Bookkeeping vs Accounting: What Does a Small Business Actually Need?
The difference between bookkeeping and accounting, what each one delivers, and how a small business can tell which support it needs.
The short answer: bookkeeping records and reconciles your transactions so the numbers are complete and correct. Accounting uses those records to produce financial statements, prepare tax filings and explain what the numbers mean. Most small businesses need both, in different amounts.
What bookkeeping covers
Bookkeeping is the ongoing, usually monthly, work of keeping financial records current:
- Recording sales, expenses and other transactions
- Reconciling bank and credit card accounts to statements
- Tracking who owes the business money and whom it owes
- Keeping payroll and GST/HST information organized
What accounting covers
Accounting builds on the books to give the bigger picture and meet obligations:
- Preparing financial statements at year end, and during the year if useful
- Preparing tax returns and supporting compliance
- Reviewing results and explaining trends
- Helping with planning, budgeting and decisions
Which does your business need?
Mostly bookkeeping
You are self-employed or a small business with straightforward finances, and you mainly need clean records and a correct tax filing each year.
Bookkeeping plus accounting
You are incorporated, have employees, are growing, need financial statements for a lender, or want regular advice on what the numbers mean.
Signs it is time to get help
- You are more than a couple of months behind on your books
- You are not sure how much cash the business really has
- Tax season involves rebuilding the year from statements
- You have hired, incorporated or registered for GST/HST
Why keeping them together helps
When the same team keeps the books and prepares the year-end work, nothing is lost in the hand-off and you only explain your business once. That is the idea behind small business accounting at Yass Financials.
Official sources
- Keeping records (Canada Revenue Agency)
- Sole proprietorships and partnerships (Canada Revenue Agency)
- Corporation income tax return (Canada Revenue Agency)
This guide is general information for Canadian taxpayers and small businesses. It is not tax, legal or financial advice for your situation, and rules change. Check the official sources linked above or book a consultation before acting on it. See the full disclaimer.
Need help with small business accounting?
Yass Financials can take this off your plate.