
Are they all the same? Can they each be all three? What makes them different and what do I need to know so that I can verify I choose the right one?
Third Mesa is a small business, so our team understands that the answer to this question can be crucial in your business' ongoing decision-making. We want to explain these roles to increase confidence in finding the correct resources. Decoding the roles will assist a small business owner in evaluating the required level of expertise.
First, understand that all three roles function in the same field and can support one another. As an example of how this is true in another industry such as education, there may be a teacher’s assistant, a teacher, and a professor. They all work in the field of education and can provide support for each role; however, they have different levels of expertise and knowledge that expand with each title. A bookkeeper, an accountant, and a CPA can have similar training, and there are many tasks that all three can perform. They are all trained in posting transactions to a general ledger. A general ledger is just a register (like a checkbook register) but for all the transactions posted on behalf of the business. For example, if a business purchase is made from the business checking account for software – the record would have two entries. This is part of double-entry accounting. There would be an expense for the software (probably posted to Office Supplies & Software) and a decrease in the checking account for the cost. The general ledger reflects all transactions during the business’ operations.
Bookkeepers can accomplish many daily tasks for the business. They record the transactions by posting the debits and credits to the ledger. They can create invoices, purchase orders, and bills. They also post the received payments to the accounts. They can book payroll transactions and reconcile cash and credit card accounts. They review receipts to ensure they are coded to the proper expense categories. They are familiar with the intimate details of the daily business and can identify if an item is out of character. They often print a report package containing a balance sheet, profit & loss, and a cash flow statement. Bookkeepers are a valuable resource for any business that needs to maintain their accounts and ensure that records are kept up to date.
Accountants can perform any tasks that bookkeepers can. However, they use the data compiled by the bookkeeper to review and analyze the accounting records. Accountants typically have an accounting-related degree and can perform subjective reviews of the bookkeeper's work. Accountants will prepare adjustments needed to the books that may not be transactional (they are only for tax or other purposes, and no physical transaction was performed). Accountants will review financial statements for accuracy and completeness. They can provide the business owner with insight into operations and how the business is performing, alongside a strategy for the future. Think of accountants as being fluent in the language. They should be able to interpret the books that have been prepared and explain the results in a common language that all owners and investors can understand. They will often oversee the work of bookkeepers or perform the bookkeeping themselves.
We can go back to the example of the field of education. The bookkeeper would be like the teacher’s assistant. A teacher’s assistant can be a fantastic teacher with a skill set to do many of the same tasks as the teacher. However, a teacher’s assistant has not completed as much professional training and may lack knowledge of navigating challenging situations and scenarios. The teacher can oversee the assistant and provide guidance and support while handling the more complex scenarios.
CPAs, or Certified Professional Accountants, are accountants. What sets them apart is the title earned through additional education, state licensing requirements, and adherence to a strict code of ethics. To achieve a CPA title in Texas, a candidate must have a bachelor’s degree or higher from a regionally accredited college with a concentration in accounting. Each individual is required to complete 150 semester hours and pass the Uniform CPA examination. In addition, they must have supervised work experience for another CPA for at least a year. CPAs swear an oath to support the laws of the United States, and the rules adopted by the board. They also complete annual continuing education and ethics training courses. They must register and pay licensing fees annually.
Due to the rigorous nature of obtaining a CPA license, many go into fields such as public accounting to work in tax preparation or auditing. With all the additional requirements, CPAs are often trusted for their insight and in-depth knowledge of the accounting process. They have a deep understanding of required accepted accounting principles and practices. Their fiduciary duty is to consider the best interest of the clients & this creates a trusted relationship for financial decisions. One can think of the CPA as the professor. The teacher who has gained their PHD and understands their field in a way that comes from years of guided and real-world practice.
Every business owner will need the services of each of these roles. A bookkeeper who can excel at performing tasks at an affordable rate is often chosen for day-to-day work and office support. An accountant will review and analyze the reports created by the bookkeeper and verify that all items are correct for reporting goals and purposes. Typically, a CPA will prepare and file taxes, work with clients on an audit, or consider complex tax strategies. In certain scenarios, a business will need a full-time accountant who works remotely or on-site at the place of business. In those instances, the accountant may serve multiple roles depending on their education.
Though this is a summary of the differences between the roles, it will bring some clarity in choosing the right fit for each owner. Accounting is an important practice in each business and can contribute to the success and failure of a small business.
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