What does an accounting department actually account for? And, what are the primary roles and responsibilities of the accounting department?
What does an accounting department actually account for? And, what are the primary roles and responsibilities of the accounting department? These are questions many non-accountants and new business owners may be asking.
The accounting department is responsible for recording and reporting the cash flows, both in and out, of a company. There are five basic roles or functions within the department:
The cash flow that comes into the company is known as cash receipts. Cash receipts are handled by the accounts receivable department. This process involves receiving and recording the cash payments from customers for services rendered or products sold. Accounts receivable is responsible for ensuring the customer receives an invoice for the goods or services and that the customer pays the balance due on that invoice.
Cash flow that goes out of the company is called cash disbursements. This is handled by the accounts payable department. Accounts payable is responsible for paying vendors for supplies purchased or any other expenses incurred by the business: utilities, taxes, etc. Accounts payable receives invoices from vendors, records them in the accounting system, and then writes the checks to pay the vendors.
Although the human resources department is often involved in the activities of employees, the accounting department is often responsible for ensuring employees are paid timely on a regular schedule. The payroll function either receives and records the hours employees work or reviews what human resources has entered and then processes payroll checks for hourly and salaried employees.