What is Accounting?
Most adults perform accounting functions every month – by reviewing a credit card statement, paying bills, checking for fraudulent charges, setting a budget, or calculating income against monies paid. These are examples of basic accounting practices, which in the business world become more complex. For this reason, many companies, organizations, and corporations employ an accountant or an entire staff. Small entities may assign the duties to someone who has the training or is self-taught in accounting principles.
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In business, accountants must understand balance sheets, payroll, income statements, tax rules, profit and loss statements, and inventory records. The professional accountant is familiar with operating expenses, liabilities, equity, accounts payable, cost of goods sold, cash flow, and more.
Accounting has several specializations- each with different job possibilities and educational requirements. Some accounting areas are:
- Financial: Focuses on business transactions
- Managerial: Provides data about entities operations to management
- Forensic: Practice examines potentially fraudulent financial data
- Fiduciary: Management of property for another person or business
- Tax: Tax preparation in compliance with IRS regulations
- Cost: Analyzing and recording manufacturing costs (typically)
- Auditing: External (third party) or internal (in-house) auditing of finances to identify fraud, mismanagement, or waste
What is Business?
The term cannot be as readily defined as accounting, as it encompasses too many disciplines and variables. Investopedia considers a business as any entity or organization, either for-profit or non-profit, that engages in industrial, professional, or commercial activities. Organizations pertaining to the arts, culture, recreation, and charities are generally non-profit. The IRS defines a non-profit organization as one that serves the public and is structured for tax-exempt purposes. These include literary, research, science, public safety testing, religion, and animal cruelty.
The most recent bachelor’s degrees data from the National Center for Education Statistics is 2018-19, which reported 390,564 business degrees conferred during this school year. Second place went to health professions and related programs with 251,355. There is no accounting discipline as it is lumped in with business, including marketing, management, and associated majors.
The Journal of Accountancy projected that 57,119 students would graduate with a bachelor’s degree in accounting for the school year 2015-16. Although this number may appear advantageous to accounting graduates, a report filed by the Association of International Certified Professional Accountants (AICPA) is not as glowing. Their 2019 Trends publication attests that in 2018 there was a 30% decline in hiring new accountants. By narrowing the gap between academia and practice at learning institutions, graduates will have more job opportunities with broader skills. These skills focus on meeting the technological demands of the evolving accounting profession.
The AICPA report presented the number of accounting bachelor’s degree graduates in 2017-18 at 54,947; for the same school year, they state that CPA firms hired 19,498 undergraduates in accounting. Of course, many may have gone to work for different entities than CPA firms. A more revealing statistic from the AICPA survey is that 16% of CPA firms planned to decrease hiring in 2018-19. In contrast, CPA firms expected to reduce non-accounting business graduates’ new hires (Bachelor’s and Master’s degrees) by 24%. Advantage = accounting (for CPA firms).
If you’re torn between majoring in general business and majoring in accounting, then you should learn as much as you can about the pros and cons of each decision. While there is a good deal of overlap between these two degree paths in both curricula and career opportunities, there are many benefits of pursuing an accounting degree over a business degree. A few of the best advantages of accounting rather than general business include developing the specialized knowledge employers are looking for, enjoying an unexpectedly wide range of job opportunities, and benefitting from above-average job growth rates.
In-Demand Specialized Knowledge
Along with subjects such as finance, accounting is what The Washington Post refers to as a “math-focused business major.” Students who graduate from a math-focused business major rather than general business or business marketing majors enjoy benefits such as higher wages and lower unemployment and underemployment rates, according to a WP 2017 article.
The article, written by Jeffrey Selingo, a college professor and advisor, stated that, although business is the most popular major, it doesn’t make it the best choice. A recap of the Collegiate Learning Assessment Plus standardized tests showed that first-year students and seniors majoring in business score lower in critical thinking, writing, analytical reasoning, and communication. Majors in mathematics, science, engineering, and liberal arts scored higher.
Other statistics by Georgetown University’s Center on Education and the Workforce report that bachelor’s degree or higher unemployment is 2.5% in computer, engineering, and science professions (STEM). The category of management, business, and finance is 2.9% unemployment.
These math-focused business subjects develop more than your math skills, as opined by Mr. Selingo. As you learn the concepts and practices of accounting, you also cultivate critical thinking and other skills mentioned above that general business programs do not cultivate as effectively. These crucial skills combined with your specialized knowledge in the field of accounting can be far more compelling to a potential employer than that of a student majoring in general business. Business administration degree programs have a reputation for bringing about less growth in these vital skills. Their major studies focus more on learning the basics of a breadth of business subjects than on developing a depth of expertise in any one discipline.
One way to have a taste of business administration and accounting is to enroll in a Bachelor of Science in Business Administration with a concentration in accounting. Old Dominion University offers this 120-credit degree that requires a minimum of 24 hours of accounting covering financial accounting, taxation, managerial accounting, and auditing. Students learn analytical skills, communication, colleague interaction, and ethical issues.
Palmetto College at the University of South Carolina has an accredited Bachelor of Science in Business Administration-Accounting. Accreditation is with The Association to Advance Collegiate Schools of Business (AACSB) – the gold standard of endorsements for business programs. More importantly, Palmetto is the only online business degree in South Carolina with this accreditation.
