Empire Tax Professionals, Inc.
Empire Tax Professionals, Inc. 5 Pennsylvania Plaza #2325, New York, NY 10001 (212) 300-5776
Accounting And Bookkeeping in NYC: How Do They Differ?
Both accounting and bookkeeping pertain to the maintenance and control of a business' transactions and reports in accordance with established accounting principles. However, bookkeeping is under the accounting umbrella and accounting is a much broader term than bookkeeping.
What is bookkeeping?
The term bookkeeping refers to the process of recording, organizing, storing, and accessing the transactions or financial information of a company. Bookkeeping records are needed for facilitating daily operations and for the preparation of financial statements such as internal reports and tax returns.
Record-keeping or bookkeeping can be likened to a financial information infrastructure of a company and it should be complete and accurate as well as timely in the recording of the transactions. The accountant applies internal control on the processes to ensure quality and accuracy of data.
What is accounting?
Accounting includes designing the bookkeeping system and establishes controls to ensure that the system works well. It analyzes and verifies the recorded data. While the accountants oversee the whole system and checks on its flow, they also give orders to the bookkeepers.
Accounting analyzes the financial activities and measures its effects on economic activities. It includes financial reporting in which its outputs are prepared for those who need the financial information of the company such as the investors, managers and others. The financial reports show the performance and financial condition of the company which is important in decision making.
Accountants design the internal controls for the bookkeeping system so that there are minimal errors in recording and to prevent or discover fraudulent activities and other kinds of irregularities.
Accountants (and CPA's) prepare financial reports based on the records kept by the bookkeeper. Among these reports are tax returns, financial statements, and the balance sheet. The bookkeeper's records should be accurate as the reports depend on them. One critical task that accountants perform is measuring profit by calculating the sales revenue and expenses to identify if there is a profit or loss during certain periods.
Bookkeeping and accounting functions
Bookkeepers record financial transactions; posts the debits and credits; produces invoices; maintains and balances the general ledgers, historical accounts and subsidiaries; and completes the payroll.
The accountant adjusts entries and company financial statements; analyzes the costs of operations; provides tax preparation ("prep") services; and assists the business owner in understanding the effects of certain financial decisions.
Bottom line, the bookkeeper and the accountant play a crucial role in record-keeping and preparation of financial reports. When the bookkeeper prepares organized and accurate financial records, the accountant can perform their job effectively. Some business owners prefer to manage their own finances while others hire a professional to do it.
Accounting and bookkeeping are necessary in any business. An accurate and error-free set of financial reports is essential for any business regardless of its size or type. Government agencies need it and when the business needs financial funding or has to borrow money, financial reports are always required. Thus, a well-prepared set of financial records are crucial to the success of any business entity.
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