Finance process and accounting are closely related terms, hence from different aspect of life, work, management, banking and business people are interested in learning about the difference between accounting and finance, including the key similarities between finance and accounting
Before we think about the similarities between Accounting process and Finance we need to establish that not many people are informed enough to acknowledge, the two are different disciplines but commonly confused by people because both of them deal with business and organizations.
Operating of public administration, depends on the principles, of which even bureaucratic institutions rely on these procedures to effectively move money and assets in an organization. Financial accounting is part of public finance, process for measuring government expenditure and budget deficit, to ensure accountability and allocation of funds through financial management to promote good governance. This shows that almost every characteristic of an organization and pillar of administration, plays a role of which under each of the two banners is similar so it would be of greater interest to interact with the differences.
The difference between accounting and finance
A closer look at Account vs Finance to help you know the difference between accounting and finance
Definitions: The first major difference between the two is in their definitions where Accounting refers to maintaining the daily financial transactions of business while Finance refers to the management and investment of money in business properly.
Here’s the difference between accounting and finance
- Accounting deals with balance sheets and trial balance, finance deals with risk analysis and capital budgeting. Accounting involves the management of day-to-day financial transactions and the flow of money and then preparing the financial statements.
- Accounting provides checks and balances in finance management
- Accounting is an art of classifying, recording, and reporting the financial figures or transactions of the business.
- Accounting is a daily routines activity of accounting feed into financial processes.
- Accounting involves the recording, creation, summation, management, and reporting of day-to-day financial transactions of the business, which ultimately leads to the preparation of business financial statements and finance does not.
- Organizations employ accountants/bookkeepers who’s responsibility is to manage accounting activities and ensure (as a matter of paramount importance)
- Accounts ensures that all monetary transactions are correctly captured into the ledger book and balance of accounts are correct, thus financial statements are reliable and accurate.
- Accounting is post-mortem activity that records what has already happened operating under finance process. Finance is a pre-term activity where the comprehensive study is done to realize the funds or assets requirements of an organization or business.
- Finance is a wider and broader term that involves the effective management of business assets and liabilities, and further planning for positive future growth.
- Finance is more of a science of logical planning and distributing the business assets.
- Finance looks into a broader perspective of the results of daily including accounting.
- Finance deals with the overall movement of income in an organization
- Finance can be used to measure the organizations capital
- Finance is broad and can sometimes refer to money, while Accounting is a process of accounting for money
Purpose for Accounting process and Finance
Aim of Accounting aims at the collection, classification, and presentation of the current financial information about the business that can be used whenever and wherever necessary(internally as well as externally) for the benefit of the business.
Aim of Finance is to manage, control, strategize, and make decisions about business finances. It involves the view-point of futuristic benefits.
Similarities Between Accounting and finance
While it is difficult to differentiate between Accounting procedure and Finance, acknowledgement of their similarities (which is not much of a challenge) is important after acquainting yourself with the differences. It is important because these differences are not conflicting but rather feeding into each other.
Attention to detail: Both disciplines pay high attention to detail. When dealing with money, business and assets you can not afford to make gross errors as it is detrimental to the entire corporation. If financial statements are incorrect then everything regarding accounts communication to top management or finance becomes incorrect and such risks can lead to total shutdown.
What is Accounting?
In Accounting, anything that has financial character associated with it in monetary terms is recorded, classified, summarized and then interpreted in a significant manner.
The financial statements prepared by the respective professional are used to understand the financial health of the business i.e. whether a business or an organization is making profits or losses of assets. The human competence and aptitude define the reliability and accuracy of financial statements.
This seeks to record and collect all financial transactions of the organization to be used internally and externally. Financial Reports may be read by investors, lenders, or creditors and these reports must portrait fair and accurate information.
The various types of accounting are Financial, Public, Government, Management, and Internal Auditing.
What is Finance?
Finance is a wider and broad term that closely describes the two activities i.e. to assess how the finances or money will be managed and how required funds will be acquired. Money, Credit, Banking, Capital markets, Leverage, Investments, Dis-investments are few concepts that are included in finance.
The finance holds its roots in Microeconomics and Macroeconomics means assessing every aspect of the finances from “how-to”, “what to”, “where to” and “when to” manage.