business.

Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love. Whichever option you choose, investing—whether it be time or money—into your business financials will only help your business grow.

What's Bench?

We're an online bookkeeping service powered by real humans. Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. We’re here to take the guesswork out of running your own business—for good. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. Get started with a free month of bookkeeping.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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