Difference Between Public vs Private Accounting
Public accounting: The easiest way to understand the difference between Public vs Private accounting is to understand who they render their services to. A public accounting firm has the expertise and resources to provide accounting, auditing, taxation, consulting & advisory services to the broader client segment such as Government agencies and Multi-national organizations. Private accounting is relatively a narrower concept and is limited in its nature and function. Private accounting refers to maintaining the accounts related to any specific company and is essentially a part of the organization. Private accounting is usually considered to be an ‘internal’ part of the organization, as private accountants are very much a part of the business and corporate structure.
Public vs Private Accounting – Explanation
Accounting, in simple terms, can be referred to as, recording of day-to-day business transactions in a systematic manner; and as per international accounting standards, so that effective decisions can be taken. Any business entity that is involved in monetary transactions is mandated to maintain a record of it, as per the accounting standards. The person who is concerned with maintaining the accounts of any organization is referred to as ‘Accountant’. An accountant is educated and trained in accounting concepts and procedures in order to maintain accounting books systematically.
Public accountants are more equipped with the knowledge required to carry out their duties effectively, and usually, possess any professional accounting certification such as ‘Certified public accountant (CPA)’. Public accounting firms are generally called ‘External accounting firms’, as they are not a part of the business and corporate structure of the clients. They usually cater to a variety of clients, ranging from small businesses, large corporations, and Non-government organizations to Government agencies, and charge fees for the services they render. The Big Four (Deloitte, KPMG, E&Y, and PWC) are the classic examples of the public accounting firms, as they are an external, yet essential part of their clients.
Often the work of private accountants is reviewed and audited by public accounting firms—this process leads to establishing the fact that the internal accounting practice of the organization meets the reporting standards. The work of the private accountant usually revolves around setting up the accounting systems of the organization, ensuring that the accounting process of the organization is carried out in a systematic manner, and maintaining the day-to-day accounting ledger. A Private accountant is trained in the processing of accounting transactions, such as billings, payments, accounts payable and accounts receivables. Typically, Private entities, small-large medium-sized businesses, and government agencies hire private accountants on their payroll and designate them with carrying out day-to-day accounting work.
Public Accounting vs Private Accounting Infographics
Below is the top 6 difference between Public vs Private Accounting:
Key Differences Between Public vs Private Accounting
As we already know, both Public vs Private Accounting are the key components of the Balance of payments, and both Public vs Private Accounting differ in nature. Let us discuss some key difference between Public vs Private Accounting:
- Public accounting is an ‘external’ part of any organization and does not have any place in its corporate structure, whereas private accounting is an ‘internal’ part of the organization and is an integral part of the corporate structure.
- The big four companies (Deloitte, KPMG, PWC & E&Y) are the examples of public accounting firms and private accounting professionals take the place in private accounting space.
- Public accounting covers a wide array of accounting & advisory related work; on the other hand, private accounting is limited to the internal transactions of the business.
- Public accounting firms can review & audit the work done by private accounting professionals, whereas private accounting professionals don’t do the same.
- Some of the examples of the work done by Public accounting firms are 1. Auditing the financial statements and giving an opinion on the same, 2. Providing advisory on the accounting policies & methods of the clients, 3. Helping clients pay their taxes as per the taxation rules. Private accounting work involves 1. Recording daily business transactions in the accounting books, 2. Setting up systems to ensure compliance with the accounting rules, 3.Carrying out internal audit of the records in a timely manner.
Head To Head Comparisons Between Public vs Private Accounting
Below is the topmost Comparison between Public vs Private Accounting:
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|The basis Of Comparison Between Public Accounting vs Private Accounting||
|Exposure||Professionals who work in a Public accounting environment tend to have broad exposure to a variety of industries and sectors, as they deal with a wide mixture of clientele.||Since Private accounting work is limited; it does not allow the professionals to expand their horizons.|
|Career advancement||Professionals who work in the public accounting firms move up the ladder quickly.||The growth in the career is limited and slow in the private accounting environment.|
|Environment||The significance of maintaining accounting records in decision making is well known. Hence, there is always a huge amount of pressure on the public accountants to carry out their duties efficiently.||The private accounting work, by virtue of its nature, provides a stress-free work environment to its accountants.|
|Certification||Public accounting firms stress more on professional accounting certifications such as ‘Certified public accountant (CPA)’ for its employees||Unlike Public accounting, private accounting firms do not stress too much on getting the international certifications such as CPA. Professionals can move up the ladder without professional certifications.|
|Flexibility||Professionals in public accounting firms may be asked to travel to the client’s place without prior notice.||Private accounting work provides its professionals flexible and steady work environment.|
|Specialization||Many public accounting firms encourage their clients to cover specific industries, which allow the professionals to become specialist in their respective area.||Unlike Public accounting firms, professionals in private accounting setting do not get an opportunity to specialize in their respective fields.|
While both have its own pros and cons, they are an integral part of the businesses. No business function without getting involved in monetary transactions; and in order to keep track of the transactions for analysis, they indulge in maintaining a record of it. It won’t be wrong to say that no business can survive without maintaining the accounts.
Public vs Private Accounting – Final Thoughts
Public vs Private accounting is the two significant parts of the Accounting framework of the entities, and both require diligence, expertise, and resources to carry out their work efficiently. While both Public vs Private accounting differ in terms of scope, functions, and nature; they are essentially required to ensure that the accounting transactions are maintained as per accounting standards and reflect the fair picture of the organization’s financial health.
This has a been a guide to the top difference between Public Accounting vs Private Accounting. Here we also discuss the Public Accounting vs Private Accounting key differences with infographics and comparison table. You may also have a look at the following articles to learn more –