Over the past 7 years, I’ve served in various accounting-related positions, and I have seen all different kinds of people throw around different kinds of words pertaining to accountants and bookkeepers. The three most common ones are bookkeepers, accountants, and beancounters. Well, some might say nobody really gives a damn what people say, but in a world where corporations rely solely on image to get business and ruin the economy, classifications in your field followed by the right subsequent designation/job title can be very important to the success of an accountant.
So, what is a Bookkeeper?
Let’s start off by saying that all accountants need to know how to do bookkeeping. Bookkeeping, without getting into too much of the history, is simply the act of keeping books using the Double Entry System. As a bookkeeper, you maintain ledger accounts in all the different ledgers, and maintain all subsidiary documents like the cash book, etc. Sounds similar to what an accountant might do, right? Well, yes, it is. However, the role of a bookkeeper ends at the Trial Balance. Once your accounting period ends and the ledger accounts are closed to produce a trial balance, and once the trial balance is produced, it is ideally handed over to an accountant to generate the statements or reports.
So, what is an Accountant?
An accountant is an advanced bookkeeper, who is familiar the typical financial statements: i.e., Profit & Loss Account / Income Statement, Trading Account, Balance Sheet, Cash Flow, etc. etc. But keep in mind that being an accountant does not mean that you are familiar with the statement. The key is to know what goes into producing such a statement. Income Statements and Balance Sheets are relatively simple and standard, but then the cash flow is a statement most accountants struggle with, and its not their fault. The typical cash flow statement isn’t exactly designed for efficiency, and that’s where the roles of different accountants come in.
So, to sum it up, an accountant uses the information produced by a bookkeeper to generate meaningful financial statements and reports. An accountant MUST have comprehensive bookkeeping knowledge, and must continue to practice his/her double entry/ T-Accounts skills, or really, he/she won’t make for a very good accountant.
Public Accountants will NOT be covered in this discussion. They are also known as auditors. We all know they don’t warrant much discussion.
Financial Accountant vs. Management Accountant
Okay, this is an unusually fancy difference between Accountants, and I think it exists primarily because of the politicization and commercialization of institutions like CIMA and IMA.
Financial Accountant is basically classified as someone who prepares financial statements and reports, i.e., your standard P & L, Income Statement, Balance Sheet, Cash Flow, Aged Receivables, Aged Payables, etc.
A Management Accountant is supposed to be someone who converts these financial statements into reports that management needs for their analysis, which should ideally make a management accountant a mix of a corporate finance expert and a financial accountant. As interesting as it is, almost ALL good financial accounts have the knowledge needed to for the role of the Management Accountant, if you are an Accountant who can’t understand what the needs and requirements of management are reporting-wise and you cannot deliver them, well, then you should rethink your career.
Let’s be clear on one thing: Bookkeeping and Accounting are complimentary work; one cannot exist without the other. In Small Businesses, you typically only have one person doing everything (as unwise as that may be for a multitude of other reasons).
I’m going to write another article on typical job titles / designations very soon, because in the Accounting field these have become extremely diverse and confusing. It’s more fancy work, ultimately the commercializtion of the profession, but then that’s what the world loves most.
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