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Accounting vs Bookkeeping Service | 6 Key Differences

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Accounting vs Bookkeeping

Accounting vs Bookkeeping services are two different processes that are often confused. While the importance of accounting is the system of recording, classifying & summarizing financial transactions, the fundamentals of bookkeeping is the practice of recording & maintaining these transactions in a specific way.

Key Differences

1) Accounting provides an internal overview of a company’s financial status while bookkeeping tracks individual dealings.

2) Accounting is used to make business decisions, while bookkeeping is used to track accurate financial information.

3) Accounting uses Generally Accepted Accounting Principles (GAAP), while bookkeeping may use other methods.

4) Accounting must be audited, while bookkeeping does not need to be.

5) Accounting records money coming in and money going out, while bookkeeping tracks individual transactions.

6) Accounting is mainly used for larger companies, while bookkeeping can be used for any company.

What Is Accounting?

Part of the accounting process is recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. This information can be used internally by businesses or externally by authorities and other interested parties.

The financial accounting process begins with the recording of transactions. This can be done manually or electronically. Once the operation has been recorded, they are then classified according to their type.

For example, money, credit card and invoiced transactions would all be classified as income, expenses, assets, or liabilities. After the transactions have been classified, they are summarized into financial statements. These reports show a company’s financial position, performance, and cash flow at a specific point in time.

How Accounting Can Help Your Business?

By completing transactions, businesses can keep a trail of their expenses and revenue, which can help them to make informed business decisions. Also, financial accounting uses (GAAP), which allows businesses to compare their performance.

Additionally, accountancy can help businesses prepare tax returns, which can save them tons of money. Overall in the long term, accounting is a valuable service for businesses of all sizes.

What is GAAP?

Is a set of cost accounting standards that are used in the United Kingdom. These standards provide a framework for financial reporting and help businesses compare their performance. They are also used by tax authorities to ensure that businesses are reporting their finances accurately.

Accounting

Types Of Accounting

There are four main types of accounting: financial accounting, management accounting, public accounting, and government accounting.

1. Financial Accounting

Is the activity of recording, classifying, and summarizing a company’s economic transactions to provide information that is useful in making business decisions. This information can be used internally by businesses or externally by investors, creditors, and other interested parties.

2. Management Accounting

Is the activity of providing reports to managers so that they can make informed decisions about how to run the business. This information includes things like budgeting, performance measurement, and forecasting.

3. Public Accounting

Is the activity of providing financial accounting services to clients such as individuals, businesses, or non-profit organizations. Public accountants may work for accountancy firms or they may work for accounting departments in larger companies.

4. Government Accounting

Is the activity of providing accounting services to governmental entities such as state, local, and federal governments. Government accountants may also work for accounting firms or they may work for accounting departments in larger companies.

What Are Financial Statements?

A financial statement is a summary of a company’s financial performance over a specific accounting history.

1. Balance sheet

The balance sheet shows a company’s assets, liabilities, and shareholders’ equity at a specific point in time.

2. Income statement

Shows a company’s revenues and expenses over some time.

3. Statement of cash flows

Shows how a company’s cash has changed over a period of time.

4. Statement of changes in equity

Shows how the company’s shareholders’ equity has changed over a period of time.

5 Accounting Mistakes To Avoid

1) Not keeping track of your fixed and variable expenses. If you don’t track your expenses, you won’t know how much money your firm making (or losing).

2) Not preparing a written budget is critical, it helps you follow your expenses, forecast future income statement and make sound financial decisions.

3) Not keeping accurate financial reporting can lead to a number of problems for your firm, including inaccurate tax returns and difficulty securing loans or lines of credit.

4) Not paying attention to cash flow data could lead to financial instability.

5) Not treating employees fairly can put a serious damper on the business and accounts. Employers have to treat them fairly and in return, you’ll have a productive workforce that will help your business grow.

What Qualification is Needed to be an Accountant?

The simple answer is no, you don’t need a degree to be an accountant. Postgraduate education is beneficial but not necessary, just like other professions. Instead, the majority of people in the sector have completed an AAT (Association of Accountants Technicians) course.

This certificate is often the min. requirement for accounting entries or for certified public accountants, which trains you the basics up to expert skills, across three levels. With this certificate, you’ll be able to pursue a career in accounts in a variety of interesting sectors like forensic accounting, public sector, private sector etc.

