The Difference Between Accounting & Bookkeeping in Hong Kong
5 minute read
The difference between bookkeeping and accounting can be compared to the difference between nurse and a doctor. Both the bookkeeper and accountant work towards the same objectives, but different levels of responsibilities.
To most people, bookkeeping and accounting can seem like the same profession with similar objects. The two terms are often used interchangeably. Both roles by definition involve working with financial data, requires having basic accounting knowledge, and deals with preparing and generating reports.
While the two roles may seem similar on paper, each of these has its own set of advantages. And if you’re a business owner, knowing the difference between bookkeeping and accounting can definitely help you understand the key roles the two processes have in growing your company.
Bookkeeping: Recording and filing
The bookkeeping role is to consistently keep the business/company records of all financial transactions in order, proper, and organized. The administrative task of bookkeeping refers to the process of identifying, measuring, and recording financial transactions on a daily basis and in a consistent manner.
Often considered as the first step in accounting, bookkeeping involves preparing the payroll, creating invoices, posting debits and credits, reconciling company credit cards, among others. The bookkeeper is responsible for updating inventories, handling petty cash, paying suppliers, and filing customers’ cash receipts.
While the management cannot make important business decisions based on the data provided by bookkeeping, it is critical that bookkeepers are accurate in their work and are fully knowledgeable about financial topics with their roles and responsibilities.
Bookkeeping in Hong Kong involves balancing the company’s ledgers, subsidiaries, and historical accounts where the sales and expenses are recorded along with other supporting documents, therefore becoming a bookkeeper requires one to take accounting courses to learn the fundamentals of accounting.
Accounting: Analysing and reporting
The accounting role’s main objective is to gauge the business’s financial situation and communicate the key information to relevant company authorities. The middle-level management task of accounting refers to the process of summarizing, analysing and interpreting, and reporting financial transactions that were classified in the ledger account.
The preparation of financial statements is heavily involved in the accounting process. The role of the accountant includes accruing or deferring expenses and revenue, analysing and interpreting the company’s operational expenses, filing taxes and other regulatory payments, preparing financial statements and reports. Business owners rely on these reports that largely influence financial decisions that they have to make to ensure the stability and growth of the business.
Due to the complex and analytical nature of the role, accounting requires special skills to enable accountants to draw conclusions on business’s accounts, outline the company’s budget, or draft loan proposals. Professional accountants set the business parameters and standards that includes filing, maintaining, and even destroying financial records when considered as necessary.
In order to become a Certified Public Accountant or Chartered Accountant of Hong Kong, one must first earn a bachelor’s degree and pass a board of exams. A professional accountant may also work as a company’s financial controller or hold key positions in the business.
The shifting landscapes
Both bookkeeping and accounting have been evolving and going through a tremendous amount of changes in the past decade. The growth and processes are now heavily influenced by technology.
With the growing numbers of bookkeeping and accounting software, the line between the two processes is slowly diminishing. Some accounting functions are now being slowly absorbed into the bookkeeping process, while generating financial statements that were earlier part of the accounting process can now be easily undertaken by bookkeeping software.