Difference between accounting and finance
Accounting vs Finance :
Although accounting and finance are both very common terms 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, 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 prepared by the accountant which circulates through out 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 reports which come in the form of financial declarations such as balance sheets, income declarations which is also comprised of the profit and loss accounts, and the declaration of changes in financial position aid the financial directors to analyze the previous performances and also to perform certain legal responsibilities such as paying taxes, 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 states 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 and also, it studies managerial finance which involves the actual management of the firm which includes profiling and management of project risks.
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 is 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 accounting is financial strategy, managing and controlling, and decision making. Based on that, one can assume that finance starts where accounting ends.