Actuary and accounting are both business-related professions that require analytical skills to determine financial implications. However, they aren’t exactly the same thing. Knowing the differences between an actuary and an accountant will better determine which career path is right for you.
Actuaries help assess the financial implications of business and predict future events, while an accountant records and analyzes an organization’s financial transactions. However, both require good statistical and mathematical mastery but differ in scope, education, and remuneration.
Who is an Actuary?
An actuary is a professional who assesses the financial implications of business risks. To perform their duties, actuaries leverage their knowledge of mathematics, statistics, economics, and theories of finance to predict future events, particularly those about insurance and pension programs.
An actuary can work in any business that needs financial risk management and estimation of premiums. These may include insurance firms, consultation agencies, government agencies, banks, investment institutions, etc. An actuary can therefore be defined as a business career that’s based on mathematics.
Other businesses/industries where actuary professionals are in high demand include e-commerce businesses, energy firms, and marketing firms. Certain departments within large corporations also typically use actuaries to accomplish their functions. These include product development departments, employee benefits departments, and predictive analytics departments.
For insurance companies, actuaries are indispensable. They use their advanced analytical and statistical skills to evaluate risks and compute premiums of insurance policies, reserves, and rating methods. Large insurance firms and other corporations that are looking to grow and continue providing value to their consumers need knowledgeable actuaries. Business managers can use an actuary’s insight to make strategic decisions and avert or prepare for future risks.
Who is an Accountant?
An accountant is a professional whose role is to record and analyze the financial transactions of an organization. They keep records of business transactions and make reports on the entity’s financial performance. These reports usually include interpretations of the financial data recorded.
Note: Normally, people confuse accountants with bookkeepers, using the term interchangeably. However, a bookkeeper is only responsible for recording financial transactions, while an accountant interprets financial data after recording it.
Apart from financial bookkeeping and analysis, an accountant may also be required to create various accounting processes to manage a firm’s assets properly. These may include processes for receiving payments from customers, sending shipments to customers, and receiving invoices from suppliers,
Accounting is a broad profession that can be classified into three types: public accountants, government accountants, and management accountants. In each of these classes of accountancy, there are several accounting sub-fields that one can specialize in. For instance, we have tax accountants, inventory accountants, billing clerks, payroll clerks, etc.
An accountant may pursue certain certifications that accord them state licensing to work for clients within that given state. The most common certification is the Certified Public Accountant (CPA).
What are the differences between an actuary and an accountant?
An actuary and an accountant are similar in using their analytical results to deduce the financial implications of past or future events. However, that’s as far as the similarities go. You can differentiate actuary and accounting by the scope of work, academic/education/training requirements, and salary.
Here are the differences between an actuary and an accountant:
Scope of work
The main difference between an actuary and an accountant is that an actuary predicts the financial implications of events that may occur in the future, while accountants interpret events that have already occurred and provide insight into the financial impact of these events.
An actuary studies various pieces of data and computes the probability of an event occurring in the future. Then, they calculate the financial implications of the occurrence of the predicted event. Finally, the actuary uses their mathematical knowledge to determine how much finances should be set aside to mitigate the risks that would arise if the predicted event were to occur.
On the contrary, an accountant collects financial data from past and recent financial transactions, such as expenses on supplies and payroll or income and profits from sales. They then use this data to generate financial reports such as income statements and balance sheets. The accountant may also be required to use these reports to evaluate the revenue performance of the business and determine which marketing strategies are effective.
Actuaries and accountants also differ regarding their academic qualifications and educational backgrounds. Most employers require applicants for actuary positions to have a bachelor’s degree in actuarial science and pass at least 1 actuarial exam as a minimum. Comparatively, you need at least a bachelor’s degree in accounting or a related field to work as a general accountant.
After completing a degree in actuarial science or a related field, you can practice actuary as an associate. However, to become an actuary fellow (a certified actuary), you’ll need to pass a series of exams offered by any of the professional actuarial societies in the country.
On the other hand, employers typically require applicants for accountant positions to have at least a degree in accounting or business. Additional accreditations in relevant areas, such as taxation and auditing, are usually an added advantage. In addition to the degree and accreditations, an accountant must complete and pass the Certified Public Accountant (CPA) exam to become a chartered accountant within a given state.
Several factors determine the salaries of both actuaries and accountants, making it difficult to determine which profession pays higher. Generally, actuaries earn higher than accountants as the profession requires more specialized training and a higher degree of technical knowledge.
For instance, the average salary for a top-level actuary fellow is $190,000 per year. Comparatively, the average salary for a senior management CPA is $145,000 per year. Additionally, entry-level actuaries who haven’t completed any post-degree actuary exams earn slightly higher salaries than entry-level accountants without CPA certification.
The table below summarizes the differences between an actuary and an accountant.
|Calculates financial implications of future events||Deduces financial implications of past events|
|Requires a bachelor’s degree in Actuarial Science to practice||Requires a bachelor’s degree in Accounting to practice|
|The average salary for a top-level actuary fellow is $190,000 per year||The average salary for a senior management CPA is $145,000 per year|
Actuary and accountant, which is better?
The better career choice between accounting and actuary depends on your personal career objectives, skills, and preferences. For example, take the actuarial route if you prefer a career path with more potential for higher pay. However, if you prefer a career with fewer barriers to entry, go for an accounting course.
i. Purdue University- Department of Mathematics: What is an Actuary?
ii. Northeastern University- Bachelor’s Degree Completion: What Does an Accountant Do? Responsibilities, Skills & Trends