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.
The accrual method uses double-entries to record transactions. This is by far the most difficult concept to learn in this field, other than debits and credits! The accrual method can also show a profit on paper when a company is cash poor, so one should look at the financial statements as a whole to get an accurate picture of the company's fiscal fitness.
A bookkeeper often performs just the first few steps in the accounting cycle. The remainder of the steps are undertaken by the accountant. This is not necessarily true for smaller companies. Accounting software has made it fairly easy for the layman to organize transactions, create financial statements, and issue invoices or balance the bank account. However, those without some business knowledge should still leave this to the professionals.
The first step in the cycle is to analyze each business transaction. Most transactions involve an exchange of money or credit. Then, these are journalized in the general journal and sometimes special journals, such as cash payments. Once journalized, they are posted in the general ledger or other subsidiary ledgers. The accountant will then take over and complete the cycle, which includes a worksheet, a trial balance, and the associated financial statements. The accountant or CPA is also tasked with interpretation of the financials and communication with management.
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 may also run the office, and purchase supplies and equipment. They keep track of inventory and replenish items that are needed. They often may be authorized to buy computers, printers, adding machines, and other small equipment that an office could not do without.
They often have a lower educational level than that of an accountant. An Associate's degree may be required if there is not considerable business experience. They must be familiar with the accepted accounting principles and often have some knowledge of tax law, especially if they deal with payroll. They must be detail oriented and organized. A great bookkeeper can be invaluable to any company, big or small.
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.
The accrual method uses double-entries to record transactions. This is by far the most difficult concept to learn in this field, other than debits and credits! The accrual method can also show a profit on paper when a company is cash poor, so one should look at the financial statements as a whole to get an accurate picture of the company's fiscal fitness.
A bookkeeper often performs just the first few steps in the accounting cycle. The remainder of the steps are undertaken by the accountant. This is not necessarily true for smaller companies. Accounting software has made it fairly easy for the layman to organize transactions, create financial statements, and issue invoices or balance the bank account. However, those without some business knowledge should still leave this to the professionals.
The first step in the cycle is to analyze each business transaction. Most transactions involve an exchange of money or credit. Then, these are journalized in the general journal and sometimes special journals, such as cash payments. Once journalized, they are posted in the general ledger or other subsidiary ledgers. The accountant will then take over and complete the cycle, which includes a worksheet, a trial balance, and the associated financial statements. The accountant or CPA is also tasked with interpretation of the financials and communication with management.
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 may also run the office, and purchase supplies and equipment. They keep track of inventory and replenish items that are needed. They often may be authorized to buy computers, printers, adding machines, and other small equipment that an office could not do without.
They often have a lower educational level than that of an accountant. An Associate's degree may be required if there is not considerable business experience. They must be familiar with the accepted accounting principles and often have some knowledge of tax law, especially if they deal with payroll. They must be detail oriented and organized. A great bookkeeper can be invaluable to any company, big or small.
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