This Guide for Accountants is designed to be the ultimate resource for business school candidates interested in a career as a CPA or accountant. There is much more to this profession than meets the eye. At first glance, accounting might seem like a straightforward profession. It’s just about crunching numbers, right? Well, no. Working with financial information indeed makes up a substantial part of the job, but accounting is actually a critical business procedure that involves much more problem solving than one might think.
An Accountant is a business professional who is responsible for keeping track of and interpreting financial records. Accountants are usually responsible for a wide range of finance-related duties, either for larger organizations and businesses employing them or for individual clients needing their services.
Other terms are discussed in conjunction with the phrase “accountant,” which can be confusing as to what this career includes. For example, “bookkeeper” and “accountant” are interchangeable terms, yet there are several crucial differences between these two titles.
Bookkeepers typically earn at least an associate degree and center on recording financial transactions. Accountants will typically earn at least an undergraduate degree in accounting and work to interpret financial information rather than just gather it.
In other words, Accountants may be Bookkeepers, but not all Bookkeepers will be Accountants.
A certified public accountant (CPA) is an accountant who has taken and passed the CPA exam. CPAs have met state licensing requirements. Just like the bookkeeper vs. accountant relationship, all CPAs are accountants, yet not all accountants are CPAs.
What Is Accounting?
Everyone is now familiar with the term “accounting,” especially during tax season. But before we discuss the importance of accounting in business, let’s address the basics – what is accounting?
Accounting refers to the detailed and systematic recording of financial transactions of an organization or business. There are many types of accounting practices. Accountants work for small businesses, the government, and large corporations doing forensic accounting, management accounting, and auditing.
Why Accounting is so Important?
Accounting plays a vital role in the running of a business. It helps everyone in an organization track expenditures and income. It ensures statutory compliance while providing investors, management, and the government with quantitative financial data, which can also be used in making business decisions.
There are three critical financial statements generated by accounting records.
An income statement provides an organization with information about its profit and losses. The balance sheet gives businesses a clear picture of the organization’s financial position on a particular date. A cash flow statement is a vital bridge between the income statement and balance sheet. It reports the cash generated and spent over a specific period. Businesses need to keep their financial records current and spotless if they intend to keep their organizations afloat. Here are just a few of the many reasons why it is essential for all organizations, big or small.
–Accounting Aids in Evaluating the Performance of a Business
An organization’s financial records reflect its operations and the financial position of the small business or corporation. In other words, these records help business leaders understand what is happening within the company financially. Clean and current records help keep track of expenses, gross margin, and possible debt, as well as aid leaders in comparing current data with the previous accounting records so they can allocate the budget appropriately.
–Accounting Ensures Statutory Compliance
Laws and regulations will often vary from state to state, but proper accounting processes and systems help organizations ensure statutory compliance when it comes to business. The appropriate accounting function will ensure that liabilities like income tax, sales tax, VAT, and pension funds are appropriately addressed.
–Accounting Helps to Create Budget Projections
Business professionals understand that budgeting and future projections will make or break an organization. Financial records play a critical role when it comes to these forecasts. Business trends and projections are rooted in historical financial information to keep operations profitable. This financial information is most appropriate when stemming from well-structured accounting procedures.
–Accounting Helps in Filing Financial Statements
Laws require businesses to file their financial statements with the Registrar of Companies. Listed entities must register them with stock exchanges and indirect and direct tax filing purposes. Accounting is needed in all of these scenarios.
What are the Daily Roles and Responsibilities For Accountants?
While the daily duties of an accountant may vary by position and enterprise, some of the most common roles and responsibilities of accountants are similar.
An accountant will:
-Ensure the accuracy of financial documents and their compliance with current laws and regulations
-Prepare and maintain vital financial reports
–Prepare tax returns and ensure that taxes get paid correctly and on time
-Evaluate financial operations and recommend best-practices while identifying issues and strategizing solutions to help organizations run efficiently
-Offer guidance on cost reduction, profit maximization, and revenue enhancement
-Conduct risk analysis and forecasting assessments
Accountants bear a legal obligation to avoid negligence and act honestly within their practices. Their responsibilities also include ensuring that their clients’ financial records are compliant with the relevant regulations and laws.
What Are Some Important Skills Accountants Should Possess?
There are some skills that all accountants need to be productive and successful in their roles. Essential skills for accountants include:
Attention to Detail-Accountants must pay close attention to detail to be able to keep information organized and accurate. With the sheer amount of financial data that gets analyzed, mistakes can be easily made. Simple errors can translate into much more significant issues if left undiscovered.
Business Knowledge-To be useful in the role of accounting, an accountant must grasp the essential functions of a business to analyze and interpret financial information accurately. Having a solid business foundation provides context to all the financial information that accountants are exposed to daily.
Computer Literacy-Professionals in the accounting field need to use advanced accounting programs and software. Computer-based tools play a significant role in the world of accounting
Analytical Skills-Collecting and evaluating financial data makes for a considerable part of accounting and is crucial in identifying potential issues and patterns. Using data analytics in the accounting field is proving itself as an emerging trend in the industry. It is expected to have a growing impact on the future of accounting.
