Basics on Bookkeeping
Any properly functioning entity will understand and properly implement the basics of bookkeeping since bookkeeping is the foundation on which all financial transactions are reflected in the company records. Whether it be receiving cash, purchasing an item or paying a vendor bill, recording of these daily transactions is essential to the entity's economic well-being. Understanding the basics of bookkeeping is so important that there is a certification level available in the field.
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Facts
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The basics of bookkeeping consist of recording the daily financial transactions of the firm. It is the first step in keeping track of the financial operations of an entity. Bookkeeping consists of posting transactions to the sales, income, purchases and payment areas of an entity. The maintenance of accounting records is the main responsibility of bookkeeping. Either a single-entry or double-entry system can be used in bookkeeping. The field involves posting transactions, footing (adding down) and cross footing (adding across) columns of inputted information, ascertaining the data correctness (if applicable), and arriving at the trial balance.
Bookkeeping positions
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Bookkeeping involves a variety of areas. A full-charge bookkeeper is responsible for the firm's entire bookkeeping duties. A bookkeeper assistant assists the full-charge bookkeeper as needed, many times to help with work overload. Bookkeepers may specialize in accounts receivable. In addition to posting transactions, the position would entail collections and updating customer accounts. An accounts payable bookkeeper would maintain vendor accounts, and handle vendor communications such as payment arrangements. Payroll bookkeepers are involved with receiving and inputting the firm's payroll data.
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Documents
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Bookkeeping has some basic source documents that are used to accomplish the tasks efficiently. Chart of Accounts is used to code daily transactions that are to be inputted. Transactions come from sales orders, purchase orders and invoices. Each account has a general ledger related specialized code to ease organization and classification. Once coded, these transactions are posted to journals such as accounts receivable, sales, accounts payable, purchases, cash receipts and payroll in the chronological order that they occur. The total of each journal is summarized in the general ledger. The final general ledger figures is reflected in the trial balance.
Significance
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Bookkeeping is an integral part of any business. Every financial transaction on the books is the result of someone understanding, and performing, the basics of bookkeeping. If this information is not inputted correctly, the financial information would need to be corrected at a later date by the accountant at more expense and time to the entity. It also is important to have the bookkeeper properly trained in the accounting software used to avoid month-end closing problems and decreased productivity. Also, bookkeeper certification is available and may be important to check into for the firm.
Considerations
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The core of bookkeeping involves a fiduciary trust relationship, meaning the employer is trusting the bookkeeper with proper implementation of their financial transactions. The information is also confidential. The bookkeeper is expected to operate with the employer's best interest in mind. Bookkeepers are responsible for abiding by generally acceptable accounting practices while posting the financial transactions. Understanding the basics of bookkeeping, the interrelationship of debits and credits, and attention to detail are essential ingredients for a good bookkeeper to possess.
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