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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 consists of several steps that occur during the accounting period. This is often one month long, however, smaller companies can use longer accounting periods. The accrual method is most commonly used and is preferred by the IRS. The other option is the cash method, which does not match business transactions in the period in which they occur.
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.
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.
The person who keeps the books might also have other duties, such as managing the office. They could also reconcile banking statements, send invoices to customers, and pay bills. They might keep the petty cash fund, make deposits or even do the payroll. They also may be responsible for drawing up a budget or giving their advice on how money should be 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.
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.
The accounting cycle consists of several steps that occur during the accounting period. This is often one month long, however, smaller companies can use longer accounting periods. The accrual method is most commonly used and is preferred by the IRS. The other option is the cash method, which does not match business transactions in the period in which they occur.
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.
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.
The person who keeps the books might also have other duties, such as managing the office. They could also reconcile banking statements, send invoices to customers, and pay bills. They might keep the petty cash fund, make deposits or even do the payroll. They also may be responsible for drawing up a budget or giving their advice on how money should be 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.
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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