Finance Vs Accounting – Important Differences
The fundamental difference between finance and accounting is that finance focuses on managing financial transactions of an organization, and accounts focus on maintaining those financial transactions in the form of records and reports.
If you are good with numbers and figures, then finance and accounting are the two perfect ways to make it big in the money world. There are several similarities between accounting and finance, such as requiring a bachelor’s degree to build a career. However, there is an ongoing debate on finance vs accounting that discusses the distinction between these two disciplines. The main difference between accounting and finance is the focus of the work. In account careers, the focus is reporting and recording transactions. On the other hand, finance professionals are focused on planning and directing these financial transactions.
In simple words, this discussion on accounting Vs finance shares key information on the differences between accounting and finance professionals.
What is Finance?
To begin with the finance Vs accounting debate, it is important to understand the meaning of accounting and finance. Finance is a broad category associated with different matters of money. From managing investments and acquiring needed funds to budgeting, forecasting, and lending, finance is a comprehensive field. In 2021, finance mostly involves corporate finance. You can become a financial advisor to an organization and help the company with its financial transactions, including saving, investing, and borrowing. Some financial concepts stay permanent, while some principles change or get upgraded with time. Finance careers teach you the intrinsic value of money, from microeconomic characteristics to macroeconomic aspects.
What is Accounting?
On the other hand, accounting has a limited scope as it deals with recording financial information. In accounting, you have to identify, record, and communicate your company’s economic results. Accounting careers revolve around the function of measuring the economic growth of a business or an individual. There are various accounting degrees and services that enable you to become a business accountant to process financial information in the form of reports. An efficient accountant can help the company by communicating accurate results to decision-makers.
The Difference Between Finance and Accounting
There are various factors on which finance and accounting can be differentiated. Here is a comprehensive comparison between them across these multiple factors.
Finance Vs Accounting : Educational Differences
|Graduating with a finance degree with cash flow management, investments planning, stock exchange trading, and insurance planning is necessary.||Graduating as a Chartered Financial Analyst or a Chartered Accountant is necessary.|
|The minimum educational qualification to start work is a bachelor’s degree in finance.||According to the Bureau of Labor Statistics, every certified public accountant holds a master’s degree in accounting to develop financial statements and calculate tax returns.|
|You need to be well-educated in the field of tax planning, estate planning, and retirement planning, as well.||You need to be a certified financial analyst by the International Federation of Accountants or local authority.|
|Corporate Finance: It involves all financial activities required to run an organization, from its budgeting to developing different investment strategies.||Financial Accounting: It includes the development of financial reports and annual statements in the form of balance sheets, cash flow statements, and income statements. This category involves the role of external decision-makers, from investors to taxing authorities and creditors.|
|Personal Finance: It involves the process of planning money for individuals. In this category, long-term financial management planning is important. Retirement planning and purchasing of financial products are involved in this type of finance. It also includes mortgages and banking schemes.||Cost Accounting: It involves calculating the costs associated with the development of products and services. This category deals with helping businesses decide the production methods and the cost of the product and services being offered.|
|Public/Government Finance: It includes different activities that study finance and taxes, annual spending, and budgeting. It involves studying policies to help the government allocate resources optimally.||Managerial Accounting: It involves using transactional data for managing the accounting profiles of organizations. Internal stakeholders are deeply associated with this category. They make the decisions on managing business operations. Forecasting, financial analytics, and budgeting are the main activities involved in this category.|
Finance Vs Accounting : Career-wise Comparison
|Investment banker, who conducts advisory-based financial services on behalf of banking organizations.||Auditor, who checks whether financial statements are following specified criteria.|
|Financial broker, who guides the investments of clients across different portfolios in the stock market.||Financial reporting accountant, who researches accounting regulations to recommend changes in company policy.|
|Financial analyst, who undertakes an in-depth economic analysis of internal or external clients.||Cost accounting manager, who supervises the costs spent by the organization.|
|Financial advisor, who consults clients on making profitable financial decisions.||Treasurer, who administers financial assets and liabilities of the company.|
|Financial manager/planner who specializes in tax planning and investment planning for clients.||Tax accountant, who calculates tax returns and prepares statements.|
Finance Vs Accounting: Salary Differences
|The average salary of a finance professional is $65,000 per year.||The average salary of an accounting professional is $82,000 per year.|
All things considered, the difference between finance and accounting highlights how these fields manage and make money in their way. Accounting focuses on tracking the money in and out of a company, whereas finance manages its assets and liabilities. Together, they play a key role in planning a better future for the company.
FAQs on Finance Vs Accounting
1) What is the basic principle of finance?
Money valuation and time management are the basic principles of finance. They help improve cash flows, investment returns, executing mergers and acquisitions, and creating an effective investment strategy.
2) How does accounting relate to finance?
Based on the generally-accepted accounting principles, finance is connected with accounting on the grounds of funding, bookkeeping, auditing, capital records keeping, business knowledge development, and management accounting.