Category Archives for "General Accounting"

Do I need a Bookkeeper or an Accountant?

There are differences between bookkeepers and accountants and you could save money by knowing what those differences are. Apart from the obvious cost difference of each role, there are functions a bookkeeper generally does not perform. On the other hand there are jobs that an accountant will do but charge a lot more for – tasks that are more suited to a bookkeeper.

Bookkeepers and accountants work together, the bookkeeper preparing and entering the financial transactions, journals etc. Bookkeeping is a skilled job and a bookkeeper should have several years experience and/or a certificate or diploma or have completed relevant industry courses. A fully qualified accountant is a professional who has completed several years of post graduate education and training. An accountant will take the accounts to the next level, producing financial reports and analysis.

This article by Antonio from shares clear insights into the different roles.

Differences Between Bookkeeping and Accounting

“…Bookkeeping implies a more administrative work of keeping financial recording and retaining documentation for transactions. Many bookkeepers begin with performing functions of data-entry clerks, and then by gaining more experience in the field, their role within a company may evolve into being an accountant.

The functions of an accountant are more subjective. Their work may also involve reporting and business analysis to provide business owners with insights based on the information obtained through bookkeeping. As we see, a bookkeeper and accountant work in close cooperation. It is often that a bookkeeper is a link that helps maintain a strong business relationship between an accountant and management of a company.

Now, when we have acquainted with the basic terms, it’s time to learn the difference in their functional areas and the roles that bookkeepers and accountants perform within a company….”

In New Zealand the qualifications of an accountant are CA ANZ, CPA, ACCA, CIMA. A bookkeeper can qualify with an NZBAI. It is not necessary to a have a formal qualification for the bookkeepers role and most we meet are self taught. Several years experience in the finance department with hands on training is best. Accuracy and computer skills are essential as is knowledge of the General Ledger.

Debits and Credits Rule

Some of you have taken formal accounting courses and know the debit/credit rules backward, forward & inside out. But the bulk of you have “fell into” a bookkeeping role when your real profession was a butcher, baker or a candlestick maker.

Quite simply there are 5 account types and each one can go up or down as follows.

Account Type      To increase this account       To decrease this account

Asset                                                                  Debit                                        Credit

Liability                                                              Credit                                       Debit

Equity                                                                 Credit                                       Debit

Income                                                               Credit                                       Debit

Expenses                                                            Debit                                        Credit

Or use the cheats guide to debits and credits

D E A D   C L I C

This acronym stands for Debit Expenses, Assets and Drawings, and Credit Liabilities, Income and Capital.

You apply this DEAD CLIC rule if an account goes up in value. If an account goes down value, you apply the opposite. In other words, if an expense increases in value, then you debit the account (because the DEAD CLIC rule says to Debit Expenses). If an expense decreases in value, then you credit the account.

Remember also that every transaction affects two accounts, one is a debit, the other a credit. This is why we call it double entry (not single entry) bookkeeping.

Do you need to know this stuff? Well not if you use MYOB software. Does it help to know – most certainly it does even if it means just having a better understanding of what your accountant is preaching on about.


Advantages/benefits of computerised accounting

The decision generally comes down to the owner and their previous experience or the advise they get from those around. Owners who have had a computerised accounting system in the past can see the benefits. They wouldn’t contemplate the idea of a manual system and realise they need an efficient accounting system to be serious and compete in the market.  They may also be aware, that the easiest time to set up a computer based accounting system is from Day 1.

On the other hand, another owner may not have prior experience and be perfectly happy (for years) using a manual cashbook. For them to change, they need to see benefits both in efficiency and cost saving. They may reluctantly change after a heart-to-heart with their accountant. Occasionally owners computerise only one part of the system (typically invoicing) but all other parts are done manually.

More business owners are moving their businesses onto computerised systems and most are moving to online accounting systems. It is usually only the very small business (the self-employed or sole traders) who continue to work with a manual handwritten cashbook and handwritten invoices. These small businesses are heavily reliant on their accountants.  They generally keep an eye on their bank statement for a financial ‘reading’. They have only a vague idea of their ‘profit’ until 6 months after the end of the financial year (when they get their tax accounts).

