Finance and accounting are often used interchangeably and viewed in the same context. From a layman’s point of view, it might seem like the same thing but there’s a big difference between these two disciplines. What is the difference between finance and account? It’s an age-old question that is often put forward by those who have little to no idea as to what these two fields entail.
At first glance, it might look like the same because both of these disciplines deal with financial data for organizations. However, the difference between both the disciplines is enormous and they have a different role to play. Accounting is more about keeping the record of financial data as per rules and guidelines whereas finance deals more with aspects like financial analysis, how the investments are made and other important monetary aspects. Let’s delve deeper into the subject to explore the key differences between finance and accounting.
How do they differ?
Some of the major differences between finance and accounting are mentioned below.
- Finance tilts towards the future and accounting towards the past
So if you look from a broader perspective you will find out that finance is more about the future prospects of an organization whereas accounting deals with the financial events that have already taken place in the past. You will see financial professionals are more engaged with sourcing capital and identifying profitable investment avenues that will give a good return in the future.
Most professionals in the finance domain such as financial planner, investment banker or financial advisors deal with future monetary planning. Accountants, on the other hand, have to record the data of financial transactions that have taken place in the past. Accountants tend to track and record these financial data for analyzing any discrepancies or fraudulent transactions. They deal with maintaining financial statements such as cash flow
- Different specializations available in finance and accounting domain
You can choose your specializations in both fields depending upon your interests. Some of the major specializations in finance include public finance, corporate finance and personal finance. Personal finance is all about finance decisions related to a particular individual. This includes aspects such as education financing, retirement planning, personal savings, life & property insurance, estate planning, etc. Corporate finance is all about handling the finances of an organization. It includes finding profitable investment avenues and maximizing returns.
Public finance specialization deals with funds of the state, it includes providing financial guidance to government and related bodies to maximize their returns. When it comes to specialization in accounting, there are four major categories financial accounting, management accounting, tax accounting, auditing & insurance, etc. Financial accounting is the most common of them all and deals with preparing financial statement and reports for an organization.
Management accounting is also related to guiding organizations to meet their overall financial objectives. The activities include budgeting, cost allocation and cost-benefit analysis. Tax accounting, auditing and insurance deals with accounting for tax-related purpose, it deals with inspecting the company’s financial records to check if they are following the industry guidelines and accounting practices. It has a very broad scope.
- Different professional qualifications and regulatory bodies
The finance and accounting disciplines have different qualifications that an individual can pursue as per his/her interest. They can choose finance and accounting courses as per their personal preference to learn about the field. Those who want to pursue a career in finance can opt for qualifications such as Chartered Financial Analyst (CFA), Certified Financial Planner (CFA), Registered Financial Planner (RFP), etc. Those looking to pursue professional qualifications in accounting can choose from qualifications such as Chartered Accountant (CA), Chartered Institute of Management Accountants (CIMA), etc.
Also Read: What Does Finance and Accounting Do?