The Importance of Bookkeeping and Accountancy
A company’s bookkeeping & accountancy are crucial to its proper functioning, giving a summary of the organization’s performance. Managing financial data, ensuring its accuracy, and making sure that reports are error-free help companies make better revenue forecasts. To maintain financial records at the end of a year or quarter, it is essential to have an organized bookkeeping and accounting process for your business. The importance of bookkeeping & accountancy extends to help the company to determine its worth and to make future decisions in a timely fashion. It also allows businesses to monitor their performance with confidence. Furthermore, it provides information that can be used to make general strategic decisions.
The Ancient History of Booking & Accountancy
History of bookkeeping and accountancy has speculated that the primary need for writing systems developed out of the necessity to record trade and business transactions. Its development was closely linked to the invention of money and counting. From ancient times, civilizations have engaged in different types of trade. As a result, record keeping, accounting, and bookkeeping tools have been commonplace since then.
An early step of accounting’s development may have been related to the advent of money in Mesopotamia. Ancient Mesopotamian documents show lists of receipts, expenditures, and trades dating back over 7.000 years. Ancient Babylonian, Assyrian, and Sumerian ruins also contain early accounting records.
At that time, people kept track of corps and livestock using primitive accounting methods. Auditing systems were developed by early Egyptians and Babylonians, and detailed financial records were compiled by the Romans. In medieval Europe during the transition to a monetary economy, merchants were required to keep books in order to oversee multiple simultaneous transactions financed by bank loans.
During the industrial revolution in 1760, the number of companies increased greatly, as did the need for more advanced accounting systems. Corporations also created more sophisticated structures of ownership and larger groups of investors, requiring accounting systems to evolve as well.
The Modern History of Bookkeeping &Accountancy
Today, the bookkeeping and accountancy profession has become a by-product of centuries’ worth of intellectual thought, custom, practice, and action. Both practices today have been shaped by two concepts. Two significant developments occurred in the 14th and the 15th century; the first being the development of double-entry bookkeeping.
The second one was the professionalization of accounting during the 19th and the 20th century. Luca Pacioli was considered a pioneer of bookkeeping and accounting in Europe and he was the first to publish work on the double-entry bookkeeping method on this continent. He is known as ‘the Father of Bookkeeping & Accounting.
The double-entry method of accounting, which became popular in parts of Italy, changed the practice of accounting on a dramatic scale. It involves recording business transactions twice – first as a debit, then as a credit. Originally, this system was designed to reduce errors that are associated with bookkeeping.
Businesses were able to improve efficiency and profitability by implementing this double entry innovative system, which revolutionized how they managed their operations.
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The Rise of Chartered Accountancy
The Scottish Chartered Accountants were the first accountants to establish a professional accountancy body in 1854. With Scotland taking the lead in the modern world, bookkeeping & accountancy became recognized professions. Since its formation, the Institute of Chartered Accountants of Scotland (ICAS) has played a key role in the development of the accountancy profession.
It was at that moment that the value of different skills required to be a professional accountant emerged – in addition to mathematical skills, accountants needed to be familiar with general legal principles, as they were often called on by the courts to provide proof of financial issues.
Chartered accountants have in-depth expertise that regular accountants don’t have. They are typically more highly qualified and experienced than accountants, and are also members of professional bodies.
A chartered accountant’s responsibilities include the preparation of tax planning documents, capital budgets, forecasts, and financial statements, in addition to the preparation of books of accounts. Additionally, chartered accountants must adhere to strict ethical and professional standards.
What Is Bookkeeping?
The process of bookkeeping involves regularly recording a company’s financial transactions. Bookkeeping ensures that these records of individual financial transactions are accurate, up-to-date, and complete. The term “transaction” refers to any purchase, sale, receipt, or payment of goods or services by an individual or a business.
Regardless of whether you are purchasing or selling something, it is necessary that all financial transactions are recorded. Maintaining a general ledger is a vital component of bookkeeping. This record is used to summarize a company’s transactions as well as sort and store them. Companies that maintain proper bookkeeping can track all information on their books to make key decisions regarding operations, investments, and financing.
What Is The Role Of a Bookkeeper?
Bookkeepers are individuals in an organization who perform bookkeeping functions. Their job is to manage every aspect of financial data for a company. Normally, they keep daybooks (inventory of sales, receipts, purchases, and payments) so that every financial transaction is entered in the appropriate daybook or general ledger.
Bookkeepers Are Generally Responsible for a Number of Different Tasks, Including:
- They carry out daily financial transactions. Bookkeeping involves a great deal of data entry. They keep track of all the accounts, including debits and credits in the general ledger.
