bookkeeping vs accounting

I'd consider bookkeeping entering the daily transactions and reconciling bank accts, etc. Whereas accounting would involve more JEs (depreciation, purchase/retirement of fixed assets, accruals, etc.), as well as financial statements. But, there are some 'full charge' bookkeepers that do the financial statements too. I don't think there is a clear dividing line. You could define the 'accounting' services to include financial analysis (ratios/trend analysis). What is more important is the quality of your service/work not necessarily what you call it. I'm sure others may have different definitions.

Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business
MLongConsulting.com

I'll agree with Michelle's definition.

Bookkeeping is a task oriented function - recording transactions.  Accounting is more results oriented - now that transactions are entered, are they categorized correctly? What kind of reporting can I do now?

I think every good accountant starts out with bookkeeping. Managers not so much, but accountants must have good bookkeeping skills too.

Scott

I agree with Michelle and Scott and would like to add that bookkeeping is more recording of the daily activities and accounting is management reporting along with financial statement and agency reporting. I do suggest that you check with your regulating board before you call your services "accounting" because it is illegal to call your firm an accounting firm if you are not a CPA.

Clarisse

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I think the others have clarified the difference between the two quite well. On a slightly different note, however, I'm finding that my clients are not real sure of the line between bookkeeping and accounting.

I firmly tell clients that I'm a bookkeeper. Yet, I find that they ask many questions as if I were a CPA/accountant.

One of my (new) clients challenged me in telling me that he was entitled to take money from the S Corp. w/o paying himself a "reasonable salary." I went back through the books to the beginning of the year and put all the checks he made out to himself under Shareholder Distribution. Finally, I asked the client if I could bring in a CPA to talk to him. He complied and finally accepted that he should also take a "reasonable salary" and pay taxes.

I'm finding that I'm way more of a tutor and/or teacher when it comes to QB and accounting than I ever imagined I'd have to be in providing services to clients. Before I opened the firm in Jan., I imagined most clients would meet with me and then setup a regular schedule that I'd adhere to in entering transactions, providing payroll services, etc. Hardly the case, thus far!

Your clients think well of you, and they are giving you the opportunity to stratify their services. You can bill them more for services that require a higher level of skills.

Scott

Thanks, Scott:o) Yes, you are right re: increased billing rates. My bookkeeping rate is $50/hr. However, I need to rethink this and potentially breakout other rates for various services, such as official "teaching/tutoring," which I've been doing much of lately. Tonight, I showed a client how to enter bills; and explained how two-sided items work.

Teaching clients how to use QB might be done at $75/hr. However, why would clients pay me such a rate when they can go to the local comm. college and learn QB at $55 for each class? I do have Michelle Long's book, which has provided me with some insight on these matters.

Rose,

Why can't they just go to a community college and learn QB? You aren't taking into account the value of their time. Yes, it would be $20 cheaper to go and take a one hour class. But what is the value of their time? If they can make $100 an hour in providing the services they provide, they in essence have given up not only the $55 for the class, but the additional $100 they had to forgo to take the class. Therefore, total forgone equals $155, versus $75 to pay you.

Not to mention the fact that because Rose knows them and their needs, she can give them information that is more relevant. Their value for the dollar may be two or three times what a cheaper alternative (in dollar terms) might be.

That's that mystical personal relationship you hear about.

Scott

Absolutely true!

These comments are so helpful! I just want to add that I charge more per hour than is noted above for the one time client that needs catch up service on bookkeeping and the set up of QB. If they are not willing to pay my rate it means their business is not profitable enough, or not large enough to get expert advise to take care of what I believe to be very important - their books.

So then I recommend they call around for a lower rate or buy QB and take the classes.

Don't underestimate the value of accurate bookkeeping and set up of QB.

I've been thinking about outsourcing some of my financial work and found this thread really insightful.  It seems a bookkeeper salary is one I could afford to pay - particularly for 10-15 hours of work a week that I have.  I already work with a CPA (mainly around tax time), so I'm hoping the bookkeeper can work with him to iron certain things out... and this was helpful in understanding where I can rely on my bookkeeper for advice and where I shouldn't expect to.