An accountant is a professional who keeps track of the financial records of a business or an individual. There are a number of individuals and businesses who use the services of an accountant all year round. There are other individuals who only hire an accountant to help get all of their finances in order before their tax returns are due. There are millions of accountants located all around the world. With many cities and towns having at least ten professional accountants it is often difficult for many individuals to decide which accountant they should hire.
Learning how to choose an accountant for personal or business use is a fairly easy process. There are a number of factors that should be considered before the services of an accountant are actually hired. The best way to get started on hiring an accountant is by finding a number of them in the area. It is possible to hire an accountant that is not located in the same area as an individual or business; however, many individuals feel that it is easier to deal with an accountant who is local.
There are a number of ways that an individual or business can find an accountant. The most popular way is through research. Many professional accountants are listed in the local phone or they advertise their business online. When using a phone book to find an accountant individuals should look in the yellow pages or the business directory of their phone book. The majority of accountants are listed under the heading of Accounting and Bookkeeping. It is also possible for an accountant to be found by using an online business directory. Online business directories work in the same way that a traditional phone book does; however, they are often nationwide and sometimes include feedback from previous customers. Feedback ratings of a particular company may come in handy when trying to find an reputable accountant to do business with. Many individuals also find an accountant by asking for recommendations from family, friends, and coworkers.
Personal recommendations are a great way to learn about an accountant that is professional and highly recommend; however, individuals and business owners are encouraged not to just take the word of someone that they know. A large number of accountants offer free consultations to the general public. Individuals and business owners are encouraged to use a free consultations to learn more about an accountant. If a free consultation is not available many professional accountants do not mind answering a number of questions over the phone or in an email.
The most important thing to consider when looking to choose an accountant is their qualifications. There are many states that require their accountants to become certified before operating a business, but there are others that do not regulate the way that accountants operate. A certified public accountant (CPA) is often a professional individual who was trained and has a large amount of accounting experience. Many certified public accountants charge more for their services, but at the same time they often offer better results.
There are many accountants who handle a wide variety of case loads; however, there are some that only specialize in a specific area of accounting or deal with a certain type of client. Individuals and business owners are encouraged to speak with an accountant to determine if their services can be applied to their individual needs. There are many accountants who only specialize in personal accounting while others may only work with business owners.
It is also important to determine if an accountant is working on their own or if they are a part of a larger accounting team. While each may have their advantages it is possible that a large accounting firm may mean that multiple accountants will be working on your finances. There are many individuals who only want to work with one accountant instead of multiple accountants. Working one on one with a specific accountant often allows individuals to feel like they are getting the appropriate amount of attention and it also creates less confusion and errors.
Setting Up Your Chart of Accounts
While installing your new accounting software you have most likely been asked whether you would like to use one of the default charts of accounts included with the program or develop your own. Unless you are very familiar with setting up a set of financial books you will want to choose from one of the selections offered. And even if you have the experience choosing one of the defaults will save you a great deal of time. But you may ask what if I don't need all these accounts and how do I know which accounts I should keep. And should I use a numbering system or not? Let me help you by explaining just what a Chart of Accounts is and how to adjust the default list to your needs.
First of all a Chart of Accounts in its simplest definition is a list of accounts used to track all financial transactions that flow through a business. This list is typically broken in to eight segments: Assets, Liabilities, Equity, Income, Cost of Goods Sold, General and Administrative Expenses, Other Income and Other Expenses. You might see Equity referred to as Capital, Cost of Goods Sold referred to as Direct Costs, and General and Administrative Expenses referred to as Expenses. Companies that wish to track Sales Expenses such as commissions, salaries and related expenses of sales personnel and other costs related directly to sales activity might also add a Sales Expense segment.
