Hello readers! Welcome to a knowledgeable article that will guide you through everything you need to know about a CPA and an Accountant.
People often confuse the two, and it is essential to learn all the facts about them to help you choose the right person to handle the finances and boost the business environment.
So, the lifeblood- finances- that drives your company is managed professionally and perfectly.
By the end of this article, you will have a clear head on these two accounting personnel so that you know which way to go.
Here is what we will cover in this article:
Without further ado, let us get straight to the fact so that your company hires the perfect fit for its accounting jobs.
CPA vs Accountant – The Key Differences
CPA stands for Certified Public Accountant, and you might be already familiar with the regular accountants.
However, from financial planning to auditing and managing the financial statements, your business would often need accounting professionals.
While their jobs may appear to be similar at times, there are certain differences between the two, and keeping them apart is vital for the success of your business.
Regular accountants hold a bachelor’s degree in accounting or finance, after which they can start their career as accounting professionals.
Whereas CPAs also have a bachelor’s degree in accounting, there are certain requirements to sit for the CPA exam.
To acquire the degree, CPAs must have an advanced master’s degree and work experience. In addition, it is essential to acquire 40 hours of continuing education credentials annually before a person gets their CPA certification.
An accountant does not need to have an accounting license to get a job. However, a CPA license is a prerequisite before they are eligible to start their practice at any accounting firm.
With their credential, licensing, and advanced degree, CPAs are more likely to meet a business’s experience requirement and get better tough jobs.
Even though regular accountants are well-versed in preparing tax returns, they may not be experienced enough to handle the tax codes.
Moreover, CPAs are more professional at auditing alongside financial accounting. Therefore, they can represent your taxes before the IRS.
This is why you should consider hiring CPAs as tax accountants instead of an accountant.
If you are still wondering which professional accounting degree will benefit your business the most, worry not.
Roles of a CPA and Accountant
From a small business to a large firm, every company has different prerequisites for handling finances and business administration.
Regular accountants can be a great fit for many small businesses, as they can easily tackle daily financial activities. However, when it comes to handling the finances of large, multinational firms where the numbers require utmost precision, a CPA seems more suitable.
CPAs can provide expert guidance on every aspect, such as forming a solid business infrastructure, dealing with asset purchases, management accounting, and much more, even for budding entrepreneurs.
So, to decide what you want for your business, you need to look into the roles and responsibilities of these two accounting professionals.
- Roles of a CPA
When you entrust your lifeblood to a person, assessing their qualities and responsibilities beforehand is crucial.
According to the American Institute of Certified Public Accountants (AICPA), a CPA is not a financial trustee, speaking legally. However, as per the Professional Code Of Conduct, as stated by AICPA, CPAs are obligated to treat their customers with justice, ethics, and honesty.
- Code of Ethics
To work as a CPA, a person is bound by the code of conduct set for them by AICPA and state boards of accountancy. But, on the other hand, an accountant is not obliged to follow them.
- Public Interest
- Scope and Nature of Services
Other than this, here are some other roles of a CPA.
- Audited financial reports
You might wonder if you have accounting software to generate financial statements and reports, then why do you need a CPA?
The software may provide you with audited reports. But, do you understand them or what the numbers are telling you?
The answer is no, and this is why you need a CPA to prepare audited financial statements for review.
CPAs prepare the reports, so it is easy for you to file them with SEC- Securities and Exchange Commission to conform to the business legalities.
A CPA also plays a crucial role in explaining the importance of financial accounting and audited statements to the new business, so they do not get into accounting troubles.
- Tax Preparation
An accountant can also prepare the taxes, and it is not a hard job. However, when dealing with challenging tax laws, the regular accountants may find themselves in a nook, and you would need a CPA to get the job done.
- IRS and Legal Tax Representation
Often, your company will appear in front of the IRS to represent the audited tax returns and financial reports. As CPAs have extensive knowledge of the tax laws, they can defend your company’s tax returns with the IRS and align them with the state requirements.
- Business Audits
Even though an accountant can handle the in-house company audits, your business will always need a CPA to handle the external audits.
- Role of an Accountant
When it comes to the finances of a business, you would hear the two terms – bookkeeping and accounting – used interchangeably. However, just like accountants and CPAs, bookkeeping is not the same as the two.
Bookkeepers are mainly responsible for recording the company’s financial transactions manually or using accounting software.
But, as for the accountants- even if they perform the tasks of a bookkeeper, their level of expertise is higher.
