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.
The first step in the cycle is to analyze each business transaction. Most transactions involve an exchange of money or credit. Then, these are journalized in the general journal and sometimes special journals, such as cash payments. Once journalized, they are posted in the general ledger or other subsidiary ledgers. The accountant will then take over and complete the cycle, which includes a worksheet, a trial balance, and the associated financial statements. The accountant or CPA is also tasked with interpretation of the financials and communication with 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 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.
The first step in the cycle is to analyze each business transaction. Most transactions involve an exchange of money or credit. Then, these are journalized in the general journal and sometimes special journals, such as cash payments. Once journalized, they are posted in the general ledger or other subsidiary ledgers. The accountant will then take over and complete the cycle, which includes a worksheet, a trial balance, and the associated financial statements. The accountant or CPA is also tasked with interpretation of the financials and communication with 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 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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