The first three segments represent the accounts you will find on a Balance Sheet and they will be broken down into sub-segments. Under Assets you will find sub-segments for Current Assets, Fixed Assets and sometimes Other Assets. Current Assets accounts are used for assets that can be readily liquidated into cash, such as cash, investments, accounts and notes receivables, and deposits. You may choose when setting up more than one cash account or receivable account to create a further segment. This will allow you to summarize all your cash accounts, for example, on your balance sheet while keeping a separate recording account for each bank account. Fixed Assets accounts are used to record the cost of items purchased that have a useful life that extends beyond one year. The Fixed Assets segment also includes contra-accounts (reduction of the value of an asset) that are used to record the depreciation of your fixed assets. These contra-accounts are typically named "Allowance for Depreciation - (name of type of fixed asset)". You should have a fixed asset account and corresponding depreciation account for each type of fixed asset you purchase. Some examples are vehicles, office equipment and furniture, building or leasehold improvements. The Other Assets segment is used for all other types of assets.
Likewise the Liabilities segment is broken into Current Liabilities and Long-Term Liabilities. Current liabilities represent the company's liabilities that are to be paid in less than one year. Examples are Accounts Payable, Payroll Tax Liabilities, and Note Payables. Long Term Liabilities represent liabilities that are to be paid over a longer term than one year such as mortgages, vehicles loans and other long term debt.
The third segment of the balance sheet is the Equity, or Capital, segment. This segment consists of accounts that record the owner's, partners or shareholders investments, draws of profits taken from the company by the investors and the net earnings of the company. For each owner or partner within a business entity there should be an individual investment account and draw account. When a company is incorporated than the capital investment by the shareholders is recorded into capital stock accounts. These accounts may be broken down further if different types of stock are issued. The Retained Earnings account is used to record the profit, or loss, the company has earned from the beginning of its existence. Usually you will not be posting to this account, as this is the account your software program will use to close out your end of year income statement accounts.
Moving on to the Income Statement segments, you will want to have in the Income segment accounts to record each type of income you earn in the course of your business. You may want to break out your sales income into more than one account if you have more than one type of service or product. For example if you are a general contractor you may want to track how sales compare between remodeling and new homes.
Cost of Goods Sold or Direct Costs are those expenses that relate directly to the sale of a product or service. Again if you are a contractor these typically would include payroll and payroll expenses of your workers, materials, subcontractors, permits, general liability and workman's compensation insurance, equipment rentals, etc. They would not include rent or office supplies.
General and Administrative Expenses are business expenses incurred that are not dependent on the sale of a product or service. They include rent, phone, office payroll and payroll expenses, employee benefits, office supplies, utilities, etc.
Other Income typically includes non-sales income such as interest income. Federal and State Income Taxes and any related interest and penalty expenses are what you will find in the Other Expense segment.
Now that you have an idea of how a Chart of Accounts if typically set up, how do you pick and choose what accounts to keep and which to delete? Print out the default list and go through it choosing the accounts you think you will need. You will need at least one cash account, an account receivable and accounts payable account. If you do not have employees and don't ever expect to have any than by all means delete all accounts with payroll in the name.
First of all a Chart of Accounts in its simplest definition is a list of accounts used to track all financial transactions that flow through a business. This list is typically broken in to eight segments: Assets, Liabilities, Equity, Income, Cost of Goods Sold, General and Administrative Expenses, Other Income and Other Expenses. You might see Equity referred to as Capital, Cost of Goods Sold referred to as Direct Costs, and General and Administrative Expenses referred to as Expenses. Companies that wish to track Sales Expenses such as commissions, salaries and related expenses of sales personnel and other costs related directly to sales activity might also add a Sales Expense segment.
The first three segments represent the accounts you will find on a Balance Sheet and they will be broken down into sub-segments. Under Assets you will find sub-segments for Current Assets, Fixed Assets and sometimes Other Assets. Current Assets accounts are used for assets that can be readily liquidated into cash, such as cash, investments, accounts and notes receivables, and deposits. You may choose when setting up more than one cash account or receivable account to create a further segment. This will allow you to summarize all your cash accounts, for example, on your balance sheet while keeping a separate recording account for each bank account. Fixed Assets accounts are used to record the cost of items purchased that have a useful life that extends beyond one year. The Fixed Assets segment also includes contra-accounts (reduction of the value of an asset) that are used to record the depreciation of your fixed assets. These contra-accounts are typically named "Allowance for Depreciation - (name of type of fixed asset)". You should have a fixed asset account and corresponding depreciation account for each type of fixed asset you purchase. Some examples are vehicles, office equipment and furniture, building or leasehold improvements. The Other Assets segment is used for all other types of assets.