What Is Bookkeeping?

Bookkeeping is the recording of individual financial transactions. It can be done manually or using cost accounting software. The aim of bookkeeping is to ensure that financial records are accurate and up-to-date.

Bookkeeping is essential for businesses, as it helps them follow their financial position and make sound decisions based on accurate data. It also helps businesses prepare tax returns and manage their cash flow.

types of bookkeeping

Types Of Bookkeeping

There are two types of bookkeeping, single and double-entry bookkeeping.

Single entry system

Single-entry bookkeeping is a simple method where each financial transaction is recorded only once, either as a debit or a credit. This method is typically used by small businesses and individuals who have basic accounting needs.

Double entry system

Double-entry bookkeeping is a more advanced method where each financial transaction is recorded twice, once as a debit and once as a credit. This method provides a more accurate picture of a company’s financial health and is recommended for larger businesses with more complex accounting needs.

5 Bookkeeping Mistakes To Avoid

1) Not keeping track of expenses is one of the most common bookkeeping mistakes.

2) Reconciling your bank statements is essential for ensuring accuracy in your financial records and history.

3) Not tracking inventory and sales makes it difficult to determine how much money your company is making or losing.

4) Not registering transactions on time makes it difficult to keep track of your business’s financial data.

5) Not using double-entry bookkeeping. This involves using debits and credits to make sure that the accounting period are accurate. For example, can help prevent human error. It can also help make sure that transactions are accurate and complete, which is important when it comes time to file taxes.

What Qualifications do you Need to be a Bookkeeper?

You don’t need a degree or years of experience to apply for an entry-level position. However, you should have good math skills, a basic understanding of accounting or bookkeeping practices, and software knowledge of programs like QuickBooks, Xero, Kashflow or FreshBooks.

The best guide to obtaining a qualification in bookkeeping is through AAT. This gives you a strong overall grasp of accounting courses including bookkeeping, economics and account preparation.

Also, get some practical experience “bookkeepers work” or training before you choose a career to become a certified public accountant and look for an accountant or bookkeeper role in accounting firms, companies or professional bodies.

Conclusion

The difference between accounting vs bookkeeping is the processes. Bookkeeping is simply the process of recording the financial transaction in a specific way, while accountancy takes these recorded transactions and interprets them to provide useful information for making company decisions.

Accountants and bookkeepers can be invaluable partners if you’re looking for help with your financial analysis or want someone to manage your books. They’ll focus on everything from generating budgets to filing taxes so you have more time on other important tasks! Contact MH Services today.

single entry bookkeeping

Easy Single-Entry Bookkeeping: Keep Your Books in Order

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Single-Entry Bookkeeping

If you’re like most business owners, you probably don’t have time to keep your books in order. That’s where single-entry bookkeeping comes in! With this method, you can easily track your expenses and income, and keep your business finances in check. We will discuss the basics of single-entry bookkeeping and how it can benefit your business.

Single Entry vs Double Entry Bookkeeping

The main difference between single and double entry system is the way transactions are recorded.

  • With double-entry bookkeeping, each transaction is recorded in two accounts, which ensures the accuracy of financial statements.

  • With single entry bookkeeping, only one account is used to record transactions, which makes financial statements less accurate. However, single entry bookkeeping is simpler and easier to use, making it a popular choice for small businesses.

Single-Entry Bookkeeping

Single-entry bookkeeping is a method of accounting in which all transactions are recorded in a single ledger. This type of bookkeeping is typically used by small businesses and sole proprietorships. Also, single-entry is easier to learn and use than double entry bookkeeping.

How it works?

  1. Keep a ledger for each type of transaction – a ledger for sales, purchases and expenses.
  2. Enter each transaction into the appropriate ledger.
  3. At the end of the period, total each ledger and transfer the totals to a master ledger.

The first step is to do your homework and understand what offshore accounting entails. Once you have a good understanding of the basics, you can start to narrow down your search for a qualified professional.

Example

For example, let’s say you own a small business and make a sale.

=> You would record the sale in your sales ledger.

=> Then, let’s say you use some of that money to buy supplies for your business. You would record the purchase in your purchases ledger.

