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Bookkeeping Services versus Accounting Services - The Difference

Posted By Member Services, Monday, July 4, 2011
Updated: Saturday, October 15, 2011
Have you ever wondered what the difference is between bookkeeping services and accounting services? Here is a brief overview of how I see it.

BOOKKEEPING SERVICES encompass:

controlling and organizing source documents;accurately and correctly classifying and recording transactions in the general ledger through data entry; as well asperforming bank, credit card, and vendor reconciliations.The steps are somewhat mechanical, involve understanding debits and credits, basic bookkeeping principles and being comfortable using computer software. The business owner's books will not have year-end procedures performed and are generally not ready for tax preparation. 

PROFESSIONAL BOOKKEEPING SERVICES, in addition to the above tasks, should only be offered if you have the work experience or training to:  review and analyze the general ledger for accuracy; prepare adjusting entries; and run useful and customized reports for the business owner including internal financial statements.These processes are more subjective than bookkeeping services. They require a "big picture" understanding of the bookkeeping process in addition to familiarity with Generally Accepted Accounting Principles. Year-end procedures will be performed on the business owner's books to ensure they are ready for review or audit by the accountant and/or tax preparer.

ACCOUNTING SERVICES involve:determining the best setup and internal controls for a business owner's bookkeeping system (it is not one system fits all);monitoring the system and interpreting the results;budgeting and cash flow monitoring;strategic planning and tax planning.These processes require the use of professional judgement. An in-depth knowledge of Generally Accepted Accounting Principles and the Income Tax Act are essential.


In a small business, the bookkeeper may perform all these duties. If your opinion, please post your comments below.

Tags:  accounting services  bookkeeping services 

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Comments on this post...

...
Chris Hafstein CPB says...
Posted Saturday, October 15, 2011
I agree for the most part with this analysis. However, I consider myself a Professional Bookkeeper even though I may not prepare adjusting entries for year end. I find that accountants consider this part of what they do for year end and would not want to step on any toes. I would only prepare year end entries if I had specific instructions from the accountant to do so, or I knew that my client was having their taxes done by a tax preparer, not an accountant.
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Gordon Holley CA FCPB says...
Posted Saturday, October 15, 2011
Just another opinion on the difference between bookkeeping and accounting services:
It seems to me that the services you outlined under Accounting services in the Newsletter dated 04JUL11, are generally considered "Advisory services". They are services that help the small business owner understand and run their business better.

"Accounting" is primarily about financial statement presentation to independent third parties. Bookkeepers generally prepare internal (management) use financial statements. Public accountants generally take these and then prepare external use financial statements - for the CRA, shareholders or banks.

Public accountants generally perform one of three different types of engagements for accounting services: a Compilation, a Review and an Audit. All have to do with financial statements and the presentation - including Notes to Financial Statements - of financial information to third parties. Most small businesses only require a Compilation. If businesses have multiple shareholders or have external financing, they may require some assurance in the form of a Review or an Audit engagement.
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