For professionals seeking to join the accounting industry, one common question often pops up—the difference between an accountant and a CPA. Although it is thought that some individuals tend to use these terms in the same way, there are differences between the two professionals.
This guide will show you the differences between a CPA vs account and answer common questions about the effect of these designations on an accountant’s career and on-the-job differences between accounting and CPA services.
Is a CPA the Same as an Accountant?
A CPA Is not an accountant. An accountant is usually a professional who has a bachelor’s degree in accounting. A Certified Public Accountant, or CPA, is a professional licensee who has qualified through a combination of education, experience and examination.
CPAs are distinct from unlicensed accountants in the following ways:
- CPAs are licensed by the state, where they maintain their firms.
- CPAs are also subject to continuing education requirements to maintain licensure.
- Accountants are held to their professional standards and code of ethics.
- CPAs are held to a fiduciary standard, where they must place their clients’ interests ahead of everything else.
All CPAs are accountants, but not all accountants are CPAs. Indeed, based on statistics from the Bureau of Labor Statistics (BLS) and CPA licensees data, only approximately 50% of accountants in America practice as a licensed CPA. When weighing accounting vs CPA services, please understand that the latter is usually more specialized and regulated.
CPA vs. Accountant: Code of Conduct and Ethics
There is no single regulator of accountants that has a single, unifying ethical code for them all. CPAs belong to the AICPA and are subject to the organization’s codified ethical principles and professional standards. The five sections this code has are:
- Duties: CPAs should be responsible for reasonable professional standards.
- Public service: A CPA's public service role is to be the public's conduit when it comes to financial and business aspects.
- Integrity: Ethics of the profession must be followed, and must be reflected in the behavior.
- Objectivity and independence: CPAs must be objective and not have a conflict of interest.
- Due diligence: To perform at their best, CPAs need to pursue continuing education, support, and reviews.
This is a tough code, which is why you should consider accounting and CPA services when you need to stay on the right side of the law and the financial games with strict legal and ethical practices.
CPA vs. Accountant: Exam and Licensing Cost
Accountancy courses and qualifications are cheaper than CPA courses and qualifications. There are several tiers of CPA Exam fees:
- CPA Exam Application Fee: $30-$200
- Examination Fee: ~$950
- CPA Review Courses: $1,200 to $3,600
- Re-Registration and Re-Testing Fees: $50 to $200
- International Charges: More Than $370 for Each Exam Section
Although the fees may be quite substantial, businesses have learned that investing in accounting and CPA services is worth the expense for accurate reporting and better financial decisions.
CPA vs. Accountant: Factors Influencing Salary Differences
There are numerous reasons for the difference in pay between CPAs and accountants. These include:
Qualifications and Education
It takes rigorous eligibility, including passing the CPA exam as well as earning continuing education credits. These are what make them more coveted by employees.
Roles and Responsibilities
Because of their unique expertise, as a rule, CPAs often assume more complex and higher stakes roles – from audits to forensic accounting, to tax strategy. These jobs pay more, of course.
Opportunities
An important thing to think about is the long-term effects on career prospects and earnings. There is a differentiator when it comes to taking the career leap. The CPA certification also allows for advancement into management and leadership positions that come with larger salaries and benefits. Furthermore, CPAs with specialities in forensic accounting, consulting, or tax expertise can justify even higher fees.
The Role of Geographic Location
Where you live could be a big factor in what you earn, too. In urban areas and high-cost-of-living areas, both accountants and CPAs make considerably more. But, there is little difference in wage when you compare CPAs to non-CPAs no matter where you go, because the CPA is valuable everywhere.
When to Employ an accountant?
You don’t always require the entire CPA. arsenal. Here are cases where it may make sense to hire an accountant:
- Daily bookkeeping and transaction records upkeep
- Managing their internal bookkeepers
- Responsibility for the ordinary payroll and budget examination
- Balancing books and reviewing financial statements
- Helping to plan the wider budget
If you are looking for day-to-day financial management, you may not want accounting or CPA services. An experienced accountant may be enough on his own.
5 examples of when to hire an accountant
- You need someone to record financial transactions.
- You need someone to oversee bookkeepers.
- Your business has expanded, and you need to hire an additional employee to manage payroll.
