Summary

To perform to the best of their abilities and to receive increased responsibility, bookkeepers should have a good understanding of all the accounting processes and their purposes in the accounting system.

Getting an understanding of the “big picture” of the accounting system involves understanding how the various financial records interact within the accounting system. Key financial records include various source documents, summary journals, subsidiary ledgers, general ledgers, and financial statements. The accounting system starts with numerous source documents and continuous processes and groups these transactions to ultimately produce daily, weekly, monthly, quarterly, and annual financial reports.

Each accounting transaction falls into one of the accounting processes or cycles. Common accounting processes include sales, accounts receivable, and cash receipts; purchasing, accounts payable, and cash disbursements; payroll; and general ledger and financial statement reports. Although the general steps performed in each of these processes may appear similar on the surface, the specific procedures performed are generally quite different. There are also certain aspects of each process that are more vital than others.

Although bookkeepers may not have direct responsibility for internal accounting controls, a basic understanding of controls is helpful for understanding why accounting procedures are performed in a certain way. This knowledge can also help bookkeepers improve the company’s control environment when circumstances permit. The controls generally fall into one of the following categories: segregation of duties, restricted access controls, document controls, processing controls, and reconciliation controls.