what is an accountant

What is an accountant?

An accountant is a person who records business transactions on behalf of an organization, reports on company performance to management, and issues financial statements. Here are several examples of the types of transactions in which an accountant may become involved:

  • Issuing an invoice to a customer, which involves recording a sale and account receivable.
  • Receiving an invoice from a supplier, which involves recording an expense or asset and an account payable.
  • Issuing a salary or wage payment to an employee, which involves recording an expense and the outflow of cash.
  • Reconciling a bank statement, which likely produces adjustments to the cash account.

In addition to transaction recordation, an accountant produces a number of reports. The key types are as follows:

  • Financial statements are issued to the owners and/or operators of a business, as well as to lenders and other creditors. The financial statements include the income statement, balance sheet, and statement of cash flows.
  • Management reports are issued to the management team. The reports are highly customized to the needs of each entity, and may cover such topics as the sales of certain product lines, investigations of cost variances, sales returns, and an analysis of overtime incurred.
  • Tax reports are issued to several government entities. The reports provide detail regarding the amounts paid for income taxes, property taxes, sales taxes, use taxes, and so forth.

Accounting Processes

An accountant may be involved in the creation of a number of processes within a business, which typically include several controls to ensure that assets are properly managed. Examples of such processes are shipments to customers, receipts from suppliers, and cash receipts from customers. These processes need to be revised whenever the operations of a business change, such as when a new product line is offered to customers.

Areas of Accounting Specialization

There are many sub-fields within accounting in which a person can specialize. For example, there are tax accountants, cost accountants, payroll clerks, inventory accountants, billing clerks, general ledger accountants, and collection clerks. This level of specialization is needed in order to increase the efficiency with which certain tasks are conducted. These specialized areas all operate under the supervision of a controller.

Accountant Certifications

An accountant may choose to pursue a certification, of which the most prestigious is the certified public accountant (CPA) designation. A CPA license is required before a person can audit the books of a client organization. Another option is the certified management accountant (CMA) designation, which is targeted at improving the management accounting and financial accounting skills of accountants. The Certified Internal Auditor (CIA) designation is intended for those who work on auditing tasks within a business.

Understanding Accountants

Accountants are financial professionals who take charge of a series of accounts—either private or public. These accounts may be owned by either a corporation or individuals. As such, they may find work with corporations of different sizes—small to large—governments, different organizations like non-profits, or they may set up their own private practice and work with individuals who enlist their services.

They perform multiple accounting duties which vary based on where they work. Accountants perform account analysis, review financial statements, documents, and other reports to ensure they are accurate, conduct routine and annual audits, review financial operations, prepare tax returns, advise on areas that require more efficiencies and cost-savings, and provide risk analysis and forecasting.

An accountant’s duties often depend on the type of educational background and designation they receive. Most professionals in the field possess bachelor’s degrees and—if employed by a corporation—may require certification to move up within the firm. Certification requirements vary, with some roles requiring additional educational requirements above the bachelor’s degree and successful completion of rigorous examinations. Accountants can have more than one designation. But the most common accounting designations are the Certified Internal Auditor (CIA), Certified Management Accountant (CMA), and Certified Public Accountant (CPA). A Certified Internal Auditor doesn’t need to receive any license in order to practice, and neither do Certified Management Accountants.  

Special Considerations

Accountants must abide by the ethical standards and guiding principles of the region where they practice, such as the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). The IFRS is a set of rules issued by the International Accounting Standards Board (IASB). These rules promote consistency and transparency in financial statements. GAAP, on the other hand, is a set of standards that accountants must adhere to when they complete financial statements for any publicly-traded companies.

Certified public accounts are legally and ethically responsible to be honest, trustworthy, and to avoid negligence in their duties. CPAs have real influence over their clients, which means their judgment and work can affect not just an individual but an entire company—including its employees, its board, and its investors. Accountants may be held liable for paying uninsured losses to creditors and investors in the case of a misstatement, negligence, or fraud.

Accountants can be held liable under two different types of law—common law and statutory law. Common law liability includes negligence, fraud, and breach of contract, while statutory law includes any state or federal securities laws. 

History of Accountants

The first professional association for accountants, the American Association of Public Accountants, was formed in 1887, and CPAs were first licensed in 1896. Accounting grew as an important profession during the industrial revolution. This was largely due to the fact that businesses grew in complexity and the shareholders and bondholders, who were not necessarily a part of the company but were monetarily invested, wanted to know more about the financial well-being of the companies they were invested in. 

After the Great Depression and the formation of the Securities and Exchange Commission (SEC), all publicly traded companies were required to issue reports written by accredited accountants. This change increased the need for corporate accountants even further. Today, accountants remain a ubiquitous and crucial part of any business. 

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