Public vs Private Accounting

Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Difference Between Public and Private Accounting

The key difference between Public and Private Accounting is that Public accounting is the accounting of financial documents required to be disclosed to the public by the individual or corporation. In contrast, Private accounting is the accounting of the company’s financial information in which the accountant is generally employed as the internal manager.

The biggest question arises when you complete your graduation and are looking for career options to pursue. Now, if you intend to pursue a career in 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 attempts to provide insight into both types of accounting careers, which will help one determine which career path is the best for your future.

What is Public Accounting?

Public accounting is the type of accounting where an accountant acts as an independent third party with various 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 client companies’ 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. read more.

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What is Private Accounting?

On the other hand, private accounting 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.read more where a company employs an accountant to act as an internal manager and prepare and analyze its financial statement.

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Public vs. Private Accounting Infographics

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Key Differences

The public accountant is trained to develop 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 helps in developing expertise in recording accounting transactions, which may include billings, accounts receivableAccounts ReceivableAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more 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.read more, 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.

Public vs. Private Accounting Comparative Table

Basis for ComparisonPublic AccountingPrivate Accounting
TrainingTrained in the analysis of accounting systemsAccounting SystemsAccounting systems are used by organizations to record financial information such as income, expenses, and other accounting activities. They serve as a key tool for monitoring and tracking the company's performance and ensuring the smooth operation of the firm.read more and validation of financial disclosuresExpert in the recording of accounting transactionsRecording Of Accounting TransactionsAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more which eventually forms financial statements
TrainingMay be exposed to a plethora of industries given the nature of my work.Limited knowledge about industries other than the one they work in
Educational QualificationMust be a certified CPANot compulsory to be a certified CPA, but it is an added advantage.
Travel RequirementMay be required to travel to the site of the client’s location.Usually fixed work location with no travel.
Client ProfileA significant number of companiesIndividual company for which they work
Work EnvironmentMay be required to work for long hours to meet tight deadlines.Relatively stable and regular work hours
Character TraitsMust be comfortable interviewing clientsMust be comfortable querying other departments of the same company

Final Thoughts

As can be seen from the above explanations, both accounting categories are very different and serve important roles in assessing a company’s financial statement in their unique ways; Both public and private accounting involve more or less similar kinds of job activities, skills, and education.

However, the distinctions can be seen in the skill developed after the fresh graduates join either career path. Public and private accounting can be seen as “external” accountants and “internal” accountants of a company, respectively. It is important to understand the various facets of the two in the pursuit of either career option. I hope the article helps you to decipher the two cost categories.

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Comments

  1. Fasil says

    I like it good explanation

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