Bookkeeping means different things to different people:
- The distinctions between bookkeeping and accounting have become blurred with the use of computers and accounting software like QuickBooks and Xero. Now, a person with little bookkeeping training can use the accounting software to record vendor invoices, prepare sales invoices, etc. and the software will update the accounts in the general ledger automatically. Once the format of the financial statements has been established, the software will be able to generate the financial statements with the click of a button.
- Some people think that bookkeeping is the same as accounting. They think recording a company’s transactions and preparing its financial statements and tax reports are all part of bookkeeping. Accountants do not share their view.
- Others see bookkeeping as limited to recording transactions in journals and then posting the amounts into accounts in ledgers. Once the details are posted, the bookkeeping has ended and an accountant takes over. The accountant makes adjusting entries and then finalizes the financial statements and other reports.
- At larger corporations bookkeeping might be absent. Often corporations have accounting departments staffed with accounting clerks who process accounts payable, accounts receivable, payroll, etc. The accounting clerks will be supervised by one or more accountants.
This explanation of bookkeeping attempts to provide you with an understanding of bookkeeping and its relationship with accounting. Our goal is to increase your knowledge and confidence in bookkeeping, accounting and business. In turn, we hope that you will become more valuable in your current and future roles.