A career in accountancy consists of data analysis, financial reports, tax filing, budgets and other accounting records. Both public and private accountants help businesses run effectively by utilizing financial documents and data to prepare budgets.
If you want to become an accountant, consider if you would want to be a private or a public one. This article explains the differences between public and private accounting, their similarities and list some accounting careers to help you get started in this lucrative industry.
What Is Public Accounting?
Public accounting is when an accountant works with a variety of clients, from people to corporations, and help them to prepare financial documents for making effective decisions. Public accountants function as a third-party to check the financial records of a company for public use. They may also prepare tax returns for both individuals and organizations. Other duties of a public accountant include audits, consulting and tax advising. An accountant needs a Certified Public Accountant (CPA) license to practice as a public accountant. The Big Four (Deloitte, E&Y, KPMG and PWC) are the examples of public accounting firms in the world.
What Is Private Accounting?
Private accounting is an accountancy career which involves an accountant being employed by a single company. It is the opposite of public accounting. These types of accountants are employees of a particular firm. They help to analyze and prepare financial reports internally. Frequently, a private accountant is responsible for accounts payable and sending out invoices to clients. When a company is going through audit, a public accounting firm will check the books of the accounting department. The main goal or objective of private accounting is to set up internal systems to record financial transactions, which will help to prepare a company’s financial statements. Examples of private accounting firms are private accountancy professionals.
Similarities Between Public and Private Accounting
- Working as a public accountant primarily involves collaboration as an independent third-party, reviewing the financial documentation of client companies to make sure that they’re accurately reporting their financial position. Private accountants, meanwhile, will typically be employed by a single company and tasked with establishing financial systems and recording transactions.
- While there are obviously some significant differences between these two career paths, it is important to know some of their similarities. For example, both public and private accountants are saddled with the responsibilities of checking financial records and transaction reports, verifying their accuracy and making sure that companies financial standing are not misrepresented.
- Similarly, both private and public accountants can play a crucial role in helping businesses to file their taxes correctly, appropriately and with a goal of reducing costs.
- While a public accountant is engaged by different companies and a private accountant is employed by one company, they both serve as general financial advisers, helping managers and executives to make wise decisions about costs and margins.
- A bachelor’s degree in accountancy is the major requirement for both private and public accounting.
What Is The Difference Between Public Accounting And Private Accounting?
They involve the preparation financial statements, audit and other reports but on opposite sides. There are other differences between public and private accounting that could affect your choice of career. They include:
1. Job descriptions
Public accountant job description involves reviewing a client’s financial documents for accuracy and perfection before making them available to the public. On a daily, public accountants test and analyze the financial records of their clients to check for errors. On the other hand, private accounting job description involves the internal financial business of the company that the accountant work for. They collaborate with financial managers to plan budgets and assess their financial performance. The daily primary duties concentrate on management reporting, such as journal entries and account reconciliation.
Also Read: Entry level Accounting Job Description
2. Education and Certifications
A CPA (certified public accountant) license is required to practice public accounting. A CPA license enables you to file reports with the Securities and Exchange Commission (SEC). After receiving your CPA license, it is mandatory for continuing education credits to keep your license. For private accountancy, a special certification is not required, but there are some certifications you can acquire. They include: CIA (certified internal auditor) or CMA (certified management accountant) and so on.
3. Work Environment
For both private and public accounting, there will be seasons that are more occupied than others. For instance, public accountants are often very busy during tax period, while private accountants are busier towards the end of a fiscal quarter. Another difference in respect to work environment is that public accountants have unpredictable work schedules, they work with different clients from individuals to big businesses and sometimes the government. A public accountant travels to their clients and is often obligated to meet rigorous deadlines unlike private accountants who usually work typical business hours.
4. Career Path
Public accountant career path start in entry-level positions and can progress to more senior positions during their careers. They can advance until they get to the peak position, which sometimes might be an audit partner at a firm. Private accountant career path usually start at the entry-level. However, their peak management position would be the CFO (chief financial officer) of the company they work for.
Both types of accountants are well paid, but public accountants earn more than private accountants. The average salary for entry-level public accounting positions at small to large businesses was $50,000-$73,500 while entry-level salaries for private accountants ranged between $44,250 and $59,500.
6. Industry Experience
Public accountants work with a vast array of clients from individuals to large organizations, they can be involved in many industries including the government. Whereas, a private accountant may only get experience in one industry.
Public accountants interact with variety of clients, so they need to be comfortable interviewing, since their focus is auditing financial reports. Private accountants also need interviewing skills, but to question other company departments. The main skills for both public and private accounting include:
- Organizational skills
- Ability to manage deadlines
- Strong communication skills and Proficiency in new technology.
- Depending on the type of accountancy you want to pursue, both careers can be rewarding.
Your analytical and critical thinking skills are needed in both roles, as well as data analysis and budgeting. While public accountants deal with audits, private accountants deal more with payroll, tax, accounts receivable invoicing and accounts payable. For a better understanding, public accountants are external, as they work with different clients, while a private accountants are internal since they work for only one company.
Public Vs Private Accounting Pros And Cons
Recent graduates keep asking this question "should I go into public or private accounting?" If you are contemplating on which type of accountancy to practice, I can tell you for free that both career paths have advantages and disadvantages. Think about these pros and cons before deciding on which one to choose.
Pros of Public Accounting
- Quick job advancement opportunities
- Gives room for specialization
- Greater exposure from working with different clients and industries
Cons of Public Accounting
- More pressure and deadlines
- Work hours
- Possibility of inconvenient travel
Pros of Private Accounting
- Less stressful
- Steady, flexible work environment
- Possibilities of reaching management level without a CPA license
Cons of Private Accounting
- Lack of variety in job duties
- Advancement opportunities are slow
- Fewer opportunities to specialize