- They reconcile bank accounts. Bookkeepers verify that the books are accurate by comparing them with bank statements as well as other sources for confirmation.
- They conduct tax filing. A bookkeeper will ensure that the entire process of tax filing is successful, from preparation to filing to auditing.
- They prepare monthly reports. These include summaries of the business’s financial situation.
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What is Accountancy?
Accountancy is a profession whose functions include measuring, analyzing, and communicating financial and non-financial information about economic entities like businesses and corporations. It is the role of accountants to help organizations develop strategic plans, make financial decisions, and adhere to accounting guidelines and laws.
Additionally, they can also assist companies with mergers and acquisitions, accounting systems, valuation of the business, and cybersecurity.
A key aspect of accounting is to perform the following tasks:
- Keeping track of transactions.
- Conducting internal audits.
- Analyzing financial data.
- Consulting on tax issues.
The function of accounting is vital no matter how small or large your company is. This is because it plays a crucial role in decisions, cost planning, as well as measuring the performance of your company. Basic accounting can be handled by bookkeepers, but advanced accounting is typically handled by qualified accountants who hold designations such as Certified Public Accountants (CPA).
In addition to being certified public accountants, many of them work for their own businesses and provide financial and tax-related services to individuals or organizations.
What Is The Difference Between Bookkeeping & Accountancy?
Both bookkeeping & accountancy play an important role in managing your finances. Although the two appear to be quite similar, there are a few key differences. They may share some similar goals but cater to different stages of the financial cycle of a company.
A bookkeeper working for a small business, however, might do some basic accounting duties. There is often overlap between roles, and the responsibilities can vary greatly from one company to another. Bookkeeping is largely transactional and administrative, concerned with recording financial transactions.
Accounting, on the other hand, offers more subjective insights into your business’s financial health based on information gathered through bookkeeping. The task of a bookkeeper is basically to organize and record financial information for the use of accountants. It is the accountant’s responsibility to analyze and present that data to the business owner or investor.
The accountant is primarily responsible for examining the financial statements prepared by the bookkeeper, analyzing and interpreting them, and then developing a report and sharing their findings with the business owner. A bookkeeper’s work is usually overseen by an accountant or by the business owner whose books they are working on.
Why Are Bookkeeping & Accountancy Important For Your Business?
Businesses need to manage their finances effectively, which is why bookkeeping and accounting are so important. Bookkeeping and accounting services make it easier to plan business strategies and lead the market in terms of competitiveness.
In addition, your organization is able to stay on top of its game as well as avoid risks that could eventually lead to damage or hinder its progress. Accounting and bookkeeping solutions play a crucial role in providing a comprehensive analytics report that will enable your business to remain competitive.
Here Are Some Highlights of the Importance of Bookkeeping & Accountancy:
- Running a business requires proper tax management. Accurate tax filing will keep you from violating compliance obligations. By following tax law requirements, a company will be in compliance with local, state, and federal laws. This will give it an advantage when it comes to auditing by tax authorities.
- Achieving accuracy in financial transactions is also a key factor in the bookkeeping and the accounting process. In other words, you understand exactly where your money comes from and where it lands.
- A significant benefit of bookkeeping & accountancy is that they facilitate better expense management. You can see what products and services are making you money, and then transfer your expenses from those that are not producing profit and returns. In addition, this will help minimize additional costs. The goal of the accountant and the bookkeeper is to ensure that you have a steady cash flow so you can protect yourself against risks whilst increasing investor and stakeholder confidence.
- Overall, businesses that work with good bookkeepers and accountants often save money, reduce risk, comply with regulations, manage growth, and plan ahead.
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What Skills Do Bookkeepers Need To Have?
The following are some of the key skills that an individual needs to possess to find success as a bookkeeper:
· Skills in Basic Math
A good bookkeeper must be good with numbers. Mathematical requirements primarily consist of addition, subtraction, and division. Calculus, statistics, or any other type of more advanced mathematic skill is not required. In conclusion, a person should be excellent at all of the key math requirements.
Data Entry Skills
In order for you to be successful in this profession, it is essential that you keep up with technology. This is because you can easily and accurately add data to the database. An added advantage could be your ability to type quickly and accurately. The work of a bookkeeper is crucial to the data collection and data input of an organization’s accounting cycle.
Attention to Detail
An essential soft skill for bookkeepers is remembering every detail. It is the job of a bookkeeper to make sure the books are reconciled and that each and every invoice is paid. Likewise, they need to ensure that all invoices are sent and that the follow-up is done in an efficient and timely manner.
