Bookkeeping is the recording of financial transactions or, more precisely, the establishment of accounts. Bookkeepers are responsible for the recording and analysis of day-to-day financial transactions such as sales, purchases, income, and withdrawals. They ensure that the sums recorded match the relevant financial records at the time of transaction. Some of the more important financial transaction categories include:
Helps You Budget Accurately
The importance of bookkeeping is heightened in the current times, when tax returns have to be prepared, audits are conducted and financial statements prepared for management purposes. The practice of recording financial transactions in a ledger, including journal entries, debits and credits, and advances, is known as “books and journals.” While historically these journals were written by individual accountants, today most bookkeeping is done at the business’s accounting department. Accounting records include information regarding the movement of assets and liabilities between owners, creditors and banks; the preparation of financial statements; the recording of tax returns; and the preparation of reports required by government regulatory agencies such as the IRS and CFTC. In addition to the many practical responsibilities associated with the preparation and recordation of bookkeeping records, the bookkeeper is also required to create policies, procedures, and systems to ensure the accuracy of the financial records.
One of the major responsibilities of a bookkeeper is the creation of the inventory control database. This “base” of information generally includes the description of the balances and the description of the inventory with particular reference to the quantity, cost, location, and date of every item contained in the inventory; description of the sales, purchase, income, and expense accounts; and description of the financial statement items. Together, these four categories constitute the general framework of accounting records. The bookkeeping staff also creates a number of other accounting records, such as the balance sheet, the income statement, the statement of cash flow, and the statement of operations. As previously mentioned, the creation of these accounting records is an important part of the responsibility of a bookkeeper. Because of this function, the bookkeeper must be highly organized and understand the significance of each piece of information.
Maintains Organized Records
The recording of tax payments is another important responsibility of accountants in a public company. As most tax time approaches, it is very important for accountants to make accurate entries on the tax forms required by the IRS. A bookkeeper’s reports on tax filing are critical to the understanding of the financial situation of the company. The quality of bookkeeping can have a direct influence on the performance of the company. Therefore, bookkeepers are responsible for accurately recording all of a company’s tax related financial transactions.
Bookkeeping is not the only responsibility of a bookkeeper. The creation of accounting records, which include the daily recording of daily cash flows and financing transactions, is also another duty of the bookkeeper. This duty is performed under the direction of the accountant. Proper recording of the daily cash flows and financial transactions are necessary for the preparation of financial reports that the owners and the management need to know. These reports are prepared to give the business owner and the management a comprehensive view of the operations of the business.
If you work as a bookkeeper for a company, it is imperative that you pay close attention to all of the details that appear on your daily financial records. Your attention should be focused on what you need to do in order to properly record the day’s financial activities. When you are familiar with the accountancy standards that are used in the United States by all accountants, you will be more confident when you are performing your own bookkeeping. This confidence will translate into excellent financial practices for your company.