Typically, when running your company, your ability to develop and prosper is hooked on how your financial records are structured. Yet handling the finances of your company is just the recording and accounting of your financial transactions. For your business to expand, bookkeepers and accountants manage the financial reports of your business but undertake specific roles during the financial process of your business.
Bookkeeping is described as “the process of collecting, organizing, storing, and accessing an entity’s financial database.” It is essential for day-to-day business operations and the basis for preparing financial statements, tax returns, and other important reports. In short, bookkeeping is documenting financial transactions.
A bookkeeper’s primary goal is to document all financial transactions correctly and logically. Bookkeepers usually document these financial activity chronologically. We use one of two big record-keeping schemes, which we will address more later.
3. The Function Of Bookkeeping
Bookkeeping involves the activities required during the primary accounting process. This requires reliable, timely and precise reporting of financial transactions in chronological order. Bookkeeper’s duties include:
Maintaining a complete and organized collection of books, consisting of the total ledger and sub-ledger (i.e., fixed assets, inventories, assets, accounts payable, currency, tax, costs, and sales) through which to post financial transactions.
- Create and file customer invoices.
- Recording invoices of vendors.
- Suppliers charged.
- Logging consumer cash receipts.
- Record shifting inventory.
- Employee payroll collection.
- Manage fund transactions.
- Preserving all relevant documentation for all transactions.
A bookkeeper follows specified protocols to perform these duties repeatedly. The sophistication of a company’s bookkeeping method depends on business dimensions and how many transactions are done every day, weekly, and monthly.
Nevertheless, it has a broader reach than bookkeeping. Accounting is described as the “systematic method of defining, tracking, calculating, classifying, checking, summarizing, explaining, and communicating financial information.” In other words, accountants are able to do more than report transactions; they are often qualified to clarify what financial data actually means to key stakeholders inside the organization.
An accountant’s primary objective is to assess the company’s financial position or well-being and transfer this knowledge to key stakeholders. Thus, accountants are not mainly concerned with the day-to-day activities of bookkeeping (although these are essential) but are concentrated on evaluating and interpreting all the financial data collected. Usually, an accountant or the small business owner supervises the bookkeeper’s job as they understand the significance of accounting and bookkeeping for businesses.
3. The Function of Accounting
Accounting includes the process by which the bookkeeper or business owner analyzes, interprets, records, and analyses financial data. A number of an accountant’s responsibilities include:
- Preparing adjusted entries (i.e., income received or expenditures incurred not reported during the bookkeeping process).
- Preparing financial statements on organizational status and results.
- Creating executive reports to fix particular problems.
- Costs monitoring processes.
- Making a corporate budget.
- Compiling financial details tax returns.
- Helping the business owner grasp the financial details of the company and, thus, its financial decisions.
There are business service professionals engaged in providing accounting and bookkeeping services, and it is a great idea to use them to create a healthy business plan. Basically, the accounting process helps you understand where your business is financially at any point in time by calculating your company’s growth and financial performance. Additionally, the financial data generated helps you shape informed business decisions, so you plan for the roadmap for your business.