A CPA, or Certified Public Accountant, is an individual who is fully qualified to practise as an accountant. A CPA's duties involve analysing, monitoring, and maintaining financial records for businesses.
But what do accountants actually have to do?
To successfully complete the processes mentioned above, accountants need to be able to fully understand and interpret these financial records so that their information can be shared with others who need to know it.
Accountants offering their service as freelancers can be hired to consult with the management of a business and offer professional advice on financial matters to CEO's or even government bodies, so it is important that accountants provide precise and unbiased information.
When sharing and distributing this information there are also a number of rules and principles that accountants in Australia are legally obliged to follow. Any job you start as an accountant shall require that you adhere to these rules and regulations as you carry out your work.
As well as being accountants a CPA can also work as bookkeepers for small businesses or individuals, aiding them with financial tasks such as tax returns or investments, and offering financial advice to the management of the business.
If you want to start a course of accounting lessons to get some support before your CPA exam, you can find online accounting classes wherever you are based in Australia.
What Skills Are Required to Succeed as a CPA?
When you are looking for a job, each position will be subject to changes in responsibilities depending on the needs of the company at the time, but all Certified Public Accountants share certain professional skills and responsibilities and are expected to follow certain principles and standards.
As a CPA in Australia, it is essential that you have strong attention to detail and have great numerical literacy. In order to satisfy the legal requirements of working as an accountant, you must also follow and practice the principles of accounting.
This is so accountants have the responsibility of preventing fraud and embezzlement from individuals or companies and maintaining up to date financial records as part of their service.
In the field of accounting; Computers, new software, and even cryptocurrencies are making an impact on the industry, meaning it is important to hone your technical skills and experience if you wish to work as a CPA.
If you plan to work in bookkeeping in Australia you will need to know how to use payroll software like Xerox and MYOB.
The Three Golden Rules Of Accounting
As we have mentioned before, accounting and CPAs are required to follow a set of principles to ensure the consistency and safety of their work. There are also a set of rules known as the golden rules of accounting, let's take a look at them:
- Debit The Receiver, Credit The Giver
This rule comes into play with personal bank accounts. When you pay money into your account, the bank shall credit your account by the value that you gave. As the bank is the receiver, it is debited the same value.
- Debit What Comes In, Credit What Goes Out
This rule is used in relation with real accounts; Accounts that have physical assets such as land, buildings, livestock, or goods. As the value of these things amounts to a debit balance already, when you get income it must be debited to add it to the value of the account. You then credit what leaves the account to reduce the account's balance.
- Debit All Expenses And Losses, Credit All Incomes And Gains
The third rule is used in regards to a nominal account. Accounting views the capital of a company as a liability, meaning it has a credit balance already. Because of this incomes and gains must be credited, and expenses and losses must be debited in order to maintain balance in the system.
The three golden rules will be explained in detail during your training to become a Certified Public Accountant, as well as much other information to do with accounting in business.
It is a requirement for all CPAs and bookkeepers in Australia to follow these golden rules in order to provide professional and legal services to a company or individual. These rules are the foundations of bookkeeping, you just need to understand the different accounts and how to apply the rules to them.
If you know these rules as a sole trader in Australia, you may have an easier time preparing your tax return for the ATO or at least getting it prepared for a CPA to check over it.
The golden rules are very useful for helping to hold the standards of accounting high, however in practice they can be tricky and clunky to use. This is why for complicated accounts with multiple income streams or a lot of expenditures, professional CPAs are often called in for advice and assistance.
These rules first came to be in order to assist junior and graduate accountant's employed by small businesses to keep their records up to date with proper standards in case of tax audits.
The Main Principles of Accounting
As well as the golden rules, there are several principles of accounting that you are likely to come across in your studies of the financial industry. These principles are a mixture of rules and standards, as well as key phrases used to define things that commonly feature in the career of a CPA.
When you specialise as a CPA, you might consider becoming a member of an accounting institute, they can provide you with resources and services throughout your career, and help you thrive in your place of work and community.
One such institute is the Chartered Accountants Australia & New Zealand Institute. They have thousands of members comprising accountants with specialised skills. This institute aims to support each member by helping them to further their education and career and providing resources and services to help them succeed and make a difference.
Values in accounting are recorded as single monetary units within a currency, in Australia this is dollars and cents.
Within a single financial record there should only be one currency, and all transactions should be recorded with the same values for each monetary unit. This allows for easy data analysis when it is time to do a tax return or an audit.
This principle of accounting makes the assumption that the value of the currency used to denote a monetary unit will remain roughly the same in the future.
Principle Of Conservatism
If you work with an accountant regularly, you may notice that they are quite conservative, this is especially true in their work as they want to present their information in an unbiased and accurate way, in order to show things as they are and not affect clients judgement with optimism or pessimism.
This is in part because of the principle of conservatism, which requires accountants to do certain things in a certain situation. The requirements for this principle include an organisations responsibility to cover themselves when they are uncertain about a figure in an account by giving it the lowest revenue value and the highest cost value.
This is thought to be the plan for a company in such a situation as it can help to keep them prepared for any financial hardship.
The cost principle ties in closely with the aforementioned principles, in that it is required for a company to have everything on their financial statements listed at the cost price, rather than any market values that may be inflated. This principle is commonly used in relation to assets like buildings and land, or goods and valuables like gold and shares.
This is because in the world of accounting market values are likened to opinions, and this inflated price cannot be proved to be a true value unless it is settled in a sale. Therefore, an accountant would use the cost principle to record an item's value at its sold or cost price, a figure which has already been paid for it, until a new sale is made at a higher price.
Full Disclosure Principle
This principle of accounting aims to allow anyone that needs to successfully analyse financial records without too much struggle.
This is done by ensuring that accountants include all relevant information that might affect a readers understanding of the company financial records.
Time Period Principle
The last principle we shall discuss here is the time period principle. Perhaps one of the most important, this principle means it is required for CPAs to report their findings and advice in a time period that keeps to standards. This is to allow comparisons in financial accounts and transactions and finding trends and patterns within the data.
There are a lot of other principles of accounting that are important to know if you wish to work as a CPA in the financial sector, either as a freelancer or as part of a company. You can find more information about these principles here.
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