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:
||Finance is associated with monitoring and managing money while acquiring required funds.
||Accounting identifies, communicates, and records the economic results of the organization.
||Finance leverages the same information and analyzes growth patterns to strategize the company finances.
||When compared to finance, accounting is a narrower domain, focusing on professional processes for managing accounts.
|Measuring Financial Performance
||Finance is a broader term where it aims to manage assets as well as liabilities and plan for future growth.
||The difference between accounting and finance is that accounting intends to work on the daily flow of money of an institution or company.
||Finance uses the information in order to project future growth and analyze expenditure.
||Accounting focuses on the daily management of the finance reports and records in the business universe.
||Considering the thinking process, finance is analysis-based
||Accounting is more rule-based
||Finance focuses on the future
||Accounting focuses on the past
||Finance is about looking forward, mitigating losses, or growing money. In terms of a long time horizon, finance is a better opportunity than accounting.
||Accounting is about accurate reporting of things that have happened (compliance with laws).
||A few career opportunities in finance include financial broker, investment banker, financial analyst, financial advisor, and financial manager or planner
||Accounting career scopes are auditor, cost accounting manager, treasure, tax accountant, controller, etc.
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:
- Financial reporting accountant
- Cost accounting manager
- Accounts payable or AP clerk
- Technical accounting manager
- Accounts receivable or AR clerk
- Tax accountant
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
Accounting vs. Finance: Objective
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
- 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
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.