Likewise the Liabilities segment is broken into Current Liabilities and Long-Term Liabilities. Current liabilities represent the company's liabilities that are to be paid in less than one year. Examples are Accounts Payable, Payroll Tax Liabilities, and Note Payables. Long Term Liabilities represent liabilities that are to be paid over a longer term than one year such as mortgages, vehicles loans and other long term debt.
The third segment of the balance sheet is the Equity, or Capital, segment. This segment consists of accounts that record the owner's, partners or shareholders investments, draws of profits taken from the company by the investors and the net earnings of the company. For each owner or partner within a business entity there should be an individual investment account and draw account. When a company is incorporated than the capital investment by the shareholders is recorded into capital stock accounts. These accounts may be broken down further if different types of stock are issued. The Retained Earnings account is used to record the profit, or loss, the company has earned from the beginning of its existence. Usually you will not be posting to this account, as this is the account your software program will use to close out your end of year income statement accounts.
Moving on to the Income Statement segments, you will want to have in the Income segment accounts to record each type of income you earn in the course of your business. You may want to break out your sales income into more than one account if you have more than one type of service or product. For example if you are a general contractor you may want to track how sales compare between remodeling and new homes.
Cost of Goods Sold or Direct Costs are those expenses that relate directly to the sale of a product or service. Again if you are a contractor these typically would include payroll and payroll expenses of your workers, materials, subcontractors, permits, general liability and workman's compensation insurance, equipment rentals, etc. They would not include rent or office supplies.
General and Administrative Expenses are business expenses incurred that are not dependent on the sale of a product or service. They include rent, phone, office payroll and payroll expenses, employee benefits, office supplies, utilities, etc.
Other Income typically includes non-sales income such as interest income. Federal and State Income Taxes and any related interest and penalty expenses are what you will find in the Other Expense segment.
Now that you have an idea of how a Chart of Accounts if typically set up, how do you pick and choose what accounts to keep and which to delete? Print out the default list and go through it choosing the accounts you think you will need. You will need at least one cash account, an account receivable and accounts payable account. If you do not have employees and don't ever expect to have any than by all means delete all accounts with payroll in the name.
Becoming a Certified Professional Accountant or CPA
The work of a Certified Public Accountant (CPA) or for the purposes of this article, a Certified Professional Accountant, requires involvement in a broad range of accounting, auditing, tax, and consulting activities. Most positions for a Certified Professional Accountant require a minimum of a bachelor's degree in accounting or related field, and will often require or prefer a master's degree in accounting, or at least some course work in an accounting master's degree program.
A Certified Professional Accountant must reach the (CPA) status through CPA certification. This involves a number of recommendations and requirements in order to receive certification. As of early 2005, based on recommendations made by the American Institute of Certified Public Accountants (AICPA), 42 States and the District of Columbia require CPA candidates to complete 150 semester hours of college course work, which is an additional 30 hours beyond the typical four year bachelor's degree program. Another five States have adopted similar legislation that will go into effect between 2006 and 2009. The only States not requiring 150 semester hours are Colorado, Delaware, New Hampshire, and Vermont. Because of the Nation's response to this trend, the majority of institutions of higher education have altered curriculum planning accordingly, with most programs offering master's degrees as part of the 150 required hours.
To become a Certified Professional Account and receive CPA certification, individuals in all states are required to take a four part, Uniform CPA Examination prepared by the AICPA. This two-day examination is extremely rigorous and detailed. Approximately 25 percent of individuals who take the exam each year pass every part they attempt. Candidates that take the CPA examination are not required to pass all four parts at once, but most States do require that those taking the exam pass at least two parts for partial credit, and are required to complete all four sections within a certain period given by the State in which certification is sought. The CPA exam is computerized, and is offered quarterly at many different testing centers throughout the nation. The majority of States also require applications for CPA certification to also have work experience in the field of accounting.
