Accounting and bookkeeping may seem identical at first, but even at that, these two terms are quite different and not similar as we may think. As a business proprietor who is eager to grow, knowing the difference between these two terms can assist you in properly grasping the important roles they play in the growth of your business.
The disparity that exists between bookkeeping and accounting can be similar to the disparity that exists between let’s say, a doctor and a nurse. A doctor and a nurse as you know strive toward similar goals, but though their operations may sometimes intersect, their area of speciality remains different.
Simply put, it is the duty of a bookkeeper to ensure that all the business information about an organization is well recorded, while it is the sole duty of an accountant to analyse the information and draw sensible conclusions from it.
Now, let’s have a lucid look at what bookkeeping and accounting are and how they help SMEs in Singapore.
1. Recording + Filing = Bookkeeping
A bookkeeper is charged with the administrative duty of recording certain business transactions, therefore, one can simply say that bookkeeping is the task of recording business transactions. The business transactions are quite significant, thus, they have to be well-recorded and kept for future use.
A bookkeeper does other things aside from simply recording business transactions; these set of individuals also make involves, they handle payroll services, reconcile credit cards, etc. It is also the duty of a bookkeeper to balance historical accounts, subsidiary accounts and the ledgers that have the records of the sales and the expenses and other important similar documents.
Bookkeepers are also in charge of other duties such as paying suppliers, inventory updating, taking care of little cash, amongst other duties.
If one wishes to become a bookkeeper, he or she will have to take certain accounting courses to have an in-depth knowledge of the basics of accounting.
Bookkeepers also perform audits, so you have between an auditor and a bookkeeper to choose from if you need someone to audit your business financial statement. If you reside in Singapore, you can get an auditor from any audit firm in Singapore.
2. Reporting + Analyzing = Accounting
An accountant gathers the information obtained by the bookkeeper so as to have the best knowledge regarding how well the business in coping on all fronts, and also to ascertain the best way to help the business so it maintains or raises its profits. Accountants are charged with the duty of accumulating or gathering revenue and expenses.
These individuals also scrutinize the expenses that are accrued from an operation, they file taxes, prepare reports, transfer pricing documents, etc. The reports made by accountants are very beneficial to business owners in several ways, one of which is that the reports assist business owners to be fully aware of how certain crucial decisions they make affect their business.
Accountants also assist to draw up account charts, make loan payments when required, and plan the budget of the business. These people also set certain standards regarding issues (financial issues) like the maintenance of records, how records should be filed and destroyed at the needed time.
3. Bookkeeping vs. Accounting for SME
A small business may not be able to afford the services of a full-time accountant so instead, they opt for a bookkeeper and contact an accountant when in dire need of help regarding issues that warrant their knowledge and expertise. Larger businesses that can afford the services of an accountant can hire them on a full-time basis. These accountants will be charged with the duty of managing many bookkeepers.
Bookkeepers, especially those working for SME must be very conversant with Singapore’s tax laws, including the provisions of SFRS (Singapore Financial Reporting Standards). These provisions are known to have a huge effect on accounting and tax statements, real estate valuation, etc. All transactions are to be recorded based on certain guidelines laid by the SFRS to prevent mismatches between actual and recorded expenses in the future. Since the tax statement is very much involved, it is also very important that bookkeepers have enough insight regarding the requirements of the Inland Revenue Authority of Singapore.
In a Nutshell
Bookkeeping is very important for SME for several reasons. As highlighted in the blog post, Bookkeepers play a role similar to that of accountants; and we are also aware of the crucial role accountants play in the growth of a business. Also, SMEs that can’t afford the service of an accountant choose a bookkeeper as their only alternative. For more information, feel free to get in touch us.