Those who describe themselves as bookkeepers fall between two extremes – from secretaries with data entry skills to professionals with degrees and years of experience. There is no regulatory body that oversees the bookkeeping profession, so anyone can say they are a bookkeeper.
There are four major types of accountants and/or bookkeepers:
- full-charge bookkeeper
- clerical bookkeeper
- data entry clerk
An accountant sets up the bookkeeping system, monitors it and interprets the results. The accountant knows how to design a system that benefits the business but also captures clear and accurate information in a way that is not burdensome to the bookkeeper.
Bookkeepers perform some or all steps of the accounting cycle. A full-charge bookkeeper knows how to perform all the steps, and a clerical bookkeeper usually specializes in one or more steps and can also specialize in one area of operations, such as accounts payable (AP), accounts receivable (AR) or payroll.
Data entry clerks enter the data into the accounting system, but they generally do not understand how the data affects the company’s financial statements. Data entry clerks specialize in speed and accuracy.
The lists below outline the minimum knowledge an accountant or bookkeeper should have.
Qualifications of an accountant
- be degreed or have several years of experience
- know everything that bookkeepers should know (below)
- be able to talk knowledgeably about the accounting cycle and financial statements
- have analytical skills and know what analyses are useful for your industry
- be proficient in Excel and in the accounting software your business uses
Qualifications of a full-charge bookkeeper
- know the difference between a Balance Sheet and a Profit & Loss Statement
- know what a Chart of Accounts (COA) is
- know which accounts in the COA belong on the Balance Sheet and which accounts belong on the Profit & Loss Statement
- know the difference between the three income and expense recognition methods – cash, accrual and hybrid
- know the Balance Sheet equation: Assets = Liabilities + Owners Equity
- know if accounts in the COA are debited or credited upon an increase or decrease
- know the rules of when and to whom your company should issue 1099s
- be proficient in Excel and your company’s accounting software
Qualifications of an AP or AR clerical bookkeeper
- be able to reconcile a vendor (AP) or customer (AR) statements with your accounting system’s records of the same and identify transactions that explain the differences
- be able to discuss and explain the differences with your vendors (AP) or customers (AR)
- be proficient in Excel and your accounting software as it pertains to AP or AR
Qualifications of a payroll bookkeeper
- know the social security, medicare and FUTA tax rates for employees and employers
- know the earnings cut off for FUTA and SUTA
- know the names of the federal and state payroll tax returns that need to be filed and when they are due
- know when federal and state payroll taxes are due and by what payment method (check or electronic) is required
- know what an I-9 and W-4 is
- know the five types of withholding/taxes that make up a “941” payroll tax payment or “deposit”