Typical financial transactions and tasks that are involved in bookkeeping include:
Today bookkeeping is done with the use of computer software. For example, QuickBooks (from Intuit) is a low-cost bookkeeping and accounting software package that is widely used by small businesses in the U.S.
Bookkeeping requires knowledge of debits and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement.
Contrary to popular belief, accountants and bookkeepers perform distinctly different tasks for the businesses they serve. Bookkeepers are responsible for on-going maintenance of their clients’ general ledgers. A bookkeeper’s common responsibilities consist of:
Accountants use the accurate and up-to-date general ledger maintained by the bookkeeper to provide advisory services, such as:
A bookkeeper's role at a company varies by the size and nature of the business. At a very small company without an accountant, the bookkeeper's duties are likely to be extensive. At a minimum, the bookkeeper is responsible for processing the paperwork for a company's transactions and getting the information quickly and accurately recorded in the company's general ledger accounts. Today, this is done best through the use of cost effective software such as QuickBooks from Intuit.
A bookkeeper's work is often reviewed by an accountant and/or the small business owner.
The qualifications of a bookkeeper include business sense, attention to detail, speed, accuracy, ability to adapt to changes in technology, understanding of debits and credits, and a general understanding of financial statements.
At small companies bookkeepers may be involved in the following activities:
At least one account will have an amount entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will result in the accounting or bookkeeping equation being in balance at all times.
Let's assume that a company borrows Rs.10,000 from its bank. The company's asset account Cash is increased with a debit entry of Rs.10,000 and the company's liability account Loans Payable is increased with a credit entry of Rs.10,000. If the company repays Rs.3,000 of the amount borrowed, the company will decrease the amount in its Cash account with a credit entry of Rs.3,000 and will reduce the balance in its Loan Payable account with a debit entry of Rs.3,000.
If the company pays its monthly rent of Rs.2,000, a credit entry of Rs.2,000 will be recorded in its Cash account and a Rs.2,000 debit entry will be recorded in its Rent Expense account.
If a company collects Rs.500 from a customer who had previously purchased goods on credit, the company will make a debit entry of Rs.500 in its Cash account and will make a credit entry of Rs.500 in its asset account Accounts Receivable.
The bookkeeping equation for a sole proprietorship is assets = liabilities + owner's equity. The bookkeeping equation for a corporation is assets = liabilities + stockholders' equity. The bookkeeping equation is also referred to as the accounting equation.
In the bookkeeping equation:
Often it is said that the liabilities and owner's equity are the claims against the assets. It can also be said that the liabilities and the owner's equity are the sources of the assets.
The bookkeeping equation should always be in balance because of double-entry bookkeeping.
Accountants will review the information that the bookkeeper had entered into the general ledger, will prepare adjusting entries, will prepare the financial statements, and will analyze them. The accountant will likely supervise the bookkeeper (or accounting clerks), will be involved in the accounting system, and will review the financial statements with the management and owners of the company. The accountant will also be involved in budgeting of operations and capital improvements, cost accounting, reports to government agencies, and various analyses required by management. Generally, the accountant will have a four-year or a five-year college degree with a major in accounting.
While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered. This is especially true when monthly financial statements are prepared under the accrual method of accounting. For instance, the monthly bookkeeping entries for depreciation, property taxes, utilities, fringe benefits and more will need to be estimates.
Even the end-of-year financial statements will require some estimated amounts. For example, a company's liability for warranties on its products and its allowance for uncollectible accounts receivable will need to be estimates. Providing an estimated amount is better than ignoring reality and reporting a zero amount.
Most businesses have been outsourced their accounting services instead of sticking with the traditional in-house systems. The popularity of these services has grown immensely among startups and small businesses across the world. It gives your business the much-needed boost and a new approach that assures you of better results.
Quality and Accuracy: When handling an accounting, it is essential to focus on the figures. That is a process that should be flawless, credible, and meet the standards. As an employer, you have obligations that you have to meet. It can become more difficult when you are expanding your team.
Cost-effective Solutions: With an accounting outsourcing service, you are going to spend less money and time than you have been using. The lower costs involved mean that you can streamline your operations, reduce expenditure, and maximize profits. Those who offer these services will not be coming to your office for work. Therefore, you are not going to have them on your accounting.
Services by the experts: The companies providing outsourced accounting services, hire experienced and trained professionals. As the organizations grow and their accounting requirements grow, they can rely on the outsourced company professionals to handle the accounting requirements.
Focusing on Core Operations: When you choose an online payroll service, you will be tapping into the skills of professionals who understand what your business all about. They know that every company has specific solutions that they look for, and that is what they will give you. Focusing on your core operations ensures that you reward what should be remunerated.
Choose based on your requirements: There are many firms offering accounting services. You may want a company that suits your business requirements. Choosing a reliable company and acquiring a customized package meeting individual needs is recommended. Before selecting an accounting firm clear about your business requirement.
Outsourcing Accounting Services can help you in Developing Business:Most of the entrepreneur thinks accounting services are easy to manage, and this overconfidence can sometimes lead to failure. Outsourcing Bookkeeping Services for a startup should be handled with care to avoid any confusion and mayhem when the time to when tax time comes up. Having an excellent bookkeeping service will not make you establish good business habits, but it protects the employees who are determined to steal from you.