Bookkeeping is the day-to-day recording and organizing of financial transactions, while accounting uses those records to interpret results, prepare reports, and support compliance and decision-making. Bookkeeping and accounting serve different purposes at different business stages. Seven key differences:
- Frequency — daily capture vs periodic review
- Inputs vs outputs — transactions to statements
- Journal entries vs adjusting entries
- Cash basis vs accrual basis
- Controls and assurance readiness
- Compliance readiness — Canadian tax examples
- Credentials — CPA vs CPB
What Is Bookkeeping?
Bookkeeping is the systematic recording and organizing of financial transactions to maintain accurate, up-to-date financial records. Bookkeeping provides the transaction recording system for your financial management.
Core bookkeeping tasks include:
- Recording and categorizing transactions from source documents
- Posting journal entries to the general ledger
- Reconciling bank accounts and credit card statements
- Managing accounts receivable and accounts payable
- Processing payroll transactions
- Maintaining sales tax records (GST/HST in Canada)
- Preparing trial balances
Double-entry bookkeeping, the standard system used in Canada, requires every transaction to have equal debits and credits. Canada Job Bank defines bookkeepers under NOC 12200 as professionals who maintain complete sets of books, post journal entries, and reconcile accounts. The Certified Professional Bookkeepers of Canada identifies accounts receivable, accounts payable, payroll, and sales taxes as key bookkeeping functions.
What Is Accounting?
Accounting is the process of interpreting bookkeeping data, preparing financial statements, ensuring compliance with standards, and providing insights that support business decisions. Accounting uses bookkeeping transaction records to deliver strategic value.
Core accounting tasks include:
- Creating adjusting entries for accruals, deferrals, and depreciation
- Preparing financial statements (income statement, balance sheet, cash flow statement)
- Interpreting financial data and identifying trends
- Designing and maintaining internal controls
- Supporting tax compliance and year-end readiness
- Providing advisory services for business decisions
Canada Job Bank defines accountants as professionals who analyze financial records, prepare statements, and ensure compliance with accounting standards. CPA Canada establishes the financial reporting standards that guide accounting practice.
Bookkeeping vs Accounting: Side-by-Side Comparison
| Dimension | Bookkeeping | Accounting |
| Purpose | Record and organize daily transactions | Interpret data, prepare reports, support decisions |
| Time Horizon | Daily/weekly transaction capture | Monthly/quarterly/year-end review cycles |
| Level of Judgment | Rules-based (debit/credit mechanics) | Judgment-based (estimates, allocations, policy) |
| Core Artifacts | Journal entries, general ledger, reconciliations | Adjusting entries, financial statements, reports |
| Compliance Impact | Errors produce incomplete ledger balances | Errors change reported taxable income and GST/HST calculations |
| Software Touchpoints | Transaction entry, bank feeds, categorization | Period-end adjustments, reporting modules, analytics |
The 7 Key Differences Between Bookkeeping and Accounting
Frequency: Daily Capture vs Periodic Review
Bookkeeping operates on a daily or weekly cycle, while accounting occurs during monthly, quarterly, or annual review periods. Transaction recording happens continuously; sales are logged when they happen, bills are entered when they arrive, and bank deposits are recorded when they clear.
Accounting operates on a different timeline. Month-end close processes occur within the first 5-10 business days of the following month. A retail business records 200 sales transactions weekly, then reviews the month’s complete revenue during the first week of the following month. CPA Canada’s financial reporting framework establishes these periodic close cycles.
Inputs vs Outputs: Transactions to Statements
Bookkeeping produces clean transaction data; accounting transforms that data into financial statements and business insights.
Bookkeeping inputs are source documents: invoices, bills, bank statements, and receipts. Bookkeeping outputs are an organized general ledger, reconciled accounts, and categorized transaction summaries.
Accounting inputs are bookkeeping outputs. Accountants start with the trial balance and reconciled ledger data. Accounting outputs are the income statement, balance sheet, cash flow statement, and management reports. The accounting cycle follows this flow: transactions → journal entries → general ledger → trial balance → adjusting entries → financial statements.
Journal Entries vs Adjusting Entries
Bookkeepers post journal entries from source documents; accountants create adjusting entries for accruals, deferrals, and depreciation.
Journal entries record completed transactions. When you pay a vendor bill, the bookkeeper debits the expense account and credits the bank account.
Adjusting entries are period-end corrections that match revenues and expenses to the correct accounting period. Examples include:
- Accruing unbilled revenue: Your team completed $5,000 of consulting work in December, but you won’t invoice until January. An adjusting entry records December revenue.
- Deferring prepaid expenses: You paid $1,200 for annual insurance in January. Each month, an adjusting entry moves $100 from prepaid insurance to insurance expense.
- Recording depreciation: A $10,000 server with a 5-year useful life depreciates $2,000 annually. Monthly adjusting entries record $167 in depreciation expense.
CPA Canada accrual accounting standards require these adjustments for accurate financial reporting.
Cash Basis vs Accrual Basis. Why Your Numbers Change?
Cash basis records transactions when cash changes hands; accrual basis records transactions when they occur, regardless of payment timing.
Cash basis is simpler. Revenue is recorded when payment is received. Expenses are recorded when payment is made. The Income Tax Act allows certain small businesses to use the cash method.