Communication Skills-Accountants need to listen carefully to clients and bosses to gather information accurately. Relationships with clients, managers, stakeholders, and other accounting staff are crucial. They should also be competent in clearly articulating the data within their work verbally and present findings in written reports.
Mathematical Skills-A common misconception about accountancy is that accountants need to be human calculators. While it is true that math skills are essential in analyzing, comparing, and interpreting data and figures, being accomplished at complex math skills are not necessary to be successful in the field.
Most employers looking to hire accountants require that candidates hold at least an undergraduate degree in accounting or other related fields, like finance or accounting management. Certifications are also preferred in most cases. Credentials can help improve a professional’s prospects. Many accounting professionals choose to become certified public accountants by completing the Association of International Certified Professional Accountants’ licensing process.
What is the History of Accounting?
Accounting originated around the time in history when societies began trading. Archaeologists have found evidence of accountant records on clay tablets from as early as 2,000 to 3,300 B.C. in Mesopotamia and Egypt.
According to the Online Etymology Dictionary, the word origin for “accounting” comes from the French word “acont,” which meant the reckoning of money being paid. The French term derived from the Latin term “computus” or a calculation.
Throughout history, the math calculations of accounting were used by nearly every culture. The Renaissance era is responsible for introducing one of the fundamental principles of accounting within the pages of a math book: double-entry bookkeeping.
Luca Pacioli was a writer, Franciscan friar, mathematician, and friend of Leonardo DaVinci. He wrote about how merchants in Venice kept records of their business transactions. This bookkeeping system was one of five subjects covered in his book, “Everything About Arithmetic, Geometry, and Proportions.”
Pacioli’s book was very popular and got widely distributed and translated into different languages. Arguably, it was the only textbook until the 16th century. The book that explained double-entry bookkeeping earned Pacioli the title, “Father of Accounting.”
Double-entry bookkeeping involves keeping records of money that flows in and out. Each transaction within this system is listed in two columns within a ledger representing the two separate accounts of debit and credit. Since one account offsets the other account, the totals in both remain equal.
Debits are monies that come into an account and are listed on the left side of the ledger. Credits are monies that go out and are recorded on the right side. Pacioli is not credited with inventing the method. He was not the first to record how Venetians functioned within business. Benedikt Kotruljević, of Dubrovnik, now part of Croatia, wrote about the double-entry bookkeeping method more than 30 years before Pacioli.
Kotruljević (also known as Benedetto Cotrugli) wrote about the method in a 1458 manuscript, described in an American Mathematical Society essay.
Pacioli deserves the credit for describing several other accounting terms and concepts that we still use today:
-Journals are transactions recorded by date as they occur.
-Ledgers are transactions assigned to a specific account. A bank balance would be considered Cash, while a bill received would be listed under “Accounts Payable.”
-Receivables refer to amounts that customers are billed.
-Inventories are materials or resources an organization may have on hand.
-Closing Entries are balances recorded in a journal at a period’s ending. These are closed out and then plugged into the next period.
-Trial Balances are the reports that show debits and credits match.
How Does Someone Prepare to Become an Accountant?
Pursuing a career as an accountant requires a serious commitment to learning the trade, an advanced education, and often a formal certification in accounting. Before getting started, prospective accountants should consider a few questions: Do I believe I have what it takes to become an accountant or CPA? Will I be ready to begin a successful career after only four years of college, or will I need to earn a graduate degree? Should I work for a large firm or corporation, or would I be better off striking out on my own?
Successful Accountants Earn the Right Degrees
Most accountants will attend college and earn an undergraduate degree. However, an undergraduate degree in accounting or a related field is only the minimum education requirement for professionals who plan on becoming a CPA. Some states require advanced coursework beyond the average undergraduate degree in areas like taxes, financial reporting, auditing, and other non-accounting regions of business. Up to or over 150 credit hours in accounting and accounting-related topics are commonly needed. Undergraduate students interested in becoming CPAs should check their state’s specific education requirements. Many CPAs continue their post-secondary education and earn a master’s degree like an online MBA.
Accounting degrees are prevalent and commonly available at universities and colleges across the nation. There are many accounting-intensive programs through distance learning online. Prospective graduate students need to confirm that their program is fully accredited before beginning their course of study.
Successful Accountants Choose a Specialty
Nearly all CPAs and accountants specialize in one or more areas of practice. Traditionally, the two general areas of concentration are corporate or business accounting and public accounting. Many sub-specializations also exist, such as taxes, environmental accounting, managerial accounting, and internal auditing. Often, the specialty a graduate student chooses coincides with the accounting degree they earn.
Successful Accountants Decide Between Accountancy and CPA
There is a difference between a certified public accountant and an accountant. Accountants are sometimes referred to as public accountants. They are typically individuals hired to work in an organization’s accounting department. These professionals lack several of the qualifications of a CPA. An accountant may not possess state certification or license. Accountants are clear to perform specific limited tasks, including the preparation of financial statements. They may prepare tax returns if they scored well enough on the required IRS test or have received a Preparer Tax Identification Number. These professionals may not conduct audits or review financial statements.
