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Difference Between Finance and Accounting

You may love working with finance figures and think both accounting and finance are the same, right? The truth is although the finance field somewhat resembles accounting, both are different sectors. 

The key differences between finance and accounting is that, the finance is concerned with the strategic management of funds and resources to achieve financial goals, while accounting is focused on the accurate recording and reporting of financial transactions for transparency, compliance, and decision-making. Both fields play crucial roles in the financial management and success of businesses and organizations. While accounting is the art of keeping records of business events systematically, finance is a part of economics. In this post, let’s evaluate the difference between finance and accounting in detail.

What is Finance?

To understand the finance and accounting difference, you first need to learn what financing is. Finance is a term associated with monitoring and managing money, thereby acquiring required funds, such as forecasting, budgeting, saving, lending, borrowing, and investing. The principles and concepts of finance include the time value of money as well as intrinsic value. These depend on the macroeconomic and microeconomic theory. Let’s deep dive in this guide to understand the key difference between finance and accounting.

What is Accounting?

Learn finance vs accounting differences after assessing what accounting is. In short, accounting is the process of identifying, communicating, and recording the economic results of an organization. It is a requisite element of any business which measures business activities. In addition, it also processes information into reports while communicating results to the decision-makers.

Exploring the Differences Between Finance and Accounting

Now that you have learned the meaning of accounting and finance, it is time to discover the difference between finance and accounting. Here’s presenting the parameters one by one:

Below is more comprehensive area on which we will be discussing the difference between finance and accounting.

Also Learn More: The Rise & Growth of Fintech: Transitioning from Traditional Finance

Accounting vs. Finance: Career Options

Some career opportunities in finance include the following:

• Financial broker
• Financial Advisor
• Investment banker
• Financial manager or planner
• Financial analyst

Some career scopes in accounting include the following:

• Auditor
• Financial reporting accountant
• Cost accounting manager
• Accounts payable or AP clerk
• Technical accounting manager
• Bookkeeper
• Treasurer
• Accounts receivable or AR clerk
• Tax accountant
• Controller

Accounting vs. Finance: Required Skills

In finance, you need technical knowledge, interpersonal skills, problem-solving proficiencies, and communication ability. Other essential skills in a finance career include analytical expertise, business acumen, and financial reporting.

In accounting, you need soft and hard skills. Hard skills for accountants include proficiency in technology as well as software systems, such as ERP experience, Excel, Microsoft Visual Basic, SQL, and business intelligence software. Other than that, you must possess soft skills like leadership ability and communication skills.

Check out: Financial Accounting vs Management Accounting

Accounting vs. Finance: Salary Expectations 

There is certain difference between accounting and finance in terms of salary expectation as well:

The average salary of professionals in finance includes the following:

• Chief Risk Officer or CRO: 50 Lakhs annually
• Chief Financial Officer: 37 Lakhs annually
• Financial Actuary: 25 to 30 annually

Professionals in accounting can earn an average salary as mentioned in the points below:

• Financial reporting accountant: 9 Lakh annually
• Treasurer: 18 lakhs annually
• Controller: 24 lakhs annually

Accounting vs. Finance: Salaries

If you compare the average salary of professionals in accounting and finance, here’s a rundown of information:

• Chief Risk Officer or CRO (in finance): 50 Lakhs annually
• Chief Financial Officer (in finance): 37 Lakhs annually
• Treasurer (in accounting): 18 lakhs annually
• Controller (in accounting): 24 lakhs annually

The basic goal of accounting is to determine loss or profit for a span of time. It enables customers to understand the firm’s current financial condition on a specified date.

In finance, the prime objective is to arrange funds for a kind of expenditure and spend money. It involves allocating funds in such a manner that it reaps the highest ROI. Besides managing funds, it also multiplies them. So, uncertainties and risks are considered too.

Accounting vs. Finance: Functions

The functions of accounting include the following:

• Measurement of the performance of an enterprise and disclosing the financial position
• Forecasting forthcoming trends and future performance
• Rational decision-making that offers useful data to users
• Accounting information can be used for comparing the past as well as present performance
• Controlling allows you to identify the operational system’s loopholes
• Government Regulation, as well as Taxation

Organizing finance functions comprise two ways. While one is by managing the finance, the other is by managing the finance control. Finance management is performed by a treasurer who takes care of the following duties:

• Cash management
• Asset management
• Credit management
• Banking
• Security management

On the other hand, a controller is responsible for the management of the finance control, including these activities:

• Budgeting and planning
• Cost accounting
• Data processing
• Finance Accounting
• Annual reporting
• Internal auditing

Finance or Accounting: Which Is Better for You?

Accounting is a more complicated field as it depends on arithmetic principles precisely. But finance requires a grasp of accounting and finance without too many arithmetic details. If you want a more progressive future, finance is a better alternative. But accounting teaches you the principles and processes for managing numbers.

Learn more: Top 20 Financial Accounting Terms That You Should Know

Conclusion

So, this post has elucidated the difference between finance and accounting: from their meanings and values to career opportunities and everything in between. Hero Vired is a platform offering Financial Analysis, Valuation, & Risk Management courses for working professionals.