While common people talk about accountants, CPAs, or accountants, they really cannot make the actual differences between them. Instead, they too often used the terms interchangeably.
Well, all of these accounting professionals handle the finances & work towards a common goal, moreover, their roles and responsibilities, scope of work varies drastically. In addition to the scope of work, there’s also a difference between their professional status.
Accountants provide you with a more detailed analysis of the financial transactions, CPAs are state-approved accounting professionals, and bookkeepers record each and every transaction that involves money.
Choosing a financial professional for your company/business is a bit more complicated. And you must be thorough with your profile and should be aware of the main differences between accountants vs CPAs vs bookkeepers to have a seamless financial management.
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In this blog post, you will learn the major differences between accountants vs CPAs vs bookkeepers, their duties and responsibilities. Read on to know more:
Overview
Every business needs to have an accounting and bookkeeping process to prepare and maintain the financial records at the end of a quarter/year. Additionally, accounting & bookkeeping help the business evaluate its exact worth & take future decisions.
Most of the times bookkeeping & accounting are used interchangeably. Although accounting and bookkeeping are inseparable, there’s a thin line to differentiate them.
Bookkeeper, Accountant, & CPA—What’s the Difference?
Bookkeeper
The term “bookkeeper” means exactly what it sounds like. They are individuals who understand and are capable of performing basic functions involved with maintaining the “books” of the finances. Small businesses can hire them simply to handle revenue and expenses, as well as perhaps payroll. They will perform services related to invoicing customers and paying bills due to vendors.
Depending on the level of complexity a business requires, they may keep a general ledger and record entries as debits and credits. They may also be in charge of producing simpler reports. In larger businesses, the bookkeeper may only be responsible for an element of the bookkeeping process, such as accounts receivable. By definition, bookkeeping does not require special training or licensure, although employers will usually point out qualifications that they are looking for, such as a bachelor’s degree in business administration or, at a minimum, some experience with accounting.
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Unfortunately, a bookkeeper’s role, which is 100% focused on the bookkeeping function, is frequently watered down with other tasks around the office. As a bookkeeper has more time devoted to books and higher-level duties like internal controls, he or she begins to take on the role of internal auditor.
Accountants
Accountants require more knowledge and management skills.
Accountants are typically required to have more formal training than a bookkeeper, such as an undergraduate or even master’s degree in accounting. In larger companies, they can oversee lower-level accounting or bookkeeping personnel.
Organizations need a lot more from them than just managing money flowing in and out. The amount of responsibility required of bookkeepers differs depending on the size of a company, and the particular needs it serves. But they are usually expected to be able to help management understand its financial condition, so that it can make better business decisions.
Perhaps most neglected of all is the role that the (internal) accountant has in providing formal financial reports to management, which will aid in making more timely, accurate business decisions, which are tailored to the business’s financial realities.
The accountant may either be employed full-time by the business, or may be employed part-time, on an annual basis, simply to keep a book, and to produce the internal financial reports, depending on the size of the company and the requirements for the report.
Tax Preparer
Being the Tax Preparer is usually not a title, nor is it an ability…it is most often simply a function. Anyone at the company can prepare a tax return, if they are authorized by management to do so (whether that is the company’s owners or a bookkeeper).
Now, it is true that third-party CPAs do the taxes very often (and I will explain more about what this credential means), but at Fat, 3/4 of all paid registered preparers (with credentials like PTIN, RTRP, EA, attorney) are NOT CPAs. Very often, the CPAs role is confused with the Tax Preparers, and while the majority of small firm CPAs are focused on this function, it is not all they do.
CPA-(Certified Public Accountant)
While a bookkeeper, an accountant, or a non-enrolled tax preparer can prepare taxes for an employer or client, they cannot represent their clients at an IRS audit, and cannot legally sign the company’s tax returns for them either.
They have to be lawyers, registered enrolled agents, or certified public accountants (CPAs) to do so. CPAs have to take an intensive exam and are licensed by their states in order to practice. They also need to keep up to date on tax laws. Because of their education and training, CPAs are better at reviewing and explaining key financial statements than an accountant. They are sometimes employed by businesses, but they usually operate their own independent practices.
But the initial function of the CPA was not to prepare a tax return or represent clients in IRS audits. The primary function of a CPA is to sign-off all the financial statements that hold public faith. Simply put, they need to sign a set of financial statements which include statements of cash flows, income statements or profit & loss statements, etc. and all of these to be fairly presented as per the accounting principles. This signature might come in the form of:
- Compilation
- Review
- Audit
- Assurance services
And finally…there are certain professionals within the accounting profession who perform none of those functions, but rather support them. Generally, these are computer consultants (specialists for accounting), QuickBooks ProAdvisors (generally experts on the features in QuickBooks), and Process/Control Consultants who help businesses accelerate their daily operations without sacrificing bookkeeping accuracy or quality. As one would expect, salaries range widely, with CPAs being the highest on the food chain. But do not shop for a financial professional by price.
Determine what level of services you want now, knowing you can always upgrade to higher levels when your business grows.
Which Accounting Profession is Suitable for You?
Every business or individual needs to keep track of its books and keep an eye on its finances. For that, one needs to hire (either full-time or on a freelance basis) a bookkeeper — the primary purpose is to keep systematic records of transactions and keep a balance in the books.
In other words, a bookkeeper would handle all of the heavy lifting, handling salary, producing reports, paying bills, and balancing accounts.
However, if you need to have the bigger picture view of those reports and numbers, the bookkeeper is the go-to guy. He or she will handle tax matters and help you to increase cash flow in order to meet future goals.
However, if you have complicated business transactions, and need someone who is more trustworthy than your accountant, opt for any accounting profession like EA or CPA. And we provide the best US taxation courses in Hyderabad along with certification where you can earn authority to represent in front of the IRS as a certified EA/accountant.