An accounting degree leads to many unique specializations like tax and auditing, as well as to different types of accounting careers.
Among accounting professions—for those who intend to pursue a career in this field—the choice most commonly falls down to two of the most popular branches of accounting, known as public accounting and private accounting.
So, what’s the distinction between these accounting specialties, and which is the best option for you? Several factors may determine the decision, including the job responsibilities, the daily routine that comes with the profession, one’s strong skills, and career goals. As such, understanding the differences between the two is significant when pursuing either professional path. Let’s take a deeper look at these jobs and see what differentiates them.
What Is Public Accounting?
A public accountant acts as an independent third party and works with various client companies to review and prepare financial documents that an individual or corporation is required to disclose to the public. They deal with a wide range of clientele, including individuals, businesses, and sometimes even the government.
Public accountants usually select a specialty, such as tax accounting, auditing, forensic accounting, or consulting, which has its own set of responsibilities. These individuals may begin their careers as entry-level accountants and progress through the ranks of senior accountants to finally take senior management roles in the business, such as audit partner.
What Is Private Accounting?
Private accountants work with financial data of a single company for which they are employed by, preparing or evaluating reports for an internal manager. A private accountant works for the benefit of a single firm, collaborating with internal business or financial managers to assess and plan their organization’s cost of doing business.
Furthermore, third-party, public accounting firms are in charge of reviewing and auditing the financial accounts issued by private accounting companies in order to ensure that the private internal accounting practices meet reporting standards.
A private accountant’s career starts as an entry-level accountant and progresses to a top management position, such as chief financial officer (CFO).
The Difference Between Public And Private Accounting
Let’s take a closer look at some of the most significant factors that distinguish these two sectors of accounting. The main differences are:
Before financial papers are released to the public, public accountants must ensure that they are correct and complete for their customers. Their everyday tasks mainly revolve around checking and analyzing the financial data that their clients have provided to ensure that they are error-free, and validating financial documents, reports, and disclosures from an outside perspective. Additionally, they prepare the financial statements to ensure fair representation of the client companies’ results, financial position, and cash flows.
A private accountant’s daily activities revolve primarily around management reporting. This includes recording manual journal entries, performing account reconciliations, and establishing internal processes, including recording business transactions that serve as the foundation for financial statement preparation. Furthermore, they will work with financial managers to plan budgets and evaluate their fiscal performance.
- Education: A bachelor’s degree in accounting is a requirement for both private and public accountants. This program helps students prepare for this career by giving a firm understanding of GAAP (Generally Accepted Accounting Principles), financial statements, journal entries, and more.
- Certifications: The most popular accounting credential is the Certified Public Accountant or CPA. To advance to managerial positions, public accountants must have a CPA, although this is not the case for private accountants. While the CPA may be the most commonly known accounting license and can give any accountant a leg up in their career, there’s a host of certification options such as CIA (Certified Internal Auditor) or CMA (Certified Management Accountant). Ultimately, if you seek to open your own accounting firm, credentials will show clients you’re knowledgeable and professional.
Public accountants are trained to develop proficiency in the analysis of companies’ accounting systems and the validation of their financial disclosures. A public accountant must also be familiar with the accounting rules (GAAP or IFRS) that regulate the accounting practices used to prepare client company financial statements. Since a public accountant is required to interact with various clients, they may gain experience in a variety of businesses.
Private accountants are trained to develop expertise in recording accounting transactions, which may include billings, accounts receivable and accounts payable, etc. However, a private accountant’s knowledge may be confined to certain areas of accounting exclusively, depending on the nature and extent of the work.
To be successful in their jobs, both private and public accountants need to have similar skills. They’ll need to know about accounting methods and standards, as well as regulations, finance, and other topics.
When it comes to public accounting, professionals in the field must be comfortable interviewing clients since they interact with a wide variety of clients. Additional soft skills include an outgoing personality, adaptability, and excellent communication.
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Similarly, private accountants need to be comfortable examining other departments of the same company. The primary skills for both include self-motivation, integrity, organizational skills, ability to manage deadlines, strong communication skills, and proficiency in new technology.
Since private accountants work for a specific company, they should anticipate working in an office space with reasonably regular hours the company assigns to them. This option very much resembles a typical office job as the work of a private accountant is relatively stable, with very little to no travel (fixed work location) and regular hours.
As for public accountants, they have unpredictable work environments and schedules. They often own their businesses or work for public accounting firms. They work wherever a customer allows them to, and they are frequently under the strain of tight deadlines, which can lead to extended workdays.
Additionally, public accountants are very busy during tax season, whereas private accountants are very busy at the end of a fiscal quarter.
Which Should You Pursue?
Both public and private accounting involve more or less similar job activities, skills, and education. It all depends on which best suits the lifestyle you want to have. If we look at the bigger picture, these can be the advantages and disadvantages of either career path.
|Opportunities for advancement may present themselves sooner
|More pressure and deadlines
|Allows for specialization
|Longer work hours
|Working with a wider range of clients and sectors provides a greater variety of experience
|Possibility of inconvenient travel
|Lack of diversity in job responsibilities
|A steady and flexible work environment
|Opportunities for advancement may not arise as soon as you would want
|Advancement to management positions without a CPA license
|Specialization options are limited
Still, when choosing the path you want to pursue, it doesn’t necessarily have to be permanent. Entry-level accountants begin working for large public accounting firms, where they’ll work extended hours as they seek their CPA license. These accountants tend to transition into a private accounting role if they prefer the nature of the work it offers.
In the end, graduates need to assess their preferences, most vital skills, and the career path they want. We hope to have helped make the distinction between these two career options. Good luck on your journey!