Quite often when one hears the word 'bookkeeper', they automatically think 'accountant.' However, the job of a bookkeeper differs in scope in comparison to that of an accountant. There are many functions that they can perform, usually at a lower rate than that of a CPA. If you are unsure what they can do and not do, just ask a bookkeeper.
Both accountants and bookkeepers follow the steps in the accounting cycle. This cycle is completed each accounting period. An accounting period can be a year, six months, or one month, depending upon the size of the business. Most keep their books according to the accrual method, which is a more accurate representation of the true nature of the company's finances. The cash method can also be used, but this does not accurately reflect when revenue is earned or when money is spent.
Accrual is often the most accurate method, at least on paper. It can be deceiving without the associated statements to show cash flow, owner's equity, and profit and loss. A company can actually be profitable on paper but be cash poor. If someone owns or manages a company, they need to know how to understand and interpret financial statements.
Bookkeepers usually perform the first three steps in the cycle, the latter steps are often the accountant's responsibility, but there can be some crossover, especially in some small businesses. Sophisticated accounting software has made it easier for almost anyone to create financial statements and perform analysis. However, those with little business savvy may want to leave this to the pros.
To begin, all business transactions must be analyzed. What accounts they affect should be determined. A transaction usually consists of some exchanged of money for a product, a service, or something the company needs, such as electricity. Once analyzed, the transactions are recorded in the general journal or a special journal, such as cash receipts. Then these amounts are posted to the general ledger, or one of many subsidiary ledgers. The remainder of the cycle involves creating a worksheet, a trial balance, and the financial statements. This is often handle by the accountant or CPA. The financials must also be analyzed and this information must be communicated to management and other stakeholders.
Bookkeepers can have other duties in the company. The might be responsible for reconciling the bank statement, billing customers, and paying invoices. They could keep track of the petty cash fund, make deposits, or even cut payroll checks. They may be responsible for compiling a budget based on past expenditures.
They can also be in charge of office supplies and equipment. Part of that job is monitoring inventory levels and replenishing supplies as needed. They might also have authority to purchase copiers, computers, printers, and other items vital to the health of an office.
Often bookkeepers have a lower level of education than a CPA or accountant, they can also get hired just based on business acumen or experience. They must be familiar with GAAP, which stands for generally accepted accounting principles. They must be very organized and pay close attention to details. A good bookkeeper equals a good business.
Both accountants and bookkeepers follow the steps in the accounting cycle. This cycle is completed each accounting period. An accounting period can be a year, six months, or one month, depending upon the size of the business. Most keep their books according to the accrual method, which is a more accurate representation of the true nature of the company's finances. The cash method can also be used, but this does not accurately reflect when revenue is earned or when money is spent.
Accrual is often the most accurate method, at least on paper. It can be deceiving without the associated statements to show cash flow, owner's equity, and profit and loss. A company can actually be profitable on paper but be cash poor. If someone owns or manages a company, they need to know how to understand and interpret financial statements.
Bookkeepers usually perform the first three steps in the cycle, the latter steps are often the accountant's responsibility, but there can be some crossover, especially in some small businesses. Sophisticated accounting software has made it easier for almost anyone to create financial statements and perform analysis. However, those with little business savvy may want to leave this to the pros.
To begin, all business transactions must be analyzed. What accounts they affect should be determined. A transaction usually consists of some exchanged of money for a product, a service, or something the company needs, such as electricity. Once analyzed, the transactions are recorded in the general journal or a special journal, such as cash receipts. Then these amounts are posted to the general ledger, or one of many subsidiary ledgers. The remainder of the cycle involves creating a worksheet, a trial balance, and the financial statements. This is often handle by the accountant or CPA. The financials must also be analyzed and this information must be communicated to management and other stakeholders.
Bookkeepers can have other duties in the company. The might be responsible for reconciling the bank statement, billing customers, and paying invoices. They could keep track of the petty cash fund, make deposits, or even cut payroll checks. They may be responsible for compiling a budget based on past expenditures.
They can also be in charge of office supplies and equipment. Part of that job is monitoring inventory levels and replenishing supplies as needed. They might also have authority to purchase copiers, computers, printers, and other items vital to the health of an office.
Often bookkeepers have a lower level of education than a CPA or accountant, they can also get hired just based on business acumen or experience. They must be familiar with GAAP, which stands for generally accepted accounting principles. They must be very organized and pay close attention to details. A good bookkeeper equals a good business.
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