Many people think the terms bookkeeper, accountant, and CPA are more or less interchangeable. While this is certainly an understandable mistake, these three terms don’t mean the same thing. In fact, they refer to three very different positions. Each of these positions performs a different set of duties. They also have different licensing requirements and divergent statuses with the IRS.
A bookkeeper is someone who tracks a specific company’s finances. Some bookkeepers work as employees of their respective companies, while others work as contractors. Either way, they’re responsible for recording a company’s transactions accurately. Using software like QuickBooks, bookkeepers handle both accounts payable and accounts receivable.
Depending on the company they work for, bookkeepers might also be responsible for inventory tracking, payroll, and presenting financial reports. Additional duties might include keeping track of a company’s credit card payments and paying their sales tax. And while bookkeepers might calculate a company’s 1099s, offering tax advice and analyzing financial reports are beyond the scope of their duties.
In terms of their training and skill sets, accountants are a step up from bookkeepers. Not only do they perform a bookkeeper’s services, but they also prepare and distribute detailed financial reports. The IRS classifies accountants as ‘unenrolled preparers,’ which means that they don’t have an official standing with the IRS.
As a result, accountants don’t sign off on the tax returns they prepare, nor can they represent their client in the case of an audit. Only enrolled agents like CPAs and tax attorneys are allowed to represent a client in front of the IRS.
Certified Public Accountants (CPAs)
Certified Public Accountants have a great deal more training than regular accountants, as well as the challenging responsibilities that come with it. CPAs are required to pass a series of standardized tests and meet a variety of state licensing requirements before they can start to practice. Once they’ve become state certified, CPAs can prepare taxes for both individuals and businesses. They’re also qualified to sign off on these tax returns and represent clients before the IRS. The American Institute of Certified Public Accountants (AICPA) is a professional association for CPAs.
Which Accounting Professional Do I Need?
It can often be very difficult to determine which kind of accounting professional you need. If you’re a business owner, you’ll always require a full or part-time bookkeeper. You’ll need them to maintain your books, help with payroll, and handle accounts payable and receivable.
Both businesses and individuals sometimes require an accountant’s services as well. The need for an accountant arises whenever you need to review financial reports or make important tax decisions. If you want a professional who can do all these things and more, a CPA is the best way to go.
Like many businesses, you can use CPA firm services to separate your taxes from the bookkeeping. This is beneficial because your bookkeeper can focus on their own tasks and provide your company with overall better bookkeeping services.
To sum up, it’s important to understand the different roles that bookkeepers, accountants, and CPAs play. For basic financial tasks, a bookkeeper will probably suffice. But if you or your company’s finances are a bit more complex, you might wish to opt for an accountant. Lastly, a CPA is your best choice if you need a professional to sign off on your tax returns or represent during the auditing process.
About Juan Pizarro
Juan A. Pizarro Llanos was born in Santurce, Puerto Rico. He's a Tax Advocate, a Certified Public Accountant and an Entrepreneur by heart. His passion for helping others and making a difference is remarkable. With more than 7 years of experience. Worked for Fortune 500 companies as a W2 Contractor under JPizars - CPA & Business Consultants LLC. During that time he saw the opportunity and the need of Small, Medium Businesses and Individuals not having a good CPA firm to guide them in the process. Juan A. Pizarro Llanos decide to continue his passion as a CPA. Juan A. Pizarro Llanos, CEO and Founder of JPIzars – CPA & Business Consultants LLC had work with clients in countries like Dominican Republic, Puerto Rico and Colombia. Also, in the United States in states like Florida, California, Texas, Georgia, Maryland, Virginia, Illinois, Ohio, Michigan, Nevada, New York, Tennessee, The Carolina's, Iowa and Arizona. Juan A. Pizarro Llanos has a BBA degree in Accounting with a minor in Business Communications from the University of Puerto Rico (Rio Piedras Campus). Also, Juan A. Pizarro Llanos has a Master of Accountancy (MAcc) from Bowling Green State University.