=> Finally, let’s say you spend some of the money on advertising. You would record the expense in your expenses ledger.

At the end of the period, you would transfer the totals to a master ledger which would show that you have made a sale, made a purchase, and incurred an expense.

Single entry bookkeeping

Types of Single Entry

There are two types of single-entry bookkeeping:

1. Cash

Cash is when transactions are recorded when the cash changes hands.

2. Accrual

Accrual is when transactions are recorded when the obligation is created, even if the cash balance has not yet changed hands.

Benefits of Single Entry

  • Single-entry bookkeeping is a simpler, more basic form of accounting that is easy to learn and use
  • This type of bookkeeping is perfect for small businesses and sole proprietorships
  • Transactions are recorded in a single ledger, making it easy to track your income and expenses

Disadvantage of Single Entry

  • The main disadvantage of single-entry bookkeeping is that it is less accurate than double entry bookkeeping. This is because there is only one record of each transaction, so it is easy to make mistakes
  • Single-entry bookkeeping can also be more time-consuming than double entry system, as you have to keep track of multiple ledgers

Double Entry Bookkeeping

Double-entry bookkeeping is a system of accounting that ensures the accuracy of financial records by requiring every transaction to be recorded in at least two accounts and works on the basics of accounting equations. This system helps businesses and individuals track where their money is going, as well as keep track of their assets and liabilities.

Also, under the double-entry system, each transaction must have corresponding debits and credits. This system provides a more complete picture of a business’s financial health than single bookkeeping.

How does it work?

  1. First, you must identify the accounts that will be affected by the transaction. For each transaction, there must be at least one debit and one credit.
  2. Next, you have to determine the amount of the transaction.
  3. Finally, you have to enter the transaction into your accounting software. Most accounting software programs will have a journal entry feature that allows you to enter the date, account names, and debit and credit amounts for each transaction.

Example

Suppose that a business buys a new computer for £1,000. The computer will be recorded as an asset in the business’s accounting records.

The transaction would be recorded as follows:

=> Debit: Asset account

=> Credit: Cash account

For the debit, we would enter an asset account because the business has acquired a new asset (the computer). For the credit, we would enter the cash account because the business has paid for the computer with cash or with a card.

Types of Entries for Double Bookkeeping

There are three types of entries for double bookkeeping:

1. Journal Entries:

A journal entry is a record of the financial transactions that take place within a business. This includes purchases, sales, payments, and receipts.

2. General Ledger Entries:

The general ledger is a record of all the financial transactions that take place within a business. This includes journal entries, as well as other entries such as payroll and invoices. Ledger entries are used to keep track of a business’s financial activities.

3. Trial Balance:

A trial balance is a list of all the accounts in a business, as well as their corresponding debits and credits. This report is used to ensure that the total of all the debits equals the total of all the credits.

Benefits of Double Entry

  • More accurate financial records
  • Easier to track where money is going
  • Keep track of assets and liabilities
  • Feel more in control of your finances

Disadvantages of double entry bookkeeping

  • Takes more time to record transactions
  • Requires a basic understanding of accounting
  • Can be overwhelming for small businesses

Different types of Accounts

There are three types of chart of accounts in double-entry bookkeeping: assets, liabilities, and equity.

=> An asset account is a record of all the property and possessions that a business owns. This includes cash, equipment, and inventory.

=> A liability account is a record of all the money that a business owes to others. This includes loans, accounts payable, and taxes payable.

=> Equity is the difference between a business’s assets and liabilities. Equity is divided into two categories: paid-in capital and retained earnings. Paid-in capital represents the money that the owners have invested in the business. Retained earnings are the net income (profit) that the business has earned over time.

What is a Balance Sheet?

The balance sheet is a financial statement that provides a snapshot of a business’s assets, liabilities, and equity at a given point in time. This report is used to assess the financial health of a business.

The balance sheet equation is as follows:

Assets = Liabilities + Equity

The income statement is a financial statement that shows how much revenue a business has earned and how much expenses it has incurred over some time. This report is used to assess the profitability of a business.

The income statement equation is as follows:

Revenue – Expenses = Net Income (Profit)

The cash flow statement is a financial statement that shows how much cash a business has generated and used over a while. This report is used to assess the financial health of a business.

