What Is An Accountant And What Do They Do?

Increase your understanding of accountants' critical role in business.

While you may have a basic understanding of accounting, founders and entrepreneurs often wonder what do accountants do and what’s their role in business.

An accountant’s job is to ensure that all financial transactions are recorded in the books of account and reported to stakeholders and external parties.

To do this, they track revenue, record expenses, and calculate the tax obligations of businesses and individuals by reviewing and analyzing the financial statements. 

Key Takeaways

• Certified Public Accountants work for accounting and auditing firms or large corporations. 
• Many accountants become financial consultants and tax advisors.
• They keep track of income and expenses, documenting, reporting, and forecasting costs.
• Some accountants specialize in tax planning or forensic accounting.
• The pinnacle of the accounting profession is the Certified Public Accountant (CPA).

All accountants have similar basic training and education but branch out into various specializations, such as external auditors or management accountants.

They may get involved in project planning, cost analysis, auditing, and financial decision-making or become advisors who perform tax planning or consulting.

To fully understand an accountant’s role in business and expose what they do, you first need to understand exactly what an accountant is.

What Is An Accountant?

Accountants handle a wide range of finance-related responsibilities for small and medium-sized businesses, government departments, large listed companies, or individual clients.

The term "accountant" is frequently used interchangeably with several other accounting terms, which can lead to misunderstandings about the true scope of accounting jobs. 

For instance, although the terms "accountant" and "bookkeeper" are occasionally used synonymously, they have a few essential distinctions that set them apart.

Bookkeepers collect, file, and capture financial transactions, recording their values in an accounting package like Xero or Quickbooks, and hold at least an associate's degree. 

They report to accountants who normally hold a bachelor's degree in accounting and are responsible for evaluating financial data rather than just collating financial records.

An accountant who passes the CPA exam and fulfills various state licensing criteria is known as a certified public accountant (CPA). 

What Do Accountants Do?

Many accountants start their careers in accounting and auditing firms where they learn the ins and outs of practical accounting, usually preparing audit files and financial statements.

After a few years, they take charge of a client’s accounting or auditing duties and may work in more specialized divisions such as tax, mergers, and acquisitions.

Large accounting firms sometimes focus on specific industries, such as banking or oil and gas, and accountants become known for their expertise in these areas.

Accountants at these firms may move to a company in these industries after finishing their training and becoming fully-fledged certified public accountants.

Starting At The Bottom

Another route some accountants take is to join a company and start at the bottom, either as a filing clerk or general assistant in the accounting department.

By working through the accounts receivable and accounts payable financial records, new accountants learn how a business operates and set them up for their next role.

Staff accountants also record invoices, follow up on debtors, and liaise with creditors to make payments or control purchases and stock levels.

These accountants build up sufficient knowledge of the business to become the head of the accounting department or move to more senior roles elsewhere.

Accounting Specializations

There are many other routes that accountants may take, such as forensic accountants who search digital financial records for signs of fraud. 

Others may become tax specialists, preparing business tax returns and related documents or even testifying in court regarding fraud or tax disputes.

To follow these more advanced careers, accountants must be certified by a national professional body and fulfill state-specific standards for education and examination.

Roles & Responsibilities

Generally speaking, the duties of an accountant depend to a large degree on where they work but include standard accounting functions, such as:

• Carrying out analyses of risk assessments.
• Keeping track of spending and financial reporting.
• Collaborating with external auditors.
• Ensuring the financial accounting records are accurate and adhere to all applicable local, state, and federal laws.
• Tracking payments and disbursements.
• Checking financial records and transactions to ensure everything is in order and address any inconsistencies.
• Putting together tax returns and supporting documentation and schedules.
• Evaluating financial data and offering clients strategic advice and recommendations.
• Creating and controlling budgets and forecasts.

Accountants may work at larger accounting firms, aiming for a partnership, or establish a private practice, building a client base of their own.

Private-sector accountants might analyze accounts, check financial statements and other reports for accuracy, control financial operations, and prepare tax returns.

They may also offer advice on areas requiring cost- and efficiency-cutting measures, conduct risk management assessments, and produce forecasts and cash flow statements.

The requirements for certification vary by occupation; some require passing challenging exams, while others require a bachelor's degree and additional coursework.

