What’s the difference between an Accountant and
a CPA? By Aradia Knight
When
asked if an individual is a CPA, you might hear this response, “No, I’m an
Accountant.” So, this begs the question: What’s the difference between an
Accountant and a CPA? The answer—legally there is no difference. The U.S.
Bureau of Labor Statistics (BLS) states that every
accountant or auditor who files a report with the Securities and Exchange
Commission (SEC) must, by law, be a Certified Public Accountant (CPA). Just as
a person who earns a medical degree must hold a medical license to legally
practice medicine, an individual must be a CPA to legally call himself or
herself an Accountant or Auditor. An accounting degree simply isn’t enough.
What
is an Accountant?
The
BLS uses the terms Accountants and Auditors interchangeably, but an individual
may use either term to describe their respective title. The basic duties of an
Accountant or Auditor include:
- Preparing and
examining financial records for accuracy and compliance with laws and
regulations
- Computing and
preparing tax returns
- Assessing a
business’ financial records to make sure the organization runs efficiently
and uses legal accounting procedures
- Maintaining and
organizing financial records
- Suggesting ways
to reduce costs, increase revenues and boost profits
- Explaining
findings to clients or employers using prepared reports
Other
professionals provide similar services, but only a licensed CPA can legally say
he or she is an Accountant or Auditor.
Types
of Accountants
While
Accountants and Auditors work with the financial records of individuals and
businesses, they generally fall under four main specializations:
- Public
Accountants:
CPAs perform a broad range of services, including accounting, consulting,
auditing and tax assistance. A true accountant is licensed as a CPA, as
this individual works with the financial documents that their clients are
required to disclose by law. Such documents can include balance statement sheets
or tax forms.
- Management
Accountants:
Requiring licensure as a CPA, a management accountant is also known as a
private, industrial, corporate, managerial, or cost accountant.
Individuals in this specialization generally work for organizations and prepare
information for budgets, performance reports and financial forecasts.
- Government
Accountants:
With duties that resemble those of a management accountant, a government
accountant has a CPA license and works with federal, state or local
governments to make sure that money is handled in a way that complies with
laws and regulations. Some government accountants audit the financial
records of businesses or private citizens to ensure compliance with tax
laws or government regulations.
- Internal
auditors:
These licensed accountants work for organizations and specialize in
looking for the mismanagement of funds. As auditors, they look for ways
that companies can use funds more efficiently and report fraudulent
activities.
Becoming
an Accountant
Having
a degree as an accountant does not legally make an individual an accountant.
Furthermore, most U.S. states prohibit using the terms “auditor,” “accountant”
and “accounting” to describe the financial services that one may perform if he
or she is not a licensed CPA. If, for example, an individual works in the
accounting department of a company without a CPA license and later starts a
private bookkeeping business, he or she cannot legally say that they held a
position as an accountant or provided accounting services. The
problem with using these terms is that it implies that the individual held the
appropriate license and was legally able to perform the services of a CPA.
To
become a licensed accountant, an individual must graduate with at least a
bachelor’s degree in accounting or a related field. The graduate must then
obtain relevant job experience before sitting for and passing a four-part CPA
licensing exam from the American Institute of Certified Public Accountants,
which is administered by each state’s Board of Accountancy. Then, to keep the
license, a CPA must participate in continuing education classes. Accounting and
Auditing certifications from professional associations are available, but they
aren’t a substitute for a state-issued CPA license. True accountants use such
certifications as a means to specialize in an accounting or auditing field
of interest.
Being
an Informed Consumer
There
is no such thing as an individual who is an accountant, but not a CPA. There
are, however, unlicensed individuals who illegally say they are accountants or
provide “CPA-quality” services to look better to clients and prospects.
On the other hand, there are those who abstain from using such terms, but are
mistakenly labeled as accountants in phonebooks and directories. If you’re in
need of a licensed accountant, you can verify if an individual holds a current
CPA license by
state, nationwide. On the other hand, if you’re simply looking for a service to
help you with your personal or business finances, plan and prepare your taxes,
or launch a new startup… a bookkeeper can indeed provide these
services.
Aradia Knight founded
Aidara Inc. in 2011, bringing with her a solid background in accounting and
business development. Aidara, Inc. an online bookkeeping service
serving businesses all over the U.S. The Aidara team provides support for tax
planning, monthly business bookkeeping, and consulting.
3 ways that a bookkeeping firm can help
your business thrive
Most small business owners don’t think much about accounting
beyond Tax Time. But the truth is, accounting and bookkeeping for your small
businesses needs to be a priority all year round, not only on April 15. Part of
what we try to help clients understand is that small business bookkeeping is a
strategic asset for your business that goes beyond taxes and numbers on the
balance sheet. Here are a few ways that hiring a bookkeeping firm can help your
business thrive and stay competitive during Tax season and beyond.
·
Focus on what the business owner does
best: Like many professional services, small business bookkeeping
firms make it possible for the business owner to outsource a complex and
challenging task. When you hire a bookkeeping service for your small business,
you give yourself more time in your day to focus on your core business
operations. Instead of puzzling over your balance sheet and financial
statements, you can get professional expertise to manage the fine details while
you can spend more time closing deals, meeting with customers, coaching your
team, and thinking strategically about how to take your business to the next
level.
·
Stay on top of regulatory
requirements and audits: Depending on what industry you’re
in, there might be various regulatory requirements (federal, state and local)
that affect how you can do business, how you hire, train and manage employees,
and how you report your business activities to maintain compliance and maintain
any relevant certifications in good standing. Hiring a bookkeeping firm makes
it easier to manage the many complex details that go with managing employees,
whether it’s for compliance with employment laws, managing employee benefits,
or minimizing your business’s tax liability at the end of the fiscal year. Any
business owner can be subject to an audit by the IRS, so getting professional
bookkeeping services can help you avoid any unnecessary stress and confusion if
the IRS selects you for a tax audit.
·
Identify business opportunities: Perhaps the biggest benefit of hiring
a professional bookkeeping service is that it can help you uncover
opportunities for your business. With an expert business accountant taking a
broad view of your business, you can find out what works, and what needs to
improve. Keep your accounts receivable and accounts payable in order. Find out
where you’re making the most money each month, and identify less profitable
customers or categories so you know where to allocate your focus and your
resources. Hiring an outsourced bookkeeping specialist can be one of the best
ways to get a clearer picture of what is happening in your business, as well as
looking into the future with financial modeling and forecasting to help you
decide how to pursue the right opportunities at the right time.
There’s a lot more to bookkeeping than doing your taxes. With the
right outsourced bookkeeping firm, you might find that your company will be
better organized, better prepared, and more profitable than ever before.
Aidara,
Inc. is an online bookkeeping service serving
businesses all over the U.S.. The Aidara team provides support for tax planning,
monthly business bookkeeping, and consulting.
