While accounting and finance are both in the money managing world, there are key differences between the two. Accounting focuses on the flow of money in and out of a business or personal account, while finance is a broader term to describe assets and liabilities.
What is the difference between accounting and finance?
While accounting and finance are different, they tend to go hand-in-hand. Finance focuses on the bigger picture, while accounting is more of the day-to-day tasks. Another way to say it is that accounting looks back at the company’s past transactions, whereas finance looks forward and plans the future acquisition of assets.
Accounting is also much more about accurate reporting and compliance with laws and standards. It’s important to be aware of business laws and taxes, and that’s what accounting focuses on. When it comes to the future of your business, however, you are talking more about finance. Finance is about the long-term horizon, growing money, and potentially mitigating losses.
Your business tasks can be divided between accounting and finance as well. For example, accounting is going to handle public accounting firms and corporations. Accounting is also going to be accurate, reliable, and rule-based. They are responsible for preparing financial statements as well.
Finance works closely with banks and corporations, analyzes financial statements, looks forward towards the future, and focuses on insight and analysis. The purpose of finance is to figure out how to add value to your business, and this process is analysis-based.
To have a successful business, you must focus on both accounting and finance. However, they are very different jobs. While accounting is focused on more of the legal assets of the business, giving a daily snapshot of the tasks, and looking back at past transactions, finance is forward-looking, focused on insight and analysis, and interested in adding value to a company.