Bookkeeping vs. Accounting: An Overview
The distinctions between accounting and bookkeeping are subtle yet essential. Bookkeepers record a business's day-to-day financial transactions. Accountants focus more on the big picture. The two careers are similar, and accountants and bookkeepers often work side by side. These careers require many of the same skills and attributes. However, significant differences exist, like work conducted in each career and needed to be successful. The following analysis compares the education requirements, skills required, typical starting salaries, and job outlooks for accounting and bookkeepers.
- The job titles bookkeeper and accountant are used interchangeably but are distinct and have different requirements.
- Bookkeeping is where accountants generally start their careers as the barriers to entry are lower and pay is decent.
- Accountants traditionally acquire their CPA certification and a master's degree.
- Bookkeepers line up all the small pieces of a company's financial records, and accountants view and arrange those pieces.
- Accounting often requires more education than becoming a bookkeeper, where most accountants hold undergraduate or graduate degrees or even MBAs in accounting, economics, or finance.
You can become a bookkeeper right out of high school if you prove you are good with numbers and have strong attention to detail. In fact, many aspiring accountants work as bookkeepers to get a foot in the door while still in school. Bookkeepers who excel at their jobs are also sometimes promoted to accounting positions, even if they lack the level of education the company typically prefers.
Bookkeepers are commonly responsible for recording journal entries and conducting bank reconciliations. A bookkeeper must be able to shift focus easily and catch tiny, hidden mistakes in a budget or invoice. They often bookkeepers work a few jobs for various clients if they work as a consultant.
Unlike careers such as law and medicine, in which state licensing boards determine how much education you need, with accounting and bookkeeping, the companies doing the hiring decide what to require of candidates.
As an accountant, you may have to crunch numbers, but those are not the only skills needed. It is important to possess sharp logic skills and big-picture problem-solving abilities, as well. While bookkeepers make sure the small pieces fit properly into place, accountants use those small pieces to draw much more significant and broader conclusions.
Some of the key tasks for accountants include tax return preparation, conducting routine reviews of various financial statements, and performing account analysis. Another key responsibility for accountants includes conducting routine audits to ensure that statements and the books are following ethical and industry standards.
As an accountant, you may work for a company or yourself, and there are opportunities for accountants in many industries like law, insurance and health, small business, and, of course, tax accounting firms. Accountants work with numbers and financial details all day long. Therefore, those who do not like math, get confused easily when making simple calculations, or are generally opposed to number crunching should not apply.
|Bookkeeper vs. Accountant Responsibilities|
|Recording journal entries||Prepares and files corporate tax returns|
|Conducting bank reconciliations||Reviewing financial statements|
|Look for errors in budgets and invoices account analysis||Performing account analysis|
|Recording daily/monthly transactions||Conducting routine audits|
With bookkeepers, there are a lot of minutiae involved, and keen attention to detail is paramount. Accountants, on the other hand, tend to use the bookkeeper's inputs to create financial statements and periodically review and analyze the financial information recorded by bookkeepers. They conduct audits and forecast future business needs. We've listed some of the key differences when it comes to the requirements and job market for each.
Both accountants and bookkeepers have a college education, although not all jobs require one. As previously mentioned, a bookkeeper can be hired out of high school, but that isn't always the case for every employer. Bookkeepers may hold an associate degree, as well.
Bookkeepers may start working for a small business to gain experience and then go back to school for a degree in accounting or finance. Enrolling in one of the best online bookkeeping classes is a smart way for those interested in this career to bolster their existing financial knowledge.
If you are interested in becoming an accountant, it may be beneficial to your career to become a certified public accountant (CPA), which has its own exam. Earning this designation is a common goal of many accountants. You must have a minimum of 150 postsecondary education hours, or what amounts to a bachelor's degree in accounting, and an additional 30 hours of graduate work. Most CPA candidates go ahead and finish their master's degrees.
