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 flowsCash FlowsCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. 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 FourThe Big FourBig Four refers to the top four accounting firms in the world that audit more than 80% of the US public companies. These firms are Deloitte, Pricewaterhouse Coopers, KPMG, and Ernst & Young. These firms have earned this title because of their huge size, good reputation and the worldwide reach in the field. (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 accountingType Of AccountingThere are different types of the accounting which an organization can follow as per the scope of its work and need of stakeholders. Some of them include financial accounting, forensic accounting, accounting information system, managerial accounting, taxation, auditing, cost accounting, etc. 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 transactionsBusiness TransactionsA business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company's financial statements. 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 practicesAccounting PracticesAccounting practice is a set of procedures and controls used by an entity's accounting department to keep track of accounting records and entries. Other reports are generated based on accounting records, such as financial statements, cash flow statements, fund flow statements, payroll, tax workings, payment and receipts statements, and so on, and they form the basis of the auditor's reliance while auditing the financial statements. 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 receivableAccounts ReceivableAccounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet. and accounts payableAccounts PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period., 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 accountantSenior AccountantA senior accountant is responsible for reporting costs, expenditure, profitability, margins and performs the lead accounting role in the organization. Their duties are more than a junior accountant, which included data compilation, journal entries, and populating balance sheets. 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
As can be seen from the above explanations that both 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 involves 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.
This has been a guide to Public vs. Private Accounting. Here we discuss the top differences between public and private accounting along with infographics and comparison table. You may also have a look at the following articles –