Accountants and bookkeepers work for business firms, government agencies, and many other organizations. In the USA public accountants are those who are available to the public for such accounting functions as monthly bookkeeping and tax preparation. Most states do not regulate the qualifications or performance of public accountants.
The only accountants permitted to offer opinions about financial statements should be Certified Public Accountants (CPAs), who have passed difficult national examinations. Accountants must also fulfill the requirements of the state in which they practice including several years of varied experience within the profession. Provided a person is a certified accountant, he will be licensed by the state to perform accounting services to clients for a fee.
Business companies, banks and large corporations employ their own accountants to examine their accounts and prepare financial statements or maintain their own internal accounting departments. If a small company or business required preparing some financial statements, it would hire the services of an outside accountant.
ACCOUNTING INDUSTRY IN THE USA
Of the various specialized areas of accounting that exist, the three most important are: auditing, income taxation, non-business organizations.
Auditors are accountants who estimate the accuracy of a company’s financial statements, and if they find any disagreements in documents with generally accepted accounting principles, they will be responsible to inform about them in their report.
Income taxation as the second area of accounting specialization includes determination of a company’s taxes according to the existing laws. The tax accountant sometimes may be a lawyer, because if there had been any changes in tax law, he would have informed the company about it.
A third area of specialization is accounting for non-business organizations, such as universities, hospitals, churches and government agencies. These organizations receive resources without paying for them, do not have profit orientation and have no defined ownership as such. As a result, these organizations have a number of differences in record keeping and in the form of the financial statements.
BOOKKEPPING AS PART OF ACCOUNTING
In general, accounting and bookkeeping mean identifying, measuring, recording economic information about any business, bookkeeping being considered the preliminary stage and a part of the larger field of an accounting.
Bookkeeping provides the basic accounting data by systematical recording such day-to day financial information as income from the sale of products or services, expenses of business operations, such as the cost of the goods sold and overhead expenses such as a rent, wages, salaries.
Accounting principles determine which financial events and transactions should be recorded in the bookkeeper’s books. The analysis and interpretation of these records is the primary function of accounting. The various financial statements produced by accountants then provide managers with the basis for future financial planning and control, and provide other interested parties (investors, the government) with useful information about the company.
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MODERN ACCOUNTING SYSTEM
Modern accounting system is considered to be a seven-step cycle. The first three steps fall under the bookkeeping function, such as:1) the systematic recording of financial transactions; 2) the transferring of the amounts from various journals to general ledger; 3) the drawing up of the trial balance.
Record keeping of companies is based on a double-entry system which doesn’t mean that the same transaction is entered twice, it means that the same amount of money is always debited to one account and credited to another account, each record having its own effect on the whole financial structure of the company.
In the second step in the accounting cycle, the amounts from the various journals are usually monthly transferred to the company’s general ledger – a procedure called posting. Posting data to the ledgers is followed by listing the balances of all the accounts and calculating whether the sum of all the debit balances agrees with the sum of all the credit balances. This procedure known as the drawing up a trial balance and those that follow it usually take place at the end of the fiscal year. By making a trial balance, the record-keeping accuracy can be checked. The trial balance having been successfully prepared, the bookkeeping portion of the accounting cycle is completed.