You may have come across different terms, such as an accountant and a CPA. But what is the difference between these two?
An accountant is someone who has a bachelor’s degree in accounting. But a CPA is a designation that a candidate gains upon going through difficult educational and training processes. It takes learning, passing an exam, practicing, and only then obtaining a license.
In simple words, CPAs have more skills and experience. But what are the responsibilities of each professional? Who should you hire for your company? Let’s try to find answers to these questions in the following article.
Who is an Accountant?
The job of an accountant is to record financial transactions and generate reports, perform tasks such as bookkeeping, taking care of taxes, and other general accounting responsibilities and functions.
Accountants provide companies with a clear understanding of the financial health of a business. They analyze data, financial reports, records, budgets, and incomes. The responsibilities of an accountant may vary due to a company’s needs. Typically, an accountant’s responsibilities include the following:
- Record financial transactions.
- Offer financial advice.
- Optimize the current accounting system (within a company).
- Reconcile bank and credit accounts.
- Analyze income statements, including any inconsistencies.
- Accomplish annual audits.
- Help with budget preparations.
- Help with tax preparations for a specific fiscal year.
Accountants often work with other professionals from the financial department. It may include working with bookkeepers, assisting senior accountants, etc.
Who is a CPA?
A CPA stands for a certified public accountant. In simple words, a CPA is an accountant but with a state license to practice. A CPA helps companies and organizations manage their expenses, investments, etc. CPAs also offer aid with optimized financial planning.
Obtaining a state license provides CPAs an option to assist businesses with advanced taxation and auditing services. In this case, CPAs have an advantage over accountants because of a license.
Typical responsibilities of CPAs include:
- Prepare for and file tax returns.
- File Securities and Exchange Commission (SEC) reports.
- Audit public companies and organizations.
- Manage business’s budgets, cash flow, accounting systems.
- Present a business in legal cases, such as a merger with another company or bankruptcy.
- Consult about management and risks.
- Help with reducing taxable income (claimable credits and deductions).
- Represent businesses during audits from the IRS.
CPAs typically work with small, medium-sized, large businesses, profit, non-profit organizations, individual clients, the government. CPAs do have a wider variety of options.
Who is Better: a CPA or an Accountant?
Before answering the question, it’s worth mentioning that the choice between hiring a CPA or an accountant depends on a specific business’s needs. It could be more cost-effective to use an accountant’s services in some cases.
In general, CPAs are better qualified and have more experience performing specific tasks. The government recognizes a CPA as a person credible and expert in accounting. Having a state license means the person obtained specialized training and has excellent skills.
CPAs are more skilled in generally accepted accounting principles (GAAP) and have more experience with modern accounting tools. CPAs also receive high-paid salaries. Consider this fact when deciding which professional to hire.
CPAs have the right to perform specific duties not available to accountants without state licenses. For instance, assist with an audit, act like a taxpayer on behalf of a company owner, etc. Indeed, a CPA has more skills and experience in different financial departments than a general accountant.
Key Differences Between a CPA and an Accountant
So, what are the differences between an accountant and a CPA? It’s clear that the latter has a license, but what exactly can each professional do? Keep reading to learn more about each professional and the peculiarities of their work.
Fiduciary Responsibilities
Many businesses and organizations require financial assistance and counseling. Only CPAs have certificates allowing them to provide organizations with financial advice. It’s also important to conduct financial statement audits, and that’s the task of a CPA.
Only certified accountants can legally represent their clients. General accountants can not carry fiduciary responsibilities. Whereas CPAs can and always act in the best interest of a company or organization they represent.
License
We’ve mentioned that only CPAs have the state license, but let’s dive more into detail. One must obtain a bachelor’s degree to become an accountant or bookkeeper. This degree enables professionals to work in accounting.
But you must go through strict training and pass an exam to obtain the license. And this is the major and significant difference between general accountants and CPAs. Additionally, CPAs must follow required institute coursework hours. These courses include auditing, accounting, participating in taxation, and main business classes for a specific time.
Moreover, a candidate to certify for a license must work for one year under the supervision of another experienced CPA. Upon the end of that year, the CPA must pass several more tests on:
- Auditing.
- General accounting principles.
- Taxing.
Only upon completing these requirements an accountant obtains a license.
But the educational process doesn’t end with obtaining a license. A CPA must keep taking regular education classes to stay in touch with modern accounting tools, principles, and protocols. A general accountant isn’t required to go through such testing.
Ethics
CPAs must maintain a specific standard of the profession and follow a code of ethics. They have to make their financial decisions based on strict codes. CPAs must act in the client’s best interest while maintaining sensitive and moral judgments in every activity.
Regulations and Taxes
Most accountants prepare tax returns since this function doesn’t require having a license. However, CPAs provide benefits that general accountants can’t offer. For instance, they file taxes on behalf of their clients.
Moreover, certified accountants undergo rigorous training and testing, so they have more experience. Certified accountants have excellent skills thanks to the non-stop educational process. This continuous educational process is required since certified accountants have to renew their licenses.
Final Thoughts
When choosing between hiring an accountant or a CPA, consider your business’s needs. If financial counseling help with taxes is vital for a business to thrive, then a CPA should be a better option. Note that CPAs services cost more than accountant’s services, so consider the company’s budget.
If your business needs help with recording financial statements and producing reports based on these statements, then a general accountant would be a perfect fit. Moreover, their services are more affordable. An average small business typically requires the services of an accountant rather than a CPA.