Common Misconceptions About Corporate Accountants

There are many misconceptions about accountants, especially among business owners and founders who have little experience working with larger organizations.

When accounting for startups, accountants play an invaluable role in ensuring that the business meets its financial targets and deadlines.

Here are some of the things that you may think about your accountant that are simply not true:

They Only Deal With Numbers

Many people believe accountants solely deal with numbers and calculations, and while numerical proficiency is required, the job entails much more.

A modern accountant also requires strategic thinking, problem-solving, and communication skills to deal with the constantly changing economic landscape.

This misconception may have led to fewer accountants becoming CPAs, with declining student numbers over the last few years, according to Ernst & Young.

Being Boring or Uncreative

There's a classic stereotype that accountants lead dull and uninteresting lives when, in reality, accountants often work in dynamic environments.

Depending on the industry and their role, accountants often collaborate with clients and colleagues to find innovative solutions to various financial challenges.

Naturally, they must follow basic accounting principles, but the accountant's role can make or break a new business, especially in very competitive industries.

Limited Career Opportunities

Some may think that accounting offers limited career growth and advancement prospects despite the field's wide range of specialties and limitless number of industries.

Depending on their education and interests, accountants can pursue careers in auditing, taxation, forensic accounting, or financial analysis, among many other pathways.

Always Working Alone

Contrary to popular belief, accountants don't always work in isolation, collaborating with teams, interacting with clients, and engaging in cross-functional projects.

This requires strong interpersonal skills as well as the ability to understand a wide range of subjects and assimilate differing points of view.

Focused on Taxes Only

While tax preparation is a significant part of accounting, it's not the only service accountants provide, offering financial planning, auditing, consulting, and advisory services.

Only Necessary During Tax Season

This leads to the next misconception: that accountants are only needed during tax season - when businesses and individuals require accounting services throughout the year.

A business must regularly engage with an accountant to make informed decisions, manage its finances, and ensure compliance throughout the year.

All Accountants Are the Same

Not all accountants perform the same duties or possess the same qualifications, as there are numerous different types of accountants.

These include:

• Public accountants 
• Management accountants
• Auditors 
• Tax accountants
• Bookkeepers

Lack of Creativity

Accounting is considered a rigid, rule-bound profession stifling creativity, but accountants often encounter complex financial problems requiring creative thinking and innovative solutions.

For a business to make informed decisions, manage its finances, and ensure compliance, it must engage with an accountant regularly.

The biggest gig economy companies such as Uber, Lyft, and Toptal all employ a range of accountants from entry to senior management level.

Accountant Vs. Certified Public Accountant: What Is The Difference?

A CPA and an accountant are not the same, as an accountant is usually a professional who only holds a bachelor's degree in accounting.

Certified Public Accountants (CPAs), in addition to holding a degree, are professionals who obtain their CPA certification through school, experience, and examination.

They are licensed by a professional regulating body and must complete continuing education requirements to maintain their professional status and license.

These accountants are subject to professional standards and codes of ethics that unregistered accountants are not, but this doesn’t mean that they're immune from criminality.

CPAs are held to a fiduciary standard, which requires them to prioritize their client's interests above anything else, especially public money.

An Accountant's Daily Activities

Accountants may enjoy a variety of tasks depending on the type of industry they’re in and their level within the organization.

A primary task involves bookkeeping, which is the process of recording financial activities such as sales, purchases, and costs using accounting software or ledgers.

They may conduct various account reconciliations, ensuring that bank statements, invoices, and other financial records match the company's accounting system.

Accountants also offer accounting tips and help to their employers so that the business runs more smoothly and is more profitable.

Preparation of Financial Statements

Preparing financial statements involves creating balance sheets, income statements, and cash flow statements to present a snapshot of the company's financial situation.

Managing accounts payable and receivable, tracking and processing customer payments, and making payments to vendors or suppliers are vital.

Planning is important, so creating budgets and financial projections based on past performance and future business goals plays a large role in senior roles.

Tax Compliance

Tax preparation and compliance entails calculating and filing taxes for individuals and businesses in accordance with applicable tax laws and regulations.

Analyzing financial data to detect trends, evaluate performance, and make recommendations for improvement is another important undertaken regularly by more senior accountants.

Internal auditors review financial records, assess internal controls, and identify anomalies or irregularities to ensure the integrity of businesses’ accounting records.

