What does an accountant do

Overview

Accountants are financial professionals who serve as the backbone of organizational financial management and compliance. They maintain, organize, and interpret financial records that reflect a company's economic activities, ensuring accuracy and adherence to regulatory standards. The profession evolved significantly from manual ledger-keeping to today's complex role involving tax strategy, financial forecasting, and advisory services. Modern accountants work across diverse sectors including public accounting firms serving multiple clients, private industry managing company finances, government agencies overseeing public funds, and non-profit organizations. According to the U.S. Bureau of Labor Statistics, approximately 1.3 million accountants work in the United States alone, with projected growth of 140,300 new positions between 2022 and 2032. The profession offers substantial earning potential, with median annual wages around $77,000 for accountants and significantly higher for CPAs and specialized professionals.

How It Works

Accountants begin their work by recording financial transactions into appropriate accounts using the double-entry bookkeeping system, where every transaction affects at least two accounts to maintain balance. They collect source documents—invoices, receipts, bank statements—and enter data into accounting software systems like QuickBooks, SAP, or Oracle NetSuite. Monthly, they reconcile accounts by comparing actual bank statements against recorded transactions, identifying discrepancies and correcting errors. Throughout the year, accountants prepare financial statements including income statements showing profit and loss, balance sheets displaying assets and liabilities, and cash flow statements tracking money movement. At fiscal year-end, accountants prepare tax returns documenting income and deductions to determine tax liability, working with tax codes updated annually by legislative bodies. For public companies, accountants may conduct or facilitate audits where external auditors verify financial statement accuracy and compliance with accounting standards like GAAP (Generally Accepted Accounting Principles). Throughout this process, accountants analyze financial data, identify trends, and provide insights helping management make informed business decisions.

Key Aspects

Accounting divides into several specializations. Public accountants work for accounting firms serving multiple clients, handling tax preparation, auditing, and consulting. Private accountants work directly for companies managing internal finances, payroll, and financial planning. Tax accountants specialize in tax strategy and compliance, helping minimize tax liability within legal bounds. Forensic accountants investigate financial crimes, working with law enforcement to uncover fraud and embezzlement. Management accountants provide internal analysis supporting decision-making on budgeting, cost control, and profitability. Audit accountants examine financial records ensuring compliance and accuracy. Becoming a CPA (Certified Public Accountant) requires meeting state-specific requirements—typically a bachelor's degree in accounting, 150 hours of education, passing the CPA exam, and gaining relevant work experience. CPAs hold more prestigious positions, charge higher fees, and access expanded services like attestation and audit authority. Professional credentials like CMA (Certified Management Accountant) and CIA (Certified Internal Auditor) offer additional specialization pathways.

Real-World Applications

In practice, accountants directly impact organizations' success. A small business accountant might manage all financial functions—payroll processing, expense tracking, quarterly tax payments, and year-end tax return preparation—often saving businesses thousands in missed deductions. Corporate accountants manage divisional budgets, track capital expenditures, and prepare consolidated financial statements for stakeholder reporting. Non-profit accountants ensure funds designated for specific programs are used appropriately, maintaining donor confidence through transparent accounting. Government accountants manage public funds across agencies, ensuring taxpayer money meets legal spending requirements. During acquisitions and mergers, accountants analyze target company financials identifying hidden liabilities or valuation issues. Forensic accountants helped recover billions in fraud, including prominent cases like Bernie Madoff's Ponzi scheme and Enron's accounting manipulation. Healthcare accountants track insurance billing and compliance with complex regulatory requirements. Manufacturing accountants monitor inventory costing and production expenses affecting profitability calculations.

Common Misconceptions

Many assume accountants only prepare tax returns, missing the broader financial advisory and strategic planning roles modern accountants fulfill. Another misconception is that accounting is purely mathematical; while numbers are essential, accountants require strong communication skills to explain complex financial information to non-financial stakeholders and advise executives on strategic implications. Some believe accounting is entirely rule-based with no judgment required, overlooking that accountants regularly exercise professional judgment in areas like revenue recognition and asset valuation where principles allow alternative treatments. A common fallacy is that accountants are replaced by software; while automation handles routine transaction entry, accountants' value comes from analysis, interpretation, tax strategy, and advisory services that software cannot provide. Finally, people often underestimate accounting's importance, viewing it as a back-office function, when accountants actually provide critical information driving business strategy and risk management decisions at the highest organizational levels.