The accrual basis provides a more accurate picture. Revenue is recorded when earned; expenses are recorded when incurred. Corporations must use accrual accounting. The accrual basis aligns with GAAP and ASPE in Canada.
Example: You issue a $10,000 invoice on December 20, and the customer pays on January 15. Cash basis shows revenue in January; accrual basis shows revenue in December.
Controls and Assurance Readiness
Internal controls are governance mechanisms that accountants design, and bookkeepers follow to ensure accuracy and prevent errors or fraud.
Common internal controls include segregation of duties, approval workflows, monthly reconciliation requirements, documentation standards, and audit trail maintenance. A manufacturing company implements segregation of duties: the operations manager approves vendor invoices, while the bookkeeper processes payments. This control prevented a $15,000 duplicate payment error.
Assurance readiness means your books are structured to support review engagements or audits. Canada Job Bank lists “develop and maintain internal control procedures” as a core accountant responsibility.
Compliance Readiness and Canadian Tax Examples
Tax compliance starts with organized bookkeeping records and extends to an accounting review that ensures proper classification and reporting.
GST/HST compliance operates in two layers. The bookkeeping layer organizes transactions and tracks GST/HST collected and paid. The accounting layer reviews transactions for proper classification and prepares GST/HST returns. Organized GST/HST records enabled a retail business to claim $12,000 in input tax credits. The Canada Revenue Agency requires adequate books and records to support GST/HST returns.
Payroll compliance splits across functions. The bookkeeping layer processes payroll and calculates CPP, EI, and tax withholdings. The accounting layer ensures timely remittances and prepares T4 and T4A slips. CRA mandates the timely remittance of payroll deductions.
Corporate tax readiness (T2) requires both functions working together. The bookkeeping layer maintains transaction records; the accounting layer prepares adjusting entries and compiles ASPE-compliant financial statements.
Credentials and Who Can Do What in Canada
In Canada, CPA (Chartered Professional Accountant) is the accounting credential, while CPB (Certified Professional Bookkeeper) is the bookkeeping credential.
A CPA credential allows professionals to provide accounting services to the public, including audit, review, and compilation engagements. CPA Ontario requires CPAs who provide accounting services to the public to maintain registration and carry professional liability insurance. When a CPA prepares reviewed financial statements for a business seeking $500K in bank financing, professional liability insurance protects against errors.
A CPB credential represents professional bookkeeping competency. The Certified Professional Bookkeepers of Canada notes that CPBs handle transaction recording, bank reconciliation, accounts receivable and payable management, and payroll processing.
Do You Need a Bookkeeper or an Accountant First?
Businesses start with bookkeeping to establish accurate data, then add accounting when they need reporting, compliance interpretation, or decision support.
Start with bookkeeping when your business shows these signals:
- Inconsistent transaction categorization or unreconciled bank accounts
- Transaction backlog spanning multiple months
- Organized records needed for tax season, but monthly statements are not yet required
Add accounting services when your business requires:
- Monthly financial statements to track performance
- Year-end adjusting entries for accrual-basis reporting
- Compiled or reviewed financial statements for lenders
- Tax planning advice beyond basic compliance
- Advisory support for business decisions
The typical sequence is: clean bookkeeping → accounting review → strategic advisory. CPA Canada notes that the accounting cycle requires complete source data before financial statements can be prepared.
What Can an Accountant Do That a Bookkeeper Usually Cannot?
Accountants handle tasks that require professional judgment, technical expertise, or regulatory authority beyond transaction recording:
- Adjusting entries: Requires judgment about period matching and revenue recognition
- Depreciation/amortization: Requires asset policy decisions and useful life estimates
- Financial statement preparation: Requires GAAP/ASPE knowledge
- Management reporting: Requires interpretation and advisory context
- Internal controls design: Requires risk assessment expertise
- Tax planning: Requires Income Tax Act expertise and strategic judgment
The task boundaries between accountants and bookkeepers reflect the difference between recording what happened (bookkeeping) and interpreting what it means (accounting).
Is It Hard to Learn Bookkeeping?
Bookkeeping requires consistency, attention to detail, and understanding of double-entry mechanics, but core skills can be learned through training programs or on-the-job experience.
Core skills include consistency in daily recording, accurate categorization, understanding debit/credit rules, reconciliation discipline, chart of accounts comprehension, and software proficiency (QuickBooks Online, Xero, Sage).
Learning pathways include college diploma programs, professional bookkeeping courses leading to the CPB designation (250+ hours of coursework), and supervised work experience. Canada Job Bank indicates bookkeeping roles require college or vocational training, or equivalent experience.
Common Terms That Confuse People
Posting: In bookkeeping, “posting” means transferring journal entries to the general ledger. Posting journal entries differs from job posting or social media posting.
Ledger: “General ledger” is the master accounting record containing all accounts. The term differs from distributed ledger technology or blockchain systems.
Books: “Books of account” refers to your financial records, journals, ledgers, and supporting documentation. Books of account differ from reading material or “booking” appointments.
Account: A “ledger account” is a category in your chart of accounts. A “bank account” is where you deposit money. To “account for” variance means to explain the difference between expected and actual results.
Conclusion
Bookkeeping records your business transactions; accounting interprets those records to support decisions and compliance. Understanding this distinction helps you hire the right service at the right time; bookkeeping first to establish accurate data, then accounting when you need financial statements, compliance support, or strategic advice.