The cash flow statement equation is as follows:

Cash Inflow – Cash Outflow = Net Cash Flow

double entry bookkeeping

Double-Entry Accounting Software

There are many different types of accounting software on the market, but the following five are some of the best for small businesses.

1. QuickBooks

QuickBooks is one of the most popular double entry accounting system available, and it’s a great option for small businesses. It’s easy to use and has all the features you need to keep your books in order.

2. FreshBooks

If you’re looking for a program that’s specifically designed for small businesses, FreshBooks is a great option. It’s easy to use and has a lot of great features, including invoicing, time tracking, and expense tracking.

3. Wave Accounting

Wave Accounting is a free double entry bookkeeping system and accounting software program that’s perfect for small businesses. It has all the basic features you need to keep your books in order, and it’s very easy to use.

4. XERO

Xero is another great option for small businesses. It has a wide range of features, including invoicing, expense tracking, and budgeting tools.

5. Sage

Sage One Accounts is a cloud-based accounting software program that’s perfect for small businesses. It’s easy to use and has all the features you need to keep your books in order.

Tips for Using SE Bookkeeping

  1. Start by creating a list of all the accounts in your business. This should include assets liabilities equity accounts.
  2. Next, create journal entries for all of your financial transactions. This includes purchases, sales, payments, and receipts.
  3. Use the general ledger to keep track of all of your financial activities. This includes journal entries, as well as other entries such as payroll and invoices.
  4. Use the trial balance to ensure that the total of all the debits equals the total of all the credits.

Tips for Using DE Bookkeeping

  1. Make sure you understand the basics of double-entry bookkeeping before you start using it.
  2. Keep your books in order by recording all transactions in a journal and posting them to the appropriate accounts.
  3. Reconcile your accounts regularly to ensure accuracy.
  4. Use software or online tools to help you keep track of your finances.
  5. Stay organized and keep track of your expenses and income so you can make sound financial decisions for your business.

Conclusion

Single entry is a simpler method of tracking your finances, and it can be more than adequate for small businesses and sole proprietors. Using DE bookkeeping is more complex, but it offers greater accuracy and can be helpful for businesses with multiple streams of income or expenses.

Ultimately, the choice between single and double entry bookkeeping comes down to how comfortable you feel tracking your finances and whether you need the extra level of detail that double entry bookkeeping provides. If you’re just starting in business, we recommend trying single entry first to see if it meets your needs; you can always switch over to double entry later on if necessary.

affordable bookkeepers

5 Affordable Business Bookkeeper Services in London

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Affordable Bookkeepers

Are you overwhelmed by the thought of having to keep track of your finances? 

Do you feel like you don’t have enough time in the day to manage everything that’s on your plate? If so, you’re not alone. Many small business owners and entrepreneurs struggle with financial matters.

Affordable bookkeeper services can take the burden off of your shoulders and help you get your finances under control. Here are five reputable companies that offer affordable bookkeeper services in London and the UK.

5 Affordable Bookkeeper Services in the UK

The following bookkeeping companies have a good reputation and constant 4-5* reviews:

1. Unicorn Accounts

Affordable bookkeeping services in London for small to medium-sized businesses.

⇒ Unicorn Price: ££

⇒ Sectors Unicorn operates: Technology, Professional Services, Entrepreneurs, Healthcare, Real Estate, E-Commerce, Legal Services, Retail, Financial Services

⇒ Services Unicorn offers: Accounting Services, Payroll Services, Outsourced Accounting, Company Formation, Xero Online Accounting, VAT Advice, Finance Director Services, R&D Tax Credits, Personal Tax, Management Reporting

⇒ Unicorn Office: 5 Merchant Square, London, W2 1AY

2. PBS Bookkeepers

Professional bookkeepers for a fixed monthly fee with over 30 Years’ experience providing bookkeeping and accountancy services.

⇒ PBS Price: ££ – £££

⇒ Sectors PBS operates: All Sectors including Startups, Entrepreneurs, Establishing New Businesses

⇒ PBS offers: Bookkeeping, Accounting, Auditing, Payroll, Tax Return, VAT Registration

⇒ PBS Offices:

  • 26 York Street, London, W1U 6PZ
  • 4 Old Park Lane, London, W1K 1QW
3. MH Services

Michael Hayden and his team have been offering bookkeeping, tax and accounting services for over 20 years in Manchester & London for SMEs, self-employed and Ltd.

