Difference Between Accountant and Actuary
The key difference between accountant and actuary is that accountants are responsible for the accounting of the financial transactions that have occurred in the past by the company, whereas, the actuaries are responsible for predicting the financial impact of the different events which may occur or may not occur by the company in the future.
The accountant exists to simplify the whole process of accounting while the actuary is to determine the risks of the insurance company and work with underwriters to derive the rates. Both works with the same set of information, generate statistics and handle financial data, but each has a different purpose and performs different business functions.
- Actuaries are mostly employed in the insurance industry or sometimes in the investment banks, and they deal primarily with risk. It provides a statistical probability of an event to occur in the future and how to reduce any likely financial impact of adverse events as advice. They also advise on the premiums with their calculations on how much to charge and to ensure which customers.
- Accountants, on the other hand, handle monetary transactions by recording financial information while working with individuals or organizations. Auditing accounts, analyzing financial reports, acting as a consultant, preparing tax returns on a wide range of financial matters. Their duties are broader than that of an actuary.
Let us now look at each one of them in detail –
Who is an Accountant?
- An accountant may get involved in issuing or receiving invoices which can involve recording account receivable and account payable. They can also issue recording an expense or an income that records outflow and inflow of cash.
- At the end of a given period, they involve in the reconciliation of the bank statements. Several reports are produced by an accountant, including all kinds of financial statements i.e., balance sheet, statement of cash flows, and income statement. They also issue management reports, which may include sales, cost variance, and overtime analysis.
- Accountants sometimes issue tax reports in regard to income tax, sales tax, property tax.
- Within the scope of a business, an accountant may also be involved in the creation of several processes, for example, shipments to customers, receipts from suppliers, and cash receipts from customers.
- A person can specialize in chartered accountancy, cost accountancy, and become tax accountants, payroll clerks, general ledger accountants, or inventory accountants. Certified Public Accountant is the most prestigious certification an accountant may choose to pursue. Before a person can audit the books of a company, a CPA license is mandatory.
Who is an Actuary?
- Let’s now understand the role of an actuary, a person who is a business professional, managing and assessing the risks of a financial venture like of risky investments and insurance policies is known as an actuary.
- They are experts in assessing the financial risk of a situation using financial theory, probability, and computer science. To determine the relative risk of various decisions, private and public institutions rely heavily on actuarial science before actuaries are allowed to practice they are tested and trained extensively.
- Insurance companies and a lot of investment banks appoint several actuaries on a full-time basis. Actuarial science is basically applicable in a business where there is uncertainty or risks. Currently, actuarial science is one of the fastest-growing and better-paying segments in the United States.
- Actuaries are actually employed to examine the risks of investments from the financial aspect. Actuaries combine the analytical tools specific to a market and their ability to statistically measure probability to get the best possible results. The fluctuations of financial markets are not very easily predicted; hence an actuarial must acquire deep knowledge of the financial world.
- They are hired as retainers by most of the investment banks and insurance companies and as consulting actuaries for businesses making big one time decisions.
These were the roles of Accountant and Actuary.
Accountant vs. Actuary Infographics
|Basis of Comparison||ACCOUNTANT||ACTUARY|
|Related to||The flow of money through an organization or a business||Risk and its financial consequences|
|Meaning||Describes the financial health of a company, individual or organization||They calculate the risk factor and determine premiums with knowledge of business and finance|
|Types||Private and Public accounting, National Income Formula, Fiduciary accounting, Government or Fund accounting, and Investment accounting.||Actuaries in Insurance companies|
|Designations||Certified Management Accountant (CMA), Certified Public Accountant (CPA), Certified Internal Auditor (CIA), Certified Financial Manager (CFM)||Mathematicians, Statisticians, Extensive knowledge of probability are the main areas where Actuaries picked from|
|Preference||Highly preferred in any kind of companies and organizations||High in insurance companies and investment banks|
Why the Accountant and Actuary are important is the question that matters overtime in recent years.
- Being an accountant these days does not mean being geeky but being able to communicate and cooperate with other people as well as having the right skills like problem-solving and detecting the errors. Accountants analyze revenue and expenses, and recommend appropriate budgets, resolve discrepancies which require some judgment skills and, at the same time, maintain financial databases and manual filing systems.
- While being an actuary requires mathematical knowledge, computer skills, and use of probability and statistical techniques. Actuaries work specifically within the insurance industry, providing companies with statistical probabilities of future occurrences and handle data related to risk. They typically focus on losses associated with illnesses, accidents, and natural disasters and assist insurance companies in determining what premiums and coverage the client should be charged.
Both are important in their own ways in the financial world. However, the roles and duties are broader for an accountant, and they are quite specific for an actuary. One cannot replace the other requires a different set of skills and qualifications to become successful in their own genres.
- Creating financial solutions
- Analysis and risk management
- Developing research data
- Create strategies for the benefit of the policyholders.
This has been a guide to Accountant vs. Actuary. Here we also discuss the top difference between Accountant and Actuary along with infographics and comparison table. You may also have a look at the following articles –