Difference Between Public and Private Accounting
The key difference between Public and Private Accounting is that Public accounting is the accounting of financial documents which is required to be disclosed to the public by the individual or corporation whereas Private accounting is the accounting of financial information of the company in which the accountant is employed generally for the internal manager.
The biggest question that arises when you complete your graduation and are looking for career options to pursue. Now, if you intend to pursue a career in the field of accounting, then the decision may come down to the choice between public and private accounting.
The decision may be driven by a few factors (not exhaustive) which include the expectation of the type of work, one’s personality traits, and career goals. This article is an attempt to provide an insight into both types of accounting careers which will help one to determine which career path is the best for your future.
What is Public Accounting?
Public accounting is the type of accounting where an accountant works acts as an independent third party with a variety of client companies to examine the financial statements that a company is required to disclose to the public. The public accountant also supports the preparation of the financial statements to ensure fair representation of the results, financial position and cash flows of the client companies.
- In essence, a public accountant intends to validate the financial documents, reports, and disclosures from an outside perspective. A public accountant works for companies that provide third-party accounting services to others.
- Some of the examples of work of a public accountant include auditing, tax advisory, and consulting services. The Big Four (Deloitte, E&Y, KPMG, and PWC) are the prime examples of such public accounting firms in the world.
- A public accountant must be a certified CPA (certified public accountant).
What is Private Accounting?
Private accounting, on the other hand, is the type of accounting where an accountant is employed by a company to act as an internal manager and prepare and analyze its financial statement.
- The work of a private accountant revolves around setting up internal systems which include the recording of business transactions that is eventually the basis for the preparation of the financial statements.
- A private accountant works towards the benefit of a specific company. Additionally, the third-party public accounting firms are the ones who review and audit the financial statements prepared by the private accounting professionals.
- The validation by the third party is an independent assessment to ensure that the private internal accounting practices meet reporting standards.
Public vs Private Accounting Infographics
- A public accountant is trained in such a way that he/she develops proficiency in the analysis of accounting systems of companies and the validation of their financial disclosures. A public accountant must also be well versed with the accounting standards (GAAP or IFRS) governing the accounting standards followed in the preparation of the financial statements of client companies. On the other hand, a private accountant’s training help in developing expertise in the recording of accounting transactions, which may include billings, accounts receivable and accounts payable, etc. However, owing to the nature and scope of the work the knowledge of a private accountant may remain limited to certain areas of accounting only.
- Since a public accountant has to work with a range of client companies, they may develop experience in different industries. On the other hand, a private accountant works on the accounting of an individual company and as such develops strong knowledge about the concerned industry but has limited knowledge about other industries.
- A public accountant must be a certified CPA while a private accountant is not compulsorily required to hold CPA certification. However, there are several other certifications for private accounting.
- Given the nature of work, a public accountant might be required to travel to the site of client location and work for long hours to meet tight deadlines. On the other hand, the work of a private accountant is relatively stable, with very few to no travel (fixed work location) and regular hours.
- A public accountant may start his/her career as an entry-level accountant and advance through a senior accountant position to eventually hold senior management positions like an audit partner in the firm. The career of a private accountant, on the other hand, also begins as an entry-level accountant but eventually to advance into a senior management position in the company like a chief financial officer (CFO).
Public vs Private Accounting Comparative Table
|Basis for Comparison||Public Accounting||Private Accounting|
|Training||Trained in the analysis of accounting systems and validation of financial disclosures||Expert in the recording of accounting transactions which eventually forms financial statements|
|Industry Exposure||May be exposed to a plethora of industries given the nature of work||Limited knowledge about industries other than the one they work in|
|Educational Qualification||Must be a certified CPA||Not compulsory to be a certified CPA; but is an added advantage|
|Travel Requirement||May be required to travel to the site of the client location||Usually fixed work location with no travel|
|Client Profile||A significant number of companies||Individual company for which they work|
|Work Environment||May be required to work for long hours to meet tight deadlines||Relatively stable and regular work hours|
|Character Traits||Must be comfortable to interview clients||Must be comfortable to query other departments of the same company|
As can be seen from the above explanations that both the categories of accounting are very different in nature and serve important roles in the assessment of a company’s financial statement in their own unique ways. Both public and private accounting involve more or less similar kind of job activities, skills, and education.
However, the distinctions can be seen in the skill developed after the fresh graduates join in either career path. In simple words, public accounting and private accounting can be seen as “external” accountants and “internal” accountants of a company respectively. As such it is important to understand the various facets of the two in the pursuit of either career options. I hope the article helps you to decipher the two cost categories.
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