⇒ MH Services Price: £ – ££

⇒ Sectors MH Services operates: Hospitality Industry, Entertainment, Retail, Tradesman, Healthcare, Real Estate, Small Businesses, Self-Employed, Contractors, Sales Representative

⇒ MH Services offers: Bookkeeping, Self Assessment, VAT Registration, Payroll, Tax Services, Account Management, Accounting Services, Company Formations

⇒ MH Services Offices:

  • Imperial Court, 2 Exchange Quay, Manchester M5 3EB
  • 25 Wilton Rd, Pimlico, London SW1V 1LW
4. Right Choice Consulting

A professional accounting team that has international experience in accounting and bookkeeping services.

⇒ Right Choice Consulting Price: ££

⇒ Sectors Right Choice Consulting operates: Business Professionals, Service Sectors, Manufacturing, Retail, Importing Businesses

⇒ Right Choice Consulting offers: Accounting, Tax Return, Payroll Managing, Bookkeeping, Accounts Management, Company Formation

⇒ Right Choice Consulting Office: 22 Peterborough Road, Harrow, HA1 2BQ

5. Accounting Preneur

The firm is run by entrepreneurial accountants who are business owners themselves, meaning they understand the daily challenges faced by business owners and what kind of help they need.

⇒ Preneur Price: ££

⇒ Sectors Preneur operates: Hospitality Accountants, Property Accountants, Start-ups, Small Businesses, Property Tax, UK and Ireland Company Formation

⇒ Preneur offers: Bookkeeping Services, Payroll Services, VAT Services, Corporation Tax Return Services, Self-Assessment Tax Return Services, Tax Advisory Services 

⇒ Preneur Office: Second Floor, 26 Goodge Street, Fitzrovia, W1T 2QG

bookkeeper services for businesses

What Does a Bookkeeper Do?

A bookkeeper is responsible for tracking and managing a company’s financial transactions. They maintain records of income and expenses, manage invoices and payments, and keep track of other financial matters.

– Bookkeepers are essential for businesses that need to focus on their day-to-day operations and do not have time to track their own finances.

– Also, bookkeepers can provide valuable insights into a company’s financial health and performance via additional data software. By analysing past transactions and trends, they can help business owners make informed decisions.

Services Bookkeeper Offer

A bookkeeper can offer a variety of services, depending on the needs of the business. typical services include bookkeeping, accounting, invoicing, and financial reporting. They can also help manage payroll, tax filings, and other financial matters.

Bookkeeping:

The most basic service a bookkeeper can offer is bookkeeping. This involves tracking and recording all of a company’s financial transactions. This includes income, expenses, invoices, and payments. This information is important for businesses to have an accurate picture of their financial health.

Accounting:

In addition to bookkeeping, a bookkeeper can also offer accounting services. This involves preparing financial statements, such as balance sheets and income statements. This information is important for businesses to understand their financial performance and make informed decisions.

Invoicing:

Another common service a bookkeeper can offer is invoicing. This involves creating and sending invoices to customers. This is important for businesses to ensure they are paid on time and manage their cash flow.

Financial Reporting:

A bookkeeper can also prepare financial reports, such as profit and loss statements. This information is important for businesses to understand their financial performance and make informed decisions.

Payroll:

A bookkeeper can also help businesses with their payroll. This involves managing employee salaries, tax withholdings, and other payroll-related matters. This is important for businesses to ensure their employees are paid on time and accurately.

Tax Fillings:

A bookkeeper can also help businesses with their tax filings. This involves preparing and filing tax returns. This is important for businesses to ensure they are compliant with tax laws and regulations.

What Qualifications Need a Bookkeeper?

You need at least a high school diploma or equivalent to become a bookkeeper. However, many employers prefer candidates with some post-secondary education in accounting or bookkeeping.

You also need to have excellent math skills and strong organisational skills. Additionally, you should be able to stay up-to-date on changes in tax laws and regulations.

