Bookkeeping Is
Bookkeeping is the ensuring of the correct flow of transactional information into a specific format designed to give a good overview of financial activity regarding things owned, debts due, revenue and expenses. In order to obtain all this information, a certain level of skill and knowledge is involved.
A bookkeeper is tasked with understanding the accounting system to be used and with having an understanding of relevant tax laws sufficient enough to ensure the flow of data into the general ledger and reports is accurate.
There are varied positions within the scope of bookkeeping of which some may be deemed clerk. A bookkeeping clerk may deal strictly with payroll or accounts receivable or accounts payable and may need a level of knowledge strictly akin to those functions and not a more in-depth level that would relate to general ledger management, journal entries, overall ensuring financial reports accuracy.
A Bookkeeper is not a CPA as they must have proper certification, having acquired a certain level of college degree and having passed a rigorous set of exams for their state, to be classified with that title. A CPA’s function extends beyond taxes in general and depending on their certifications may be in the line of audit or financial advisory of varied types. A bookkeeper is not generally a tax professional although they can be if they have studied and passed the exams for the certification of EA (Enrolled Agent) which is an IRS designation for a tax professional who has studied and gained a deep knowledge of tax rules and the EA designation is country wide and not restricted to a given state. Often a CPA will also sit for this exam. This exam is detailed and is not accomplished overnight. No college education is required but an in-depth knowledge of current tax standards is. An EA has a high level of tax knowledge and skill.
A full-charge bookkeeper or one that manages the overall books, should have a good understanding of tax rules in order to ensure the set of books created serve the purposes for which they are intended. A set of books should be correct data that a tax professional can depend on for filing taxes, although a tax professional also has a level of due diligence required of them and them knowing the company has a skilled bookkeeper will help them have a measure of confidence in the set of records provided. The records created should provide a excellent view of the profit and loss of a business so the company can make wise business decisions about hiring employees, products sold, expenses, the purchasing of assets, debts and future growth. With out this basic business tool a company would be flying by the seat of their pants basically, hoping things will work out without having any details to base decisions on.
Larger companies by necessity often break up their accounting into sections. Having just one person perform all tasks would just be too much for anyone to handle correctly and timely. As such they may include varied roles which will require specific level of skill sets.
A Payroll clerk deals with employee time entry and the processing of same, often using job costs so a company has a more in-depth understanding of employee cost per job. The payroll clerk may be the one responsible for ensuring timely payroll tax payments or this may be up to the head bookkeeper or another within the firm. The managing of payroll is detailed because it involves ensuring employees are paid on time, for the correct number of hours and that overtime is paid as required, taxes correctly withheld, child support, uniforms and things of that nature deducted correctly. Adding job costing to this role is an added detailed responsibility. Certain reports are due for payroll usually each quarter and year end, and payroll taxes are due at specific times and schedules.
An Accounts Payable clerk manages the accounts payable for the company. This involves the entry and payment of bills due from vendors, payments due on notes payable, the verification of the bills to be entered at times and at times the verification is handled by the purchasing department or the company owner or someone that has the details of receipt of items and a given authority. This person deals with vendors, answering questions about payment, credits or other issues that may arise. Detailed job costing may also be part of accounts payable depending on the nature of the business. Job costing, to be effective, must be managed in detail and the information required for said jobs must be on documents for correct processing.
An Accounts Receivable clerk manages invoicing and sales forms. This person may also handle payment status and often is in contact with customers regarding timely payment receipt and questions regarding invoices and income related topics. When job costing is being used by the company then this person is the one to ensure job costing detail is correct on all invoice and sales forms. This person posts payments to invoices and reviews the over all accounts receivable report to ensure payments were posted correctly, credits due are received and things of that nature. This person might also handle vendor credit applications for other than due on receipt basis.
As the age of information grows, accounting software is more and more useful but let’s be honest, accounting software will always only be as good as the person and their level of knowledge, that uses it. Accounting software can make your life so much easier when it comes to bookkeeping. It’s far from the days of manual bookkeeping, which many remember well. For more information refer to Basic Bookkeeping Concepts article
With some of the very basics out of the way we will move on to setting up QuickBooks Online which is a service as a software used by many companies today.
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