The difference between accounting and bookkeeping that SME India must know about

Category: Finance 6 0

In every business, whether big, medium or small, all financial transactions need to be recorded. This is most important for SME India, where the accurate recording of transactions, with proper assessment and processing, gives the business a firm base to grow, prosper and function efficiently. Bookkeeping and Accounting are both a part of this very vital functional process.

To run a small business successfully, it is imperative for you to understand everything about your company’s finances, from the beginning to the end. This may also include understanding the difference between Bookkeeping and Accounting.

Bookkeeping refers mainly to the record-keeping aspects of accounting. It is more of a transactional and administrative activity.  Bookkeepers are acquainted with a number of business software solutions, enabling them to make recommendations to clients.

Accounting, on the other hand, is a subjective and much broader term, referring to a systematic and comprehensive recording of financial transactions in a business. Accounting gives SME India insights based on bookkeeping information. Accounts use accounting software to conclude tax planning and other financial forecasts.

A bookkeeper maintains the day-to-day transactions of a client’s business and is typically certified through a Bookkeeper’s Training Program. The duties of a bookkeeper comprise:

  • Recording financial transactions such as invoice, receipts and payments
  • Designing, establishing and reviewing accounting systems
  • Posting debits and credits
  • Producing initial financial statements
  • Calculating GST
  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts
  • Completing payroll
  • Billing clients directly

An accountant, on the other hand, has a higher-level view of a client’s business and holds an accounting degree. An accountant’s key responsibilities are:

  • Taxation advice and planning
  • Business valuation
  • Preparing company’s financial statements
  • Analyzing costs of operations
  • Financial management advice
  • Completing income tax returns
  • Corporate reporting and compliance
  • Risk management
  • Strategic planning

A complex field as it may seem for many, the finance team is the backbone of any organisation. Having said that, just like in all other fields, here too technology is taking over bookkeeping and accounting, for swifter and more accurate turnarounds. And to be able to maintain businesses with intimate detail, this shift makes progressive sense.

Financial softwares are blurring the lines between the two roles in question, helping these number crunchers grow into financial and technology consultants.

The introduction of technology in finance not only helps to provide more accurate data, but can also act as a deterrent to fraud or theft, aiding in the smoother functioning of SME India.

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