Welcome back to bookkeeper durango co. Let’s take a look at what professional bookkeepers are trained to do. Hopefully this will give you a better understanding of what you should expect from people engaged in the bookkeeping profession.
Bookkeeping, as a profession,is the recording of financial transactions as they arise in a given business. These transactions can include such items as sales, purchases, income, and payments by an individual or organization. Bookkeeping services are usually performed by a trained, bookkeeping professional. A bookkeeper charging a fee for services rendered will usually have taken certain college-level courses and preferably, have at least one year experience in the field.
Bookkeeping should not be confused with accounting. The accounting process is usually performed by an accountant who creates reports from the recorded financial transactions recorded by a bookkeeper. The accountant will then file forms with government agencies related to the financial posture of a given business entity such as a small business. Bookkeepers and accountants use some common methods of bookkeeping such as the single-entry bookkeeping system and the double-entry bookkeeping system. Be that as it may ANY process that involves the recording of financial transactions is a bookkeeping process.
Following are some of the more important skill sets with which a competent bookkeeper should be familiar:
A bookkeeper, also known as an accounting clerk or accounting technician, records the daily financial transactions of an organization. A bookkeeper is usually responsible for writing what are commonly known as the “daybooks.” A daybook is a descriptive and chronological record of day-to-day financial transactions also called a book of original entry. The daybook’s details are entered formally into journals to enable posting to ledgers. The daybooks consist of purchase, sales, receipts, and payments.
The bookkeeper ensures that all transactions are recorded in the correct daybook, suppliers ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial balance stage. An accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper
Single and Double Entry Systems
Two common bookkeeping systems used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a revenue and expense journal. Single-entry bookkeeping is generally adequate for many small businesses. Double-entry bookkeeping requires posting each transaction twice, using debits and credits.
Petty cash book
Petty cash is funded based on a company’s estimated cash expenses for a given period (a week, month, quarter, etc) and is managed by an employee known as the petty cash custodian. Petty cash payments are approved by the custodian, usually for small items such as postage, coffee, etc. The details of these expenses are recorded by the custodian in the petty cash receipt book, which acts as the source document for the journal entry to record the expense.
A journal is a chronological record of financial transactions before their values are accounted for in the general ledger as debits and credits. One journal can be kept for all transactions, or a business can keep several journals based on similar activity such as sales, cash receipts or revenue. This tends to make transactions easier to summarize and reference later. For every debit journal entry recorded there must always be an equivalent credit journal entry to maintain a balanced accounting equation.
A ledger is a record of accounts recorded separately that shows their beginning and ending balance. The ledger takes each financial transaction from the journal and records each of them into the right account for each transaction listed. The ledger sums up the total of each account transferred into the balance sheet and income statement. The 3 different kinds of bookkeeping ledgers are as follows:
Sales ledger, which deals mostly with the Accounts Receivable account. This ledger consists of the financial transactions made by customers to the business.
Purchase ledger is a ledger that goes hand and hand with the Accounts Payable account. This is the purchasing transaction a company does.
General ledger representing the original 5 main accounts: assets, liabilities, equity, income, and expenses.
Chart of accounts
A chart of accounts is a list of the accounts codes that can be easily identified with numeric, alphabetical or alphanumeric codes, allowing the account to be located in the general ledger.
These are simply estimates of future business activities. By estimating the future, you have something to aim for. Even if the projection is not accurate you have a frame of reference. The real value of financial projections for a business owner is that they enable the owner to set a target or goal to work toward.
Also referred to as the basic business financial statement. This is a record of assets, liabilities and owner’s equity (capital). Assets are things owned by the business. Liabilities are things owed to others. Owner’s equity is the difference between assets and liabilities.
Income or Profit and Loss StatementThis is a summary of your earnings and expenses over a given period of time. This is a business’ report card. It shows revenue, expenses and profit or loss, usually for a month or a year.
Cash flow statement
The cash flow statement shows cash coming into the business and cash going out. Nothing else is recorded.
Computerized bookkeeping is more commonly associated with double entry bookkeeping, as opposed to using single entry programs such as Quicken. It removes many of the paper “books” that are used to record transactions.
Online bookkeeping (also known as remote bookkeeping) allows bookkeepers and accountants to access source documents and data that reside in web-based applications. All entries made into the online software are recorded and stored in a remote location. The online software permits the bookkeeper to work from any location with a suitable data communications link.
So, why did we create this blog site called bookkeeper durango co? Because we believe that YOU – a consumer – should have every reasonable assurance and protection when dealing with local bookkeepers charged with the important responsibility of accurately and truthfully recording and posting your financial transactions.
As you will see, much of this site’s focus is on how you can remove the scare factor from finding a reliable, competent and locally based bookkeeping service in Durango Colorado and surrounding areas.
Besides the death of a loved one, there is no greater tragedy than the kind of financial turmoil that can lead to the ultimate ruin of your personal or business fortunes. Bad, or should we say, incompetent bookkeeping practices can lead to this type of turmoil.
From personal experience, and considering the sheer number of unhappy blog and forum posts found on the internet, it’s apparent there need to be more voices in support of ethical and responsible bookkeeping practices for small businesses, including mom and pop home-based operations.
