What is an Accountant?

Robinhood Learn
Democratize finance for all. Our writers’ work has appeared in The Wall Street Journal, Forbes, the Chicago Tribune, Quartz, the San Francisco Chronicle, and more.
Definition:

An accountant is a professional who tracks and assesses the finances of organizations or individuals by preparing different types of statements, ensuring their accuracy according to applicable laws and regulations.

🤔 Understanding accountants

An accountant is an individual who performs accounting functions. He or she works independently or as part of an organization, often involved in tracking the finances of companies, governments, or individuals. Depending on the scope of their assignment, accountants may prepare tax returns, report business operations in financial statements, review the accuracy and legal compliance of accounting records, analyze budgets, predict the economic impact of different decisions, and/or make recommendations for improving finances. Because the accounting profession is heavily regulated, accountants typically complete years of academic and technical training, including completion of licenses such as the certified public accountant (CPA), enrolled agent (EA), and certified management accountant (CMA). Generally, accounting licenses are subject to national and state-specific requirements.

Example

Starbucks employs different accountants to support its business operations and meet compliance requirements. The company hires accountants to provide accounting services, including preparing financial statements, filing federal and state tax returns, establishing differences between estimated and actual figures, and supporting management. Because Starbucks trades on a stock market, the company is legally required to report to investors and the government certain financial information. So some of Starbucks’s accountants also prepare financial statements according to those legal requirements. Additionally, Starbucks has hired Deloitte & Touche since 1987 to audit its financial reports. Accountants are an essential part of Starbucks’s operations.

Takeaway

Accountants are like mathematicians…

Mathematicians are able to express ideas using numbers and concepts from several disciplines, including algebra, calculus, and geometry. Through years of study and training, mathematicians become skilled at interpreting situations through an established set of rules. Likewise, accountants record, summarize, and report the activities of individuals and businesses according to a wide range of accounting principles and legal requirements.

Ready to start investing?
Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

Tell me more…

What is an accountant?

An accountant is a professional who accurately records and maintains the activities and transactions of an individual, business, or government in a series of documents, including:

  • Financial statements: A series of reports (e.g. income statement, balance sheet, and cash flow statement) that companies use to share important information about their financial situations.
  • Tax returns: Forms to file federal taxes with the Internal Revenue Service and state taxes with state tax agencies.
  • General ledger: A master record that keeps entries for all the financial transactions (a.k.a. “money in” and “money out”) for a company.

Accountants review, summarize, and report business and financial data according to applicable laws and regulations. For example, financial statements for public companies must comply with generally accepted accounting principles (GAAP) — a commonly followed collection of guidelines set by policy boards for reporting financial numbers. Additionally, accountants are capable of performing an audit — a formal review of the accuracy of a person’s or company’s financial statements.

The accounting profession is ever-evolving and its guidelines and government regulations are continuously updated to reflect the current business environment and updates to applicable laws and statutes. So an accountant needs to complete extensive academic and professional training, often obtaining professional designations, such as the certified public accountant, enrolled agent, and certified management accountant.

While some accountants work for a specific company, government, or organization, other accountants may work on their own and have several clients.

What does an accountant do?

An accountant uses accounting books and software to maintain the financial records of a business, government, or individual. Most accountants opt to use software for more efficient storage, organization, maintenance, and retrieval of financial data. Since it’s essential for their jobs to ensure accuracy and compliance of their records, accountants follow established guidelines and best practices allowing them to verify their calculations and findings.

The specific job description of an accountant depends on several factors, including place of employment, industry, level of specialization, and career path. For example, one accountant may focus only on preparing federal and state tax returns for individuals, while another accountant may focus only on practicing forensic accounting — the searching, collection, and interpretation of accounting-related evidence to assist in the decision-making of legal or administrative processes.

Let’s review some types of accountants to understand what they do:

  • Private accountants: Professionals who are employed by a single company and only perform accounting services, such as financial reporting and bookkeeping, for that company are private accountants. Private accountants set up and maintain internal systems and processes for a company to accurately and efficiently record its transactions. Private accountants prepare reports only for the company’s management and not for the general public.
  • Public accountants: Unlike private accountants, public accounts are professionals who deliver accounting services, such as filing taxes, preparing financial statements, and creating and reconciling budgets, to other firms. Firms often hire public accountants to keep an arm's length relationship between management and accounting and to verify the work of private accountants. Public accountants need to complete licenses such as the certified public accountant designation.
  • Government accountants: Employed by a federal, state, or local agency, a government accountant keeps the records of the agency to make sure that taxes are being spent according to applicable rules. Another duty is to audit the tax filings of individuals and businesses.

