Bookkeeper, Accountant or CPA?

Article written by EricBank

 

Have you ever been mixed up by the precise meaning of bookkeeper, accountant and CPA? Each is involved in the financial records of organizations and individuals, but they each have different tasks, work scopes and licensing requirements. Let's explore the differences among these three jobs, and also glimpse at a fourth one, enrolled agent.

Bookkeepers

Bookkeeping requires less training and has the smallest work scope when compared to the others. Bookkeepers maintain the financial books of organizations. They enter transactions into accounting software for activity associated with financial accounts, including payables, inventory, payroll, receivables, and cash. They also reconcile receipts and cash, and may prepare financial reports. They can monitor credit cards and ensure all payments are timely. Bookkeepers may issue W-2 and 1099's and pay the organization's sales tax. Bookkeepers often have an associate's degree or other credentials.

Accountants

Next up are accountants, who might do some bookkeeping tasks but normally busy themselves with detailed financial reports, audits and tax returns. Accountants are formally educated, holding a bachelor's and perhaps a graduate degree. Unless they have the right to represent you before the IRS, they can't sign your tax return. Some accountants go on to become CPAs.

Certified Public Accountants

A CPA is a certified public accountant and passes a set of examinations. Each state sets its own regulations for certification. CPAs file tax returns for individuals and businesses and prepare financial statements for organizations. They can sign a tax return and can represent clients to the IRS. The American Institute of Certified Public Accountants educates society about CPAs and represents members on various issues.

CPAs often create partnerships and may employ a staff of accountants and bookkeepers. Certification requires passing the Uniform CPA Examination. Before taking this test, the accountant must have sufficient coursework. This usually means a BA degree in accounting and about 150 semester hours of study. Some states insist that coursework include topics in economics, business administration, finance, business law or marketing. New York State, among others, requires one year of accounting work experience before a candidate can become certified.

CPAs receive continuing education throughout their working careers. For instance, Florida mandates almost 50 hours of CE credits every two years, and at least 5 percent of these credits must address ethical considerations that affect accountants.

Enrolled Agents

Like a tax lawyer and CPA, an enrolled agent can represent clients in front of the IRS. Many EAs are former employees of the IRS. EA candidates have to pass an exam that the IRS administers. Frequently, an EA is also a CPA, and has the right to prepare, sign and file tax returns.

Normally, small business owners must hire competent persons to take care of their books, or else do the job themselves. Bookkeepers charge less than do accountants, CPAs and EAs, and if your business is a simple sole proprietorship or partnership, you may be able to get by with a bookkeeper alone. However, if you need a qualified person to prepare, sign and file your taxes, you'll need an EA or CPA.