Our purpose is not to bash or embarrass any existing local bookkeepers or bookkeeping firms in Durango or surrounding areas. But based on what we’ve seen, you really do need someone concerned about your welfare in your corner. We intend to help you determine the best approach to take in deciding which local bookkeeping service is best for your particular circumstances.
If you are like most of us who take all of our receipts, checks and other financial notes and instruments to bookkeepers monthly, quarterly or annually, it’s a sure bet that as savvy as you may now be about what a good bookkeeper can do for you, surely at one time you were clueless about even the simplest of accounting basics and bookkeeping processes.
Think back a bit and honestly ask yourself if, at some point in the past, terms such as accrual basis, cash method, double entry system, single entry system, revenue realization ortrial basis were meaningful to you. Unless you have been gainfully or partially employed as an accountant or full charge bookkeeper, we’ll bet they weren’t.
In fact, a buck will get you 10 if you can come up with 1 person out of every 5 people you meet on the street, on any given day, who normally utilize someone or some organization engaged in the bookkeeping profession and actually understand what the service can truly provide for them.
With the advent of online communication and mobile device capabilities and conventional media, the average housewife knows all about bank reconciliation,basic bookkeeping principlesand the popular bean counter approach to bookkeeping for small businesses – the reliable old shoe box method. We’re not just talking about established small business operations.
In case you haven’t noticed, there are a large number of mom and pop operations up and running all over La Plata County that habitually choose to pursue their own home bookkeeping systems. Unfortunately, for many of them preparing financial statements, outsourcing bookkeeping services when they should and following generally accepted financial reporting standards are tasks that are more often feared and avoided than embraced with confidence and assurance.
The fear or wariness most of us experience right around the time we need to see our bookkeepers is due, in large part, to our misunderstanding about what exactly our bookkeeping services can do for us and the ever nagging question we ask of ourselves:
“Is the bookkeeping service I use really the best for my particular set of circumstances?”
Which brings us to the behind-the-scenes story about why bookkeeper durango co was developed.
Some years ago in southern California, one of the webmasters of bookkeeper durango co met a young woman who, for all intents and purposes, could pass for a bookkeeper. As a matter of fact, she approached the webmaster about creating a 3-fold brochure and business card template to use for the marketing of her bookkeepingbusiness. Little did the webmaster know that she was not properly trained or educated as a full charge or otherbookkeeperand she had never worked professionally as a bookkeeper.
This, however, didn’t deter the woman from offering her services locally as a bookkeeping professionalwith, as she put it, ‘a good understanding of accounting principles.’ She was a decent, law abiding person who meant no harm to anyone. Yet, her lack of knowledge about this very exacting profession got her in hot water on more than a few occasions.
Although the webmaster admired her willingness to help clients prepare their financial books at a deeply discounted rate, her general lack of knowledge about accounts payable, accounts receivable, general ledger entry and payrollaccounting were her eventual undoing. She was advised by the webmaster to withdraw her services from locals who could find much more competent bookkeeping services elsewhere from trained and learned professional bookkeepers.
This experience left a strong impression that colored the way the webmaster thought about the bookkeeping profession until this day. I’m sure we can agree that the last thing we want to do after working so hard to earn our salaries, fees and commissions and faithfully paying our bills, is to turn over the record of all those dealings to an incompetent, untrained or simply uncaring bookkeeper.
Let’s face it; a bad bookkeepercan send the wrong financial records to an accountantwho, in turn, may send in a faulty subsequent filing to the IRS, based on the bookkeeper’s data. This can spell disaster for a small business trying to abide by existing tax law and attempting to remain penalty-free.
Prior to gathering information that we felt would be useful, relevant and appealing to you here at bookkeeper durango co we decided to take a hard look at bookkeeping services in general without singling out any individual bookkeepers or bookkeeping service in particular. What we want to do is give you a different and hopefully fresh perspective on what you can and should expect from small business bookkeeping outfits.
People often ask; “How much should I know about basic bookkeeping?”
Bookkeeping is all about numbers. The more you know about and understand the numbers associated with your home business or other small business, the better your financial posture will be. You should, at least, learn the basics of your bookkeeping system. This means you need to have a good comprehension of how your money is earned and spent. You should also be able to read and understand a balance sheet and an income statement.
Our next post will explain what specific training bookkeepers should have as well as their major areas of focus. We’ll lay it all out for you in plain, everyday English, with no financial or legal mumbo jumbo.
You won’t find any obscure financial terminologies or holier than thou attitude here. We’ll talk to you straight, just as if we were old friends having a friendly and engaging fireside chat. This way you can make an informed, clear headed decision about whether or not your present bookkeeper is truly taking care of business for you or if you need to seriously consider making a change.
There are a lot of bookkeeping services in Durango metro. Frankly, it’s hard to find a street in the business district of Durango that doesn’t have at least 1 bookkeeping business represented. For every bookkeeping service there are just as many people who claim that one service is better than another.
With all of this confusion going on where can you turn for sound, clear headed, reliable advice about a bookkeeper that is a perfect match for you and your specific needs? Look no further than right here at bookkeeper durango co. Talk soon.
Below is a short video on information a small business owner should know about their books.