What is the difference between a certified public accountant (CPA) and an accountant?

The main difference between a certified public accountant (CPA) and an accountant is that a CPA holds a license issued by a state board of accountancy, and an accountant doesn’t. A key component for obtaining a CPA license is passing the Uniform CPA Examination from the American Institute of Certified Public Accountants (AICPA).

The process to get a state-issued CPA license is comprehensive and lengthy:

  • A CPA candidate must complete the necessary requirements in one of the 55 U.S. Board of Accountancy jurisdictions to sit for the Uniform CPA exam. For example, the Maryland Board of Accountancy requires candidates to complete 120 semester hours of eligible academic coursework, among other requirements.
  • After completion of the educational requirements, a CPA candidate is ready to sit for the Uniform CPA exam, which has four sections, each one with a four-hour time limit.
  • Then, a CPA candidate who successfully passes the exam needs to complete the necessary work experience to qualify for a CPA license from the state. For example, in Hawaii, you would need 1,500 billable hours in full-time experience or two years of satisfactory professional experience.
  • Once a CPA obtains a license, he or she needs to complete additional professional development requirements from the state board of accountancy to retain the license. Alabama’s board of accountancy requires 40 hours of professional development annually to renew a CPA license.

Another difference between a CPA and an accountant is that only those accountants holding a valid CPA license may sign the financial statements filed by publicly traded companies with the Securities and Exchange Commission — the government agency in charge of ensuring the fair and orderly functioning of the securities markets in the United States.

What is the historical importance of accountants?

Historians have found records of accounting systems across several civilizations, including Egyptian, Roman, and Greek. Prior to the invention of a standardized numeric system, accountants used clay tokens to keep an inventory of grains and animals.

Rulers had a vested interest in keeping track of commercial trades, inventories, taxes, and expenses, so early accountants played a crucial role in developing different systems and processes for those tasks.

Luca Pacioli is commonly referred to as the father of accounting because he laid the foundation of the modern accounting system in his book Summa de Arithmetica Geometria Proportioni et Proportionalita in 1494. He introduced the double-entry system to the world through the use of the Latin terms credito (owed to X by the firm) and debito (owed or belonging to the firm). In accounting, every debit must be balanced by a credit in a company’s general ledger.

In the United States, the very first certified public accountant (CPA) exam took place in New York in 1896. Over time, the CPA license has become a coveted standard of the accounting profession, with more than 650,000 actively licensed CPAs nationwide as of 2019.

What are the legal responsibilities of accountants?

Accountants have several legal responsibilities because their actions have financial ramifications. For example, the tax refund of an accountant’s client depends on the decisions that the accountant takes when completing the client’s return. Another example is an investor basing her decisions on the financial statements completed by an accountant and filed by a company with the Securities Exchange Commission (SEC).

Federal and state governments and governing bodies of the accounting profession (e.g., the American Institute of Certified Public Accountants, the Institute of Management Accountants) set laws, legal codes, and rules that accountants must follow when providing accounting services to clients. Additionally, industry governing bodies and state boards of accountancy set standards of professional ethics and require continuous professional development in ethical behavior to renew a license.

What are the qualifications to become an accountant?

There are four qualifications to become an accountant:

  • Completing a bachelor’s degree with eligible coursework to become eligible to sit on the exam for a license
  • Obtaining professional, full-time work experience that meets the licensing requirements for a state board of accountancy
  • Passing an official exam towards a license
  • Obtaining and retaining a license by completing continuous professional development and adhering to the accounting standards and ethics guidelines from the board issuing the license

Several industry licenses exist in the accounting industry. If you’re looking into becoming an accountant, you might consider one of these licenses:

  • Certified public accountant (CPA)
  • Enrolled Agent (EA)
  • Certified management accountant (CMA)
  • Certified Internal Auditor (CIA)
  • Certified Systems Auditor
  • Accredited in Business Valuation (ABV)

What skills do accountants need to have?

Accounting can be a demanding industry requiring you to have strong skills in reading comprehension, mathematics, critical thinking, and communication.

Technological advances have affected the industry, and accountants need to be proficient in software and information systems for word processing, organizing files, doing calculations, and making entries. Depending on job function and industry, an accountant may need to use specialized accounting software for different purposes, including tax preparation, financial analysis, and asset management.

Due to the cyclical nature of the industry, accounting firms often expect accountants to work overtime to meet deadlines during peak periods of the year, such as tax season or the end of a fiscal year.

Ready to start investing?
Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

1318288

Related Articles

You May Also Like

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

1771482

© 2022 Robinhood. All rights reserved.
Follow us on

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

1771482

© 2022 Robinhood. All rights reserved.