Difference between accounting and finance
Accounting vs finance:
Although accounting and finance are both very common terms which are used very often in economics, these two words distinguish themselves from each other in many ways. Prior to exploring the differences between accounting and finance, it is important that one explores each title individually.
Accounting can be described as the precise and methodical recording, assessment and reporting of a company’s financial deals. This includes providing data, measuring the performance of the firm, interpretation of financial statements, assessing its financial position and also, paying taxes and etc. These financial records are maintained through a method called bookkeeping which presents all the day to day financial activity of the company in detail. Accounting is also best described as the voice and the heart of business as it is these financial documents which are prepared by the accountant which circulates throughout the company hierarchy and it is according to these documents that the public views the performance of the company and the authorities make the key decisions. These financial reports come in the form of financial declarations such as balance sheets, income declarations, profit and loss accounts and the declaration of changes in financial position and these documents aid the financial directors to analyze the previous performances and they also aid in performing certain legal responsibilities such as paying taxes and etc. Therefore, one can say that accounting and finance are very closely knit indeed.
Finance is the main economic body which covers a wide range of subjects to which accounting too belongs. The end-product of accounting is comprised of financial declarations such as income declarations and balance sheets which state the profit and loss accounts and the declaration of changes in financial position which also includes the funds declaration. Finance studies money and capital markets which deal with many of the topics covered in macro economics. It also manages and controls assets and investments which focus on the decisions of individual and other financial institutions. It also studies managerial finance which involves the actual management of the firm which includes profiling and also, the management of project risks.
What is the difference between finance and accounting?
The differences between these two terms can be seen in decision making and the treatment of funds. In finance, the funds are determined on the cash flow whereas in accounting, income and expenditure are based on the accrual system where expenses are acknowledged at the point of occurrence and revenue is acknowledged at the point of the sale as opposed to when it is collected. In finance, the revenue is acknowledged at the point of receipt in cash and the expenses are acknowledged just as the actual payment has been made.
These two terms have their differences in respect to their purposes as well. The purpose of accounting is collecting and presenting financial information. The purpose of finance on the other hand is financial strategy, managing, controlling and decision making. Based on that, one can assume that finance starts where accounting ends.