There are various career paths for accountants (and some for bookkeepers), from working as a forensic accountant to becoming a financial auditor or an enrolled agent.
There are critical differences in job growth and salaries between the two. Growth for accountants and auditors is expected to continue for the next several years. The Bureau of Labor Statistics (BLS) expects 6% job growth in this field from 2021 to 2031.
However, bookkeeping and accounting clerk jobs are expected to decline, with the BLS projecting a 5% fall in jobs over the same period. The BLS notes that job growth for accountants should track fairly closely with the broader economy. However, bookkeepers will face pressure from automation and technology that will reduce the demand for such workers.
Starting Salaries and Benefits
Both careers cover a broad gamut of starting salaries. This is particularly true for accountants. How much you make as a first-year accountant depends mainly on the specific career path you pursue. While accounting can be a lucrative long-term career, most accountants, unlike corporate attorneys or investment bankers, do not command huge salaries during the first few years.
Public accounting generally pays the most to a candidate right out of school. In particular, the big four firms of Ernst & Young, Deloitte, KPMG, and PricewaterhouseCoopers offer larger salaries than mid-size and small firms. Depending on the city, you can expect to earn between $40,000 and $60,000 your first year as a Big Four accountant. While the companies do not publish salaries on their websites, the benefits can be a large draw. For example, KPMG offers employees up to 25 days of paid vacation time, telecommuting opportunities, and a robust health insurance package.
Mid-size and small public accounting firms pay, on average, about 10% less than these firms. If you choose to work for a company internally instead of in public accounting, the starting salary range is very broad. In most cases, private companies do not pay more than the Big Four for young accountants with little experience.
Bookkeepers often get paid hourly wages rather than annual salaries. The average wage for someone new to the business is $21.70 per hour. This is the equivalent of around $45,000 per year, assuming a 40-hour workweek. The advantage of hourly pay is you receive 1.5 times your average wage for hours worked more than 40 per week. In bookkeeping, extra hours are typical during the busy tax season of January to mid-April.
Accountants and bookkeepers work with numbers and financial data all day long. Therefore, those who do not like math, get confused easily when making simple calculations, or are generally opposed to number crunching should not apply.
As a bookkeeper, your attention to detail must be almost preternatural. Careless mistakes that seem inconsequential at the time can lead to bigger, costlier, more time-consuming problems down the road. You must be able to multitask. Rarely does a bookkeeper work on one big project for an eight-hour shift; instead, a typical workday involves juggling five or six smaller jobs. Nearly all bookkeeping is done using computerized accounting software and programs, so bookkeepers should be comfortable learning new technology if not proficient in it.
As an accountant, you must pay attention to figures and financial details, but it is more essential to possess sharp logic skills and big-picture problem-solving abilities. While bookkeepers make sure the small pieces fit correctly into place, accountants use those small pieces to draw much more significant and broader conclusions about a company's finances.
Which One Do You Need?
As a business leader, you should have a good idea of which professionals best suit the needs of your company. As such, it's important to know whether you need a bookkeeper or an accountant to keep track of your affairs. That may be tough since the roles and responsibilities may intertwine. So here are a few tips to help you decide.
You may want to consider a bookkeeper:
- For recording daily transactions
- If you have small inventories and a less complex business structure
- To satisfy a conservative salary budget (bookkeepers make less than accountants)
Choose an accountant:
- To help monitor and record complex transactions
- If you have larger inventories
- If you're able to pay more
It is not an unusual career move for a bookkeeper to gain experience at a job, study, get certified, and work as an accountant.
For a long-term career, accounting offers much more upward mobility and income potential. The education required to be competitive in the field is greater, but the payoff down the road can be considerably higher.
Bookkeeping is a great starting point if you are interested in the field but not fully committed and want to test the waters. You may also be an ideal bookkeeping candidate if you want a good job with a respectable wage and decent security but may not be looking for a long-term career. Bookkeeping offers much lower barriers to entry, and the competition you face in the job search is less fierce.