The above curriculum attests that graduates will have strong oral and written communication and analytical skills that employers believe students lack in general business programs. The coursework includes three hours of legal, social, and ethics in business and three hours of management and leadership principles. Thirty-three hours are devoted to accounting-related studies, like corporate income tax, federal tax procedures, financial statement analysis, financial accounting, and auditing theory.
We’ve looked at business programs with accounting; what about accounting programs that incorporate management courses. Rasmussen University has an online Bachelor’s degree in accounting with only 90 credits, and students could complete it in 18 months. The study plan includes standard financial accounting, cost accounting, auditing, corporate accounting, business law, leadership, operations management, teamwork, and strategic management. Therefore, the curriculum blends management/leadership with accounting principles and practices.
Graduates from Rasmussen will qualify for the Certified Management Accounting (CMA) exam. Individuals who aspire to be management accountants or financial professionals will benefit from this certification. Candidates must have at least two years of work experience and an undergraduate degree to take the prestigious exam. The average time to complete the two parts is 12 to 18 months, with 150 to 170 study hours per part.
You might expect that the specialized knowledge that distinguishes an accounting degree from a business degree would also mean that graduates of this degree program have less flexibility in their job search. After all, business majors may become sales managers, retail managers, project managers, account managers, and marketing managers. Accounting degrees correspond most closely with accountant jobs, like taxes, auditing, and management accountant. The latter position refers to professionals who manage a company’s financial records and statements to obtain a clear picture of the entity’s performance.
However, accounting jobs are just as varied as business management jobs, if not more so. According to the United States Bureau of Labor Statistics (BLS), there were 1,392,200 employed as Accountants and Auditors with a median wage of $73,560 (May 2020). Most work in accounting, tax preparation, bookkeeping, and payroll services (339,020). A distant second is those classified as Management of Companies and Enterprises with 97,250.
Management is a broad field that makes it difficult to establish accurate data. The BLS reports on the occupation of Administrative Services and Facilities Managers, of which there are 322,000 employees. The group refers to managers who direct, plan, and coordinate an organization or company’s activities. Logically, there are many more than 322,000 management positions in the nation. For example, the BLS states that there were 161,700 human resources managers in 2020; general and operations managers numbered 2,347,420; and 681,700 Financial Managers (May 2020).
Accountants take on various accounting tasks, from tax preparation to auditing and consulting to forensic accounting investigations, according to the United States Bureau of Labor Statistics (BLS). The field of private accounting, which has more in common with business management roles, can include roles in management accounting, cost accounting, and other corporate accounting job duties. Further, accounting students gain skills and specialized knowledge that can position them for non-accounting jobs such as financial examiner, financial analyst, and budget analyst.
If you think accountants can’t work in management roles, you might be surprised. Senior management positions in Certified Public Accounting (CPA) firms often offer six-figure salaries. Roles like finance manager, controller, and Chief Financial Officer (CFO) are all possibilities for accountants with plenty of ambition, experience, and education. However, many general business majors find themselves underemployed after graduation, working in roles that don’t require a college degree or aren’t relevant to their field of study. On the other hand, accounting majors can immediately start out working in junior accountant roles and work their way up to senior accountant and management positions, especially if they choose to attain an advanced education or professional certification along the way. Business administration degree programs might prepare students for eventual management roles, but they still need to gain the work experience that will help qualify them for leadership opportunities.
Because accounting is a more targeted degree path than general business doesn’t mean students miss out on learning business foundations. Accounting degree programs require core coursework in a variety of business subjects.
High Job Demand
Even during economic downturns, accounting has a consistently low unemployment rate. During profitable and less-than-profitable times, individuals and businesses still require help with their financial reporting needs. Career prospects are strong for graduates of a bachelor’s degree program in accounting, but they are even better for those who pursue a graduate education.
According to U.S. News & World Report, the recruiting process for candidates with a master’s degree in accounting often begins before they have even started their graduate-level studies. It’s not unusual for schools to begin working with students who have been admitted to the master’s in accounting program to improve their recruitment prospects over the summer before the students start grad school. Within the first few weeks of accounting students’ first term, recruiters may already be on campus to meet face-to-face with potential employees.
Another consideration is choosing an MBA or a master’s in accounting. The former typically studies marketing, finance, operations management, and business ethics. The Master of Science in accounting delves deeper into taxation, forensic accounting, auditing, and risk management. The business choice may provide greater flexibility in career paths; in contrast, accounting takes you primarily into auditing, forensics, and taxes. Also, do you have the aptitude for numbers, equations, tax forms, and financial statements? The chances are that long before you reach the crossroad of accounting and business, students will know which degree suits their career goals.
Overall, jobs for accountants and auditors will grow at an average rate of 7 percent or the turnover in 96,000 jobs through 2030, the BLS reported. Financial managers have a job outlook of 17% growth or a change in 118,200 over a decade. This statistic supports the degree in accounting that includes management classes. The May 2020 BLS data state that 98,570 out of 681,700 work in the Credit Intermediation and Related Activities industry.
Deciding if accounting is more beneficial to a business degree may be a personal decision based on personality. Some business programs stress leadership skills, which mean public speaking. Not all people feel comfortable communicating orally with superiors or groups. In comparison, tax accountants can perform their work with relative autonomy among small groups. However, the accountant can enjoy both worlds by assuming a management position in an accounting department.