When it comes to managing the financial books of a business, it’s very crucial to differentiate CPAs, accountants, and bookkeepers. Most businesses find it difficult to choose, and most do not know what the differences are. There has been a lot of confusion in the business world especially in differentiating the three business terminologies.
To start with, bookkeeping is a subset of accounting. It is very mechanical in nature and involves performing a single task or all the eight steps that are undertaken in bookkeeping. A bookkeeper performs tasks such as transactions, journal entries, trial balance, worksheet, postings, journal amendment and adjustment, and financial statements. A bookkeeper mainly manages almost everything starting from recording the financial events to closing the books at every end of each accounting cycle. In general, bookkeeping is focused on the entry of data and proper maintenance of business records. The bookkeepers are ultimately responsible for all the reliability of data that is used by the accountants.
Accountant vs. Bookkeeper
The difference between accounting and bookkeeping is that accounting is much broader. The primary work of an accountant is to prepare correct reports based on the information that is gathered during the bookkeeping process. CPAs and accountants also hold a responsibility in the preparation of tax return documents for individuals and businesses. For instance, payroll tax returns, income tax returns, and personal property returns are catered by CPAs and Accountants.
The main work of accountants is to design a bookkeeping system that captures the financial information to be recorded by the bookkeepers. They frequently monitor the system and ensure that its performance is accurate and as designed. They also make adjustments according to business needs and changes.
The other task performed by the accountants is to provide financial statements to business management at the end of every month. Since accounting requires a clear understanding of the bookkeeping process, they are left to manage the bookkeepers. Generally, accountants design information and interpret the resulting information. They measure, identify, report, and critically analyze the economic events in a business.
CPAs on their part have majored in accounting in college. To be a certified CPAs, you need to have sat for the CPA exams. This exam covers theory, auditing practice and law. A qualified CPA needs to have worked for an established accounting firm for two years and additional five hundred hours of auditing time.
The work performed by a CPA is to prepare an audited financial statement. This work can only be done by a CPA. The process requires them to examine and test the yearly financial records of the company. After the process, the auditing accountants offer a report stating whether the information contained in the financial statement was fair and genuine.
Apart from this, only CPA’s can prepare a review financial statement. The CPA goes further to provide a report that describes the scope of the review, limitations, and project findings.
However, CPAs, accountants, and bookkeepers can prepare and compile financial statements. They can then send a report that is compiled and that no auditing or review methods were used.
The services that are offered by a CPA are more than that provided by the compiled financial statement. The services of a CPA can be required anytime. For instance, a bank can request for your financial statement to be audited in order to process a loan.
For a business or an organization, a CPA can be a very expensive choice especially a small business that is starting out. Depending on what you need, CPA rates average from $250 to $450 per month. However, an accountant can perform the same task with an average rate that ranges from $200 to $350 on a monthly basis.
A certified public accountant and an accountant can do a great job for you in the case you need one. It’s advisable to manage your books in case your business is a small one since it can cost you a lot. This is because the receipts and bank statements that you give out to them will be given to their bookkeeper who will get your books in manageable and clean orders at the accountant or CPA rates.
Read more in our post here: http://www.flowershopvancouver.ca/bookkeeper-certification/