Bookkeeping and Accounting in Hong Kong: Key Differences
Before we dive deep into the differences between bookkeeping and accounting in Hong Kong, let us understand what they are and why they are essential for every company.
Bookkeeping and accounting are two of the most essential tasks for every business. They are also thought to be the same profession by general people. After all, both of them involve working with numbers and filing statements and reports. Although the ultimate objective of both disciplines is the same, they are different in terms of responsibilities.
The key differences between bookkeeping and accounting in Hong Kong can be explained on the basis of the following terms.
One of the differences between bookkeeping and accounting in Hong Kong is their basic concept.
Bookkeeping refers to the continuous recording of a company’s transactions on a daily basis. It also consists of the full documentation of every penny that goes in and out of the company and who is involved in the transaction. Most importantly, bookkeeping is a crucial process that provides trustworthy information while preparing financial statements and reports.
There are two types of bookkeeping: single-entry bookkeeping and double-entry bookkeeping. In single-entry bookkeeping, transactions are recorded in a cash register as income and expenses. However, in double-entry bookkeeping, each transaction is recorded in at least two accounts, either as a debit or a credit.
On the other hand, accounting refers to the process of summarizing, analyzing, and presenting the financial status of the organization. Likewise, the process of accounting occurs over a defined period of time typically a year. There are about ten important steps that go into the accounting cycle. The cycle starts with the basic identification and recording of transactions and ends with the preparation of financial statements and adjustments of balances. Some of the major branches of accounting are financial accounting, cost accounting, government accounting, and managerial accounting.
We can also explain the difference between bookkeeping and accounting in terms of their objectives.
Bookkeeping makes sure that each and every penny that goes in and out of the company is properly tracked. Therefore, bookkeepers must have great attention to detail and inspection skills. Even though bookkeeping alone is not sufficient for deriving insights and making predictions, it is the first step to building a credible financial report.
The main objective of accounting is to understand, analyze, and communicate the financial situation of the company to relevant stakeholders. The financial statements and reports are the primary ways of communicating this information. In contrast to bookkeeping, accounting is a crucial process that affects decision making in the company.
One of the primary ways to differentiate bookkeeping and accounting in Hong Kong is in terms of required skills.
Since bookkeeping is a straightforward job and requires minimal analysis skills, there is no requirement for a college degree. However, you still need to be good with numbers and maintain a strong focus. Errors in bookkeeping can lead to larger, time-consuming problems that can be difficult to find. Furthermore, if you are a freelancer wanting extra work, bookkeeping can be a great option.
In the case of accounting, there is no requirement for a fixed degree. However, if you have a bachelor’s degree in finance or economics, you will be at a competitive advantage. Additionally, accountants need to have strong reasoning and problem-solving skills. Furthermore, since most of the accounting today is done with software, strong IT skills are a must. Moreover, since you have to communicate your works with managers and investors, you need strong communication skills.
Present Status and Changing Landscapes
Although bookkeeping and accounting in Hong Kong are fundamentally different in terms of the actual work and required skills, the line between them is slowly diminishing.
- With the rise of accounting software, all the steps that go into an accounting cycle can be carried out conveniently in a short period of time. Bookkeepers are now able to carry out the primary functions of an accountant on their own. With growing automation, you can also generate financial statements and reports without breaking too much sweat.
- The identification and recording of transactions will not be an isolated task. Due to the incorporation of powerful functions in bookkeeping and accounting software, bookkeeping will be more than just data entry.
- There has been an increase in efficiency in the preparation of financial statements and reports. Since accounting software comes with data analysis and machine learning tools, deriving insights and making predictions is quicker and cheaper.
From this blog, we have understood the key differences between bookkeeping and accounting in Hong Kong. We have also learned about the present status and the changing landscape of these two professions. Lastly, we understood how the development of advanced accounting software has diminished the line between these two traditionally isolated processes.
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