What Skills Do Accountants Need To Have?
An accountant’s technical skills allow them to be able to analyze, report, and manage financial activities accurately, which is what recruiters are looking for in applicants. In addition to technical skills, employers are looking for soft skills or abilities that support your success on the job.
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The Following Are Some of the Necessary Skills for Accounting:
Skills in Data Analyzing
One of the greatest assets of an organization is its financial data. A strategic plan can influence decisions almost everywhere in the business and is crucial to ensuring a company’s success. Accountants may also have the ability to identify patterns in business data sets, locate errors within them, and uncover fraud through data query skills.
Skills in Preparing Financial Statements
Your organization’s financial statements provide you with a clear overview of its financial condition on a regular basis. There are three basic types of financial statements that need to be prepared: income statements (profit and loss), cash flow statements (inflows and outflows of cash assets), and balance sheets (real-time evaluations of assets, liabilities, and equity).
Knowledge of General Business Practices
A professional accountant with a strong business sense can assist in the development of a company’s strategy, inform key decisions, and collaborate with many other departments across the organization. By understanding how your department fits into the big picture of the business in which you operate, you will be able to build more productive relationships with your colleagues outside your department.
Knowledge of the Latest Technologies
New technology affects accountants all the time, from software to cloud computing to automation. Accountants have to stay current with the following accounting software and tools:
- QuickBooks
- Microsoft Visual Basic
- Business Intelligence Software
- Advanced Excel
- Enterprise Resource Planning
A Career in Bookkeeping & Accountancy
Bookkeeping and accountancy is a high-demand occupation that offers a lot of opportunities. Businesses and individuals around the globe benefit from the work of bookkeepers who deal with the world of numbers in an essential way. The need for professional accounting teams is fundamental to the success of any business or organization.
Bookkeeping positions can also be found in a broad range of industries. Many individuals choose to work in the finance industry, but there are plenty of opportunities in the retail sector, healthcare, or the insurance sector. However, there are differences between the roles and responsibilities of bookkeepers and accountants.
Despite the fact that both have common goals, they mainly function at different phases of the financial cycle. This is an important aspect of the world of finance in which both career paths are essential. Choosing where and how quickly you wish to advance in your bookkeeping career is entirely up to you.
Bookkeeping & Accounting certificate programs are an excellent start for aspiring bookkeepers. On the other hand, if you choose to pursue a career in accountancy or auditing, you can easily acquire further qualifications that will provide you with the necessary support to achieve your goal.
Frequently Asked Questions
1] What education do bookkeepers and accountants need?
In general, bookkeepers don’t need any formal education. It is usually the accountant or the small business owner who oversees the work of the bookkeeper. On the other hand, an individual must usually possess a bachelor’s degree in accounting in order to qualify as an accountant. For those without specific accounting degrees, finance degrees are frequently considered equivalent.
2] Is bookkeeping & accountancy the same?
It is quite common for the terms bookkeeping and accounting to be used interchangeably. Although bookkeeping and accounting may seem inseparable, there is a thin line between them. While bookkeeping is part of accounting, accounting deals with a broader range of issues.
3] Is it possible to do bookkeeping remotely?
Fortunately, today’s cloud accounting capabilities are designed to make life a whole lot easier. Your bookkeeper will be able to manage your books remotely. Additionally, you will also be able to access your financial information, data, and reports from your own computer and tablet. As a result, you will always be able to access the information in real-time from anywhere, at any time, and on any device, from the location.
4] Do I need to hire a bookkeeper for my business?
If you’re a small business owner with a limited budget, then you might be able to manage your finances on your own. In the case of growing businesses that have more transactions to record as time goes by, they may need a part-time bookkeeper with an end-of-year accountant. This is a situation that will naturally arise when your business expands.
5] What is bookkeeping and accounting software?
Accounting software assists in creating invoices, tracking payments, and analyzing the performance of a company’s finances. Accounting software is comprised of a number of modules, including accounts payable, accounts receivable, billing, and bookkeeping. Furthermore, accounting software may include modules for debt collection, expenses, timesheets, purchase reconciliation, payroll, and reporting for each of these.
Conclusion
Keeping accurate accounting records is not only a legal requirement but is also imperative to every company’s sustainability in the long run. With proper bookkeeping, organizations will be better able to make informed decisions regarding expenditure, investment planning, and cash flow management. This sector dominates government revenue streams. It plays a significant part in developing the economic health of the country. Therefore, the experts predict that in the years to come there will be a strong demand for accounting professionals. Hence, the field of bookkeeping & accountancy offers a range of interesting career opportunities.
