Accounting, also known as the “Language of Business”, is undoubtedly an important business function. Accounting mainly includes recording, analysing, and summarising business finance and every business transaction. It helps in evaluating the actual financial position of the company for owners, managers, or investors to make strategic business decisions. On the other hand, Finance is also considered one of the most important elements of a business. It includes monitoring company finance, acquiring and managing company funds, and planning expenditure for the funds. Managing finance is essential for effective decision-making.
While accounting and finance may overlap or seem similar, they are far from being similar practical terms. There are major key differences between accounting and finance. Few major differences between accounting and finance are listed below:
Differences Between Accounting and Finance In Terms
In general, accounting focuses on a company’s cash flow, recording and reporting everyday business transactions to prepare accurate financial statements. With an accounting report, you can measure the capital and liquidity of a business. An accounting report or a balance sheet is a record sheet of business transactions that highlights a business transaction’s specific time and activity and shows the remaining balance of assets, liability, and equity.
Meanwhile, finance is more focused on managing the assets and liabilities of a company. It’s responsible for managing funds and investment for a company or individuals, or even for the governments. With finance, you will learn how to ensure adequate funding for necessary situations and the funds are allocated appropriately in your organisation. In simpler terms, finding investors for a company in times of emergency and ensuring enough flow of capital for successfully carrying out business operations is the most basic activity under finance. Another prime job of finance experts is to create value by managing company funds in a way that maximises the expected profit returns.
Differences Between Accounting and Finance In Career
A career path in accounting and finance are pools apart. Individuals with an accounting background can pave a career as:
The most common employers for accounting professionals are public accounting firms, personal tax filing firms, and business operating companies.
As for Finance professionals:
Personal Finance Consultant
Investment Management Analyst
Finance professionals usually get hired by commercial banks, insurance companies, research companies, business operating companies, government firms, private companies, etc.
Available Degree in Accounting and Finance:
There are various types of degrees you can do in accounting and finance. With each degree, you will gain qualification for doing specific jobs in the respective fields.
Certificate or Diploma -1/2 year
Bachelor’s Degree in Accounting – 4 years.
MBA in Accounting Degree – 1-2 years.
PhD or DBA in Accounting Degree – 1-5 years
Differences Between Accounting and Finance In Salary
Salary for accounting and finance differs from country to junior level and senior-level positions. Different countries have different values of money, which also depends on the economic conditions of the country. Based on both your salary and every other money involved, activities occur, such as the market price of a product, states, etc. For example, take the US and the southern countries like Malaysia or Bangladesh. You definitely won’t get paid with an equal amount of salary. These southern countries have their own rate of currency which has a significant difference in comparison to dollars.
Salaries also depend on different levels of job positions. Being one of the most popular and highly demanding career fields, all job positions under accounting and finance have a decent salary offered even for beginner level employees. The salary will increase in great numbers with each level of senior posting, and the salary amount will contain from 5 to 6 digits in number annually. The most basic amount of salary offered in the accounting field are:
In Audit service job posting:
Beginners of up to 1 year – $46,000
General Employees – $51,000
Manager – $88,500
Senior Manager or Director – $129,750
In Tax service posting:
General employees – $56,500
Senior Employee – $70,000
Manager – $102,000
Senior Manager or Director – $132,000
As for finance, basic job salaries in corporate finance include:
Chief Financial Officer – $192,500
Vice President, Finance – $176,500
Director of Finance – $145,500
Corporate Controller – $170,000
In finance service sector:
Financial Analyst – $75,000
Regulatory Reporting Manager – $110,000
Internal Auditor Manager – $115,000
Importance of Accounting In Business
Accounting plays an important role in running the business successfully. It helps track your business income and expenses, statutory compliance, and lastly, in making proper business decisions.
You can gain a clear understanding of your business’s profit and losses with the help of an accounting income statement. You will also have a clear picture of the financial condition of your business. It is essential to keep your financial records accurate and up-to-date so that you can keep a steady flow of your business.
Having an accurate financial report helps in evaluating your business performance. It reflects the success of business operations. It keeps track of your business expenses, gross margin, and possible debt. You can also allocate an appropriate budget for your business operation as well as compare previous accounting data records with the current ones to gain a better understanding of your expenses. Budgeting and future projection can affect your business greatly, both positively and negatively. Accounting can help you in making the correct decision with that. As accounting records address every aspect of your business that requires financial assistance, it automatically ensures statutory compliance. It keeps a record of your liabilities such as sales tax, VAT, income tax, etc., which helps you track and fulfil your business’s law and regulations responsibilities.
Importance of Finance In Business
Just like accounting, finance also plays a vital role in your business management. Finance helps generate funds, proper utilisation of the funds, searching beneficial investment sources, raising capital, and many more.
For your day-to-day business expenses, payments, bills, salary, etc. finance works with gathering funds for successfully carrying out these activities. It helps in stabilising the cash flow of your business. It also raises capital or savings for shielding your business from unpredictable threatening circumstances in the future. Balanced finance management in the company is necessary for successful business operations. Finance focuses on planning and achieving long-term business goals. It looks for potential investment opportunities for you to invest in and analyse its risks and your limitations for joining the deal. It works for the financial growth of your business. Money management is the most crucial part of the business. Without funds and capital, your business can not operate flawlessly. It speaks volumes why finance is essential for any business.
Importance of Accounting and Finance In The Economy
Accounting contributes to the economy of the country in a certain way. The role of accounting is to report the correct data of business transactions and identify the profit and loss for the business owners or investors to make effective decisions. Without the presence of accounting in the business, all the business operations will be interrupted and disarrayed. It will affect the work procedures and create dissatisfaction and disturbance to the people involved. On the other hand, inaccurate accounting reports can do the same with additional issues such as leading the investors or managers to make wrong decisions, ultimately making the business collapse. And this is where accounting affects the economy of your country. Wrong data will need correction and re-do of all the business procedures, which will demand time. It will slow down the business activities and all the sources involved. The company may lose important deals or make errs that will cause loss, and that’s exactly how it affects a country’s economy.
Similarly, the role of finance is to raise capital, arrange funds and manage the financial activities of your business. Without the proper management of finance, your business will suffer a loss. The lack of cash flow will result in missing important inverting deals, delay of payments and bills, interruption of business procedure such as lack of product goods, etc. The repeated occurrence of these things can slow down the business and, at some point, make the company bankrupt, which will bring unemployment issues and financial issues for the government to deal with.
Accounting and finance both are highly demanding career choices because of the versatility and money-making opportunities. As you can see, there are various job positions available under the respective subjects and all with highly attractive paychecks. You can choose different sectors to work in by gaining a professional degree and proper experience. It is said that by nature, accountants are backwards-looking because they are required to always look back for theories or information to create their report. In contrast, finance professionals are forward-looking because they always need to plan by predicting the future.