AY Honors/Bookkeeping/Answer Key

1. What is the difference between bookkeeping and accounting?

Bookkeeping refers only to the actual posting of financial transactions into the various journals and account ledgers (e.g., collecting the raw financial data). This provides the underlying foundation for a system of accounting, which accumulates and organizes the raw data into useful information.

2. Define the following terms:

a. Asset

An asset is an economic resource owned by a person or company that is expected to provide them future benefits. Examples include, but are not limited to, cash, accounts receivable, supplies, furniture, land, and buildings.

c. Credit

A credit is an entry on the right side of an account. It represents an increase in a liability or owner's equity and a decrease in an asset.

d. Debit

A debit is an entry on the left side of an account. It presents an increase in an asset or expense and a decrease in a liability or owner's equity.

g. Voucher

A voucher is basically a "permission slip" authorizing a transaction. It details the transaction approved and is signed by one or more company officials with authority to approve the transaction. At a minimum the voucher would show what item(s) may be purchased and at what price per unit.

h. Invoice

An invoice is an itemized bill with detailed list of goods shipped or services provided, each with their individual costs. For example, the invoice might show that a company bought 10 trashcans @ $15.00 a piece and 2 packages of trash can liners at $7.00.

i. Interest

Interest is a charge made for the use of money. It is usually expressed in an annual percentage rate (APR). One may pay interest (such as on a mortgage loan) or earn interest (such as from money deposited in a savings account).

4. What education is necessary to be a bookkeeper? What other education is helpful to a bookkeeping career?

One could become a bookkeeper having only taken a high school bookkeeping course, given the computer software currently available. This would be especially true of a bookkeeping position at a very small business. A two-year degree at a technical college would probably open up bookkeeping jobs at a somewhat larger company or as a paraprofessional at an accounting firm. Other courses that further one's understanding of business are helpful in advancing in one's career. These would include economics and marketing, which are part of the course work needed to earn one's Bachelor's degree in accounting.

6. Conduct an interview with your church treasurer, asking the following questions:

• a. How much time do you spend each week at your job as church treasurer?
• b. What do you do with the money collected in the offering plates?
• c. How do you keep track of who contributed how much money?
• d. What money is sent to the conference?
• e. What money is kept in our local church?
• f. Are your records ever reviewed by an accountant? How often?
• g. How do you report the church finances to the church board?
• h. How do you report the church finances to the conference?

Make arrangements with your church treasurer well ahead of time so that she has plenty of time to work you into her schedule. Be flexible in scheduling your guest's time with your club. It may be necessary to have "honor time" earlier or later in the meeting to accomodate her schedule. Remember (and remind your Pathfinders) that she is doing you a favor by taking time out of her schedule to help you with this requirement. You may wish to provide the questions to her in advance so she doesn't have to come up with the answers on the spot. Write the questions down on index cards and pass them out to your Pathfinders so that they can take turns asking them.