Bookkeeper vs. Accountant vs. CPA – What is the Difference?

When common people talk about bookkeepers, accountants, or CPAs (Certified Public Accountants), they cannot really make out the exact differences between them. Instead, they often use the terms interchangeably.

While all of these professionals handle the finances and work towards a common end goal, their scope of work varies drastically. Along with the scope of work, there is also a difference between their professional status.

Bookkeepers record every company transaction that involves money, accountants provide a more in-depth analysis of the financial transactions, and CPAs are state-approved accountants.

Main Functions: Bookkeeper vs. Accountant vs. CPA

Bookkeeper

Bookkeeping involves the systematic, accurate, and consistent recording of a company’s financial transactions on a daily basis. In simple words, it is the process of maintaining records that help accountants perform their tasks.

Generally, bookkeepers do not require any formal training; the information they keep is handed over to the accountants. Their basic tasks include –

• Maintaining a daily record of financial transactions
• Entering transactions
• Billing for goods sold or services provided
• Paying suppliers
• Handling payroll-related tasks
• Loan payments
• Producing invoices
• Creating financial reports

Maintaining a daily record (also known as a ledger) is one of the primary tasks of bookkeeping. This daily record is a document where a bookkeeper keeps a record of all the incoming and outgoing money. It can be created using a wide variety of methods – an Excel spreadsheet, a software tool, or a lined sheet (of paper).

If yours is a small business, the ledger can be maintained using a lined sheet, but if your business transactions are complex, you may need specialized software (like QuickBooks) to manage the transactions.

Accountant

Upon first glance, accounting may seem similar to bookkeeping as many of the accountant’s tasks are similar to that of a bookkeeper. Accountants may work as a bookkeeper, but accounting is a much more complex and analytical job role.

They analyze the financial data to offer financial projections and advise on financial elements that affect the company’s growth. Their day-to-day tasks include –

• Providing tax advice
• Preparing financial statements
• Calculating tax liabilities
• Filing income tax returns
• Ensuring bookkeeping practices adhere to the norms
• Finding accounting discrepancies
• Developing and analyzing budgets
• Collaborating with auditors

Accounting offers businesses with reports and insights that help them bind together multiple financial indicators. As a result, the businesses are better positioned to understand the areas generating profits and the ones that need improvement. It is responsible for turning the numbers from ledgers to statements that help businesses plan better and reach their long-term goals.

Recommended Reading: 12 Places to Find CPAs and Accountants for Your Business

Decision-makers often seek the advice of accountants when they need help with budget forecasting, calculating tax liabilities, and tax filing.

CPA

CPAs are accounting professionals who have taken their skills to a higher level and passed the CPA exam. They are certified by a particular state and help individuals and businesses prepare and file tax returns. Thus, they are your first point of contact in the case of IRS audits. Their day-to-day tasks include –

• Preparing reports on transactions
• Updating accounting records
• Representing clients in front of the IRS
• Performing detailed audits

The basic role of a CPA is to maintain and keep a regular check on financial accounts for companies, governmental bodies, and individuals. CPAs are more credible and have better expertise than regular accountants. They help companies, businesses, and individuals manage their wealth and reach financial goals. CPAs are individuals that have gone through years of education and training and passed a state CPA exam.

Which Accounting Professional Is Suitable For You?

Every company or individual needs to manage their books and take care of the finances. For this, you need to hire (on a full-time or freelancing basis) a bookkeeper — the main aim to maintain a systematic record of the transactions and balance the books.

In other words, a bookkeeper will do all the ‘busy’ work, manage payroll, generate reports, pay bills, and reconcile accounts. However, if you need to get a bigger picture of these reports and numbers, an accountant is your go-to person. He will manage your taxes and help you improve the cash flow to reach your future goals.

However, if your business transactions are tricky, and you need someone more credible than an accountant, choose a CPA. Another deciding factor is that only a CPA has the authority to represent if the IRS decides to knock on your door.