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.
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.
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 bookkeeper first analyzes all of the business transactions and determines what accounts they affect. They will then journalize all transactions in the general journal, or special journals, if needed. The third step is to post to the ledgers, be it the general ledger or subsidiary ledgers. If the bookkeeper works with an accountant, the accountant will often finish out the cycle, including a trial balance and financial statements. The accountant also has the job of interpreting the financial statements and conveying this information to 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.
Bookkeepers have a lower level of education than an accountant or CPA. They usually have an Associate's degree and are well versed in accounting principles, known as GAAP (which stands for Generally Accepted Accounting Principles.) Business experience can also take the place of education. They must be fastidiously organized and detail oriented. A good bookkeeper is vital to the success of any company, large 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.
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.
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 bookkeeper first analyzes all of the business transactions and determines what accounts they affect. They will then journalize all transactions in the general journal, or special journals, if needed. The third step is to post to the ledgers, be it the general ledger or subsidiary ledgers. If the bookkeeper works with an accountant, the accountant will often finish out the cycle, including a trial balance and financial statements. The accountant also has the job of interpreting the financial statements and conveying this information to 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.
Bookkeepers have a lower level of education than an accountant or CPA. They usually have an Associate's degree and are well versed in accounting principles, known as GAAP (which stands for Generally Accepted Accounting Principles.) Business experience can also take the place of education. They must be fastidiously organized and detail oriented. A good bookkeeper is vital to the success of any company, large or small.
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