Accounting and finance are related to the resource management of a company. This means they come under the same category of monetary growth with distinct meanings.
For a startup or company to succeed, they need to set their finances and accounting with top priority. The former with the current and the latter with the upcoming strategy.
Accounting vs Finance
The main difference between accounting and finance is that accounting focuses on the present and past resource management of a company or startup. On the other hand, finances are done by keeping in mind the future strategy of the company or the startup.
Accounting deals with the past and present financial outputs. Like clearing of checks, payrolls, important expenses, and tracking of liabilities and assets on the balance sheet. This closing of entities is performed with the general regulation of GAAP. Which ensures precision in external and internal computing of fiscal data.
Finance deals with the long-term growth plan of the company. This is done by analyzing and understanding financial inputs through a vision of growth and strategy. It helps in preparing annual plans for the company and maximizes the use of capital investment. Finances are done by individuals with relative knowledge of GAAP.
Comparison Table Between Accounting and Finance
|Parameters of comparison||Accounting||Finance|
|Period||For short terms financial decisions like payrolls and expenses||For long term growth plan to utilize capital investment|
|Area of focus||Current reliabilities and precision||Developing high-end insights|
|Aim||To transmit the details about the financial health of the company||To strengthen the distant financial status of the company|
|Private and Public corporation||Consultancy agencies and banks|
|Extent||Preparing current financial statement||Preparing future financial statements or financial transaction|
What is Accounting?
The process of keeping the records and communicating financial decisions is termed accounting. Mostly it deals with maintaining the economic commodities and ensuring the health of a company. It is also known as the real language of business.
Those who practice accounting are known as accountants. Their job is to keep the integral information related to all the monetary transactions of the organization. Like payrolls, liabilities, assets, salary checks, etc. This ergonomically keeps all the financial data for better financial stability. Other practices in accounting include actuarial accountant, budget analyst, tax attorney, tax preparer, etc.
Accounting can also be described as a summary of the financial operations of a company. This summary can be categorized into the financial and managerial forms of accounting. The former is mostly concerned with interim financial statements while the latter deals with independent utilization of the same information.
It also becomes a crucial factor for the investing partners of the company. Modern-day investors are highly dependent on the accurate growth report of the organization and its current statistics. This type of transparency helps them to diversify their funds precisely and in the right channel.
Accounting also provides auditing reports, 10-k filings for the proper regulation of the organization.
What is Finance?
Finance refers to the process of gathering funds and managing your capital. It is a long-term exercise that deals with the creation of the best future options for the company. It is a vital factor for the economical health of an organization.
The concepts of finance are based on the theory of micro and macroeconomics. It revolves around the basic relation of consumer and a product. This means that the company has to build its financial strategy around consumer needs.
Finance can be defined more precisely by including its activities. For instance, investing in bonds and stocks for maximum return is the core value of finance. Furthermore, issuing bonds on the behalf of the company is also an activity in finance.
The concept aims to create value for the organization and the company. It involves dealing with the risk factor to ensure optimum returns. Finance also decides the future of working capital and rates of interest paid or given by the company.
There are many career paths in the field of finance. Notably, you can become a commercial banker, investment banker, private fund manager, equity researcher, treasurer, financial planner, Audit, etc.
Main Differences Between Accounting and Finance
- Accounting deals with the current strategy of the company, whereas finance focuses on the future strategy of the group.
- Accounting deals with generation invoices and bills, while finance manages the annual report of the company
- Accounting is practiced by accountants whereas finances are controlled by investors
- Accounting is significant for public and private organizations, whereas finance is highly beneficial for consultancies,
- The history of accounting dates back to the roman empire, whereas the history of finance dates back to the Babylonian empire.
Accounting and finance are different fruits of the same branch. Technically, they both deal with money management and its optimization, but the scale of financing is much bigger than accounting. Usually, accounting targets the micro components of the company or organization while finance helps them to reach the macro level.
You can efficiently run a company and make it a success with great accountants. But to reach a unicorn stage, you need to have the best financers. Accountants can simplify your current economic issues, but financers or investors will have the power to prevent major economic catastrophe for your group.
Accounting is a much older process than finance. The process of accounting is as old as the existence of money itself. This means that finance was a concept created to enhance the previous economic structure. People in those times had enough money to manage, but they had nowhere to invest it. Therefore, finance met the economic needs of the modern man.
However, both accounting and finance are critical for the economic health of the company, startup, or organization. For instance, they both complement each other. If the accounting isn’t up to mark the finance will suffer and vice versa. Therefore, a balance of both departments is vital for economic growth. If accounting is the language of business then finance is the enriching vocabulary of that language.