Accountants in private practice may advise clients and coworkers on financial planning, investment strategies, and risk management, depending on each unique set of circumstances.

Much of a day involves client, management, or external stakeholder meetings to present financial reports, answer inquiries, and resolve financial problems.

Types Of Accountants

There are many different jobs in the accounting field and depending on interests and education, these are some of the types of accountants you’ll encounter:

Certified Public Accountant (CPA)

As far as accountants go, CPAs are the highest-paid accountants and may occupy a variety of senior roles across all industries and government departments.

Washington, New York, and California are the states in which CPAs earn the most money, with the Bureau for Labor Statistics showing average earnings of $78,000 per annum.

Certified Management Accountant

A Certified Management Accountant, also known as a CMA, analyzes budgets and assists businesses in meeting their financial planning objectives.

They generally supervise less experienced accountants and focus on completing profitability analysis and risk assessments for various investments and projects.

According to a survey conducted by the Institute of Management Accountants, CMAs can expect to earn 24% more than non-CMAs.

Staff Accountant

Staff accountants are in charge of generating and keeping financial records, invoice coding, account reconciliation, balance sheet preparation, and ledger maintenance.

Salaries for staff accountants vary widely based on geographic location, but they can expect to earn in the region of $72,700 on average.

Enrolled Agent (EA)

Qualified tax professionals who represent taxpayers before the Internal Revenue Service are called enrolled agents and must pass an IRS test first.

This is the perfect job for accountants who enjoy tax law, and they can expect to earn in the region of $42,500 per year.

Investment Accountant

Accountants with an interest in investments may work at brokerage firms or for portfolio managers, where they monitor and analyze investment activity.

Their work helps individuals and organizations to better manage stocks, bonds, and other investment assets and can be a very lucrative career move.

Certified Internal auditors

Internal auditors provide a safety net for companies by ensuring that their systems are robust and complement the work of external auditors.

By reviewing company data and financial documents, they assess financial risk, identify fraud, and maintain accurate records for the company’s management team.

Forensic accountants

A forensic accountant employs their accounting and analytical abilities to investigate a person's or company's financial transactions to identify fraud. 

They are frequently called upon as experts in legal matters involving financial fraud or embezzlement.

An experienced forensic accountant can expect to earn up to $150,000 per year, with an average salary of $85,100 in the industry.

Tax Accountants

Tax practitioners prepare and file tax returns for companies and individuals, helping them maximize their tax savings and guaranteeing that tax returns are legally compliant.

The best tax professionals are detail-oriented, have good problem-solving skills, and have mathematical abilities, earning an average of $82,000 per year.

The Impact of Regulatory Changes on Accounting Practices

Accounting is a dynamic profession that must constantly adapt to changing regulations brought about by advances in technology and new industries.

When regulatory shifts took place, such as the new IFRS 9 standards, it increased the complexity for accountants who needed to adapt quickly.

Likewise, when changes such as the ASC 606 compliance requirements were implemented, they impacted financial reporting, auditing, and business compliance.

Most recently, the creation of new asset classes in the crypto world increased uncertainty in classification and reporting, requiring accountants to adapt to new norms.

These changes make for an interesting and challenging work environment in which accountants play an increasingly pivotal role.

The Future of Accounting

Remote work has become an integral part of the accounting landscape, with a global pool of gig workers available to provide a competitively priced workforce.

This availability gives companies unprecedented flexibility and allows accountants greater choice in where they work and on what terms.

Globalization is not without its challenges and requires accountants to have an understanding of diverse standards and cultures to be successful.

With the increased focus on sustainability, reporting requirements offer those with expertise in environmental and social impact greater choice in where they work.

As the future of business becomes clearer, more specialized career paths will open up, offering opportunities for forensic and environmental accounting.

Machine learning will help handle the increasing volume of financial data as data analytics becomes more difficult for humans to process alone.

Accountants will evolve their role in the future as they transition from number crunchers to strategic business advisors with strong communication and problem-solving skills.

Summary

Certified Public Accountants are the most well-known type of accountant, but they are just one of many different roles within the accounting industry.

Most accountants are involved in financial reporting as well as the management of a company's day-to-day financial resources and tax affairs.

So, whether they work for public accounting firms, investment banks, or within government, accountants play a crucial role in our economy.