Accountant: Definition & Meaning
When you first think of an accountant, what comes to mind? Someone who sits and crunches numbers all day long? That’s definitely a big part of being an accountant.
However, there can be much more that goes into the job and it’s a critical business function. A small error here or there can have large and unintended consequences. There are several processes that need to happen and procedures that need to get followed.
So what does an accountant actually do? In this guide, we’ll break down everything that you need to know. Keep reading to learn more about the definition of an accountant. We will also cover their roles and responsibilities and some other important information.
Table of Contents
- Accountants are specially trained to keep and interpret financial records for businesses and organizations.
- Primary responsibilities can range depending on the type of business. But they can include financial statement analysis, account analysis, and auditing.
- There are several different types of accountants. These can include private, public, fiduciary, governmental, investment, cost accountants, and forensic accountants.
- Accounts will need to have some type of degree in accounting. They can also achieve additional designations, such as becoming a Certified Public Accountant (CPA) or Certified Management Accountant (CMA).
What Is an Accountant?
An accountant will often wear many different hats. They are professionals trained to keep and interpret financial records.They are an important part of every company, whether it’s a small business or a large organization.
As mentioned, an accountant does more than crunch numbers throughout the day. They will do things like financial statement analysis, auditing, account analysis, make accrual and closing journal entries, and make sure that loan payments are categorized correctly. Plus, they ensure the accuracy of different financial records and often review the bookkeeper’s work.
The reports can include things like balance sheets, income statements, and ensuring the general ledger is accurate. They can work with large or small businesses, or even have their own accounting practice.
There are certain testing and educational requirements that an accountant must meet. A Bachelor’s Degree is usually the first step with additional credits needed if they want to obtain a certification offered by various professional associations.
Accountants play a big role in understanding the health and efficiency of your business. Where a bookkeeper may concentrate on the day to day details, an accountant may take a higher view and be able to recognize how the numbers work together and tell a story about how a business is doing.
What Are the Main Tasks of an Accountant?
Depending on the type of business you operate and some of your needs, an accountant can have any number of tasks. Here are some of the main roles and responsibilities that an accountant can take on.
- Auditing. Accountants interact with both external and internal auditors when audits get completed.
- Payroll. This can include all payroll requirements, including gathering payroll data and processing payrolls.
- Billing. Submitting and receiving invoices is an important responsibility. This can include billing invoices to clients, vendors, and staff.
- Budgets. Having an accurate budget is an important part of a business. Accountants prepare and review budgets that include items like revenue, expenses, and staff projections.
- Statements. Accountants prepare profit and loss statements, cost accounting reports, and monthly closing. They also prepare ad-hoc reports requested by the management, like profitability reports.
- Analyzing trends. This can include revenue and expenditure trends, ensuring that the expected revenue is not missing and to control expenditures. It can also include things like determining the right budget levels.
- Preparing entries. Accountants will balance general ledger accounts, prepare account entries, and document business transactions.
- Discrepancies. Skilled accountants can resolve certain discrepancies with accounts to ensure they’re accurate. They will be able to figure out why accounts don’t reconcile, certain checks were not cashed and will decide how to fix the issues.
- Inputting data. Handling sensitive financial data and inputting it correctly is critical to business operations.
- Procedures. An accountant will coordinate, maintain, and establish implementing accounting control procedures.
- Filing. This can include manual filing systems and automated computer software systems. Accountants will also develop and maintain a business’s financial database.
There are a broad range of roles and responsibilities that an accountant can take on. Regardless of their duty, there is an obligation to avoid negligence and to act honestly. This helps ensure financial records are accurate and compliant with regulations and laws.
Within several of the responsibilities of an accountant, there’s a large emphasis on preparing reports. Ensuring that this gets done efficiently and accurately is crucial for business operations.
Financial statements are some of the most important reports an accountant will produce. These get issued to owners and operators of a business. They can also get produced for creditors and lenders.
At the end of the day, it doesn’t matter who they’re prepared for. The main financial statements will include reports like income statements, statements of cash flows, and the balance sheet.
Management reports are customized reports that will include areas like product line sales that get sent to a management team. They can also include cost variance investigations and other types of analysis.
