Defining bookkeeping

Bookkeeping is an indispensable subset of accounting. Bookkeeping refers to the process of accumulating, organizing, storing, and accessing the financial information base of an entity, which is needed for two basic purposes:

Facilitating the day-to-day operations of the entity Preparing financial statements, tax returns, and internal reports to managers

Bookkeeping (also called recordkeeping) can be thought of as the financial information infrastructure of an entity. The financial information base should be complete, accurate, and timely. Every recordkeeping system needs quality controls built into it, which are called internal controls.

Defining accounting
The term accounting is much broader, going into the realm of designing the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information. Accountants give orders; bookkeepers follow them. Accounting encompasses the problems in measuring the financial effects of economic activity. Furthermore, accounting includes the function of financial reporting of values and performance measures to those that need the information. Business managers, investors, and many others depend on financial reports for information about the performance and condition of the entity. Accountants design the internal controls for the bookkeeping system, which serve to minimize errors in recording the large number of activities that an entity engages in over the period. The internal controls that accountants design are also relied on to detect and deter theft, embezzlement, fraud, and dishonest behavior of all kinds. Accountants prepare reports based on the information accumulated by the bookkeeping process: financial statements, tax returns, and various confidential reports to managers. Measuring profit is a critical task that accountants perform a task that depends on the accuracy of the information recorded by the bookkeeper. The accountant decides how to measure sales revenue and expenses to determine the profit or loss for the period.

On a Role The Job Titles of Accounting

Beyond the specialized functions required in an audit, accountants can occupy diverse roles within a business. For example, listed below are some of the most common functions of accountants as well as requirements for each title 5,6.
Payroll Clerk

A payroll clerk is responsible for maintaining payroll information through collections and recording data. Payroll clerks also handle all payroll discrepancies. Typically they are required to have between zero and three years of experience with at least a high school degree. Payroll clerks are a great way to gain experience in the accounting field.
Accounts Receivable

An accounts receivable (A/R) clerk is responsible for posting payments, updating the receivable account by totaling unpaid invoices, and in charge of maintaining the receivables account. Typically, they are required to have between zero and three years of experience with a high school degree. Some companies may call this position Accountant 1 (with other functions) and require a bachelors degree in accounting. Accounts receivable clerks are great entry level accountant job.
Accountants Payable

An accounts payable (A/P) clerk is responsible for paying invoices and verifies and maintains transactions. Typically, they are required to have between zero and three years of experience with a high school degree. Some companies may call this position Accountant 1 (and combine it with the accounts receivable clerk) and require a bachelors degree in accounting. Accounts payable clerks are another great entry level accountant job.
Tax Accountant

A tax accountant is responsible for recommending tax strategies through research and analysis of tax laws. Tax accountants also file federal, state, and local tax returns. A tax accountant requires a bachelors degree as well as at least zero to two years of experience in a tax-related area.
Bookkeeper

A bookkeeper records all financial transactions. Bookkeepers maintain and balance subsidiary, general ledger, and historical accounts. Typically, bookkeepers are required to have between two to four years of experience or an associates degree.
Internal Auditor

An internal auditor will ensure that financial practices are compliant with set standards. They are also required to verify all liabilities and assets within a company and report all their findings to the appropriate finance leader. An internal auditor must have between zero and two years of experience with a bachelors degree in accounting.

External Auditor

An external auditor is typically a CPA-certified individual. The external auditor works for an independent auditing firm and will evaluate all of the financial records for an organization and report this information back to the client. External auditors are required to have a CPA, a bachelors degree in accounting, and two or more years of related experience.
Controller

A controllers goal is to maximize the returns of an organization. They also guide and monitor financial decisions and protect assets within an organization. A controller requires a CPA, bachelors degree, and 15 years of experience.
Chief Financial Officer (CFO)

A CFO is in charge of all aspects of finances within an organization. The CFO will develop strategies and find new financial prospects while monitoring the performance of the organization. As an executive position, being a CFO requires at least a bachelors degree in accounting plus 15 or more years of direct experience. The CFO leads the entire financial division and reports to the Chief Executive Officer (CEO) and Chief Operating Officer (COO)

Full Definition of ACCOUNTING

The system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results; also: the principles and procedures of accounting

Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements.

What is Accounting Five Main Accounting Activities There are five main activities involved in accounting. These are: 1. gathering financial information about the activities of a business or other organization; 2. preparing and collecting permanent records. Records provide evidence of purchase, proof of payment, details of payroll and so on. 3. rearranging, summarizing, and classifying financial information into a more useable form; 4. preparing information reports and summaries for the following purposes: a. to help management reach decisions; b. to serve the needs of groups outside the business, such as bankers and investors; c. to measure the profitability of the business; 5. establishing controls to promote accuracy and honesty among employees.

Accounting assumptions
Accounting have established group of assumptions, those assumptions are the basics of financial accounting. At the same time, assumptions are not accounting principles, as they are more of agreed upon rules. Assumptions:

The Economic(Business) Entity Concept The Monetary unit assumption The Going concern(Continuing Concern) Concept The Time Period Concept

The Economic(Business) Entity Concept : as the name indicated, The accountant keeps all of the business transactions of a sole proprietorship separate from the business owner's personal transactions. For legal purposes, a sole proprietorship and its owner are considered to be one entity, but for accounting purposes they are considered to be two separate entities.

Monetary unit assumption: meaning that the business should have one money unit to record its transactions, for example U.S. dollar. Going concern assumption: meaning that the business is going to be operated for non predefined period, in other words, there is no ending date for business life.This accounting principle requires companies to use the accrual basis of accounting. The matching principle requires that expenses be matched with revenues. For example, sales commissions expense should be reported in the period when the sales were made (and not reported in the period when the commissions were paid). Wages to employees are reported as an expense in the week when the employees worked and not in the week when the employees are paid. If a company agrees to give its employees 1% of its 2012 revenues as a bonus on January 15, 2013, the company should report the bonus as an expense in 2012 and the amount unpaid at December 31, 2012 as a liability. (The expense is occurring as the sales are occurring.) Because we cannot measure the future economic benefit of things such as advertisements (and thereby we cannot match the ad expense with related future revenues), the accountant charges the ad amount to expense in the period that the ad is run. Time period assumption: This accounting principle assumes that it is possible to report the complex and ongoing activities of a business in relatively short, distinct time intervals such as the five months ended May 31, 2012, or the 5 weeks ended May 1, 2012. The shorter the time interval, the more likely the need for the accountant to estimate amounts relevant to that period. For example, the property tax bill is received on December 15 of each year. On the income statement for the year ended December 31, 2011, the amount is known; but for the income statement for the three months ended March 31, 2012, the amount was not known and an estimate had to be used. It is imperative that the time interval (or period of time) be shown in the heading of each income statement, statement of stockholders' equity, and statement of cash flows. Labeling one of these financial statements with "December 31" is not good enoughthe reader needs to know if the statement covers the one week ended December 31, 2011 the month ended December 31, 2011 the three months ended December 31, 2011 or the year ended December 31, 2011.