Many people use ‘accountancy’ and ‘accounting’ interchangeably, but they do have different meanings and connotations. The basic difference lies in that ‘accountancy’ refers to the study of the principles and applications of creating financial documentation, whereas accounting refers to implementing those principles in the real world.
What is accountancy?
Accountancy encompasses the study and understanding of financial principals and concepts and the way in which they should be implemented in real life situations. It therefore also includes the knowledge of various techniques and laws involved in employing accountancy principles to specific cases. Essentially, it is the theory behind the practice of accounting.
What is accounting?
Accounting refers to the practical application of accountancy. It is the process of creating financial records and documentation on the basis of established accountancy principles. It is also used to analyze and track an organizations economic and financial activities in order to convey the information in a way that is concise and useful to the organization’s management and stakeholders.
What does an accountant do?
An accountant is responsible for balancing financial accounts, as well as interpreting and recording the financial information of a business or company. Although they cannot work in public accountancy, as that requires a higher level certification such as that of a Certified Public Accounting (CPA), due to their level of education they still have a broader role in the financial running and auditing of the company than a bookkeeper or untrained professional would.
How do you become an accountant?
The typical method of becoming an accountant is by receiving a bachelor’s degree or higher in either Accountancy or a similar field such as Finance or Business Administration. There are some who become accountants through slowly acquiring the experience, but this approach is unlikely to get you a position as an accountant in a firm, as most companies would prefer to see educational qualifications on a resume. Accountants are not necessarily certified, so while all CPAs, Certified Internal Auditors (CIA) and Enrolled Agents (EAs) are accountants, not all accountants are CPAs.
What can an accountant do?
As we mentioned above, unless they have the correct designation, they cannot perform public accountancy. This mean that they cannot legally prepare and sign tax returns, prepare and sign audited financial statements, represent clients before the IRS or other similar tasks. But these functions are far from the only forms of accountancy, and they are not required in industry or other types of private accounting. Some of the tasks that any accountant can perform include:
- Conduct annual audits
- Handle daily financial records of the company
- Assist in preparing budgets
- Verify that the company’s tax preparation complies with federal regulations
- Prepare tax returns and financial audits, even though they cannot sign them
- Advise in financial strategies and budget planning
The seven main types of accounting are:
- Financial accounting
- Cost accounting
- Forensic accounting
- Tax accounting
- Information systems
- Management accounting