What’s the Difference Between Ecommerce Bookkeeping and Accounting?

What’s the Difference Between Ecommerce Bookkeeping and Accounting?

Keeping track of your financial transactions should be a top concern if you want to know how your small business is going. 

There are many benefits to maintaining sound bookkeeping and accounting procedures for your small business, from ensuring tax returns are done correctly to accurately projecting cash flow.

But how do accounting and bookkeeping differ from one another? Finding accurate data and presenting the proper documents require understanding the differences. 

The primary distinction between the two is that you or a professional must acquire financial information and organize it appropriately with bookkeeping. 

A CPA (Certified Public Accountant) can assist you in going one step further and examining your financial data to see if your company is large enough or if you need an extra set of eyes.

Just what is bookkeeping?

To arrange, record, and track the financial information for your company, you must perform several bookkeeping duties. 

More particularly, it guarantees that all of your earnings and outlays, including dates and business categories, are accurately tallied and structured.

Bookkeeping is part of examining daily transactions, balance sheets, bank statements, accounts payable and receivable, income statements, and other documents. 

Some small business owners choose to do their bookkeeping, while others choose to engage a bookkeeper to assist with bookkeeping responsibilities, from bank reconciliations to logging journal entries. 

Either manually, by entering data into spreadsheets, or with the aid of business bookkeeping software or bookkeeping services.

A bookkeeper must ensure that your financial records are as accurate as possible because doing so helps the accountant with tasks like tax preparation. 

When preparing your company's financial records for more difficult tasks, think of bookkeeping as a component of the accounting process. 

Even if the bookkeeper is you, you still need to see any little or undetectable mistakes. Even a little one may impact your business.

Additionally, bookkeeping records could improve your understanding of the financial situation of your business. 

Following that, you can use this data to decide whether to alter your company's budget or the way cash flow is allocated.

Accounting

Although bookkeeping is an element of the accounting process, accounting involves more than just looking at a company's financial data on the surface. 

As an alternative, it also entails studying them. Accounting tasks include analyzing financial information to recommend ways to enhance your company's tax returns, such as tax planning and filing. 

Accountants will also be well-versed in the tax breaks available to your company.

Since they typically possess the specific knowledge to assess the "big picture" of your company's finances and provide advice, accountants are given these kinds of tasks. 

Compared to bookkeeping, accounting typically involves more logic and problem-solving abilities. 

The organization and accuracy of your financial data are ensured by bookkeeping, but it also goes a step further to make predictions about your company's financial health. This then enables business owners to make wiser financial choices.

What sets accounting apart from bookkeeping?

Financial data is used in accounting and bookkeeping in several ways. A business's daily financial transactions are recorded through bookkeeping. 

Accounting looks at the data in financial accounts and uses it to focus on the overall state of a company. 

Simply put, bookkeeping focuses on the details, such as allocating numbers to the proper categories and locations (such as income or expenses). 

For instance, bookkeepers must look at a business checking account to ensure they have recorded all bank deposits within a specific period.

Accounting will use these transactions to fulfil duties like predicting the business's future needs or carrying out audits. 

For instance, an accountant or accounting software can examine the potential tax liability for your small business in the current fiscal year and recommend actions to help lower that liability. 

Additionally, they could consider any business expenses that seem exorbitant or superfluous and propose adjusting the budget accordingly.

Can I handle my books?

Yes, you can, provided you're willing to accept the challenge and are patient with yourself while you're getting your bearings. 

Additionally, you should be at ease with being exceedingly organized, detail-oriented, and current with your booking-related activities. Accounting experience is advantageous but optional.

You can enlist the aid of automation, or in other words, bookkeeping software, to make it simpler for you. 

To improve the effectiveness and organization of your company's bookkeeping, Novo interfaces with programs like Quickbooks and Xero. 

Your financial information can sync instantly between the two platforms with only a few mouse clicks. 

You only need to check the transactions to make sure everything is accurate and documented properly.

Can CPAs work for themselves?

It is normally preferable for small businesses with more sophisticated organizational structures to engage a CPA; 

However sole proprietors and business owners operating alone can manage their accounting obligations or use accounting software. 

CPAs or Certified Accounting Professionals require a bachelor's degree and other qualifications. 

The latest tax laws and regulations are taught to them. They can offer you qualified advice on strengthening your business's financial stability. 

They can also help your small business put in place a trustworthy accounting system. 

Think of this person as a team member who can convey the big picture and challenging tasks to you.

When your company is having problems with the IRS, Enrolled Agents, a specialized form of accountant, can act as an advocate on your side. 

Certified public accountants might suggest the ideal ways to set up your business after they examine how it is now set up. 

Your CPA can explain why it could be worthwhile to go through the additional paperwork and potential costs if, for example, you are currently a single proprietor and would be better suited to restructuring as an S-Corp.

Accountants can also use your financial reports to provide a clearer view of your company's financial data and state. 

A good return on your investment can be obtained by hiring an accountant.

Regardless of the size of your company, outsourcing your bookkeeping or accounting services may make sense. 

You'll have more time if you accomplish this to concentrate on other tasks relating to your business. 

Additionally, you will get sage financial guidance from qualified experts on how to sustain long-term business stability and growth.

The Lesson

Accounting and bookkeeping are two different things, and managing your company's finances requires understanding the difference. 

Accounting concentrates on the large picture, whereas bookkeeping concentrates on the specifics of your financial data, making sure that your transactions are accurately recorded, and your financial statements are current. 

It is essential for forecasting, budgeting, and tax preparation.

Depending on the size, development, and comfort level you have with numbers in your firm, it might be worthwhile to hire an accountant or bookkeeper to ensure its financial success. 

Remember that sound record-keeping and financial accounting are prerequisites for making successful business decisions, whether you need to log transactions or take a broad view of your finances. 

Even if you don't hire someone full-time, it might be time to think about outsourcing your bookkeeping or accounting. 

If you thoroughly understand your company's financial picture through both bookkeeping procedures and accounting strategies, making business decisions will be considerably simpler.

FAQ’s

  • What is accounting?

Accounting involves more than just looking at a company's financial data on the surface. As an alternative, it also entails studying them. Accounting tasks include analyzing financial information to recommend ways to enhance your company's tax returns, such as tax planning and filing.

  • What is bookkeeping?

To arrange, record, and track the financial information for your company, you must perform several bookkeeping duties. More particularly, it guarantees that all of your earnings and outlays, including dates and business categories, are accurately tallied and structured.

  • What are the benefits of bookkeeping?

There are many benefits to maintaining sound bookkeeping and accounting procedures for your small business, from ensuring tax returns are done correctly to accurately projecting cash flow.

  • What are the duties of a bookkeeper?

A bookkeeper must ensure that your financial records are as accurate as possible because doing so helps the accountant with tasks like tax preparation.

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