Certified public accountants meet several specific requirements, including the acquisition of a college degree, passing the CPA exam, and working a predetermined number of hours under the supervision of a licensed CPA. CPA’s are cleared to perform all of the same tasks as a public accountant. They may also conduct audits, review statements, and speak on behalf of clients to the IRS.
When deciding which accounting-based career to pursue, students must honestly assess their personal goals and determination in putting in the ample time and effort needed to become a CPA.
Successful Accountants Pass the CPA
Every state in the U.S. requires CPA candidates to pass all four parts of the CPA exam successfully. The four parts include Audit and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. CPA exams are offered over several days during the first two months of every quarter. Candidates may complete test sections in any order they choose. Once they have completed one part, they must successfully pass the other three parts within 18 months. Given its well-known degree of difficulty and breadth of subject matter, many CPA candidates enroll in private test preparation courses.
Successful Accountants Work to Acquire an Entry-Level Position
Before graduating with an undergraduate degree or an online MBA, students should attempt to get an accounting internship or find some way to get experience to strengthen a resume. Taking the necessary steps to draft a resume and register for a career-focused social media platform like LinkedIn is a great choice. When it’s time to seek entry-level accounting positions, candidates will be ready to hit the ground running. Sites like LinkedIn have jobs posted that let candidates apply for these positions directly off the site. Job seekers need to check their business school’s job listings, look for networking opportunities, and log onto local and national job search sites. There are many job sites available online that are free to use.
Successful Accountants Take Advantage of Continuing Education Opportunities
After landing their first jobs, accounting students may be tempted to sit back and enjoy the ride after a strenuous education in accounting and business. However, it is always good to plan the next move within a career in accounting. Earning a specialized certification in accounting or considering an advanced degree in accounting like the online MBA could help boost promising careers. There are a plethora of free resources for accountants to keep them sharp.
What Are the Future Trends of Accounting?
There are some exciting trends influencing the field of accounting today that will continue to make an impact in the future. Aspiring and current professionals in accounting will do well to stay up-to-date on these developments to keep their skills sharp and maintain a competitive advantage in the field.
Accounting Will Continue to Develop Automation Services and Technologies
Automated accounting software like QuickBooks and other popular applications will continue to influence the industry. In fact, a recent survey found that accountants and bookkeepers spend nearly 90 percent of their time on tasks that will potentially become automated in the future. Robots will not replace accountants. Instead, the increased use of automation will result in accountants spending less time on the manual tasks of data entry, and more time on substantial analysis.
Accounting automation implementation will allow accountants to streamline workflows and become more productive. These emerging technologies will reduce labor-intensive tasks like audits, tax preparation, and payroll, reducing the amount of time and resources an organization needs to move forward.
Accounting Will Continue to Develop in the Areas of Transparency and Security
A greater focus on data security and the increasingly high standards surrounding transparency are among the most critical trends in the accounting field of the future. Since the accounting scandals following the 2008 financial crisis, it has been crucial to restore trust and credibility to the business profession. An industry-wide push for transparency in reporting has influenced the financial reporting process. This effort now influences the general public’s expectations of accurate reporting. As a result, organizations are now expected to report their financial statements to the public to present a complete picture of their current scenario and reduce uncertainty in the market.
Accounting Will Continue to Develop in the Area of Data Analysis
CPAs and accountants perform tasks that require analytical skills at increased rates. This is primarily due to the proliferation of information across industries. There are many data analytics applications in the world of accounting. Auditors use analytics to enable processes like auditing and continuous monitoring. Accountants can use big data to identify patterns in the behavior of markets and consumers, leading to higher profits and investment opportunities. Modern accountants will continue to develop an analytical mindset to keep up with trends in the industry of tomorrow and remain competitive in the workforce.
As you can see in this Guide for Accountants, accounting involves more than just crunching numbers. Accounting is an in-demand field with many opportunities to offer. If becoming an accountant interests you, there are many resources available to help prepare you for this role. Here are some high-quality ideas to guide your research into the world of accounting.
Reach Out to an Accountant-Find out if there is an accountant in your extended family or if a neighbor or friend is a CPA or accountant. There is simply no substitute for having exposure to someone who pursued a degree and is working within the profession of accounting. Practicing accountants will be more than happy to give you the lessons they have learned along the way. An accountant may also prove to be a great connection to have in the future for networking and potential job opportunities.
Contact a Business School-One of the best steps a potential accounting student can take is to invest in the best education possible, such as an online MBA in Accounting. Business schools that offer this stellar distance degree have staff and contact people within admissions departments ready to answer all questions about their business degrees like an MBA in Accounting. Some schools will connect program candidates with career advisors and make sure that they find the right program schedule.
Make a Plan for the Future-After taking part in some valuable interviews and becoming informed on accounting as a career, a potential accountant or CPA can begin to imagine what it would be like to work in this profession. Business school students should start to plan what she wants her career to look like. Perhaps she wants to work for the government or a non-profit. Whatever the field may be, a career in accounting is challenging and rewarding.