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.
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.
Accountants and bookkeepers are in charge of carrying out and completing the accounting cycle. Bookkeepers usually perform the first few steps and the accountant or CPA does the rest. In some small businesses the owner or bookkeeper might actually do all of the steps. Accounting software has made it easier for almost anyone to keep their own books, but some accounting knowledge is still advised.
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.
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.
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.
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.
Accountants and bookkeepers are in charge of carrying out and completing the accounting cycle. Bookkeepers usually perform the first few steps and the accountant or CPA does the rest. In some small businesses the owner or bookkeeper might actually do all of the steps. Accounting software has made it easier for almost anyone to keep their own books, but some accounting knowledge is still advised.
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.
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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