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Accounting vs Bookkeeping

Paul Martin • July 31, 2014

Accounting vs Bookkeeping – What is the Difference and Why Does it Matter?

It is very common for non-accountants to think that accounting and bookkeeping are the same thing. Both play a vital role in the financial cycle but fulfil quite different purposes. As a business owner you need to understand how these functions operate to ensure your business is getting the right financial data and advice that is critical for your future growth and success. So, let's take a closer look:

What is a Bookkeeper?
Bookkeeping is the process of recording the daily financial transactions of the business in a consistent way – generally the basic cash in, cash out in order to gain a simple understanding of financial performance.

Bookkeeping is the first stage of the accounting process and lays the foundations for the work completed by an accountant.

Unlike accountants, bookkeepers do not need any formal qualifications. Frequently the person keeping the books for a small business is the business owner themselves, although as their business grows, they often look to their accountant to provide this service.

What is an Accountant?
The accountant takes the raw information recorded by the bookkeeper and makes sense of that information. Accountants are trained and qualified professionals, skilled in analysing, interpreting and presenting data in different ways. This includes preparing tax returns and financial reports such as profit and loss statements and balance sheets – all essential to managing your business.

Accountants create reports that bring together key financial indicators to enable a better understanding of profitability and cash flow. Their focus is on providing business advice to help ensure your business performance is on track for the future.

There are however differences between regular accountants and Chartered Accountants. Chartered Accountants are further qualified to be members of the industry body which has strict professional and ethical standards. This includes the requirement for ongoing training and upskilling. So, working with a Chartered Accountant gives you the extra confidence your financial affairs are being well looked after!

Accountants and Bookkeepers Working in Harmony
Accountants can be bookkeepers but bookkeepers are rarely accountants. However, as the transactional information provided by the bookkeeper provides the foundation for the accounting process, it is important the two work in harmony.

One way many small businesses create this professional and financial harmony is to outsource both functions to a Chartered Accountant. Using the latest cloud accounting systems such as MYOB and Xero, Paul Martin Chartered Accountant Limited is able to exploit the synergies of a single data source to deliver real-time views of your company's performance. This enables more effective decision making, saves you time and gives you peace of mind your business is in good hands.

Contact us  today to talk about how we can help you transform your business financial management.

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By Paul Martin • December 4, 2023
There were some key takeouts of interest to many of our clients from the recently signed coalition agreements between National, ACT and New Zealand First and the formation of the new Government. In particular there are a number of policies which will likely benefit landlord clients who own residential rentals. I have summarised some of these below. 1. Return of Interest deductibility for residential rental properties Interest deductibility for residential rental property owners will return. It will be phased back in over three tax years: • 2023/24 tax year: 60% of interest cost will be deductible. • 2024/25 tax year: 80% of interest cost will be deductible. • 2025/26 tax year: 100% of interest cost will be deductible. 2. Reduction in bright-line period National signalled in their pre-election campaign that the bright-line period for residential rental property sales would reduce from 10-years to 2-years. While the exact implementation of this policy is not yet known, it is good news on the horizon for residential property investors. 3. Reinstatement of 90-day no-cause termination notices The new government will reinstate 90-day no-cause tenancy termination notices. This will avoid many unnecessary disputes in the Tenancy Tribunal and gives landlords more confidence in letting to possibly “marginal tenants". Many landlords have avoided what they considered to be risky tenants because eviction for anti-social behaviour was so difficult. With this reinstatement, landlords might be more inclined to give a marginal tenant a chance because they know that if the tenant misbehaves, they won’t be stuck with them. If you would like more information on how these changes might affect your personal circumstances, please feel free to contact us to discuss further.
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