At times, it feels as if the field of accounting can get lost in discussions and fears related to the CPA exam. And while it is certainly important to give the CPA exam the respect it deserves, the best thing one can do to prepare for life as an accountant after the exam is to both pay attention to and study the right things during their academic years.
So, what are the best skills and qualities for an accountant to study, strengthen, and continually educate themselves in? Are strong math skills going to be enough? What if you hate doing your own taxes? Are there other skills (that you may have) that can be foundational to a fulfilling career as an accountant?
Accounting Areas of Knowledge
There are three ways to achieve a bachelor’s in accounting: a bachelor of science in accounting (BS), a bachelor of business administration in accounting (BBA), or a bachelor of arts in accounting (BA). A BA in accounting is a lot less common and it typically includes more student options for free electives. The following discussion of areas of study and knowledge is more relevant to the education a BS or a BBA in accounting will offer.
Seven core concepts of knowledge are commonly studied for an accounting major. Within those core concepts, there are a variety of classes one can expect to take.
Managerial Accounting
Managerial accounting involves identifying, analyzing, interpreting and communicating information to managers or leadership. This information is intended to help leadership make the right decision(s) to meet goals.
Managerial accountants are going to work with data related to business operations, including costs of products and services, investments and the operational budget. They are involved in the preparation of financial reports, budgets, financial statements, and strategic decisions.
Cost Accounting
Cost accounting is a specific component of managerial accounting. Cost accountants determine the actual cost of manufacturing a good or providing a service by assessing all of the possible related expenses. This information is usually determined before budgets are prepared to allow different operational departments to make the most profitable choices.
Cost accountants are going to work with a lot of data. This includes both fixed and variable costs of business. Examples of fixed (recurring) experiences include rent and interest. Examples of variable (recurring) expenses include supplies, maintenance, or labor. These expenses are all used to determine breakeven points and supposed profitable points.
Financial Accounting
Financial accounting may be the “typical” career many imagine for an accountant. These accountants prepare financial statements to display financial performance to all interested parties (both inside and outside of the company).
Unlike managerial accountants, the information financial accountants prepare is available to persons outside of the business (like investors).
Typically, a financial accountant will prepare four different types of statements.
- Income statement: Also known as the profit and loss statement, this will include information related to revenues, expenses, and income.
- Balance sheet: The balance sheet involves information related to assets, liabilities and stockholder’s equity. It should be a snapshot of a specific point in time.
- Cash flow statement: This statement should detail the flow of cash in and out of a company in a specific period of time. Finances typically flow from three activities: investing, operating, and financing.
- Statement of retained earnings: This statement is related to dividends and shareholders. Over a specific period, it should display the dividends paid out and the company earnings kept.
Accounting Information Systems (AIS)
Accounting information systems are in place to collect data, process that data, store data and distribute that data. The AIS should also generate informational reports used to make business decisions. Typically, the AIS are computer-based.
The six parts of an AIS are the people, the procedures, the data, the software, the IT infrastructure, and internal controls. Accountants are one of the people involved in the AIS process.
Auditing
Auditors examine organization’s or individual’s financial records to ensure that they are appropriate and in accordance with all rules, regulations, and laws. Auditors can be both internal and external. Internal auditors work within the company. External auditors come from outside of an organization. Public companies must be externally audited. Audits should be used to improve internal processes, including operations, risk management and governance.
Generally Accepted Accounting Principles (GAAP)
The GAAP rules address the complexities and legalities of both business and corporate accounting. The Financial Accounting Standards Board (FASB) uses the GAAP rules as a foundation for their approved accounting methods and practices.
Any accountant needs to be well-versed in the 10 key concepts of the GAAP guidelines, including the principle of regularity, principle of consistency, principle of sincerity, principle of permanence of methods, principle of non-compensation, principle of prudence, principle of continuity, principle of periodicity, principle of materiality, and principle of utmost good faith. All documents prepared by accountants need to follow all GAAP guidelines.
International Financial Reporting Standards (IFRS)
The IFRS guidelines are like GAAP guidelines, but they are a set of international accounting standards that state how transactions should be reported. The IFRS guidelines are an attempt at having a common accounting language from country to country. The Securities and Exchange Commission has expressed a desire to switch from GAAP to IFRS in the US, but the development of that change hasn’t occurred yet.
Becoming a Better Accountant
You can see that the top skills for an accountant may be dependent on which branch of accounting one desires to work in (or already works in). Whether you are still in school or are out of school and already working, pay attention to the specific skills that your branch of accounting requires. Becoming a better accountant may start in school, but the best accountants continue to stay on top of the nuances and details of their chosen profession through their whole career.
DQ Staff
February 2020
More Articles of Interest:
- If I Have Bad Credit, Will This Keep Me From Getting a Job as an Accountant?
- What is the Difference Between an Accountant and an Auditor?
- If I Were An Accountant, Would It Help Me Financially and/or Professionally to Get My MBA?
- Is It Easy For An Accountant to Get a New Job for a Company in a Different Field?