Why is Bookkeeping Necessary?

At Ashton Virtual we hold certifications in Quickbooks Online, BBL & Accounting Coach certifications.

Why a Bookkeeper is Necessary?

Accounting software like Quickbooks gives the appearance that many of the bookkeeping and accounting tasks have been eliminated or are occurring simultaneously.

While the accounting software is amazingly fast and accurate in processing the information that is entered, the software is unable to detect whether some transactions have been omitted, have been entered twice, or if incorrect accounts were used. Fraudulent transactions and amounts could also be entered if a company fails to have internal controls.

After the sales invoices, vendor invoices, payroll and other transactions have been processed for each accounting period, some adjusting entries are still required. The adjusting entries will involve:

  • revenues and assets that were earned, but not yet entered into the software
  • expenses and liabilities that were incurred, but not yet entered into the software
  • prepayments that are no longer prepaid
  • recording depreciation expense, bad debts expense, etc.

The adjusting entries will require a person to determine the amounts and the accounts. Without adjusting entries the accounting software will be producing incomplete, inaccurate, and perhaps misleading financial statements.

Recording Transactions

Bookkeeping (and accounting) involves the recording of a company’s financial transactions. The transactions will have to be identified, approved, sorted and stored in a manner so they can be retrieved and presented in the company’s financial statements and other reports.

Here are a few examples of some of a company’s financial transactions:

  • The purchase of supplies with cash.
  • The purchase of merchandise on credit.
  • The sale of merchandise on credit.
  • Rent for the business office.
  • Salaries and wages earned by employees.
  • Buying equipment for the office.
  • Borrowing money from a bank.

The transactions will be sorted into perhaps hundreds of accounts including Cash, Accounts Receivable, Loans Payable, Accounts Payable, Sales, Rent Expense, Salaries Expense, Wages Expense Dept 1, Wages Expense Dept 2, etc. The amounts in each of the accounts will be reported on the company’s financial statements in detail or in summary form.

With hundreds of accounts and perhaps thousands of transactions, it is clear that once a person learns the accounting software there will be efficiencies and better information available for managing a business.

Information on this page is quoted from Accounting Coach- Bookkeeping.

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