Bookkeeping

A lot of people look down on bookkeepers, and the act of bookkeeping is often
seen as one of the less challenging aspects of accountancy. However, without
good bookkeepers, accounts would find that they were faced with a huge amount
of extra work. Bookkeeping is the foundation of accounting and is just as, if not
even more important than some of the more 'glamorous' accounting work.

So why are bookkeepers seen as being less important to the success of an

accounting department than accountants? Well to get the answer to this, it is
important to understand what exactly bookkeeping is.

Bookkeeping within a business is basically the recording of any

financial transactions. These transactions include purchases, sales, receipts and
payments- in fact just about every financial transaction.

A lot of people think that bookkeeping and accounting is the same thing, but this is
wrong. The confusion comes from the fact that bookkeeping is an element of the
accounting process. Accountants create reports from the financial transactions,
which were recorded, and file the appropriate forms with the government. But it is
the bookkeeper who provides the accountant with the source information which
these reports are based on. So without the bookkeeper the accountant would be
forced to spend a great amount of time recording every transaction.

It is also incorrect to think that bookkeeping is easy. Bookkeepers use one of

several methods of recording transactions, the single entry bookkeeping system
and the double entry bookkeeping system being the most common. Of these
methods, it is universally recognised that double entry bookkeeping is a more
effective system for accounting. By using double entry you can prove the accuracy
of the records to ensure that the two sides agree. This being said double entry
bookkeeping is known for being difficult, with some qualified accountants not
completely understanding it.

The double entry system works by recording two sides to each

income or expenditure transaction. For example, if you buy a new computer for
the office the two sides would be that: the amount of money in your bank
account would decrease and the value of assets in the office would increase. This
follows the accounting equation that assets - liability = capital.
Traditionally, bookkeepers kept written records in the form of daybooks, sales
ledgers, purchase ledgers and other journals. Recently, computerised accounting
programmes have overtaken these in popularity as they allow bookkeepers to
record transactions faster and at the same time automatically generate reports
based on the figures. In the traditional paper form bookkeeping required an exact
knowledge of which transactions should be posted into which T-accounts, now a
bookkeeper can do the same job by memorising the nominal code attached to an
account.

Although automated bookkeeping software has made bookkeeping easier, it is still

an area of great difficulty for anyone without suitable training or experience.
Bookkeeping, as with accounting, requires a thorough understanding of the system
which is being used and the effects of the transactions being posted.

In the single entry system, each transaction is recorded only once. This means that
the record does not accurately show the effect of the transaction and as such is
less effective. Single entry bookkeeping is often used by sole-traders starting out in
business as it requires little expert knowledge. In fact most people who have
balanced their chequebook have used a single entry system.

Bookkeepers bring 'the books' to the trial balance stage at which point the work is
passed to the accountant to prepare the income statement and balance sheet
using the work prepared by the bookkeeper.

Bookkeepers usually also deal with petty cash and authorise its use,
VAT returns and personal tax returns. In fact, just about any 'accounting' function
that doesn't require an official statement from a certified accountant.

In effect anyone working on accounts preparation before this stage can be labelled
as a bookkeeper although most people prefer a more formal title such as accounts
payable. Self-employed bookkeepers face the added difficulty of having to deal
with clients who have either incomplete or disorganised financial records and as a
result have to spend hours wading through boxes of receipts before they can start
recording the financial information contained in these receipts.

Unfortunately a lot of people remain unaware of the complexity of the role of the
bookkeeper, and the term is now more commonly used to show an individual
preparing basic financial records rather than a member of a professional
accounting team.

This is the end of the reading!