- You want help in reviewing financial statements and reconciling accounts.
- Budgeting has been hard, and you want to hire someone to help build and maintain them monthly, quarterly, and annually.
CPA vs. Accountant: Job Opportunities
Let’s look at both career paths to see the difference between a CPA and an accountant (non-licensed). For instance, if you’re a general accountant, you’ll probably work for one employer at a public or private company. You may work as:
- Accounting manager
- Financial or budget analyst
- Internal auditor
- Project accountant
- Risk analyst
- Management accountant
- Tax accountant
- Self-employed accountant
Meanwhile, a CPA may be employed in the following areas:
- Forensic financial accountant
- IT consultant
- Personal financial advisors
- Business valuator
CPAs can work for any company, including multi-national and international corporations, public accounting firms, governmental or not-for-profit organisations, and public companies that have to report their financial standings to the public and shareholders.
Qualifications for the CPA Professional Designation
The CPA professional designation is administered by the Association of International Certified Professional Accountants (AICPA). Every state has a board of accountancy that delineates the particular requirements for that state.
As a rule of thumb, you need an additional 150 hours of undergraduate or graduate education. You need between six months and two years of experience working in public accounting, depending on where you live. Then you sit for a four-part exam, with each part lasting four hours. You need to clear all the four parts in an 18-month time frame. The four CPA exam parts are assurance and auditing, financial accounting and reporting, regulation, and business environment and concepts. CPAs must also satisfy 40 hours of continuing education every year and comply with rigorous ethics standards from the AICPA.
Which to Choose: a CPA or Accountant?
The majority of companies and a good share of the well-heeled have a use for both. There’s an accountant you hire every day (bookkeeper) and you can never have too many accountants by your side, especially when it comes to tracking and recording your finances, staying on top of your bank accounts, reconciling statements, and breaking everything down so you know where and why your money went missing. You need a CPA more sporadically. If you are a public company, your audited financial statements must be prepared by a CPA. On a personal level, you need a CPA for anything more complex than a personal tax return, as well as to assist and advocate for you if the I.R.S. ever comes calling.
What to Consider When Deciding Whether to Hire a CPA?
Here are a few things to think about before hiring a CPA or handling it on your own:
- The current financial state of your business: Are you able to prepare accurate and up-to-date financial records, including balance sheets and profit and loss statements, without aid? Even if you can, think about all the time it takes to run all of your necessary financial reports and how you could be using that time in a more productive way if a CPA were handling it for you.
- Your grasp of personal vs. company income: Can you clearly articulate your income and know your business’s? As a small business owner, taxes can be challenging, and specifying how much of your income you’re earning is not only a necessity but also a legality.
- Your company’s accounting cycle and what it covers: Do you have good information and processes on the accounting cycle and the items that add up to proper financial management of your business? Feel good about how you want to handle your company’s accounting periods.
- Your company’s legal structure, and its tax issues: What kind of company are you running? Different types of entities — sole proprietorships, C corporations, S corporations and partnerships, for instance — have different tax treatments, and any confusion can land you with legal problems.
- The complexity of how your business makes money: The more complicated the ways your business brings in revenue, locales or industry (interstate or international vs. local) the more you will need a CPA to help it make sense.
- Your familiarity with tax laws: Tax laws are always changing. And even if you do have the time to keep abreast of changing requirements, the native complexities could make it hard to interpret them accurately. A CPA can help you figure out what tax deductions you do (or do not) qualify for and the specific tax rules your business needs to meet as the requirements change.
- Your business’s specific financial intricacies: Do you have complicated inventory or accounts receivable procedures? A CPA can put your situation in context with strategic tax filing for legal compliance and not just to achieve the most sound financial health.
Also Read | How do CPA Advisory Services Benefit Small Businesses?
Final Thoughts
The best way to choose between accounting vs. CPA services is to consider your unique needs depending on the size and particulars of your business or personal financial situation. General accountants can perform common financial duties such as bookkeeping, payroll, and budgeting, but certified professionals offer greater value when it comes to complicated tax issues, financial audits, and regulatory compliance. Long-range strategic business growth nearly always involves a combination of accounting and CPA services to ensure accuracy and intelligence at every level of the company.
