Bookkeeping 101: The Difference between Bookkeeping and Accounting

Mar 5, 2019

We’ve come a long way since the old pencil and ledger.  There are several free and low-cost tools available. Many sites offer tutorials and support to help you get started.

Bookkeeping is the act of keeping tabs on all financial transactions.

A bookkeeper is responsible for recording and classifying those transactions.
An accountant is responsible for analyzing and interpreting that data.

Basic bookkeeping terms:

  • Chart of Accounts – A list of the accounts that comprise a general ledger.  This includes assets, liabilities, bank accounts, income, and expenses.
  • Accounts Receivable – All monies due for products sold or services rendered. (Think of Wimpy, “I’ll gladly pay you tomorrow for a hamburger today”.)
  • Accounts Payable – All monies owed for products and services.  (Think of the rent bill you’ve received on your hamburger stand).
  • Sales – tracks all incoming revenue.  (Think of actually getting paid by Wimpy for his hamburger.)
  • Cost of Goods Sold – Any direct costs attributable to the goods you sell. (Think hamburger buns, meat patties, mustard.)

Whether you do your books yourself or use a 3rd party bookkeeping service, you must keep solid records of business transactions.  

Here is a basic list of monthly bookkeeping tasks:

  • Enter sales invoices
  • Enter purchase invoices
  • Enter check payments
  • Enter deposits
  • Enter/classify debit and credit card expenses
  • Enter petty cash receipts
  • Reconcile bank accounts
  • Reconcile credit card accounts
  • Run aged debtor and aged creditor reports
  • Run Profit and Loss statement
  • Run Balance Sheet
  • Check all reports for accuracy

Having a good, clean bookkeeping system will set you up to easily provide your Accountant with all the necessary paperwork for tax season.  

We primarily use Quickbooks Online at Buying Time to manage our clients’ books.  As Certified Quickbooks ProAdvisors, Buying Time can take away the stress and frustration of you managing your books.  

We will enter all transactions and reconcile all accounts and then provide you with the reports necessary for you to understand your business and make important decisions.

By: Katharine and Linda | Accounting Department at Buying Time