Bookkeeping FAQ

1.) What is bookkeeping;
      a.  A method of properly recording the financial transactions of an entity into a set of prearranged accounts.
      b.  The double entry system of bookkeeping, based on the English system, is used to assure the accuracy of recording of the transaction.

2.) Why use a CPA vs. a bookkeeper?

     a.  A bookkeeper is a recorder of the transactions for the entity.
     b.  A CPA is an accountant licensed by a state board of accountancy after passing a national uniform accountancy examination administered twice a year showing competency in accounting theory, accounting practice, business law, and auditing theory.
     c.  The function of the CPA is to give an independent opinion to the fairness of the amounts reported in the income statement, balance sheet, and statement of cash flows so that the users of those financial statements can rely on the information to make decisions regarding the entity.
         1.  Should the bank grant a loan request?
         2.  Should an investment company buy shares in the entity or not.
     d.  C Pas are required to have a certain number of continuing professional education hours, as required by the state they practice in, to hold their license in good standing. For example, Indiana requires 40 hours per year.

3. How do I set up accounts (retail operation)?

     a.  By grouping similar transactions together by account title.
          1.  Sales for all revenue activity for the period.
               a.  Subdivided by cash and credit.
               b.  Bookkeeper is familiar with how to set up accounts and is cheaper than hiring a CPA to do it, although the CPA is capable of setting up entity accounts.

4. Define "Accounts Receivable".

          a. Accounts receivable are sales made on credit and payment for goods or services happens at a future time such as 30 days from date of purchase of item or completion of service.