What does an Accountant Do? Definition & Career Path

In the intricate world of finance, accountants play a pivotal role in maintaining the financial health of businesses and organizations. But what exactly does an accountant do? How does one become an accountant, and what sets accounting apart from bookkeeping? 

This article provides a comprehensive exploration of these questions, offering insights into the accountant's role, responsibilities, and the pathway to entering this profession. Additionally, we will clarify the distinctions between bookkeeping and accounting, two terms often used interchangeably but with significant differences. 

Whether you're considering a career in accounting or simply looking to understand the financial backbone of businesses, this guide will equip you with essential knowledge and understanding.

What is an Accountant?

An accountant is a financial professional who oversees the financial health of an organization or individual. They specialize in recording, classifying, analyzing, and reporting financial information. In simpler terms, they are the financial record keepers and interpreters who ensure everything runs smoothly.

Their work helps organizations and individuals make informed financial decisions, manage resources effectively, and achieve financial stability.

What does an Accountant Do?

An accountant performs various tasks related to financial record-keeping, analysis, and reporting. Their duties can vary based on their specific role, industry, and level of expertise but generally include the following key responsibilities:

Financial Recordkeeping and Reporting

Accountants are heavily involved in financial recordkeeping and reporting, which are fundamental aspects of their role.

Financial Recordkeeping

Accountants are integral to the financial recordkeeping process. They meticulously record all financial transactions, including sales, purchases, receipts, and payments, ensuring accuracy and completeness. 

Accountants use the double-entry bookkeeping system, where each transaction impacts at least two accounts to maintain the accounting equation (Assets = Liabilities + Equity). They update the general ledger, which contains all the financial accounts of the business, and maintain subsidiary ledgers for specific accounts such as accounts payable, accounts receivable, and inventory. 

Regular reconciliation tasks are also part of their duties, including bank reconciliations to ensure that bank statements match recorded transactions and account reconciliations to verify the accuracy of various accounts. 

Accountants also prepare and post journal entries, including regular, adjusting, and closing entries, to ensure that all financial activities are accurately captured. Accountants must maintain records of all receipts and supporting documents to ensure compliance with regulatory requirements and internal policies.

Financial Reporting

In addition to recordkeeping, accountants are responsible for preparing comprehensive financial reports. They create financial statements such as income, balance, and cash flow statements to provide a clear picture of the company’s financial performance and position. These statements are significant for stakeholders to understand the profitability, financial health, and cash flow dynamics of the organization. 

Internal reports are also prepared for management, submitting detailed insights into financial performance and supporting strategic decision-making. Accountants do variance analysis, comparing actual results with budgeted figures to identify and explain differences. Accountants must also prepare regulatory reports, ensuring compliance with financial disclosure requirements and assisting with external audits.

Financial Analysis and Interpretation

One of the key tools used in financial analysis is ratio analysis. Accountants calculate various financial ratios, such as liquidity ratios, profitability ratios, and leverage ratios. These ratios supply insights into how efficiently the company is operating, its financial stability, and its ability to meet short-term and long-term obligations.

Additionally, accountants conduct trend analysis by comparing financial data over multiple periods. It identifies patterns and trends that can indicate potential issues or opportunities for growth. For instance, a consistent increase in revenue might suggest a growing market share, while a decline in profit margins could signal rising costs or pricing pressures. 

Variance analysis is another important aspect, where accountants compare actual financial results with budgeted figures to identify discrepancies and understand the reasons behind them.

Beyond analysis, accountants interpret financial data to provide actionable insights for decision-making. They translate complex financial information into understandable terms for various stakeholders, including management, investors, and regulatory bodies. 

For management, accountants prepare detailed reports and presentations that highlight key findings from financial analysis, such as areas of financial strength, potential risks, and recommendations for improvement. 

For investors and creditors, accountants convey clear and concise financial information that helps them assess the viability and profitability of their investments or loans. 

Regulatory compliance is another area where accountants play a crucial role. Financial reports must comply with accounting standards and regulatory requirements, providing transparency and maintaining the organization’s credibility.

Tax and Compliance

Accountants are integral to managing tax responsibilities and ensuring compliance with financial regulations.

Tax Responsibilities

Accountants are responsible for preparing and filing tax returns for individuals, businesses, and other entities. They gather financial information and ensure that all relevant income, deductions, and credits are accurately reported. One of their responsibilities is to stay up-to-date with the latest tax laws and regulations to ensure compliance and optimize tax filings.

Accountants for clients or organizations plan their tax strategies to minimize liabilities and maximize savings. It encompasses advising on tax-efficient investment strategies, structuring transactions to be tax-advantageous, and timing income and expenses to benefit from favorable tax treatments.

Accountants monitor changes in tax legislation, understand their implications, and implement necessary adjustments to maintain compliance. Accountants also handle tax audits by preparing necessary documentation and representing clients before tax authorities.

Beyond compliance, accountants provide advisory services to help clients understand the tax implications of their business decisions. They advise on mergers and acquisitions, divestitures, and other significant financial transactions to ensure tax efficiency.

