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.
The accounting cycle has several specific steps that are undertaken by bookkeepers and accountants during the accounting period. This is usually a month, but can be longer in some companies. The IRS prefers that companies use the accrual method, but cash and hybrid methods are also acceptable. The cash method usually violates the rule of matching, which is one of the generally accepted accounting principles. In order to change you accounting method, you must put in writing the reasons behind the change and submit it to the IRS.
There are drawbacks to both methods, cash and accrual, but the general consensus is that accrual is a more accurate method. However, the accrual method can be misleading without accompanying statements such as the statement of cash flows. A business can be profitable under the accrual method but not have enough money in the bank to pay the bills. It is important for anyone who owns a company or manages one to know what the financial statements are really saying.
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.
Someone who keeps the books may have other related duties as well. They could be involved in reconciling bank statements, paying invoices, or billing customers. They might be in charge of a petty cash fund, make bank deposits, and could even process payroll. They will also have considerable input to how money is budgeted and spent.
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.
The accounting cycle has several specific steps that are undertaken by bookkeepers and accountants during the accounting period. This is usually a month, but can be longer in some companies. The IRS prefers that companies use the accrual method, but cash and hybrid methods are also acceptable. The cash method usually violates the rule of matching, which is one of the generally accepted accounting principles. In order to change you accounting method, you must put in writing the reasons behind the change and submit it to the IRS.
There are drawbacks to both methods, cash and accrual, but the general consensus is that accrual is a more accurate method. However, the accrual method can be misleading without accompanying statements such as the statement of cash flows. A business can be profitable under the accrual method but not have enough money in the bank to pay the bills. It is important for anyone who owns a company or manages one to know what the financial statements are really saying.
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.
Someone who keeps the books may have other related duties as well. They could be involved in reconciling bank statements, paying invoices, or billing customers. They might be in charge of a petty cash fund, make bank deposits, and could even process payroll. They will also have considerable input to how money is budgeted and spent.
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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