Once CPA certification has been received, a Certified Professional Accountant has many career options available. Certified Professional Accountants may choose to be self employed, or may seek employment with banks and credit unions; government agencies; businesses; nonprofit organizations; accounting firms; auditing firms; and a variety of other areas. Based on the individual Certified Professional Accountant, it is possible to advance within a corporation or accounting department quite rapidly. Certified Professional Accountants that have inadequate preparation, or those that are not adequately detail oriented, for example, may find career advancement very difficult.
A Certified Professional Accountant may perform a variety of job duties. Certified Professional Accountants generally perform a broad range of accounting, tax, and consulting services for their clients. Some may choose to specialize in different areas, such as auditing or forensic accounting, which involves investigating and interpreting white collar crimes such as securities fraud and embezzlement, bankruptcies and contract disputes, and other complex and possibly criminal financial transactions, including money laundering by organized criminals.
An entry level Certified Professional Accountant will generally maintain records of routine accounting transactions, and may also assist in the preparation of financial and operating reports, including trial balances, adjustments, and closing entries. The entry level Certified Professional Accountant may also assist in the analysis and interpretation of accounting records for use by the management team.
The intermediate Certified Professional Accountant prepares and maintains accounting records, not only for general accounting, but may also work with costing and budget data, as well as examine, analyze and interpret accounting records for the purpose of giving advice or preparing statements. An intermediate Certified Professional Accountant often acts as a lead to lower level employees in the accounting department.
A Certified Professional Accountant must reach the (CPA) status through CPA certification. This involves a number of recommendations and requirements in order to receive certification. As of early 2005, based on recommendations made by the American Institute of Certified Public Accountants (AICPA), 42 States and the District of Columbia require CPA candidates to complete 150 semester hours of college course work, which is an additional 30 hours beyond the typical four year bachelor's degree program. Another five States have adopted similar legislation that will go into effect between 2006 and 2009. The only States not requiring 150 semester hours are Colorado, Delaware, New Hampshire, and Vermont. Because of the Nation's response to this trend, the majority of institutions of higher education have altered curriculum planning accordingly, with most programs offering master's degrees as part of the 150 required hours.
To become a Certified Professional Account and receive CPA certification, individuals in all states are required to take a four part, Uniform CPA Examination prepared by the AICPA. This two-day examination is extremely rigorous and detailed. Approximately 25 percent of individuals who take the exam each year pass every part they attempt. Candidates that take the CPA examination are not required to pass all four parts at once, but most States do require that those taking the exam pass at least two parts for partial credit, and are required to complete all four sections within a certain period given by the State in which certification is sought. The CPA exam is computerized, and is offered quarterly at many different testing centers throughout the nation. The majority of States also require applications for CPA certification to also have work experience in the field of accounting.
Once CPA certification has been received, a Certified Professional Accountant has many career options available. Certified Professional Accountants may choose to be self employed, or may seek employment with banks and credit unions; government agencies; businesses; nonprofit organizations; accounting firms; auditing firms; and a variety of other areas. Based on the individual Certified Professional Accountant, it is possible to advance within a corporation or accounting department quite rapidly. Certified Professional Accountants that have inadequate preparation, or those that are not adequately detail oriented, for example, may find career advancement very difficult.
A Certified Professional Accountant may perform a variety of job duties. Certified Professional Accountants generally perform a broad range of accounting, tax, and consulting services for their clients. Some may choose to specialize in different areas, such as auditing or forensic accounting, which involves investigating and interpreting white collar crimes such as securities fraud and embezzlement, bankruptcies and contract disputes, and other complex and possibly criminal financial transactions, including money laundering by organized criminals.
An entry level Certified Professional Accountant will generally maintain records of routine accounting transactions, and may also assist in the preparation of financial and operating reports, including trial balances, adjustments, and closing entries. The entry level Certified Professional Accountant may also assist in the analysis and interpretation of accounting records for use by the management team.
The intermediate Certified Professional Accountant prepares and maintains accounting records, not only for general accounting, but may also work with costing and budget data, as well as examine, analyze and interpret accounting records for the purpose of giving advice or preparing statements. An intermediate Certified Professional Accountant often acts as a lead to lower level employees in the accounting department.
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