Things that regular accountants are responsible for are:
- Managing Financial Transactions
To handle the finances of any business, an accountant must manage, organize and record the entire financial transactions.
To keep a check on the cash flow and avoid legal troubles, an accountant is responsible for:
- Accounts payable
- Accounts receivable
- Account collections
- Depreciation records
- Journal entries
- Looking after the budgets
- Reconciling bank accounts
- Figure out the fluctuations in a general ledger account (if the business holds one)
The responsibilities of an accountant may also vary from company to company.
For example, many business administrations impart the role of managing and supervising the bookkeepers, handling accounting clerks, and handing over the paychecks to the accountants.
- Examine and Analyze Financial Statements
To assess the financial statements, a company needs to analyze and examine its various components such as the month’s cash flow, checking on the accounting ratios, and tackling expenses.
Accountants are also responsible for the following tasks:
- Examine and assess business expenditures
- Analyze the employee travel expenses
- Processing the financial reports and tax remittances with timely submission
- Taking Care of Budget
Every business needs to stick to its budget, or else it can go bankrupt. Organizing the budgets for each department and project of the company is an accountant’s responsibility.
Accountants are well aware of how a company operates. Therefore, they can draft flexible budgets based on their expertise.
Which Accounting Professional Should You Choose for Your Business?
If we talk about an ideal case scenario, every business should use both a CPA and an Accountant to handle things efficiently. However, practically, companies choose to go with only one of them.
An accountant is an important resource for the business as they handle routine financial transactions, journal entries and manage diverse accounting tasks, including depreciation and amortization.
Moreover, they also deal with bank reconciliations and perform their tasks as a financial analyst.
Even if your company has a highly proficient staff accountant, you would always need a CPA.
When does your business need an accountant?
Most companies prefer CPAs; however, often, regular accountants can prove to be a better choice. Such as;
- Accountants are pro in organizing, recording, and managing routine financial transactions for day-to-day financial transactions
- Looking after management accounting: An accountant is always the better choice for internal audits and costs analysis and can also examine and analyze the business’s expenses and budgets to draft recommendations to generate better revenues
- To curate a budget: accountants have their expertise in creating a departmental and organizational budget to keep the company’s finances running smoothly
- To take care of financial statements: even though a company can use either a CPA or AN accountant to analyze financial statements, the latter is a better option
When does your business need a CPA?
A company can have a difficult time deciding between the two, however, to narrow down your choice, below are things to consider when hiring a CPA:
- To tackle complicated taxes: CPAs know everything about the tax laws and have their expertise in this area
- If you are a new business: you would have to see the bigger future if you are just starting. A CPA can provide expert assistance and guidance on the finances and entire business structure
- Auditing: CPAs are audit experts. Whether you have to generate tax returns or represent the taxes in front of the IRS, CPA is the best choice
- If you are a public company: it would be beyond an accountant’s scope to handle the state law requirements, and only a CPA will create audited financial statements that meet all the legalities
Is CPA a better choice than an Accountant?
A Certified Public Accountant is recognized as credible, qualified, and expert accounting personnel by the government.
A CPA designation is more experienced and better trained in accounting duties than a regular staff accountant.
CPAs are considered qualified for best practices, alongside the use of online tools and they tend to be obligated to the code of ethics or disbarred from any misconduct.
A CPA, unlike an accountant, is legally permitted to perform certain tasks, including auditing and taking up the role of a company’s tax representative.
This is why you need to be mindful and smart when finding the best accounting personnel for your firm.
Expected Salaries of a CPA and Accountant
An individual with a CPA certification has more qualifications and responsibilities to expect higher pay than an accountant.
- CPAs with less than a year’s experience can earn $66,000 annually
- CPAs with more than 15 or 20 years of experience earn an average of $152,000 annually
- On the other hand, an accountant can earn up to an average of $71,500 annually after acquiring some work experience
To decide the better choice between the two depends on your business administration, the company’s priorities, time, and budget – everything matters.
To sum it all up, Accountants are ideal for managing business finances, handling office tasks, performing bookkeeping if needed, providing business advice, and looking after tax preparation.
Whereas CPAs add their credibility and expertise alongside the routine accounting tasks, in addition to traditional accounting tasks.
A CPA will enable you to adhere to international laws, abide by the principles, and live up to standards.
However, getting through the uniform CPA examination is more difficult than any other accountancy certification.
Therefore, in the end, it is your decision that matters.