Book Keeping

Bookkeeper versus CPA – What’s the Difference?

In the accounting industry, we are often asked, “What is the difference between a bookkeeper and a CPA, and which one do I need?”

In the accounting industry, we are often asked, “What is the difference between a bookkeeper and a CPA, and which one do I need?” We can typically answer the first part in technical terms, but the second question is one that really depends on your small company or business and what it is that you want from your accounting. They are both qualified accounting professionals, but their certifications and what they can and can’t do differ. Which one is right for you? Only you can decide.

What is a Bookkeeper?

The tasks of a bookkeeper involve accurate, consistent, and systematic daily recording of a business’s financial transactions. The data they collect aids accountants in performing their global financial tasks. These tasks include:

  1. Entering transactions into a record
  2. Maintaining daily records related to financial transactions
  3. Paying suppliers
  4. Billing for services provided and goods sold
  5. Handling all aspects of payroll
  6. Invoicing
  7. Loan payments
  8. Creating financial reports

A ledger, which is a daily record of all business transactions, is a bookkeeper’s primary responsibility. It is designed to track both incoming and outgoing money. There are several ways bookkeepers can keep consistent records. Typically, they use computer tools like software and spreadsheets, while some will use paper ledgers. For most businesses, however, a paper ledger is not enough to keep track of things or to successfully make the most of their financial information and data.

What is an Accountant?

An accountant is a professional who does most of the same tasks as a bookkeeper; in fact, there are times when they simply perform the task of a bookkeeper. For most, however, the financial data collected and analyzed is much more complex and requires more than simply counting what comes in and what goes out. Accountants use the data they collect to analyze financial projections and goals. Those analyses are used to determine the direction the company should go concerning growth and the steps to get there. Daily tasks include:

  1. Preparing financial statements
  2. Giving tax advice
  3. Income tax filing
  4. A calculation of tax liabilities
  5. Keeping bookkeeping practices on task
  6. Looking for accounting discrepancies
  7. Collaborating with auditors
  8. Analyzing and developing budgets

Where bookkeepers leave off is often where accountants begin to make sense of the data collected. They are responsible for analytic reports to provide financial indicators, and they also provide advice about what steps need to be taken to achieve set goals for growth or profit increases.

What is a CPA?

A CPA is a Certified Public Accountant licensed by the various states within our country. The license permits them to perform an audit of financial statements as prepared by a business or individual. So they are accounting professionals with a substantial education and skills required to take and pass the CPA exam, as well as having worked under the direction of a certified public accountant for experience in the profession. They must be certified within the state where they practice and are responsible for both preparing and filing tax returns. As a result, they are the authorized to represent individual and business in the event of an IRS examination. They help businesses see their overall picture of financial health and help plan steps to achieve goals. It takes many years of training and education to pass the CPA exam, so they have extensive knowledge of financials and taxes.

Which Professional is Right For You?

The right type of accounting professional really depends on your overall size, sales numbers, industry, and your business goals. If you only need someone to count what comes in and what goes out, then a bookkeeper is probably sufficient. However, if you need someone to help you with your business goals and objectives and provide you with the necessary information to grow and enhance your business, then a CPA is the way to go. If you need a CPA in Charleston, Baldwin is here to help. With tax season coming up quickly, now is a great time to schedule your upcoming appointment.