CPA vs Bookkeeper

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Difference Between CPA and Bookkeeper

Both Certified Public Accountants (CPAs) and bookkeepers are accounting professionals. In the context of CPA vs bookkeeper, the primary difference between the two lies in their job responsibilities, salary, and professional stature. While a CPA’s key role is to provide financial advice, a bookkeeper is mainly responsible for maintaining an organized record of all financial transactions.

A bookkeeper keeps a history of every financial transaction in the accounting books. A CPA analyzes these books and offers appropriate financial advice. Thus, a bookkeeper and CPA complement each other to ensure that a company maintains a sound financial position in the long run.

Difference Between CPA and Bookkeeper

CPA vs Bookkeeper Comparative Table

The role, educational requirement, professional standing, and salary of a bookkeeper vary considerably to that of a CPA. The following table outlines some significant differences.

Particulars	CPAs	Bookkeepers
Definition	State Board-licensed accounting experts who have passed the Uniform CPA exam and possess the required education and work experience.	Professionals are responsible for maintaining a record of money moving in and out of business.
National Professional Association	AICPA	AIPB/NACPB
Job Responsibilities	Preparing, examining, and analyzing financial records Drafting financial reports Representing clients in legal issues with IRS Building accounting procedures and policies Conducting detailed audits from time-to-time Preparing financial budgets Estimating profit margins Preparing and filing tax returns Overseeing accounting transactions	Posting financial transactions in appropriate accounts Utilizing Bookkeeping spreadsheets, databases, and software Observing and reporting any differences found in the records Maintaining the general ledger and journals Receiving and recording vouchers, cash, and checks Arranging bank deposits Ensuring accuracy in reporting and postings figures Generating income statements, balance sheets, and other financial reports
Hire for	Financial consulting to handle complex business transactions Preparing and filing tax return	Routine recordkeeping
Basic Requirements	A Bachelor’s Degree (150 credit hours) 1-2 work experience (May vary as per the jurisdiction) Pass Uniform CPA Exam	Minimum high-school diploma
Skills required	Higher order thinking skills (analysis, interpretation, and evaluation)	Basic math and computing skills
Licensing and Certification requirement	CPA license mandatory to practice as a CPA	AIPB and NACPB's Certified Bookkeeper (CB) Certification available but not mandatory for practice
Average annual salary	$60,000 -$160,000	$42,410
Industries they work for	Large corporations Public accounting firms Government agencies Non-Governmental Organizations (NGOs)	Universities & colleges Healthcare firms Government agencies Retail stores NGOs Small and medium sized businesses (SMBs)
Professional job status	High status	Low status

What is a CPA?

CPAs are licensed accounting professionals who have passed the Uniform CPA exam conducted by the American Institute for Certified Public Accountants (AICPA) and fulfilled the education and experience requirements set by the state boards.

The AICPA coordinates with the National Association of State Boards of Accountancy (NASBA) to conduct this exam and issue the license. Once CPAs get their license, they need to sustain it through accomplishing the Continuing Professional Education (CPE) requirements every 1-3 years, as per their state board policies.

CPA is considered one of the most credible, reputed, and sought-after certification in the accounting industry. One has to undertake an arduous journey to earn a CPA license. This license is what distinguishes a CPA from a bookkeeper or any other accountant.

Unlike a bookkeeper, a CPA’s scope of work extends beyond maintaining accounting records. It involves the following:

Analyzing financial records
Preparing financial reports
Conducting audit
Preparing and filing tax returns
Assisting business decision making
Financial consulting

Let's use an analogy to explain the concept of CPA vs bookkeeper. By analogy, a bookkeeper can be thought of as a college professor, while a CPA as a Dean. Although a professor has subject-specific knowledge, a Dean is better trained, knowledgeable, and skilled to handle all responsibilities of a college. Just like college deans, CPAs are competent in handling all financial aspects of an entity.

CPAs enjoy higher earning potential, global exposure, better job opportunities, and more respect in general compared to that of a bookkeeper. With their extensive knowledge and training, CPAs are well-equipped to take up the role of an advisor, strategist, auditor, or chief financial officer in any company.

By virtue of holding a license, CPAs are entitled to represent you before the Internal Revenue Service (IRS) in case of any legal trouble. They are also authorized to audit financial statements of publicly traded companies and file a report with the U.S. Securities and Exchange Commission (SEC).

What is a Bookkeeper?

Bookkeepers are professionals who maintain a company’s ledger. They ensure that all financial transactions are recorded accurately on a daily basis. From traditionally handling the hard-copy ledger to using modern accounting software now, bookkeepers have undoubtedly come a long way in managing a business’s financial records.

Also known as bookkeeping clerks, bookkeepers perform the following functions:

Track cash, sales, and purchases of a company
Post entries in appropriate accounts
Manage employee payroll
Prepare financial statements
Reconcile bank statements
Handle receivable and payable accounts
Generate invoices

As bookkeepers keep a company’s records updated, it assists managers to make effective business decisions. Managers evaluate a company's financial situation by reviewing its bookkeeping records. Bookkeepers’ accurate and quick organizing skills also help accountants and CPAs to perform their tasks more efficiently.

While comparing the role of CPA vs bookkeeper, always remember that the latter is only responsible for maintaining financial books and records, not analyzing them. Also, unlike a CPA, bookkeepers do not command high salaries. They usually work for small companies or businesses. Companies hire bookkeepers on a contract or full-time based on their needs and budget.

Please note that it is not mandatory to have a bachelor’s degree in bookkeeping to take up this job. Employers hire candidates possessing a postsecondary education with coursework in accounting or even a high school diploma at times. Bookkeepers can also get certified by the American Institute of Professional Bookkeepers (AIPB) or the National Association of Certified Public Bookkeepers (NACPB).

CPA vs Bookkeeper Example

Suppose you own an international travel agency named Wanderlust. To manage your accounts, you hire Anna as a bookkeeper and Julie as a CPA.

Now, Anna’s primary responsibility is to make an excel spreadsheet or use any other digital tool for maintaining a daily ledger. This refers to entering the detail of every penny Wanderlust sends or receives from another entity.

Also, she is responsible for producing invoices, balance reports, and recording every piece of financial information for the company. In case she notices anything unusual or faulty, she can inform the concerned authorities about the same.

Here comes the role of Julie. Suppose there is a sign of a considerable capital loss in the reports or the transaction details of Wanderlust varies in specific months. As a CPA, her responsibility is to assess the information, determine the profit factors, and decide areas that need improvement.

Once she analyzes the records, Julie will hold a meeting with the officials, come up with a strategy to improve the financial position of Wanderlust and offer them suggestions. The suggested changes will help stabilize the company’s monetary condition and yield more profits.