Sometimes the terms "accountant" and "CPA" are used interchangeably. But while all CPAs are accountants, not all accountants are CPAs. If you're thinking of employing an accountant for your needs — whether it's for taxes, business, or your personal finances — it's important to know the difference between the two.
This article will describe the major differences between an accountant and a CPA, what kind of qualifications and education one needs to become a CPA, and which might be the best choice for your needs and budget when you're in the market for one.
The following is a guest post. Enjoy!
First, you should know that bookkeepers, accountants, and CPAs are all different. Bookkeepers are not qualified accountants and cannot be expected to perform the same duties an accountant does. By the same token, CPAs have skills and qualifications that accountants without certifications don't have. With that in mind, let's look at what sets a certified public accountant apart.
What Makes a CPA Different
While there's nothing wrong with hiring a bookkeeper or non-licensed accountant for certain needs, there are some things non-licensed accountants are legally not allowed to do. In order to do audit work, file reports with the SEC, act as a representative on behalf of a business or individual before the IRS, an accountant must be certified.
CPAs are also bound to a strict code of ethics, which makes them a more frequent choice for businesses who must entrust them with sensitive data. That doesn't mean non-certified accountants aren't ethical — only that they're not legally required to adhere to the same regulations that a CPA is.
What It Takes to Become a CPA
So, what education and qualifications do you need to become a CPA in the first place?
First and foremost, you'll need a bachelor's degree, which is technically the only requirement for CPA licensure. While that's all that's formally required, simply getting a four-year degree will not fulfill all the educational requirements you'll need to become a CPA.
The AICPA (American Institute of CPAs) sets two different standards for attaining a CPA license: a degree requirement and a credits requirement. Long story short, the credits requirement for CPA licensure is 150 credits, and a typical four-year degree only accounts for 120 credits, making further education necessary in most cases.
While many students use this requirement to go on to earn a master's degree in accounting or a Master's of Business Administration, that isn't technically a requirement. Some students will instead opt to take a double major while in school in order to meet the credit requirement. In some states, further education is mandated in the form of accounting courses and business courses.
Following the degree and meeting the educational requirements, an aspiring CPA must take the Uniform CPA Examination, which is an exam carrying the same form and equivalency everywhere in the world.
The examination is made of four parts:
Financial Accounting and Reporting, which covers financial accounting principles, financial statements, consolidation, bonds, equity, currency translation, cash flow, and a myriad of other topics.
Auditing and Attestation, which covers the planning, testing, types, and execution of audits.
Business Environment and Concepts, which will cover the managerial accounting courses taken in college, as well as microeconomics and macroeconomics, financial management, IT and more.
Regulation, which covers taxation and business law in the United States.
The Uniform CPA Examination is considered one of the toughest and most challenging licensure exams ever, with a pass rate of only about 50%. This is primarily because it has so many parts, each of which requires an extensive command of diverse accounting knowledge. There is also a time limit to the exam — a limit of four hours, or a total of 16 hours to complete the entire exam.
After passing the Uniform CPA Examination, the aspiring CPA must take a short ethics exam administered by the AICPA. This isn't mandatory in all states but is common enough that most aspiring CPAs will study for it.
Before getting licensed, there may be a work experience requirement, which is different in all states, but usually means anywhere from 6 months to 2 years of practical experience working under a CPA. Finally, one must pay their dues (literally) and be licensed by the state's accounting board.
CPAs: The Real Difference
And this brings us back to why hiring a CPA is different from a non-licensed accountant: an accountant is ideal for recording financial transactions, handling payroll, and other financial duties. If your needs are more sophisticated — and thus require a bigger budget — a CPA is empowered to do things a non-licensed accountant cannot do. the requirements for becoming a CPA are demanding, it is also a rewarding career choice: CPAs earn 10% more than their non-licensed counterparts, which can add up to quite a bit at the top end — CPAs working in senior or managerial positions at large companies can earn over $120,000 a year, although the average for smaller and mid-sized firms is more in the range of $60,000.
And this brings us back to why hiring a CPA is different from a non-licensed accountant: an accountant is ideal for recording financial transactions, handling payroll, and other financial duties. If your needs are more sophisticated — and thus require a bigger budget — a CPA is empowered to do things a non-licensed accountant cannot do.
