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.
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.
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.
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.
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.
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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