An enrolled agent (EA) is a tax professional authorized by the United States government. Their job is to advocate and assist taxpayers when they have issues with the Internal Revenue Service. To become one, you have to either have worked at the IRS or pass an EA examination.
Bookkeepers who are interested in switching jobs but do not have a college degree might consider becoming an EA after a stint with the IRS. This job doesn't require a college degree, only five years of tax experience with the IRS. All EAs must have 72 hours of continuing education every 36 months. If you are already a CPA, you can act as an enrolled agent without passing the exam. Only a federal license is required.
As a financial auditor, you may work as an external or internal auditor. If you are an external auditor, you will most likely have a job at a public accounting firm, and you will need to have a CPA license, plus a college degree, and often a master's degree.
An internal auditor—one who will work as part of a small company, keeping its books and financial operations—won't usually need a CPA license, and with experience and solid skillset, may only need a bachelor's degree in finance or accounting, or business.
Forensic accounting is a highly specialized field of accounting. A forensic accountant's job is to investigate, audit, and prove the accuracy of financial documents and dealings. These accounting detectives' work often centers around legal issues. There are opportunities for forensic accountants in many industries, like nonprofit work, government and law-enforcement agencies, law firms, and large corporations.
To become a forensic accountant, you must usually have a CPA certification, plus earn a certified fraud examiner exam, which covers the legal side of fraud, criminology, ethics, investigation techniques, and how to go through financial transactions.
In addition, you must be a member of the Association of Certified Fraud Examiners. In most cases, employers want to hire someone with a bachelor's degree, and a master's degree may help boost your earnings.
How Can a Bookkeeper Become an Accountant?
Bookkeepers are usually responsible for documenting or checking financial data for a company or client, including checks received or written, invoices, cost spreadsheets, and monthly or quarterly revenue. A bookkeeper is skilled at keeping documents and tracks a wide net of financial information.
When a bookkeeper wants to leap to being an accountant, they will need to take the CPA exam, plus earn a bachelor's degree (most of the time), if they do not have one already. Fifty states plus the District of Columbia require accountants to earn 150 credit hours of college education before taking the national four-part Uniform CPA exam.
Is Bookkeeping Hard to Learn?
If you are proficient and comfortable using mathematics and computing figures, plus punctual, organized, and detail-oriented, it is not hard to learn how to be a bookkeeper. Of course, a background in accounting practices will help you ride out a learning curve as a new bookkeeper.
Which Accounting Jobs Are in Demand?
According to Northeastern University in Boston, and the U.S. Department of Labor's Occupational Handbook, some of the most in-demand accounting jobs include comptroller, accounting manager, senior tax accountant, and internal auditors.
The Bottom Line
People often confuse bookkeepers and accountants—and with good reason. While there are certain similarities and overlaps between the two, there are distinctions that set these two roles apart. Bookkeepers don't necessarily need higher education in order to work in their field while accountants can be more specialized in their training. Another key difference is their pay scale. Because bookkeepers tend to work for smaller companies, they may not be paid as much as accountants. Knowing the differences between the two can help people find their niche in the industry and can give guidance to companies on who to hire for their needs.
American Institute of Certified Public Accountants. "150 Hour Requirement for Obtaining a CPA License."
U.S. Bureau of Labor Statistics. "Accountants and Auditors."
U.S. Bureau of Labor Statistics. "Bookkeeping, Accounting, and Auditing Clerks."
KPMG. "Investing In Your Success."
Glassdoor. "Accounting Salaries."
U.S. Bureau Labor of Statistics. "Occupational Employment and Wages, May 2020."
Internal Revenue Service. "Maintain Your Enrolled Agent Status."
Internal Revenue Service. "Enrolled Agent Information for Former IRS Employees."
Association of Certified Fraud Examiners. "About the ACFE."
AIPCA. "The Uniform CPA Examination," Page 9.
Northeastern University. "Top 12 In-Demand Finance and Accounting Careers."