Both finance and accounting have some similarities and both revolve around asset management. However, there are many factors that differentiate these two terms. The main difference between finance and accounting is that finance is the art of allocating assets and liabilities, it deals entirely with money management, while accounting is the art of providing financial information about the activities of an entity, either be it finance-related or cost-related.
Finance is the art of dealing with the allocation of assets and liabilities and the management of large amounts of money. The time value of money is the important factor in finance that states that the purchasing power of a unit of currency can change over time. Finance can be subdivided into different categories such as public finance, corporate finance, and personal finance. Personal finance deals with financial status, adequate protection, tax planning, investment and accumulation goals, retirement planning, and estate planning. Corporate finance deals with the means of financing and the capital structure. Public finance deals with the financial affairs of the state and provinces. In summary,
Accounting refers to the way of measuring, processing, summarizing and communicating the financial information of an entity. Accounting is called “business language.” Accounting measures the performance of an organization and understands it in a way that is useful to investors, creditors, management, and regulators. Accounting professionals are known as bookkeepers. Accounting can be subdivided into various categories such as: financial accounting, management accounting, cost accounting, tax accounting, and auditing. Each accounting category has a specific purpose. Financial accounting deals with the preparation of financial statements for external users of information. Management accounting deals with the preparation of information and data for internal use,
- Finance deals with the management of assets, especially money. That is why the employees who work in the finance department are responsible for the planning and distribution of business assets. Accounting is concerned with the presentation of an organization’s financial information in accordance with generally acceptable accounting principles.
- Finance deals with decision making and distribution of assets, while accounting deals with the economic activities of an organization.
- The purpose of accounting is to take care of the performance of the organization, while finance forecasts the future performance of the business.
- The statement of comprehensive income, the statement of financial position, the statement of cash flows, the statement of changes in stockholders’ equity, etc. are various accounting tools. Variance analysis, ratio analysis, return on investment, return on equity, return on capital employed, risk analysis, performance reporting, etc. are various finance tools.
- The finance positions are: financial analysts, loan officers, information systems analyst, accountants and financial managers. Accounting job titles are: accountants, financial analysts, tax advisors/consultants, financial managers, treasurers and controllers, and auditors.