Many landlords use the terms bookkeeping and accounting interchangeably as if they mean the same thing. Doing so is understandable since both deal with a business’s finances, however they serve different purposes in managing your rental property’s money.
Understanding the differences between bookkeeping and accounting can help you determine what kind of support you need for your rental property’s account books.
We understand that bookkeeping and accounting can be intimidating for new rental property investors.
In this article, we’ll answer your questions about the differences between bookkeeping and accounting and share advice to help you build strong financial practices for your rental business.
Use our efficient and accurate property management software to streamline all of your accounting, bookkeeping, and expense tracking needs.
Bookkeeping, also known as recordkeeping, keeps track of every dollar that goes in and out of your business. The administrative role focuses on keeping financial data accurate, up-to-date, and organized.
Accurate bookkeeping is vital for managing your rental property’s finances. Sound bookkeeping gives rental property owners clear, precise data to use for analysis. Landlords need this information to assess their financial status, property performance, and tax filings accurately.
For rental property owners with only one or two units, these are your key bookkeeping tasks:
Real estate investors with more complex portfolios might have additional bookkeeping tasks, like payroll and budget maintenance.
Bookkeepers generally have a minimum of an associate’s degree or a bookkeeping certificate. Are you new to bookkeeping for real estate investors? We’ve got you covered. Check out TurboTenant’s “Five Essential Property Management Bookkeeping Tips” to get started.
As a rental property owner, you can handle your own bookkeeping, but outsourcing may make more sense in these situations:
Accounting takes the information from your bookkeeping and helps you make sense of it. Accountants look at the big picture to help you make smart decisions. For instance, your accountant may recommend adjustments to your rental property’s invoicing process or budget lines. They can also assess your company’s financial health, from your individual rental units to the business as a whole.
Most accountants have a bachelor’s degree in accounting or a related field. They may also have additional degrees or certifications.
Accounting is crucial for landlords because it helps to optimize an investment property’s financial performance. An accountant’s role is to better understand your business’s profitability and cash flow, giving you an advantage in a competitive market.
Sound accounting principles—and records—for your rental property help you secure funding, save money, produce reliable financial reports, and simplify your tax preparations.
Beginner landlords and small-scale rental property owners—or their accountants—carry out these accounting tasks:
Do you have an extensive portfolio or a complex financial situation? If so, you may benefit from additional accounting tasks, such as financial forecasting or help with audits or internal controls.
Key point: An accountant can provide financial advice and prepare tax documents but cannot sign tax returns.
Are you looking for an overview of accounting specifically for rental property? Get started with TurboTenant’s quick-start guide, “Rental Property Accounting Guide for Landlords.”
Real estate investors can act as their own accountants, but hiring an accountant or CPA can help if you’re unsure about any of these items:
Pro tip: Accounting fees for your rental property business are tax deductible. Investing in an accountant is often worth the cost, especially if they’ll teach you how to improve your accounting skills.
Bookkeeping focuses on recording information and maintaining accurate books. It’s the financial foundation for your business with the day-to-day organization of your data.
Accounting is the next financial level, taking the bookkeeping data and analyzing it, then using the results to make recommendations for your business. Accountants focus on the big-picture analysis and financial health of the business.
The differences between an accountant and a certified public accountant (CPA) are the education requirements and the scope of work.
An accountant holds a bachelor’s degree in accounting or finance, and they may have a master’s degree but don’t have additional certifications.
A CPA is an accountant who has a special license. To get a CPA license, candidates must meet their state’s education, experience, ethics, residency, and age requirements. Although the requirements vary by state, all candidates must meet these criteria:
CPA licenses, issued by the American Institute of Certified Public Accountants, are state-specific.
A CPA’s scope of work goes beyond an accountant’s. CPAs can prepare and sign tax returns and audited financial statements, represent taxpayers to the IRS, and act as financial advisors.
Unsure if you need a CPA? Check out our article “Benefits of Hiring a Real Estate CPA (+ Costs, Tips & Software).”
Although the roles of bookkeeper and accountant are distinct, software often uses the terms interchangeably. Most popular accounting software handles both bookkeeping (data entry) and accounting (reporting) elements.
However, real estate accounting platforms vary in features, so doing your research is essential. Ensure any bookkeeping program you choose supports essential financial tasks, but consider your current needs and portfolio goals.
Some accounting platforms specialize in working with landlords with a certain number of units. Plus, using software with more features than you need can be confusing and costly.
The type of support you need determines whether you would benefit from working with a bookkeeper, an accountant, or both.
Do you need help with data entry, transaction categorization, account reconciliation, or bill and invoice management? If so, start with a bookkeeper.
Do you need help preparing your budget, understanding financial reports, completing tax documents, correcting errors in your account books, or evaluating your business’s health? If so, an accountant or CPA can help you with these tasks.
Pro tip: Accountants can handle both bookkeeping and accounting duties but may charge more than bookkeepers for the same tasks.
TurboTenant is property management software with an integrated accounting platform for rental property owners and real estate investors. We focus on simplifying accounting for landlords so that you can update your books efficiently and easily.
Whether you have single- or multifamily units, long- or short-term rentals, flips, or buy-and-hold properties, we’re here for you (and your account books).
With TurboTenant, you’ll have every feature you need for accurate bookkeeping and accounting:
Of course, bookkeeping and accounting for rental property is about more than just numbers. That’s why we’re the one-stop shop for property management, trusted by over 750,000 landlords. With our hassle-free integrations, organizational features, and support resources, you can efficiently manage both your tenants and your books.
Our property management and accounting software provides an end-to-end solution for rental property owners, and we’re proud to be the number one free rental software management tool! With 4.6 star ratings, we’re recommended by 90% of our reviewers, like Bryson.
“TurboTenant is the perfect solution for first-time landlords. The account is simple to set up for the landlord and tenant. It streamlines the transaction of money so you can be hands-off. It’s organized, it’s easy to navigate, and the mobile app is great, too. I’ve been using it for six months now, and I love it.”
—Bryson Tibbitts
See how TurboTenant can simplify and streamline the bookkeeping and accounting for your rental property. Sign up for a free account today!
New landlords should find an accounting platform that uses CPA-approved accounting principles and features, like double-entry accounting, bank reconciliations, secured data imports, depreciation tracking, standard financial reports, and bookkeeper access. TurboTenant provides all these features (and more) to simplify bookkeeping for your rental property.
Bookkeeping organizes your financial data and ensures that the income and expense figures are correct. Clear, up-to-date books reduce the time needed to prepare your tax returns. Accounting uses the bookkeeping data to plan for taxes and maximize deductions and credits on your tax returns, lowering your tax liability.
Rental property owners need standard financial reports, such as a balance sheet, profit and loss report, and cash flow statement. Investors also benefit from performance reports, like net operating income, cash-on-cash, and operating expense ratio reports.
Outdated account books can cause cash flow issues, late payments, and missed tax deductions. Inaccurate books can also lead to late fees or penalties and difficulty securing funding or filing tax returns.
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