People often put off their business idea because bookkeeping and accounting scare them. We understand it can be tough and technical to do tax and accounting. However, a little understanding for bookkeeper and accountant can help build a strong financial reporting mechanism.
This article shall discuss the main differences between bookkeeper and accountant to decide if you should hire an accountant/bookkeeper.
Role of bookkeeper in the business
Following are some of the roles performed by bookkeepers.
1-Collection of the receipts
The bookkeeper is responsible for collecting receipts and invoices from suppliers and employees. It helps to ensure that the accounting record of the business is backed by sufficient and appropriate audit evidence.
Further, the bookkeeper needs to ensure that all transactions in the accounting record are backed by evidence. It helps enhance the reliability of an accounting record and it becomes easy for the business to get audit reports.
2-Perform bank reconciliation
The bookkeeper needs to ensure all items of bank reconciliation are accurately placed. The record for the uncredited cheques, un-presented cheques, and financial charges is kept accurately. It further helps during internal control evaluation and audit of financial statement.
3-Process monthly payroll
The bookkeeper needs to ensure payroll and related data are kept appropriately. It helps streamline on-time payment and matters related to taxation. Further, it’s about maintaining a comprehensive record for the salaries, benefits, payroll taxes etc.
4-Ensure chart of accounts are appropriate
It’s the bookkeeper’s responsibility to ensure that the chart of accounts is always clean. It helps in the classification and posting of the accounting transaction appropriately. Further, the bookkeeper needs to ensure all accounting entries are posted in the correct accounting period and correct chart of accounts.
In fact, it’s the basis of the reliable and transparent financial reporting process.
5-Ensure debit and credit are equal
The bookkeeper is responsible for ensuring data entry is correct and all debits and credits are equal. It helps ensure no suspense accounts and books remain clean with all debit and credit equal.
These are the main duties of the bookkeeper and the bookkeeping function needs to ensure completion of given tasks. So, when the work of an accountant begins? Let’s discuss this in detail.
When the work of an accountant begins?
Generally, the work of an accountant begins at the time of closing. An accountant needs to perform technical and complex tasks that include but are not limited to posting adjusting entries in the accounting system, calculating taxes, preparing financial statements, updating notes to the financial statement, adjusting business announcements like dividend payment, provisions, and other technical details.
Let’s discuss detailed aspects of each of the tasks.
1-Posting adjusting entries
An accountant needs to prepare and post general entries at closing. Common general entries to be posted include depreciation, prepaid, accruals, provision etc. An accountant needs to ensure that reasonable assumptions back all the amounts posted in the system.
For instance, the receivables provision increases with the increase of doubtful debts. Similarly, tax provision increases with the increase of profit. Likewise, depreciation expense should increase with production plant expansion.
2-Calculating taxes
Tax calculation is one of the most technical and complex processes. It includes tax planning, tax compliance, and business understanding. This task needs to be performed with a professional attitude and consideration. Otherwise, it might trigger a tax audit.
3-Updating notes to the financial statement
Updating notes to the financial statement is a technical task. It requires business understanding, market understanding, product/service understanding, financial market understanding, comprehensive knowledge of the business and related financial reporting framework.
Further, an accountant needs to obtain input from different sources. For instance, details for the savings account rate need to be obtained from the bank.
4-Making movement schedule
An accountant needs to prepare different movements for balance. For instance, a fixed assets schedule is prepared from the general ledger by obtaining figures for depreciation, accumulated depreciation, opening balance, addition, deletion, etc.
An accountant needs to prepare different schedules depending on the company’s size, applicable financial reporting framework, and business policies.
5-Closing of the books
An accountant needs to close books of accounts at the end of the accounting period. In this regard, closing entries are posted in the accounting system. These closing entries transfer the balance from different account balances like revenue and expenses to respective profit and loss accounts.
It helps businesses in calculating profit/losses. The next step is the generation of a financial statement.
6-Generating financial statement
It’s one of the most important roles of a professional accountant. A financial statement depicts the financial performance and financial status of the business.
Business stakeholders are interested in the financial statement as it helps them understand management performance and review their stake in the business.
The users of financial statements include shareholders, employees, suppliers, employees, government, regulators, auditors etc.
Also read, Duties of auditor.
So, who should you appoint, bookkeeper or accountant?
If you want someone to take care of accounting records and data entry, hiring a bookkeeper is a good idea. The bookkeeper is expected to work daily.
On the other hand, hiring an accountant is logical if you need some technical help in accounting department. Generally, cost of accountants is more than bookkeepers.
Hope, it helps to decide if you should hire bookkeeper or accountant.
