Bookkeeping vs accounting: who does what, and why it matters.

Business owners often use the two words interchangeably, and then wonder why their accountant's year-end bill was so high. Bookkeeping vs accounting is really about stages: one builds accurate records every month, the other interprets them, adjusts them and files with CRA.

This post wraps up the core of our Bookkeeping Basics learning path. If you've followed it from double entry through to the trial balance, you've learned the bookkeeping side. Here's what happens next.

1Bookkeeping vs accounting: the split

The line isn't rigid. Some bookkeepers do more, some accountants do their own bookkeeping. But this is the split most small businesses end up with, and it's how Plum works with our partner CPA.

What bookkeeping covers

Bookkeeping is the daily and monthly work of getting every transaction into the right account, with support behind it. It includes:

• Recording sales, expenses, loans and owner transactions using double entry
• Tracking GST separately and claiming input tax credits with proper documents
• Reconciling every bank, credit card and loan account to statements
• Following up receivables and paying payables on time
• Running payroll, remitting CPP, EI and income tax to CRA, and preparing slips
• Producing monthly reports you can actually use

The end product of good bookkeeping is a reconciled, reviewed general ledger and trial balance. Every account ties to a statement or a schedule, nothing sits in suspense, and each unusual item has a note explaining it. That handover is what lets an accountant spend their time on judgment and tax planning instead of detective work.

What accounting covers

Accounting starts from the trial balance and asks bigger questions: is everything recognized in the right period, how should assets be treated, what's the tax position, and what should the owner do next?

• Year-end adjustments: accruals, prepaid expenses, amortization, inventory counts and corrections.
• Financial statements: for most small private corporations, prepared under a compilation engagement. That standard replaced the old Notice to Reader in Canada.
• Tax returns: the T2 for corporations, with statements mapped to GIFI codes, or the T2125 inside a sole proprietor's personal return.
• Tax planning: how to pay yourself, when to buy equipment, whether to incorporate.

Accountants can also provide higher levels of assurance. A review engagement involves more analysis and inquiry than a compilation, and an audit involves testing the records themselves. Most small owner-managed businesses don't need either unless a lender, investor or agreement requires it. If a bank asks for "financial statements," ask which level they need before you assume.

When to call your accountant mid-year

Year-end isn't the only time accounting matters. Bring your accountant in before, not after, these decisions:

• Buying a vehicle or large piece of equipment
• Hiring your first employee or bringing on contractors
• Taking money out of a corporation in a new way
• Incorporating, adding a partner or selling part of the business
• Receiving a letter or review request from CRA

2A worked example: from book profit to taxable income

Say you're an incorporated contractor in St. Albert. Your bookkeeper closes December and hands over a trial balance showing a book profit of $62,000. Your accountant then makes one year-end adjustment to the books, recording amortization on a $15,000 truck bought this year:

That brings accounting profit down to $59,000. Then, on the tax return itself (not in your books), the accountant makes tax adjustments:

The CCA figure here is just an illustration. The real amount depends on the truck's class, the half-year rule and the CCA rules in effect for the year, which is exactly why it's accounting work. Your bookkeeper's job was to make sure the truck was recorded as an asset at the right cost, with the GST split out, so your accountant could do this quickly.

3A year of bookkeeping and accounting

Here's how the work typically falls across a year for a small incorporated business with a December 31 year-end and a couple of employees. Your dates may differ, so confirm deadlines with CRA or your accountant.

Corporate tax owing is generally due earlier than the T2 filing deadline, usually two or three months after year-end depending on the company, which is one more reason to close the books promptly.

What a good year-end handover includes

4Bookkeeper, accountant or CPA?

In Canada, CPA (Chartered Professional Accountant) is a regulated designation. CPAs prepare compiled, reviewed and audited financial statements and complex returns. Bookkeeping isn't a regulated profession, so anyone can call themselves a bookkeeper. That's not a reason to avoid bookkeepers; it's a reason to ask good questions:

• What software do you work in, and who owns the file?
• Do you reconcile every account every month?
• Who reviews your work, and how do you hand over to an accountant at year-end?
• What does it cost, and what's included? Our post on what a bookkeeper costs in Edmonton covers the ranges.

Working together in QuickBooks Online

The smoothest setup has the bookkeeper and accountant in the same QuickBooks Online file. QuickBooks lets you invite an accountant user, so your accountant can review the books, run reports and post year-end adjustments directly. After year-end, the books are closed by setting a closing date in the advanced settings, which protects the finished year from accidental changes.

When your accountant sends adjusting entries, make sure they're actually recorded in your file. If they're not, next year's opening retained earnings won't match the filed financial statements, and the problem compounds every year.

5Common mistakes

• Skipping bookkeeping and paying the accountant to do it at year-end. It almost always costs more and happens in a rush.
• Expecting the bookkeeper to give tax advice. A good bookkeeper flags issues; the accountant advises on them.
• Not recording year-end adjustments. Your books and your filed statements drift apart.
• Editing closed periods. Changing last year after it's been filed breaks the link with your return.
• No one owning GST. Decide who prepares and files the GST return so it doesn't fall between the two.

Plum is a bookkeeping firm that works with a partner CPA, so you get both halves without having to coordinate them. We work with owners across Edmonton, St. Albert, Sherwood Park and Morinville. Have a look at who we are, then book a short call to see if we're a fit.

6Questions people ask

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This article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.