The role of bookkeepers in any business is pivotal to the success of that business and, amongst other outcomes, assists in keeping external costs down for the preparation of financial statements. There are, however, some pitfalls in the approach and intent of some bookkeeping practitioners that may actually increase the external cost of the preparation of the financial statements.
The motto to keep in mind is:
‘Beware of the beguiling bookkeeper bafflement’
Cut-off
A term readily understandable by Accountants but mysteriously not by some bookkeepers. Having the discipline to observe cut-off involves locking the accounting system as soon as the monthly or quarterly BAS is prepared or when the file is whisked off to the external accountant for financial statements preparation. Failure to observe cut-off invariably means differences between the accounting system; ATO records and DBM financials, which takes time and cost to investigate and remedy.
Assets recorded as Expense
The instant asset write-off concession is a boon for small businesses that are, currently able, to claim 100%, for tax, of the cost of equipment up to $150,000. Again mysteriously, some bookkeepers are swayed by the tax treatment and expense the equipment in the Profit & Loss Statement. Imagine comparing the Balance Sheet of 2 businesses – one, where the equipment is expensed and the other where the equipment is included as an asset employing a depreciation policy where the cost is written off over the equipment’s useful life.
Does it matter? Try and present to a bank for finance and you may find out that it does, indeed, matter!
Bookkeepers should always bear in mind the differences between ‘expense’ and ‘asset’, namely:
Expense
100% of the service potential is used in the accounting period e.g., rent for October 2021 will be expensed in Oct as it has no application past that month.
Asset
Service potential occurs in a future accounting period e.g., rent paid in October 2021 for 2 months. The amount for October will be expensed in October; the amount for November will be a Prepayment asset in the financial statements for October.
General Journal mischief
General Journals are a favourite of the beguiling bookkeeper as they can be difficult to follow if they are numerous and not well described. They can be used to confuse, obfuscate and baffle the accountant, for the beguiling bookkeeper’s enjoyment!
DBM bookkeepers are initially trained to:
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process data using the normal input screens i.e., Bank, Debtors, Creditors, Payroll, etc;
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If General Journals are required, they are to be signed off by a supervisor prior to processing
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