©2011-2023 Less Accounting
If your business has reached the point where you need someone to take care of all the financial aspects, you probably come across CPAs and Accountants. But which one should you choose? Today we bring you all about CPA vs Accountant, what is the difference, whether there are any similarities, and which one is the right one.
Before we get into the differences between these two important business administration roles, let’s explain what each of them means and what are their main duties, so you can already get an idea about some of the basic differences between these two occupations.
CPA is an abbreviation that stands for certified public accountant. CPA licensure is given to highly skilled individuals in the US. In some states, only those who have a licensed CPA certification are allowed to give opinions on financial matters.
A CPA prepares audited financial statements, can represent you legally in front of the IRS, handles internal but also external audits, and of course, helps you with tax preparation.
An accountant is a person who performs the accounting function and prepares accounting records by gathering all the data and then summing it up properly and adding it to the financial statement.
Tracking and recording financial transactions can include accounts payable and receivable, journal entries, collections, depreciation entries, but also, in some cases handling payroll.
While explaining what the role of a CPA and an accountant is, we actually already provided some differences between them regarding their duties. Now, let’s get more into details to try to portray these two occupations as precisely as possible and explain what requirements one needs to fulfill in order to become an accountant or certified public accountant.
In general, accountants hold bachelor’s degrees in finance, accounting, or business management, but most of them take additional courses and training to be able to perform more services. Some of those additional certifications are:
To become a CPA, one would also need at least a bachelor’s degree in finance or accounting and then take additional courses to prepare for the CPA exam. Although some rules vary from state to state, in general, these are the steps one must take to obtain a CPA license:
The uniform CPA exam has four parts and is issued by the American Institute of Certified Public Accountants. To become a certified public accountant, a regular accountant needs additional training (this can last up to 2 years, depending on the state) and must take the CPA exam, which consists of these four parts:
A tax accountant can act as a tax preparer for your tax return but can’t sign it. On the other hand, a certified public accountant can also help you with tax planning, but it has the right to sign it as well as the audited financial statement, which is very important to keep in mind because an accountant can’t do that.
An accounting professional is usually the person who has a bigger picture of the business and, therefore, can often provide all sorts of strategy and planning advice. However, a CPA can also provide a piece of professional business advice, help with financial planning and even develop comprehensive accounting systems.
There are not any specific ethics codes to which an accounting professional should stick. However, expectations from a professional CPA are slightly different, and they should maintain a strictly professional level and comply with the code of ethics. For example, it is expected that a CPA is always objective and that their actions serve the public interest.
As you can already assume by the requirements in education and training, a CPA salary is higher than the one of an accountant. However, keep in mind that this can vary, depending on the company, job location, and industry. On average, a CPA salary in the US is $67,080 per year, while for an accountant, it is $56,520 per year.
Depending on what sort of financial planning you need help with, you should be able to determine which one of these two is the right choice for the needs of your business. As you can already assume, usually, a certified public accountant is more expensive to hire than a regular accountant. Also, it costs more to become a CPA.
For most small business owners, an accountant should be enough to cover their needs at the beginning, but in some cases, you might need both actually. On the other hand, having an experienced CPA by your side from the very beginning can help you make some smart moves and be very beneficial. It all depends on your priorities, time, and resources.
Since the services of an accountant are more affordable, you might be tempted to simply turn to them without considering the perks of hiring a CPA. We went through all the key differences, and although some of them don’t seem that big, it is obvious that a CPA has a bigger power.
Strict CPA licensure requirements and education should guarantee that a CPA is able to perform a number of different services and that his knowledge and capabilities surpass the ones of a regular accountant. Although sometimes they both can perform the same tasks, a CPA can do more for you.