The words “accountant” and “CPA” are sometimes used interchangeably, but do you know the difference? All CPAs are accountants, but not all accountants are CPAs. Much more is required of a CPA, and these types of financial professionals are generally preferred by large businesses and high-net-worth individuals.
What Is a CPA?
The acronym CPA stand for Certified Public Accountant. In its simplest terms, a CPA is an accountant who has passed the CPA exam and satisfied the requirements for state licensure—a rigorous process that includes exhaustive coursework and extensive work experience requirements.
While anyone can become an accountant with the proper training, only specially licensed professionals may call themselves certified public accountants. The requirements vary from state to state, as every state has its own licensing body. Because of this, most CPAs are only licensed in one state. Nevertheless, the licensing exam is the same nationwide.
What Does a CPA Do?
A certified public accountant is concerned with much more than just bookkeeping and preparing financial statements. CPAs function as accountants, financial advisors, strategists, and investigators. They operate in a business management capacity, all with the goal of improving the company’s bottom line.
A professional CPA firm will provide actionable strategies to cut waste, improve profitability, and remain in compliance with applicable laws and regulations. They may also be involved in high-level financial transactions like:
Estate planning
Contract negotiations
Investments
Mergers & acquisitions
Valuation
CPA licensure requires an unrivaled degree of financial expertise and insight, which is why CPAs often go on to become chief financial officers for large businesses. They’re considered the cream of the crop when it comes to finance.
What’s the Difference Between an Accountant and a CPA?
Due to the stringent licensing requirements for CPAs, these types of accountants are often preferred by more established businesses and entrepreneurs. While any accountant can compile financial information and interpret it in the form of detailed reports, a CPA goes a step further and helps to guide the financial direction of the organization.
CPAs are also authorized to engage in activities that a standard accountant cannot. For example, they can represent their clients in the event of an IRS audit; a standard accountant can only advise clients as they represent themselves. In addition, only CPAs can file reports with the Securities and Exchange Commission (SEC).
It’s also important to note that CPA isn’t a job title; it’s a professional distinction. Not all CPAs choose accountancy as their main line of work. Many work primarily as CFOs, financial planners, auditors, business consultants, or tax consultants.
Why Are CPAs Important?
Bookkeepers crunch the numbers. Accountants interpret the numbers. Certified public accountants help multiply the numbers.
It requires the utmost analytical and problem-solving skills. That’s why businesses pay more for CPAs. These professionals don’t simply document and report financial data. They help organizations to prosper due to a greater understanding of financial trends, laws, and strategies.
It’s not always about profit, though. A CPA’s financial expertise and impeccable attention to detail also make them highly coveted among government and law enforcement agencies. In this capacity, certified public accountants often help investigate white-collar crimes with complicated paper trails.
How Long Does It Take to Become a CPA?
The exact requirements vary from state to state, but in general, it takes a minimum of seven years to complete all of the schooling and work experience requirements. Before you’re eligible to take the exam, you must earn a minimum of 150 applicable college credits (30 more than you would need for a bachelor’s degree) and two years’ worth of work experience in public accounting.
Some colleges offer a Bachelor of Accountancy program that includes the full 150 credits, but most prospective CPAs pursue a business bachelor’s degree (120 credits) followed by an MBA to satisfy the requirement.
What's a Typical Salary for a CPA?
The CPA career path is potentially very lucrative. Industry survey indicates that the average salary for a certified public accountant is $119,000 per year. A first-year CPA who just completed the exam can expect to earn about $66,000, and a 20-year veteran CPA can earn north of $150,000.
For financial professionals who have already pursued accountancy as a career, CPA licensure may be worth pursuing. CPAs have the potential to earn far more than standard accountants, as the median salary for financial accountants is only around $69,000.
If you’re interested in becoming a CPA, the first step is to begin your education. Because CPAs are the most in-demand accountants and are needed in every industry, they represent one of the most stable and recession-proof vocations with high earning potential.
If, on the other hand, you’re a business professional in need of expert financial services, a CPA is the way to go. You won’t find a more qualified financial expert.