Tax reports are another critical responsibility of an accountant. These get prepared and issued to the proper government authority. They can include several pieces of information, such as sales taxes and income taxes.
Different Types of Accountants
While the first thing that comes to mind is managing finances, there can be many ways this happens. Let’s take a closer look into some of the different types of accountants.
A private accountant is an employee of a single business or organization. They get paid a salary by the business and would handle their accounting needs. Even if the accountant is part of a public business, they’re still considered private.
A public accountant provides accounting services to the public. A public accountant can own their own practice, or work in an accounting business. Public accounting services can be offered by both certified and non-certified public accountants, and are offered to other businesses or governments.
An auditor helps to ensure that the accounting records of a company are accurate. Typically, private companies and governments will hire auditors to ensure financial records are efficient. This can be for individual businesses, non-profit organizations, corporate companies, and different government agencies. Some larger organizations employ internal auditors, who regularly check the accounting records. Outside auditors are usually hired to issue audit and compile reports.
A consultant helps by playing a role in the growth of a company. They’re able to lend their knowledge and expertise to clients to better understand how accounting records and reports will affect operations. They can also play a critical role in evaluating the profitability of businesses and executing accurate and reliable accounting practices.
Fiduciary and Forensic Accountant
This type of accountant generally acts as a witness in a court of law if there’s a case of misappropriation or deception. They’re incredibly skilled with analytical and accounting skills to help highlight potential fraud, or detect errors of omission. A forensic accountant can also look into a company’s financial records to make sure that no fraud has been committed, or if it has been committed, to figure out how it happened.
Governmental accountants work for branches of government or a non-profit organization. They follow slightly different accounting principles than private and public accountants.
Investment accountants generally focus on accounting for portfolios of investments like real estate portfolios or securities commodities. This type of accounting is typically a part of a hedge fund or mutual fund, for example.
Important Accountant Skills
To become an accountant you will have to get an accounting degree and possibly other designations. There are some skills that are important to have in the accounting profession like a high attention to detail and deep analytical skills to help avoid errors.
An accountant should have excellent communication and organizational skills. There is a need to accurately gather the right facts and figures from many moving parts. For example, communicating effectively with stakeholders and managers avoids the possibility of miscommunication. It’s also beneficial to be able to explain the data in layman terms, so business owners can understand what’s going on without having to look up official accounting terms.
Great communication skills allow an accountant to articulate details. It helps in preparing certain types of reports and other financial transactions. Critical thinking and mathematical skills are also important no matter the accounting field.
Accountants are responsible for interpreting and keeping all financial records of a business. They take on the responsibility of examining and preparing financial records. This makes sure that any money transactions a business has are accurate.
Plus, accountants play a big role in ensuring that taxes are filed and paid on time, are accurate, and are paid to the right government entity. There can be private or public accountants, or even fiduciary or forensic accountants.
FAQs on Accountant
The first thing that you should do is find out what requirements your state has for becoming a CPA. Once you know those details, you’ll need to complete a degree in accounting, plus there’s often additional college credits to accumulate. Then you’ll need to take and pass the CPA exam, which will test your knowledge of accounting standards. You will also need to gain practical working experience before you receive the CPA license.
Accountants play an important role in every type of business. If you like numbers, analysis, and don’t mind consistent and sometimes unchanging types of tasks, being an accountant could be a good career choice. There are often lots of opportunities and there are many different types of accountants, so you can try and align it with your interests.
It’s all going to depend on the type of accountant you are, your professional designations and the type of industry you work in. That being said, most accountants in the United States earn well above $50,000 per year. The median salary for an accountant is around $70,000 per year.
With accurate accounting information, investors can determine if an investment makes sense for them. They will look at the value of an asset and better understand which financing sources should be used to obtain the investment. Accounting helps to calculate things like probability and estimate potential risks. They would look into a company’s balance sheet and profit and loss to find some of this information.
The primary responsibilities of an accountant will depend on their specialty or what type of business they work for. They can range from preparing tax returns, monitoring budgets, auditing services, and financial forecasting. An accountant might take on advising duties and present budget reports to management or even help to implement a new accounting software.
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