Know the Difference Between Bookkeeping and Accounting for Self Employment

by Agro Accounting CPA Accounting for Artists, Freelancers & Creative Com

Many self-employed taxpayers who are new to the world of income tax often end up confusing the role of accountant and bookkeeper. However, it is not their fault. There are many bookkeepers that are offering accounting services, and there are many accountants that offer both bookkeeping and accounting services for freelance workers. This creates confusion about how an accountant differs from a bookkeeper and what differences exist between accounting and bookkeeping.

What is Accounting?

Accounting is the process of analyzing financial reports and transactions, troubleshooting cash flow problems, preparing income taxes and ensuring they get paid on time, and providing financial advice to a business. An accountant manages the whole process of accounting.

What is Bookkeeping?

Bookkeeping is the process of recording the financial transactions of a business. It involves entering the records of income and expenses into a database and that is an essential part of the accounting process. CPAs analyze the data reports prepared by the bookkeepers.

What is the Difference Between Accounting and Bookkeeping?

Bookkeeping is all about recording the financial transactions of business, whereas accounting is about analyzing those financial transactions and preparing reports that help businesses make sound financial decisions. However, it is important to understand that both processes are essential for business.

What is the Difference Between an Accountant and a Bookkeeper?

An accountant is a certified professional that offers accounting services. To become a Certified Public Accountant, a candidate needs at least a Bachelor's Degree in Accounting and has to pass a licensing examination. On the other hand, there is no such formal requirement of certifications for bookkeeping. One can become a bookkeeper after successfully completing basic courses in bookkeeping.

Can a Bookkeeper Do Accounting?

There are many bookkeepers who offer accounting services, but it is not at all recommended by experts to receive accounting services from bookkeepers. A bookkeeper does not have relevant education. On the other hand, a CPA has at minimum a Bachelor’s Degree, and if you are working with an expert CPA for accounting, he/she might have an MBA in accounting or tax. The skill, knowledge, and expertise of a CPA and bookkeeper are different. In the real world, bookkeepers report to CPAs when managing the accounting process of a company. However, it is important to understand that an accountant is able to offer bookkeeping services.

Why should you Prefer a CPA for Accounting for Freelance Workers?

An accountant for freelance workers has the required skills, education, and experience to offer accounting services. Not only that, an accountant does much more than accounting and bookkeeping such as preparing income taxes for freelance workers, offering financial advice, finding investment options, and helping to create financial strategies.