When people think of bookkeepers, they often think that their job is the same as an accountant's. However, a bookkeeper may not have a job that is less busy than an accountant, but they have less responsibility for financial records than a CPA. If you want to know the difference, just ask a bookkeeper-or keep reading!
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.
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.
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 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.
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 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.
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.
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 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.
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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