Compliance Responsibilities

Accountants ensure that financial practices and reporting comply with relevant laws and regulations. These documents adhere to accounting standards such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), as well as industry-specific regulations.

Implementing and monitoring internal controls is elementary to safeguard assets and the accuracy of financial records. Accountants design and oversee these controls, conducting regular reviews and audits to ensure their effectiveness.

Anyway, maintaining ethical standards is a cornerstone of the accounting profession. Accountants adhere to codes of ethics and professional conduct, ensuring transparency, integrity, and accountability in all their activities.

How to Become an Accountant?

To become an accountant, you should experience a series of educational steps, gain relevant work experience, and often obtain professional certifications. 

Educational Requirements

Here are the educational requirements to become an accountant:

High School Diploma

A strong educational foundation in high school is a condition for aspiring accountants. Students should focus on courses in mathematics, business, and economics, as these subjects provide the fundamental skills needed for accounting. Exposure to these areas can build analytical and problem-solving abilities that are crucial for future accounting studies and practice.

Bachelor’s Degree

The next step is obtaining a bachelor’s degree in accounting or a related field such as finance or business administration. You will complete a four-year program that covers core courses in financial accounting, managerial accounting, auditing, taxation, business law, and ethics. 

Additionally, coursework in economics, statistics, and information systems is valuable. It is important to choose an accounting program accredited by a recognized body like the Association to Advance Collegiate Schools of Business (AACSB) or the Accreditation Council for Business Schools and Programs (ACBSP) to ensure the quality of education.

Professional Certifications

Obtaining professional certifications enhances credibility and career prospects for accountants. 

The Certified Public Accountant (CPA) designation is the most widely recognized certification and typically requires 150 semester hours of college coursework, passing the Uniform CPA Examination, and meeting specific state requirements for work experience. 

Other valuable certifications include the Certified Management Accountant (CMA), which focuses on management accounting and financial management and requires a bachelor’s degree, relevant work experience, and passing the CMA exam. 

Certifications such as Certified Internal Auditor (CIA) or Certified Fraud Examiner (CFE) can also be pursued based on career goals and interests.

Continuing Professional Education (CPE)

To maintain professional certifications and stay current with industry changes, accountants must participate in continuing professional education. You had better fulfill the continuing education requirements set by professional bodies, such as completing 40 hours of CPE annually for CPAs in many states. 

Regular participation in workshops, seminars, and courses helps accountants stay updated with changes in tax laws, accounting standards, and best practices, ensuring they remain competent and effective in their roles.

Advanced Education (Optional but Beneficial)

While not mandatory, pursuing advanced degrees can provide a competitive edge and open up higher-level opportunities. A Master of Accounting (MAcc), Master of Business Administration (MBA) with a focus on accounting, or similar advanced degree programs can deepen expertise and enhance career prospects. Specializing in areas of forensic accounting, taxation, or auditing through these programs can further refine skills and knowledge, making accountants more valuable in specialized fields.

Gain Work Experience

Practical experience is the opportunity to apply theoretical knowledge in real-world settings, develop skills, and build a professional network.

Internships

During college, participating in internships is one of the most effective ways to gain hands-on experience in accounting. Internships allow students to work in actual business environments, where they can observe and participate in the day-to-day activities of accounting professionals. 

Interns often assist with basic tasks like data entry, maintaining financial records, and preparing reports. These experiences bring insights into the workings of different types of organizations, from small businesses to large corporations. Moreover, internships help students build a professional network, which can be invaluable when seeking full-time employment after graduation.

Entry-Level Jobs

After completing a bachelor’s degree, starting in entry-level accounting positions is the next step. Jobs as bookkeeping, accounts payable/receivable clerk, or junior accountant provide foundational experience in managing financial records, processing transactions, and preparing basic financial reports. 

On-the-Job Training

Working under the supervision of experienced accountants or CPAs are opportunities for mentorship and professional development. New accountants can easily understand the complexities of financial reporting, auditing, and tax preparation. It also allows them to gradually take on more complex tasks and responsibilities as they gain confidence and proficiency.

Diverse Experience

Working in various roles like auditing, tax preparation, and financial analysis exposes aspiring accountants to different facets of the profession. Diverse experience aids in developing a well-rounded skill set and understanding of the interconnections between different accounting functions. For example, experience in auditing can enhance one’s ability to identify errors and discrepancies in financial records, while tax preparation work can deepen knowledge of tax laws and regulations.

Develop Key Skills

Becoming a successful accountant requires not only formal education and relevant work experience but also the development of a wide range of key skills. 

Analytical Skills

Accountants must be able to analyze financial statements, evaluate the financial health of an organization, and make provisions for insights that support decision-making. So, this job requires a keen eye for detail and the ability to think critically.

Attention to Detail

Attention to detail is paramount in accounting. Accountants make certain that every financial transaction is recorded accurately and that all financial reports are precise. Errors in accounting can lead to significant financial discrepancies and legal issues. No doubt that a meticulous approach is indispensable.

