What is Accounting?
Accounting is basically the recording and reporting of financial transactions. Anyone who does accounting functions can call themselves an accountant, even without a professional degree in accounting, although usually, an accountant does have an accounting-related degree.
Often, accountants with no certification perform tasks such as bookkeeping, looking after general accounting matters, and taking care of some tax-related matters. However, all accountants with some training and experience can perform an extensive range of services.
What is a CPA?
A Certified Public Accountant (CPA) is an accountant who has met state licensing requirements. Requirements for CPA vary by state; they include minimum education (usually a master’s degree in accounting) and experience requirements, plus passing the CPA exam.
The Uniform CPA examination is administered by the American Institute of CPAs (AICPA), which has four sections: Regulation, Financial Accounting, and reporting Business Environment and Auditing. The CPA qualification is considered by many organizations to represent the commitment of an accountant in meeting high standards.
While all CPAs are accountants, not all accountants are CPAs.
Let us discuss the differences between Accounting vs. CPA in detail –
Accounting vs. CPA Key Differences
Here are the critical differences between Accounting vs. CPA –
#1 – Education
CPAs have strict education requirements which include obtaining a Master’s degree from an accredited University in a related field of study like Management Accounting, Auditing, or Taxation. On the other hand, most accountants have some formal business and accounting education but are not required to receive a master’s, bachelor’s, or associate degree to use the title “Accountant.”
#2 – Licensing
CPAs have to pass rigorous testing and strict requirements for licensing in the state in which they intend to practice. CPA candidates must complete required hours of institute coursework, including specific hours in accounting, auditing, taxation, and business core classes.
After graduation and a year of experience under the supervision of a CPA, candidates must take and pass the comprehensive test of tax, auditing, and general accounting skills.
After getting a license, CPAs must take continuing education classes throughout their career in order to remain up-to-date with the information on issues and changes in the accounting world.
#3 – Fiduciary Responsibility
CPAs are considered some of the business world’s most trusted advisors, according to a survey conducted by the AICPA.
Many businesses that are required to have a financial statement audit will find that only a CPA is capable of performing these services and issuing the necessary reports.
In addition, CPAs are considered the ones with a legal duty and power to act on behalf of and in the best interest of their clients. Non-CPA accountants are not considered to be fiduciaries to their clients.
#4 – Taxes and Regulations
Accountants without a CPA certification may prepare a proper tax return, but a CPA provides distinct advantages to clients that non-CPAs cannot offer.
Many CPAs are more knowledgeable in tax codes because of the rigorous CPA licensing examination and continuing education requirements. Another critical factor is that CPAs are eligible to represent clients before the IRS, while a non-CPA accountant is not.
#5 – State Requirements and Codes of Ethics
CPAs are also expected to follow a strict code of ethics and meet the high standards of the profession, as having the license is not the only requirement to be a CPA.
#6 – Cost and Expenses
The cost and expenses in pursuing CPA Certification are significantly higher when compared to pursuing accountancy courses/certifications.
Accounting vs. CPA – Final Thoughts
When it comes to which is better between the two, I can say both are the best at their places, depending on your priorities, time, and cost involved. If you opt for CPA, you will go through with international laws, principles, and standards. The CPA exam is significantly tougher than any accountancy certification.
Accounting is basically the process of recording and reporting of the business and financial transactions. Anyone who does that function can call themselves an accountant.
Obtaining a CPA license is a bit more difficult and will take more time. You can see that it is definitely worth it.
Accountants mainly prepare three types of financial statements:- audited, reviewed, and compiled. Non-CPA can only prepare a compiled financial statement.
Only a CPA can prepare audited financial statements or review financial statements. Small businesses generally may not require an audited or reviewed financial statement, but public companies are required to publish audited statements. When individuals or businesses make the decision of choosing between a CPA and an accountant, this is one of the important considerations they take into account.