FAQ

FAQ

What does a Bookkeeper do?
A bookkeeper is a person that records financial transactions. Transactions include sales, purchases,
income, receipts and payments. In smaller companies, the same person may perform all these tasks.
In larger companies, each task is performed by a different person. In very large companies, there are
often multiple people performing each task. The bookkeeper's job is usually to "keep the books" on a
daily basis, preparing a “trial balance” and then hand that information off to the accountant on a monthly
or quarterly basis. Smaller companies often hire a contract bookkeeper to come in for a few hours each
week, or at the end of the month, to do what's called "writeup services" -- basically entering all of that
week's (or month's) transactions and reconciling the books in one step, rather than updating the books
every single day.

What does an Accountant do?
An accountant is the person who sets up the bookkeeping system, monitors it, and interprets the
results. Accounting is more of an analytical process than bookkeeping, which is purely mathematical.
The accounting process begins with designing a system that will capture the company's financial
information in a useful manner without being overly burdensome to the bookkeeper. The accountant then
monitors the system to ensure that it's yielding the desired information in the most efficient and useful
manner. Finally, the accountant compiles the information on a monthly or quarterly basis, analyzes the
information, prepares various reports called financial statement, and presents the financial statements
to the business management in such a way that decisions can be made. In smaller companies,
bookkeeping and accounting may be handled by the same person. In larger businesses, one or more
accountants typically supervise multiple bookkeepers. In very large companies there may be hundreds,
possibly even thousands of accountants. One will be designated as the "Controller" who oversees the
entire accounting system.

What is a CPA?
CPA stands for Certified Public Accountant, the statutory title of qualified accountants in the United States
who have passed the Uniform Certified Public Accountant Examination and have met additional state
education and experience requirements for certification as a CPA. A CPA is licensed by the state and
is the only accountants who are able to provide public attestation opinions (including audits) on financial
statements. Hiring a CPA full-time may be cost-prohibitive for the average small business owner. Many
companies work with bookkeepers and accountants throughout the year and hand off their year-end
records to their CPA for a final audit before the year's taxes are prepared.

What does a Tax Preparer do?
Tax Preparers are individuals who prepare tax returns for individuals or small businesses. There is
currently no special licensing or certification required to become a tax preparer, aside from passing
the IRS's competency exam, which was just instituted in 2011. When choosing a tax preparer, look for
someone who has some other financial credentials and experience, such as bookkeeping or accounting.
Some accountants who specialize in tax preparation call themselves "tax accountants," which would
indicate a greater degree of financial literacy beyond just buying software and proclaiming themselves
a “tax preparer”. However, be sure to ask about their background, since most states currently have no
laws governing who can use the title "accountant."

What is Accounts Receivable?
Accounts Receivable (A/R) refers to customer accounts and the funds that are due to be paid to the
company. The company provides products or services to its customers and the company receives
payment in exchange. The process usually consists of entering customer orders into the computer
system, preparing invoices, sending them to customers, receiving payments, logging the payments into
the computer system, and following up with customers who have overdue payments.

What is Accounts Payable?
Accounts Payable (A/P) refers to vendor accounts and the funds that are due to be paid by the company.
The company orders goods or services from other businesses (vendors) and the company then pays
for those goods or services. The process usually consists of entering purchase orders into the computer
system, receiving bills and invoices and logging those into the system, paying those bills and logging
the payment into the computer system, and following up with vendors regarding account adjustments,
refunds, returns, etc.

What is Payroll?
Payroll refers to the company's employee salaries, wages, bonuses, net pay, and deductions; the
maintenance of all records pertaining to payroll and payroll taxes (federal income tax withholding, Social
Security, federal unemployment tax, state and local taxes); and the issuance of the actual payroll checks
or electronic payments to the employees. The process usually consists of entering or verifying employee
hours in the computer system, computing and recording the earnings owed to each employee, calculating
payroll taxes and other deductions, generating the payroll checks or initiating the electronic payments,
and keeping records of benefit deductions, sick leave and vacation pay, 401(k) and pension contributions,
and other nontaxable wages.

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