1.01 – Bookkeepers: An Introduction
All businesses need to keep track of their financial transactions. That’s where bookkeeping comes into play. Without accurate records, it’s impossible to determine if your business is making a profit or running at a loss.
This lesson covers the essentials of bookkeeping, introducing the language of bookkeeping, how bookkeepers manage the accounting cycle, and an overview of the more complex double-entry bookkeeping.
Think of your personal cheque book. If you forget to record a few checks, it can lead to bounced payments – not a pleasant experience. Now imagine this on a larger scale for a business. Accurate bookkeeping is crucial to ensure every transaction is recorded correctly, providing a clear picture of the business’s financial health.
Bookkeepers: The Record Keepers of the Business World
Bookkeeping is the meticulous process by which businesses track their financial transactions. It falls under the broader umbrella of accounting, which involves recording, classifying, and reporting financial information. Bookkeepers are the diligent professionals who record this financial information, adhering to solid accounting principles.
Detail-oriented and number-savvy, bookkeepers play a vital role in maintaining financial accuracy. While not necessarily certified public accountants (CPAs), they ensure that every financial transaction is recorded accurately. In many small businesses, the owners often handle bookkeeping duties themselves until the business grows enough to hire dedicated staff.
Typically, small businesses might not have a full-time accountant on staff. Instead, they employ bookkeepers who handle day-to-day financial records and work closely with external accountants. These accountants, often CPAs, review the books and prepare official financial reports periodically.
A bookkeeper’s role involves daily transaction entries. At the end of each month or quarter, these transactions are summarized and sent to the accountant, who then verifies the accuracy and prepares financial statements.
Setting up an accounting system usually involves an accountant to ensure adherence to solid accounting principles. Periodic reviews by the accountant help maintain accuracy and proper handling of transactions.
Accurate financial reports are essential to understanding your business’s performance. These reports are based on the data entered by the bookkeeper. If the data is inaccurate, the reports will be too. As the saying goes, “Garbage in, garbage out.”
