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How to Become an Accountant?

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Anyone interested in numbers or who has taken accounting courses may wonder how to become an accountant.  A love of working with numbers and good analytical skills are just the tip of the iceberg when it comes to a career in accounting.

Reasons to Become an Accountant

Because every business needs some sort of accounting duties performed, accountant jobs are almost always in high demand. The skilled accountant is rarely unemployed.  Accountants have a certain amount of job security that many other careers don’t.  There are many choices of employment for the accountant, including forming a new accounting firm.

Duties of an Accountant

The duties of an accountant can vary widely, depending on the size and type of business and the specific job title, but accountant duties often include:

  • Classifying and recording the financial data of a business using journals and ledgers, usually prepared with an accounting software program, occasionally done by hand
  • Analyzing a company’s financial data
  • Keeping accurate financial records of a business
  • Reviewing and processing expense vouchers and invoices
  • Reconciling bank transaction records
  • Assisting with the company’s budget
  • Maintaining payroll data and processing payroll
  • Preparing tax returns
  • Preparing, statistical data, reports of operations,, financial statements, expense reports and other requested reports

Knowledge that Accountants Should Possess

Accountants perform many duties, including record keeping, analyzing financial statements, budgeting, preparing tax returns, payroll duties, and much more.  To increase your chances of landing a job as an accountant, it’s important to have knowledge in the following areas:

  • Accounting principles and standards
  • Cash vs. accrual accounting
  • Debits
  • Credits
  • Payroll
  • Expense accounts
  • Profit and Loss statements
  • Balance sheets
  • Taxes
  • Asset accounts
  • Liability accounts
  • Income accounts
  • Budgeting
  • Computer skills

Recommended Education for Accountants

Most accountants have a 2-year or 4-year college degree in accounting, business or some type of financial degree, but very often a degree is not necessary for an entry-level accounting job. Certain types of accountants, such as CPAs, are required to take specific courses and pass an exam in order to obtain a license from the state.

These positions are, of course, higher paid than many of the other accounting positions.  CPAs are often employed as tax accountants.  If you are interested in how to become an accountant for a general accounting position, a couple of college level courses in accounting are sometimes the only requirements. The following courses, however, will provide a good solid foundation for an accountant position.

  • Introduction to Accounting
  • Financial accounting
  • Business writing
  • Economics
  • Managerial accounting
  • Microsoft Excel
  • Accounting software

As stated earlier, accounting is a good field to go into because the jobs are numerous and the unemployment rate for accountants is very low.  Every kind of business needs some form of accountant, to do bookkeeping, payroll, taxes, audits, reconciliation, financial reports, statistical data and much more. You can even start your own business. With the information in this article, you now know how to become an accountant.

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Big Four Accounting Firms

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The Big Four accounting firms are not single firms, but actually accounting networks, each having an entity to coordinate network activities. The Big Four are the largest professional networks in accounting and are responsible for handling audits for a majority of private, as well as publicly traded companies.

The Big Four accounting firms are:

  • Ernst & Young
  • KPMG
  • Deloitte Touché Tohmatsu
  • PwC (Pricewaterhouse Coopers)

The coordinating entity for the Big Four firm KPMG is a Swiss company, and for the other three Big Four accounting firms, the coordinating entity is UK based. The entities do not practice accounting but are similar to law firm networks.

KPMG, in 2007, merged four firms in Germany, Switzerland, Liechtenstein and the UK to form a single firm.

Ernst & Young includes separate legal entities consisting of EMEIA (Europe, Middle East, India, Africa), Asia-Pacific and Americas. These firms do not hold ownership in local entities or perform services but coordinate the services of local firms within their areas.

Number of Employees

The Big Four firms’ employee count in 2011 was as follows:

  • PricewaterhouseCoopers   -  169,000
  • Ernst & Young   -  152,000
  • KPMG  -  140,000
  • Deloitte Touché Tohmatsu   -  182,000

Total Employees  –   643,000

Revenue

Big Four revenues for Fiscal year 2011:

  • Pricewaterhouse Coopers  -  $29.2 bn
  • Ernst & Young  -  $22.9 bn
  • KPMG  -  $22.7 bn
  • Deloitte Touché Tohmatsu  -  $28.8 bn

Total Revenue 103.6 bn

Headquarters

Big Four firms headquarters are located in:

  • Deloitte Touché Tohmatsu  -  United States
  • Ernst & Young  -  United Kingdom
  • Pricewaterhouse Coopers  -  United Kingdom
  • KPMG  -  Netherlands

Big 8

Originally, the Big 4 was the Big 8. The Big 8 originated in the late 19th and early 20th centuries, when alliances formed between United States and British accounting firms.

The Big 8 consisted of:

  • Arthur Young and Co.
  • Arthur Anderson
  • Coopers & Lybrand
  • Deloitte Haskins and Sells
  • Peat Marwick Mitchell
  • Ernst & Whinney
  • Price Waterhouse
  • Touche Ross

Due to several mergers, and a scandal which involved Arthur Anderson, the Big 8 eventually became the Big Four.

Big 6

In 1989, the Big 8 became the Big 6 with the merger of Arthur Young and Ernst and Whinney, to become known as Ernst & Young.; and the Touché Ross merge with Deloitte, Haskins & Sells, to become known as Deloitte & Touché.

Big 5

In July, 1998 Coopers and Lybrand merged with Price Waterhouse, to become Pricewaterhouse Coopers, making the Big 6 become the Big 5.

Big 4

In the 2001 Enron Scandal, Arthur Andersen was the auditing company. They were at one point indicted for obstruction of justice due to the shredding of crucial documents. This led to the demise of Arthur Andersen. Arthur Andersen practices were sold to the Big Four firms Deloitte and Touché, Pricewaterhouse Coopers, and Ernst and Young. Eventually, the conviction against Arthur Andersen was overturned, but still the scandal marked the end of Arthur Andersen, and the Big 5 became the Big 4.

The Big Four is sometimes called the Final Four, meaning basically that other firms will never really be able to compete with the Big Four firms, with the thought being that they are not as credible as the Big Four firms.

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Accrual Accounting

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The term “accrual” means any single entry recording revenue or expense without a cash transaction occurring.  The accrual accounting process measures the performance and financial status of a business by acknowledging economic events irrespective of when cash transactions transpire.

The premise of this method is that economic events are recognized by the matching principle, which is essentially matching revenues to expenses when the transaction occurs, instead of when the payment is either made or received.

The use of accrual accounting allows current cash flows to be merged with future projected cash flows to provide a more precise representation of a businesses’ current financial condition, but it is complicated making it more costly to implement.

Accrual accounting is the customary accounting method for most companies, except small businesses.  Accrual accounting is the opposite of cash accounting, acknowledging transactions only when cash is exchanged. [click to continue…]

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