Bookkeeping course providers:

  1. ATT – short bookkeeping qualification that takes from 2 to 12 months to complete
  2. Kaplan – an entry-level qualification that gives you the skills to become a bookkeeper
  3. Training Centre – range of bookkeeping courses that can be taken full-time, part-time or online
  4. IAB – courses are broken down into different levels, each level working towards the final qualification

Bookkeeper Salary and Cost

The average annual salary in the UK is £25K to £27K. However, it depends on the size of the firm and the sector it operates in and what position are you in: Junior, Senior, Partner etc…

=> £50K+ – partner bookkeeper

=> £35 – £45K – established /senior bookkeeper

=> £25 – £30K – beginner/apprentice bookkeeper

Bookkeepers rate:

Freelance bookkeepers usually charge between £15 and £30/ hour.

bookkeeper vs accountant

How Do You Find a Bookkeeper in the UK?

When looking for a bookkeeper in the UK, there are a few things to keep in mind.

  1. It is important to find a reputable company that has qualified bookkeepers.
  2. You should ask for references and reviews from previous clients.
  3. It is important to discuss the services you need and ensure that the company can meet your needs.

Where to Search for Bookkeepers in the UK?

Some good places to start your search for a qualified bookkeeper are online directories such as ICB or Xero. These directories have listings of qualified bookkeepers from around the UK. You can also ask your friends and family for referrals, or contact your local Chamber of Commerce for recommendations.

Or simply just use the Google search bar, type eg. London Bookkeeper

Once you have a shortlist of potential bookkeepers, it is important to interview them to make sure they are a good fit for your business. Some questions you may want to ask include:

⇒ What qualifications do they have?

⇒ What services do they offer?

⇒ How much do they charge?

⇒ What experience do they have working with businesses like yours?

Bookkeeper vs Accountant?

A bookkeeper typically tracks expenses, invoices, and other financial matters. Bookkeepers are not typically licensed to prepare tax returns, while accountants are.

An accountant typically prepares tax returns and provides other financial consulting services. 

Tax Returns

When it comes to tax returns, many business owners may feel overwhelmed or confused. This is where an accountant can be a great help to prepare and file their tax returns. This is important for businesses to ensure they are compliant with tax laws and regulations. Tax is due on the 31st of January every year, and businesses must file their tax return by the end of the tax year.

Business Bookkeeping & Financial Transactions FAQS

=> WHAT IS A FULL-SERVICE BOOKKEEPER?

Full service bookkeepers can be a valuable resource for small businesses that need assistance managing their finances but don’t have the time or resources to do everything themselves.

=> DIFFERENCE BETWEEN BOOKKEEPING AND BOOKKEEPER?

  • Bookkeeping is the recording of transactions, while a bookkeeper is someone who performs bookkeeping tasks. A business may do its own bookkeeping, or it may hire a bookkeeper to maintain its financial records.
  • Generally, bookkeepers are responsible for more than just basic bookkeeping tasks, such as preparing and filing taxes and reconciling bank accounts. They may also be responsible for tracking inventory and expenses and providing analysis and recommendations related to the business’s finances.

=> HOW MUCH SHOULD I PAY A BOOKKEEPER?

A bookkeeper in the United Kingdom will earn between £15 and £30 per hour. You should discuss the services you need with potential bookkeepers to ensure that they can meet your needs.

=> IS IT WORTH IT TO HIRE A BOOKKEEPER?

There is no one-size-fits-all answer to this question, as the cost and benefits of hiring a bookkeeper will vary depending on your business and its needs. However, hiring a qualified bookkeeper can be a valuable investment for businesses that need assistance managing their finances. your needs.

=> IS A BOOKKEEPER CHEAPER THAN AN ACCOUNTANT?

The answer to this question depends on the services you need and the qualifications of the bookkeeper. Accountants typically charge more than bookkeepers, and their services may be more suited to businesses with more complex financial needs.

Conclusion

Hiring a bookkeeper can be a valuable investment for businesses that need assistance managing their finances. Bookkeepers offer a range of services, such as preparing and filing taxes, reconciling bank accounts, and tracking inventory and expenses.

The cost and benefits of hiring our bookkeeper services will vary depending on your business needs. However, hiring a qualified bookkeeper can be a great way to take the stress out of financial management for small businesses.

If you need any support or bookkeeper services, MH Services has qualified bookkeepers and accountants who can help your business with all of its financial needs.