Does your business need accounting or bookkeeping? What’s the difference between them?

Business people need to manage business finances. In the transaction process, do you need accounting or bookkeeping? The two seem to be similar, but in daily life, many people confuse them. In fact, have you ever thought about the difference between them and how to help your business grow continuously? What are the characteristics of each of them?

1. Bookkeeping – record transaction information for the company’s financial affairs

In short, the function of bookkeeping is to organize and record day-to-day business transactions. Bookkeeping requires careful labelling and organization of all business-related data and information in the process of regular recording in preparation for accounting.

For specific bookkeeping work, the following information may be recorded in detail:

• Daily transaction expenses and receipts.

• Billing expenses (water, electricity, telephone, etc.);

• Payment method (check or cash);

• Transaction details (product/service);

• Customer information, etc.

For the information related to these transactions, bookkeeping generally records various transactions in an orderly manner, and may be processed in the form of “double-entry bookkeeping” or “single-entry bookkeeping”.

The former will record each transaction in a “ledger” way and balance the entries between the two parties; the latter is a more common method, according to the actual situation, each transaction is classified by type and recorded in the borrower field.

You may need to do bookkeeping if your business requires the following activities:

• Manage product inventory and its changes in a timely manner;

• Uniform invoicing to suppliers;

• Uniform invoicing to customers

• Hire staff and manage salaries;

• Business activities have multiple expenses that need to be recorded;

• Daily transactions are frequent and responsible for keeping invoices, documents, etc.

Accounting – Analyze financials and prepare reports for companies

If the main axis of bookkeeping is to record financial information, then the main axis of accounting is to analyze and verify this financial information, be responsible for interpreting bookkeeping information, and prepare financial reports when necessary, and directly explain to management.

In the process of aggregating financials, accounting will apply the accounting principles of Hong Kong Accounting Standards to compile financial statements. Accountants should correctly display the cash flow, performance, etc. of business activities in the financial statements in the following forms and ensure that they are reliable and available. A compliant financial statement that will summarize the company’s business activities, accounting and financial content including:

• Profit and loss statement;

• Balance sheet;

• cash flow statement;

• Statement of retained earnings.

In addition to the above preparation of financial statements, accountants may also engage in the following business activities for enterprises:

• Handling business accounts and accounts;

• company audits;

• financing or investment;

• Tax reporting, deductions and exemptions;

• Publish customized financial management reports;

• Prepare budget plans;

• Design the recording and filing of financial data;

• Make financial decisions, analyze performance, etc.

Should I be looking for a bookkeeper or an accountant? their pros and cons?

Bookkeeping is more suitable for daily transaction processing, and can help companies review transactions and financial information, laying a solid foundation for accounting verification. Since there are no specific qualifications or educational requirements for bookkeepers, the cost is generally lower than that of accountants.

As for accounting, they can provide professional tax and financial advice to the business, and provide actual data in decision-making, so that the management can understand the real business situation and improve the operation strategy. They are also more expensive to hire because of their greater qualifications and needs.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.