Advantages of computerised accounting

Automatic ledger entries

The general ledger accounting systems gets automatically updated once the entry in a subsidiary ledger is posted. For example, when invoicing a debtor through the Debtors Ledger there is an automatic entry made to the general ledger. This means if all entries are recorded the general ledger is up to date.

Accounts always in balance (Debits = Credits)

Computerised systems recognise double entry bookkeeping where for every debit entry there is a corresponding credit entry made. The computerised accounting system accounts are always in balance.  For example, when entering a payment, the system will not allow you to record a transaction unless you have allocated to an expense (or other) account.

Accuracy and speed of automatic calculations (such as GST and invoices)

Computerised systems have automatic calculations built in and therefore there is a slim chance of making mistakes calculating invoices and GST. The system automatically calculates GST inclusive and exclusive figures. This means GST reports and forms provided all relevant entries have been made. Invoicing is usually a breeze because all lines (quantity x price) are calculated automatically.

Automatic production of a trial balance from ledger entries

Computerised systems create a trial balance automatically. For example, when electricity is paid, the Bank account (Asset) gets credited and Electricity (Expense) account gets debited. Both figures would be included if you were to run a trial balance. From a trial balance we produce a Profit and Loss Statement and a Balance Sheet and both are generated in seconds.

Potential to create customised reports and provide additional analysis

Computerised systems allow you to customise professional looking reports (which may include your company details and logo). These reports provide additional analysis which may be needed by the bank, shareholders, suppliers and/or the owners. Far less time is spent creating reports than using a manual system.


Entries from your bank come directly into the software saving you added time and enabling quick coding. Feeds have revolutionized the accounts persons job making it quicker, easier and more fun.

Data lives in the cloud (a remote file server)

This means you have access to your invoices from your smart phone or other devices. Backups are done for you and your financial advisor/accountant/bookkeeper/staff can also access your data & post entries.

Lower accounting fees?

This may or may not eventuate and depends on the ability of the business to produce an accurate set of accounts from their computerised system. With competent set up and good training and accurate inputting, then yes, accounting fees should definitely be lower as you are reducing the workload of your accountant doing your bookkeeping.  If your fees increase, then ask why! You can always ask for timesheets to justify your accounting fees.

Computerised files produced by businesses  and supplied to accountants vary from very bad to outstanding. If  your file is on the ‘bad’ end of the scale it will need many corrections done! Good communication between you and your accountant is vital.

How good is your office filing system?

I once went imessy office2nto an office and noticed a pile of paper a meter high next to a desk. I asked the accounts lady “what’s this?”. Oh she answered “that’s my filing! – I only do it once a year”…

If this is you then sort it! Eastlight folders (or similar) are essential for your office to properly function. Shoeboxes won’t do. A messy office wastes time, decreases accuracy and costs money. Plus the IRD would have a field day if they came to visit you to do an audit.

You will need 9 folders as follows:-

1 Sales invoices

It is not essential to keep a copy of your sales invoices so long as you can always reprint them on demand. If you do keep a copy, do it in invoice number order with the latest on top or A-Z by customer (lastest on top).

2 Suppliers invoices (unpaids)

File these in alphabetical order by supplier name. Include all unpaid invoices no matter how old they are.

3 Paid Invoices

Once invoices are paid, file these first in alphabetical order by supplier name, then by date, with the latest paid invoices for each supplier always on top.

4 Bank & Credit Card Statements

File these in date order with the latest on top. Use dividers to separate each bank account. Always print and file your bank reconciliations with the bank statement it refers to. You could keep copies of all bank statements and reconciliations. We suggest you create a folder for each financial year.

5 PAYE (Pay as you Earn)

File a copy of your employer monthly schedule and remittance in date order, with the latest one on top.


File a copy of the return with supporting reports and work papers, in date order, with the latest one on top.

7 Income Tax

File any IRD statements and related correspondence from your accountant or the IRD , in date order, with the latest on top.

8 Hire Purchase and Loans

Use file dividers to separate documents relating to each HP or loan

9 Business expenses paid with owner/shareholder’s personal funds

File these receipts in the months they were paid, with the latest on top until you write a business cheque to pay yourself back. Then move them to the paids above.

Tip: At the end of each financial year box up the records and store for 7 years.