What is the difference between finance and accounting
There have been many cases where the word accounting as a course of study and finance as a course of study are thought to be the same. This article is mainly to clear what is the difference between finance and accounting. Here after reading this article you will be fully clear between the difference in these two terms of business management.
READ: Skills required for finance manager
Let me start by giving the definition to both i.e. Finance and Accounting in details.
Accounting: accounting can be defined as the study and act of giving and keeping perfect record of financial events and transactions in an economy for the purpose of giving the financial position and the state of profitability of the economy either at the end of the financial month or year.
Finance: finance as a study deals with the study of investment in terms of assets and liabilities of the economy. Finance helps in analysing the company budget, makes the company understands the risk on ground, the profit to be coming in on every investments, issuing of bonds and selling of shares to investors to raise funds for the company in financing the company.
As accounting focuses on the provision of information on the financial status of an economy in other to make the company take a rational decision, the finance aims at focusing on money, investments, bonds, stocks of the company and giving the company advises on how to generate funds to run the affairs of the company. Here with definitions, this is clear what is the difference between finance and accounting. And in later discussion, you will also find out who is major in business management.
READ: What can you do with a finance degree
Relationship between finance and accounting
There are lot of differences between accounting and finance. For the differences to be understood, I will place the difference in different categories below on basis.
- On the basis of career.
As accounting has its career in different field under it in an economy, the finance as a study has its career at different level from the accounting in the economy. Some of the careers in accounting are accountants, tax consultant, auditor, clerk, cashier etc. while careers under finance are finance manager, financial analyst, insurance manager, risk manager, finance controller etc.
- On the basis of objective and aim
The main objective of accounting is to give the financial record of the company and provide information of the financial issues and the aim is to make the company executives or users to make a rational decision while the objective of finance is to focus on how to get funds and capital for the company and also give the investment analysis to company, they focus on how to get the company to finance its affairs properly and their aim is to make profit for the company on every investment and to prevent the company from going bankrupt.
- On the basis of tools used
Accounting uses cash books, balance sheets, income statements, account statement etc. as there tools in using to carrying out there day to day activities and record keeping while finance uses promissory notes, risk analysis, mortgage, leverage capital budgeting etc. as there tools
- On the basis of meaning
Both accounting and finance may look alike but they have entirely different meaning. Accounting has its meaning as the act of giving and keeping perfect record of financial events and transactions in an economy for the purpose of giving the financial position and the state of profitability of the economy either at the end of the financial month or year while finance has its meaning as study of investment in terms of assets and liabilities of the economy.
READ: Is finance a good major
Conclusion: Finance over accounting
Other differences are that accounting is a topic and subset under finance while finance is a major. Finance deals with funds management while accounting gives the information on transactions. While finance is useful in making the company understand the profit coming in on every investment and the company risks, the accounting makes the company understand their financial status.
Finance has three sub categories which are public finance, personal finance and corporate finance while accounting has four sub categories. Finance controls and heads every financial sectors in an economy or company including accounting. Finance sees to the effective activities of accounting and accounting makes its reports back to finance while finance works on it to make decision on how money should leave and to enter the company. Accounting works are limited unlike finance that can work in any sector that uses money in their day to day transactions and activities. Now the topic, what is the difference between finance and accounting is completely clear and fully elaborated.
