8 Differences Between Accounting and Bookkeeping

by Zaara 11, Feb 2021

8 Differences Between Accounting and Bookkeeping

Accounting and bookkeeping are vital functions of the company’s financial department. Bookkeeping is the method of recording financial transactions and acts as a guide to accounting, which is interpreting, classifying, analyzing, summarizing, and reporting financial data.

Bookkeeping and accounting may seem to an untrained eye to be the same process. Accounting and bookkeeping both deal with financial information, require necessary accounting skills, and use financial transactions to identify and produce reports.

A bookkeeper/accountant who will run their businesses is required for any company, small or large. Today's company owners know more than before that they will eventually not be in the company if they are not vigilant about their finances. It can be costlier for smaller firms to appoint a full-time bookkeeper or accountant; outsourcing this function has become very attractive to business owners and an excellent opportunity for bookkeepers or accountants to start up their bookkeeping or accounting business Dubai.

Advantages of Starting an Accounting & Bookkeeping Business

Below mentioned are the benefits that help to start any Accounting and Bookkeeping Business.

  • The startup cost for Accounting and Bookkeeping firms is minimum.
  • You can become an expert in one accounting application for enhanced marketability.
  • Its regular work that generally takes place on a daily schedule
  • You can also work virtually and expand your target audience.
  • The service provider has the amount of flexibility to scale up the business without any lag substantially.
  • To save time, most organizations use accounting automation tools. It will save time, but it reduces risks substantially.
  • The accounting and bookkeeping sector is growing.
  • This industry is a sector that never dies.
  • The most reliably rising sector is accounting and bookkeeping.
  • Work flexibility in this industry.

Opening an Accounting & Bookkeeping Business

Accounting and Bookkeeping consultancy businesses are among the most common start-up company services and are almost always in demand. Implementing new levies and the fine-tuning of the current taxation system has resulted in an unprecedented order for accounting firms, especially those offering their customers’ integrated solutions. The reach of the start-up of accounting and bookkeeping businesses is growing every day. Here are a few things to keep in mind before getting into registering your company with the authorities.

Requirements to Establish an Accounting and Bookkeeping Business

1.Degree in Accounting Services

As a consultant, you will be engaged in delivering services for business rather than private companies. As an investor/expert, you need to have a degree in accounting or associated business setup in Dubai. It also implies that you need to have an accredited certificate that indicates you are a professional accountant. However, before operating an accounting firm, investors need to verify the legality of the degree they hold. You can also take local exams to increase the chance of authorization.

2.Professional License

You will need a license to start any business. You must have a legitimate professional license issued by the Department of Economic Development (DED) when opening an accounting firm.

3.Office Room

It is mandatory to choose an office room when setting up a business. Having an office in a business center also makes it easier to find customers. A physical workspace also creates a lot of trust among customers as they feel secure and relaxed, working with an accounting company with a dedicated CPA team. You can rent a room of your choice when you start a bookkeeping company.

Procedure to Setup the Accounting and Bookkeeping Business

  1. The first step is to register a trading name for your company. It can be the name of your choice but under the government's laws.
  2. The next step is to focus on the business structure you want: a sole proprietorship, joint-stock corporation, LLC, or other agency.
  3. After this, you need to get initial approval from the DED. Generally, the initial support indicates that the DED has no issue running a business with you as long as it satisfies all the legalities needed to start a business.
  4. The next step is to open your company by submitting all the documents, along with the initial approval.
  5. You will need to rent an office room for your company as required by the authorities.
  6. After this, you will need to acquire a Professional License from the authority concerned.
  7. Once you obtain the license, you can legitimately open your accounting and bookkeeping company.

Difference Between Accounting and Bookkeeping

Basis of Comparison

         Accounting

       Bookkeeping

  1. Meaning

1. Accounting is defined as the process of summarizing, interpreting, and communicating financial transactions that were classified in the ledger account.

1. Bookkeeping mainly refers to identifying, measuring, and recording financial transactions

  1. Objective

2.The objective of accounting is to evaluate the economic situation and further communicate the information to the relevant authorities

2.The purpose of bookkeeping is to keep the records of all financial transactions proper and systematic.

  1. Types

3. The accounting department does preparations for a company's budgets and plans loan proposals

3. There are two types of bookkeeping -

  • Single entry 
  • Double-entry
  1. Preparation of financial statements

4. Financial statements are made during the accounting process

4. Financial statements are not qualified as a part of this process.

  1. Tools

5. Ledgers and journals

5. Balance sheet, Cash Flow Statement, and Profit and Loss Statement

  1. Analysis

6. Accounting uses bookkeeping information to evaluate and interpret the data and then compiles it into reports

6. The procedure of bookkeeping does not require any analysis

  1. Determination of financial position

7. Accounting indicates the entity's financial status.

7. Bookkeeping does not depict an organization’s financial standing.

  1. Decision Making

8. Depending on the information provided by the accountants, the management can make business decisions

8. Management can't make a decision based on the data provided by bookkeeping

Bookkeeping functions as a platform for Accounting procedure as bookkeeping is the preliminary step or beginning of accounting. Hence, Bookkeeping is an inseparable portion of Accounting. Bookkeeping serves as a basis for the Accounting. So if the bookkeeping of records is appropriately managed, it is supposed that accounting will also be perfect and vice versa. The function Bookkeeping is a clerical process. Therefore, a little knowledge of commerce is adequate for it, while the study of accounting is an analytical one, so authentic experience in this field is required.

How Can We Help?

The services of accounting and bookkeeping satisfy the expectations and requirements of many business organizations. Although typical accounting companies take care of large and medium-sized enterprises’ needs, some address individuals and small businesses’ needs. We at Commitbiz can help you with it if you are interested in venture capitalists/investors eager to start this company. Contact us today- we'd be happy to help you.