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Roles & Responsibilities of an Accounting Department

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  • 0:00 The Accounting Department
  • 0:44 Cash Receipts &…
  • 1:29 Cash Disbursements &…
  • 2:07 Payroll
  • 3:06 Financial Reporting
  • 4:27 Lesson Summary
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Lesson Transcript
Instructor
Jamie Pulley

Jamie has over 15 years experience as an accounting and business professional and is awaiting the conferral of her master's degree in nonprofit management.

Expert Contributor
Steven Scalia

Steven completed a Graduate Degree is Chartered Accountancy at Concordia University. He has performed as Teacher's Assistant and Assistant Lecturer in University.

In this lesson, you will learn about the primary roles or functions of an accounting department and the responsibilities completed by those functions. When you are through, take a quick quiz to test your comprehension.

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:

  • Accounts receivable
  • Accounts payable
  • Payroll
  • Financial controls
  • Financial reporting

Each of these functions will be explored throughout this lesson. Because financial controls are an important part of every area of the accounting department, these will be mentioned along with each function.

Cash Receipts & Accounts Receivable

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.

Financial controls come into play once the cash receipts are received and recorded in the system, and a deposit needs to be made. In order to maintain the best separation of duties possible and prevent any opportunity for wrong doing, it is a good idea to have one person recording the cash and another person making the deposit at the bank.

Cash Disbursements & Accounts Payable

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.

The financial controls occur in order to maintain a good separation of duties in this department. One person should be responsible for recording the accounts payable, and a different person should be responsible for signing the checks.

Payroll

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.

The payroll function is also responsible for completing the payroll taxes that may be associated with paying employees. These taxes may include FICA, federal and state withholding, unemployment, and workers' compensation. The proper reporting forms are completed and checks are written for any amounts due to the taxing authorities.

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Additional Activities

Establishing the Roles & Responsibilities of the Accounting Department - a Business Case

The business case below will provide you with a real-life example of an accounting department that is highly disorganized and ineffective. Your knowledge from the lesson will help you optimize the functions of the accounting department to make the company both more efficient and more effective.

In this scenario, you're an independent consultant that specializes in accounting and organizational structure. You receive a call from a prospective client, Jim Burns, from Happy Smelly Shoes, a niche shoe company. "I need your help, consultant. My accounting department has threatened to quit because they are overwhelmed and frustrated with their work. I do not know what the problem is - I give my accountants some of the most interesting work in the company. In any case, I cannot afford to lose them. I have sent you an email with a summary of their responsibilities. Let me know if there's anything that should be changed."

You receive the email and print out the following listing.

Task
Process payroll bi-weekly
Call prospective retail customers and sell shoes to them
Prepare quarterly budgets
Negotiate the terms to the bank loan
Approve the marketing plan
Call customers who haven't paid balances owed and ask for payment
Pay suppliers for outstanding invoices
Interview potential new hires in the production department

Required:

Identify which of these tasks should be assigned to the accounting department and suggest how to assign those tasks that are not ideal for the accounting department.

Solution:

TaskFit for Accounting Department (Yes or No)
Process payroll bi-weeklyYes
Call prospective retail customers and sell shoes to themNo, this should be performed by the sales department.
Prepare quarterly budgetsYes
Negotiate the terms to the bank loanNo, this should be performed by the finance department or the CFO directly.
Approve the marketing planNo, this should be performed by the marketing department.
Call customers who haven't paid balances owed and ask for paymentYes
Pay suppliers for outstanding invoicesYes
Interview potential new hires in the production departmentNo, this should be performed by the human resources department.

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