Many people confuse the jobs of a bookkeeper and an accountant, especially since bookkeepers are sometimes referred to as accounting technicians or accounting clerks. While very similar, a bookkeeper focuses on maintaining timely and accurate records of financial data – ranging from income, payments, sales, and purchases. An accountant, on the other hand, takes the information recorded by the bookkeeper in order to create financial statements. Since the jobs are intertwined, some accountants actually start their careers as bookkeepers.
Bookkeepers help business in immeasurable ways. Depending on the size of the business, the bookkeeper can use the single entry method where most transactions, including money made and money going out is kept in a an expense ledger. This is a great and simple method for small businesses. Then there is the double entry method. This way of doing books is not as simple but there are less mistakes since there are two separate sections where income and expenses are written down and they are balanced against each other based on simple math.
A bookkeeper can record all the business transactions in ledgers, journals or on a computer database. Everything that is involved in the business including sales, purchases, cash, credit, pay outs, and other items are recorded in these very important places. Everything that is spent, bought, or sold throughout the days events are then recorded in these types of journals, whether digital or not, so that the business has an accurate accounting at the end of the week.
Income statements and balance sheets are created from ledgers, which include various financial data that is divided into sections. The general, or nominal, ledger details the various income, expenses, liabilities, and assets of a business. The customer, or sales, ledger illustrates the various financial information transacted with customers. The supplier, or purchase, ledger shows the company’s transactions with various suppliers.
Part of a bookkeeper’s job is to check the books for mistakes. This is done by creating a worksheet where they record the balance shown in every ledger account. Each balance will show as a debit or a credit, as of a set date. When the double-entry system is being used, the debits should equal the credits. When the two are equal to each other, the accounts are considered to be balanced. If they are not equal, a mistake has been made and the bookkeeper will have to root out the mistake.
Depending on the size of your business, you may feel the need to hire a bookkeeper full time so that they are in complete control of your income and expenses, while you deal with the suppliers and customers. Some businesses are still small and so they do not need a full time bookkeeper but they do need help. They can easily find someone who does bookkeeping and contract the work to them. A contract bookkeeper will either visit the business on a weekly basis or will have all the invoices brought to them so that they can put them in a ledger. Whichever way you prefer, a bookkeeper can help your business stay in the black by staying on top of income, expenses and your businesses bottom line.
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