The Business Financial Processes – Understanding Accounting, Bookkeeping and Auditing

Bookkeeping, accounting, and auditing are all essential business functions in terms of finance or financial health of a business entity.

The Business Financial Processes: Accounting, bookkeeping, and auditing

Bookkeeping is responsible for the recording of financial transactions. The work of a bookkeeper is to record financial transactions in chronological order for the daily business. Bookkeepers nowadays make use of software (and some of which are cloud-based) to help their work. Accounting software (such as Xero) automates many of the processes in bookkeeping. Now bookkeepers in medium/small size companies classify and summarize financial data in financial reports, and they are usually known as full charge bookkeepers. In certain cases, these specific bookkeepers make good salaries. Sometimes they get salaries that are higher than some accountants.

Accounting is responsible for interpreting, classifying, analyzing, reporting and summarizing financial data. In accounting, the process is about recording, interpreting, classifying, analyzing, reporting and summarizing financial data. Recording financial transactions is the first part of and the foundation of the accounting process (which is usually done by bookkeepers). Bookkeepers should handle the recording part of the accounting process. But in accounting, some accountants handle all parts of the accounting process. An accountant analyzes financial transactions in financial statements and business reports following accounting principles, standards and requirements. To contribute to a business, the accountant should analyze and interpret financial data to report the financial condition and performance of the business to the CEO/CFO/leadership of the company. This will provide sufficient information for them and help them make the right decisions to grow their businesses.

Auditing: An audit is the review of the accounting books of a company. An audit may be done through forensic accounting. This forensic accounting can be conducted by the company itself. When the company is traded on a stock exchange, the audit should be done by an official independent entity. In a typical audit process, it includes an in-depth examination of all the financial transactions that were made by the company. When the independent audit is complete, the bookkeeping and accounting processes kick in. The purpose is to verify the auditing as accurate.

For people who are not in the accounting/bookkeeping field of work, bookkeeping and accounting may appear very similar to them. A bookkeeper works with financial data, so as an accountant. You can see the one major difference between accounting and bookkeeping is: Accounting involves interpreting and analyzing data, but bookkeeping does not. One must have at least the basic accounting knowledge to be able to work as a bookkeeper or accountant. One can take several accounting courses and develop a basic understanding of accounting. This will qualify the person for a job in bookkeeping. But to be able to work in accounting, the person must at least get a bachelor degree in accounting. That is the basic requirements.