Accountants and auditors ensure that financial records are accurate and that taxes are paid properly and on time. Public accountants perform a broad range of accounting, auditing, tax, and consulting tasks. Budget analysts prepare budget reports and monitor institutional spending, while cost estimators collect and analyze accounting data. A certified public accountant (CPA) may utilize these reports in preparing summaries for managerial accounting purposes, as well as in tax filings and SEC reporting.
For example, some public accountants concentrate on tax matters, advising corporations about the tax advantages of certain business decisions or preparing individual income tax returns. Public accountants, many of whom are Certified Public Accountants (CPA), generally have their own businesses or work for public accounting firms. Publicly traded companies are required to have CPAs sign documents they submit to the Securities and Exchange Commission (SEC), including annual and quarterly reports.
Managerial accountants, on the other hand, may work on budgeting and performance evaluation. They also may help organizations plan the cost of doing business. Some may work with financial managers on asset management, which involves planning and selecting financial investments such as stocks, bonds, and real estate. Accountants employed by federal, state, and local governments ensure that revenues are received and spent in accordance with laws and regulations.
Internal auditors check for mismanagement of an organization's funds. They identify ways to improve the processes for finding and eliminating waste and fraud. The practice of internal auditing is not regulated, but The Institute of Internal Auditors (IIA) provides generally accepted standards. IT auditors are internal auditors who review controls for their organization's computer systems to ensure that the financial data comes from a reliable source.
Most accountant and auditor positions require at least a bachelor's degree in accounting or a related field. A few universities and colleges offer specialized programs, such as a bachelor's degree in internal auditing. All accountants filing a report with the Securities and Exchange Commission (SEC) are required by law to be a Certified Public Accountant. CPAs are licensed by their state's Board of Accountancy. Becoming a CPA requires passing a national exam and meeting other state requirements. Almost all states require CPA candidates to complete 150 semester hours of college coursework to be licensed, which is 30 hours more than the usual 4-year bachelor's degree.
All states use the four-part Uniform CPA Examination from the American Institute of Certified Public Accountants (AICPA). Certification provides an advantage in the job market because it shows professional competence in a specialized field of accounting and auditing. The Institute of Management Accountants offers the Certified Management Accountant (CMA) to applicants who complete a bachelor's degree. The exam covers areas such as financial statement analysis, working-capital policy, capital structure, valuation issues, and risk management.
For accountants with a CPA, the AICPA offers the option to receive any or all of the Accredited in Business Valuation (ABV), Certified Information Technology Professional (CITP), or Personal Financial Specialist (PFS) certifications. Entry-level public accountants often start as cost accountants, junior internal auditors, or trainees for other accounting positions. As they rise through the organization, they may advance to accounting manager, chief cost accountant, budget director, or manager of internal auditing. Some become controllers, treasurers, financial vice presidents, or chief financial officers (CFO).
Accounting certificate programs are educational programs that provide training in basic accounting skills. Shorter than a full degree program like an associate’s or bachelor’s degree, accounting certificate online programs can usually be completed quickly and give students real-world skills that are in high demand in the workplace.
The Associate in Premium Auditing (APA) program provides a sold foundation in essential auditing, accounting, and insurance principles. It will help you produce accurate premium audits that meet high professional and industry standards.
The CTS designation is the first of its kind in the industry and has proven effective in helping reducing clients' tax obligations. With CTS knowledge and strategies, you can offer expert guidance on Who must file an income tax return The impact of current tax regulations on individuals, couples, families, and business owners Business income and home businesses Tax credits, itemized deductions, and retirement plans LLCs and S corporations.
The accounting balance sheet is one of the major financial statements used by accountants and business owners. The other major financial statements are the income statement, statement of cash flows, and statement of stockholders' equity. The balance sheet presents a company's financial position at the end of a specified date. Because the balance sheet informs the reader of a company's financial position, as well as what it owes to other parties, this is valuable information.
Assets are the resources of the company, and have future economic value that can be measured in dollars. Assets commonly cover cash on hand, accounts receivable, buildings and equipment, but also include costs paid in advance such as prepaid advertising, prepaid insurance, prepaid legal fees, and prepaid rent.
Liabilities are obligations of the company, amounts owed to creditors for a past transaction, or payables such as wages, rents, or taxes. Along with owner's equity, liabilities can be thought of as a source of the company's assets, as well as a claim against a company's assets. Liabilities may also include amounts received in advance for future services, reported as Unearned Revenues or Customer Deposits.
A company's commitment to purchase goods may be legally binding, but is not considered a liability on the balance sheet until actual services or goods have been received. Commitments must be disclosed in the notes appending the balance sheet. Similarly, the leasing of an asset may appear to be a rental cost, but in substance it may involve an agreement to purchase the asset and finance it through monthly payments. Therefore, accountants must look past outward appearances, and focus on the substance of business transactions.
The income statement shows revenues, expenses, gains, and losses, but it does not include cash receipts nor cash disbursements. Revenues from primary activities are often referred to as operating revenues. The primary activities of a business are purchasing merchandise or raw materials and selling products, referred to as sales revenues or simply gross sales. Non-operating revenues, on the other hand, are earnings that fall outside of purchasing and selling goods and services. For example, when a retail business earns interest on some of its idle cash, or sells an commodity investment for a capital gain, these items are reported on the income statement in a separate section.
Revenues from primary activities are often referred to as operating revenues. The primary activities of a business are purchasing merchandise or raw materials and selling products, referred to as sales revenues or sales. The primary activities of a company that provides services involve selling expertise to clients. For companies providing services, the revenues from their primary services are referred to as service revenues or fees. It is common in business to extend a modest amount of time to repeat customers to pay for purchases. For example, if a retailer gives customers 30 days to pay, revenues occur (and are reported) when the merchandise is sold to the buyer, not when the cash is received 30 days later.
Expenses involved in primary activities are expenses that are incurred in order to earn normal operating revenues. Under the accrual basis of accounting, the cost of goods sold and expenses are matched to sales and the accounting period when they are used, not the period in which they are paid. Because of the cost principle and inflation, the expenses shown on the income statement reflect costs that may have different present values. An accountant, though, is not allowed the luxury of waiting until things are known with certainty, so in order to properly account for revenues when they are earned, and expenses when they are incurred, accountants must often use cost estimates.
Like the income statement, the statement of retained earnings covers a specified period of time (the accounting period), which in this case is one year. The statement reports the way that net income and the distribution of dividends affected the company's financial position during the accounting period. Net income earned during the year increases the balance of retained earnings, showing the relationship of the income statement to the balance sheet. The declaration of dividends to the stockholders decreases retained earnings.
The statement begins with beginning-of-the-year retained earnings. The current year's net income reported on the income statement is added and the current year's dividends are subtracted from this amount. Thus, the retained earnings statement indicates the relationship of the income statement to the balance sheet. Investors examine retained earnings to determine whether the company is reinvesting a sufficient portion of earnings to support future growth.
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