How Important is Bookkeeping

bookkeeping

Bookkeeping

So what goes on the accounting and bookkeeping departments? What do these people do on a daily basis?

Well, one thing they do that’s terribly important to everyone working there is Payroll. All the salaries and taxes earned and paid by every employee every pay period have to be recorded. The payroll department has to ensure that the appropriate federal, state and local taxes are being deducted. The pay stub attached to your paycheck records these taxes. They usually include income tax, social security taxes pous employment taxes that have to be paid to federal and state government. Other deductions include personal ones, such as for retirement, vacation, sick pay or medical benefits. It’s a critical function. Some companies have their own payroll departments; others outsource it to specialists.

The accounting department receives and records any payments or cash received from customers or clients of the business or service. The accounting department has to make sure that the money is sourced accurately and deposited in the appropriate accounts. They also manage where the money goes; how much of it is kept on-hand for areas such as payroll, or how much of it goes out to pay what the company owes its banks, vendors and other obligations. Some should also be invested.

Bookkeeping – The other side of the receivables business is the payables area, or cash disbursements. A company writes a lot of checks during the course of year to pay for purchases, supplies, salaries, taxes, loans and services. The accounting department prepares all these checks and records to whom they were disbursed, how much and for what. Accounting departments also keep track of purchase orders placed for inventory, such as products that will be sold to customers or clients. They also keep track of assets such as a business’s property and equipment. This can include the office building, furniture, computers, even the smallest items such as pencils and pens.

The origin of book-keeping is lost in obscurity, but recent researches would appear to show that some method of keeping accounts has existed from the remotest times. Babylonian records have been found dating back as far as 2600 B.C., written with a stylus on small slabs of clay. The term “waste book” was used in colonial America referring to bookkeeping. The purpose was to document daily transactions including receipts and expenditures. This was recorded in chronological order, and the purpose was for temporary use only. The daily transactions would then be recorded in a daybook or account ledger in order to balance the accounts. The name “waste book” comes from the fact that once the waste book’s data were transferred to the actual journal, the waste book could be discarded.

Bookkeeping Basics – A Function of Accounting

bookkeeping basics

Bookkeeping Basics

Most people probably think of bookkeeping and accounting as the same thing, but bookkeeping is really one function of accounting, while accounting encompasses many functions involved in managing the financial affairs of a business. Accountants prepare reports based, in part, on the work of bookkeepers.

Bookkeeping Basics – Bookkeepers perform all manner of record-keeping tasks. Some of them include the following:

-They prepare what are referred to as source documents for all the operations of a business – the buying, selling, transferring, paying and collecting. The documents include papers such as purchase orders, invoices, credit card slips, time cards, time sheets and expense reports. Bookkeepers also determine and enter in the source documents what are called the financial effects of the transactions and other business events. Those include paying the employees, making sales, borrowing money or buying products or raw materials for production.

-Bookkeepers also make entries of the financial effects into journals and accounts. Bookkeeping Basics – These are two different things. A journal is the record of transactions in chronological order. An accounts is a separate record, or page for each asset and each liability. One transaction can affect several accounts.

-Bookkeepers prepare reports at the end of specific period of time, such as daily, weekly, monthly, quarterly or annually. To do this, all the accounts need to be up to date. Inventory records must be updated and the reports checked and double-checked to ensure that they’re as error-free as possible.

-The bookkeepers also compile complete listings of all accounts. This is called the adjusted trial balance. While a small business may have a hundred or so accounts, very large businesses can have more than 10,000 accounts.

-The final step in Bookkeeping Basics is for the bookkeeper to close the books, which means bringing all the bookkeeping for a fiscal year to a close and summarized.

The bookkeeping process primarily records the financial effects of transactions. The difference between a manual and any electronic accounting system results from the former’s latency (engineering) between the recording of a financial transaction and its posting in the relevant account. This delay—absent in electronic accounting systems due to nearly instantaneous posting into relevant accounts—is a basic characteristic of manual systems, thus giving rise to primary books of accounts such as Cash Book, Bank Book, Purchase Book, and Sales Book for recording the immediate effect of a financial transaction.