Technical Proficiency

Accountants need to be proficient in using various accounting software and tools. Familiarity with software such as QuickBooks, Microsoft Excel, and other financial management systems is acute. Additionally, understanding and staying updated on the latest technological advancements in accounting, for instance, cloud computing and data analytics, can enhance efficiency and accuracy.

Mathematical Skills

Accountants must be comfortable with basic arithmetic as well as more complex calculations involving percentages, ratios, and statistical analysis. Mathematical skills are necessary for tasks in budgeting, forecasting, and financial analysis.

Communication Skills

An accountant's job goes beyond crunching numbers; it's about translating financial data into a clear and compelling story.

Financial information can be complex. Accountants need to explain concepts and data in a way that is understandable to both technical and non-technical audiences.

Accountants use communication skills to interpret data, highlight trends, and convey insights that inform business decisions.

Organizational Skills

Accountants often manage multiple tasks and deadlines simultaneously. Accountants ought to prioritize tasks, manage time effectively, and ensure that all financial records are systematically maintained. Good organization is also important for preparing for audits and compliance with regulations.

Problem-Solving Skills

Whether it’s reconciling discrepancies in financial statements, finding cost-saving opportunities, or navigating regulatory challenges, strong problem-solving skills enable accountants to address and overcome various financial obstacles.

Ethical Judgment and Professionalism

Accountants are entrusted with sensitive financial information and must adhere to ethical standards and regulatory requirements. Maintaining integrity, confidentiality, and transparency is indispensable for building trust with clients and stakeholders.

Adaptability

The accounting profession is constantly evolving due to changes in regulations, technology, and industry practices. Accountants must be adaptable and willing to continuously learn and update their skills to stay relevant in the field. To do this, you had better pursue continuing professional education and staying informed about industry trends.

Customer Service Orientation

For accountants working directly with clients, strong customer service skills are consequential. They have to understand client needs and provide timely and accurate information, simultaneously building strong professional relationships. A customer-oriented approach can deliver high-quality service and maintain client satisfaction.

Teamwork and Collaboration

Accountants often work as part of a team, whether within an organization or in a public accounting firm. Collaboration and teamwork to work effectively with colleagues, share knowledge and contribute to collective goals. Being a team player also involves being able to give and receive constructive feedback.

Strategic Thinking

Beyond managing daily financial tasks, accountants need to think strategically about the financial direction of the organization. Accountants contribute to the broader business objectives of financial planning, risk management, and advising on business strategies that align with long-term financial goals. 

Join Professional Organizations

Joining professional organizations is highly beneficial for aspiring accountants as it offers numerous opportunities for networking, professional development, and staying current with industry trends.

Access to Resources and Information

Professional organizations such as the American Institute of CPAs (AICPA), the Institute of Management Accountants (IMA), and local accounting societies provide access to a wealth of resources and information. Members gain access to industry publications, research reports, and updates on accounting standards, regulations, and best practices. This information is valuable for staying informed about developments in the accounting profession and enhancing professional knowledge.

Networking Opportunities

Networking is a key benefit of joining professional organizations. These platforms facilitate networking with fellow accountants, finance professionals, and industry experts. Networking events, conferences, seminars, and online forums give members permission to connect, exchange ideas, and build relationships. Networking can lead to mentorship opportunities, job referrals, and collaborations with peers, which are invaluable for career advancement.

Professional Development

Professional organizations organize workshops, training sessions, and webinars on topics of technical skills, leadership development, and industry trends. You should join these events to expand your knowledge, acquire new skills, and stay competitive in the job market. Many organizations also offer certifications and continuing education programs that enhance professional credentials and support career progression.

Difference Between Bookkeeping and Accounting

Bookkeeping and accounting are closely related but distinct processes within the financial management of an organization. Here are the key differences between them:

In essence, bookkeeping provides the raw financial data, while accounting analyzes and interprets it to tell the financial story of a business.

Here's an analogy to illustrate the difference: Imagine a delicious pizza. Bookkeeping is like preparing the ingredients (recording transactions) and assembling the pizza (organizing the data). Accounting is like baking the pizza (analyzing the data) and understanding how the different flavors come together (interpreting the financial health of the business).

In summary, bookkeeping is the process of recording and organizing financial transactions, while accounting encompasses a broader scope, including the interpretation and analysis of financial data to support strategic decision-making. Bookkeeping provides the raw financial data needed for accounting, which then transforms this data into meaningful insights and reports.

Conclusion

The world of accounting offers a diverse and rewarding career path for individuals with a knack for numbers and a keen eye for detail. This journey isn't just about crunching numbers; it's about using your skills to play a vital role in the financial well-being of businesses and organizations.

With this comprehensive understanding, you are better equipped to appreciate the critical role accountants play in the business world. And if you need to hone your necessary skills, you can join Skilltrans courses today at the most preferential prices.