Frequently Asked Accounting Questions
Accounting FAQ Answers
What is accounting?
Accounting is a language to communicate financial information usually in the form of financial statements that show in monetary terms the economic resources under the control of management. The American Institute of Certified Public Accountants defines accounting as "The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."
What is an accountant?
In the United States a legally practicing accountant is a Certified Public Accountant. Accounting work may be performed by uncertified individuals who work under the supervision of a Certified Public Accountant (CPA). CPA’s are licensed by the state in which they reside. The specific requirements vary by state although the passage of the Uniform Certified Public Accountant examination is required by all states. The exam is designed and graded by the American Institute of Certified Public Accountants.
What are the educational requirements to become an accountant?
Most accountants have at least a bachelor’s degree in accounting and many have a master’s degree. Most states require that you complete 150 credit hours of college level courses before sitting for the CPA. That is the equivalent of the hours required to complete a master’s degree.
Are there additional requirements to specialize or be certified in a particular accounting area?
Yes. The minimum number of credit hours the AICPA requires in a master’s program is 30 and of those 21 must be accounting related. Specializations can require up to 64 credit hours to complete with the additional hours being related to the specialization. The AICPA recognizes three specializations: Personal Financial Specialist (PFS), Accredited in Business Valuation (ABV), and the Certified Information Technology Professional (CITP). The Institute of Internal Auditors (IIA) offers a certification as a Certified Internal Auditor (CIA). The IIA also offers the designations of Certified in Control Self-Assessment (CCSA), Certified Government Auditing Professional (CGAP), and Certified Financial Services Auditor (CFSA) to those who pass the exams and meet educational and experience requirements. The Accreditation Council for Accountancy and Taxation certifies Accredited Tax Advisors (ATA) and Accredited Business Accountants (ABA). The IRS certifies Enrolled Agents (EAs) who have to pass a rigorous test and background check administered by the IRS. The Institute of Management Accountants confers the Certified Management Accountant (CMA) designation on those who pass an exam and meet the requirements.
Are there different distinct types of accountants?
There are three types of accountants
Public accountants prepare taxes and financial statements, consult on financial strategies, do forensic accounting work, and perform financial analysis.
Cost accountants sometimes called management accountants, work for businesses and organizations providing budgets, evaluating ongoing business functions and processes, advising on business opportunities as well as providing information on the business or organizations assets, costs and liabilities.
Government accountants perform work for governments or businesses regulated by governments. Government accountants make sure financial laws and regulations are being followed by businesses and government organizations.
In addition to these main types of accounting practices some accountants specialize in internal audit functions and/or forensic accounting. Internal auditors establish and implement internal controls for business and government organizations to help prevent fraud, embezzlement and other financial abuses. Forensic accountants help establish the documentation of fraud, embezzlement or other crimes often working with law enforcement, government regulators and prosecutors.
What does an accountant earn?
According to the US Bureau of Labor Statistics,
"Median annual earnings of wage and salary accountants and auditors were $54,630 in May 2006. The middle half of the occupation earned between $42,520 and $71,960. The top 10 percent earned more than $94,050, and the bottom 10 percent earned less than $34,470….According to a 2007 salary survey conducted by Robert Half International, a staffing services firm specializing in accounting and finance, general accountants and internal auditors with up to 1 year of experience earned between $31,500 and $48,250 a year. Those with 1 to 3 years of experience earned between $36,000 and $60,000. Senior accountants and auditors earned between $43,250 and $79,250, managers between $51,250 and $101,500, and directors of accounting and internal auditing between $68,000 and $208,000. The variation in salaries reflects differences in size of firm, location, level of education, and professional credentials."
What are job prospects for accountants?
According to the US Bureau of Labor Statistics, “Strong growth of accountants and auditor jobs over the 2006-16 decade is expected to result from stricter accounting and auditing regulations... The best job prospects will be for accountants and auditors who have a college degree or any certification, but especially a CPA.”
I am a small business, why do I need an accountant?
Accountants are not just number crunchers. An accountant can provide you with advice on cash flow, possible savings, how to raise capital, tax advantages, and most importantly an accountant will free up your time to run your business.
When do I need a tax accountant to file my taxes?
If you are an individual, sole proprietor or small business owner who is comfortable doing your own bookkeeping and filing your annual tax returns you need to hire an accountant when it costs you more in time and potential earnings to do your accounting/tax work than you would pay an accountant. At that point it makes since to hire an accountant.
If I am doing my own tax preparation and filings are there software or online accounting/tax packages to help me?
There are hundreds of personal and small business accounting/tax preparation software and online programs to choose from. Some of the more popular accounting software packages are marketed as QuickBooks. The QuickBooks software comes in a variety of packages offering functionality ranging from simple to complex. QuickBooks also offers an online version of its accounting package. QuickBooks accounting products are produced by Intuit who also makes Turbo Tax a popular tax preparation application that is compatible with the QuickBooks accounting software. Other reputable accounting packages include Peachtree Pro by Sage, Sage BusinessVision Accounting 50, Netsuite Simply Accounting, Netsuite, AccountEdge (compatible with Macs), and MYOB.
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