Accounting or bookkeeping: what each one is, and which you need
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Bookkeeping records what happened. Accounting builds the filings, statements and returns from that record. Most small businesses need both.
The short answer
Bookkeeping records and reconciles what happened in the business. Accounting uses that record to produce the filings, statements and returns. The two depend on each other, because a return is only as good as the books behind it.
What bookkeeping covers
- Categorizing every transaction
- Reconciling the bank and credit card accounts to the statements
- Tracking invoices you have issued and bills you owe
- Recording payroll
- Closing each month so the figures stop changing
What accounting adds
- A monthly profit and loss statement and balance sheet built from the books
- GST and PST returns filed on the reporting periods the CRA and the province assign
- Payroll remittances and T4s
- The year-end income tax return: a T1 for a sole proprietor, a T2 for a corporation
Which one you need
If your records are current and you need the filings made, you are buying the accounting half. If your records are behind, bookkeeping comes first, because a return cannot be built on books that do not reconcile. If you want both done all year, one monthly plan covers them.
Who does which work
Audit and review engagements are done by CPA firms. Bookkeeping, payroll, GST and PST filing, and preparing income tax returns are not limited to CPAs. We are a bookkeeping practice, not a CPA firm, so we do the second list and not the first.
What it costs
We charge a fixed monthly fee scoped to your transaction volume, with no hourly billing. The year-end return is quoted separately, and catch-up work is quoted as one number once we have seen how far back it goes. Your written quote lists what is included.
Is accounting the same as bookkeeping?
No. Bookkeeping records and reconciles transactions. Accounting produces statements, filings and returns from those records.
Does a small business need both?
Most do. The statements, filings and returns depend on books that are complete and reconciled.
Can a bookkeeping practice file my GST, PST and income tax?
We file GST and PST, run payroll and prepare T1 and T2 returns. We are not a CPA firm, so we do not do audit or review engagements.
What if my books are behind?
Catch-up comes first. We look at how far back it goes and quote it as one number before we start.
What our small business accounting includes →
Where bookkeeping stops and the tax return starts →
Want this handled for you
This is the work we do for clients every month. Tell us what you sell and where your books stand, and a written plan and a fixed monthly price follow within one business day.
info@orbisaccounting.ca