Finance: Finance refers to the management of funds for a business organization or a person. Management of finance must ensure capital generation and its optimum utilization. People who work in the finance sector of an industry may comprise of finance managers, investment bankers, etc.
Accounting: Accounting refers to the day to day recordings of income and expenditure of a firm or a person. This ensures details about the financial status of a person or an organization and can help predict future investment plans and models. People who work in the accounting sector of a business or practice accountancy are generally accountants.
Are they the same?
The above-mentioned sectors viz. finance and accounting are often confused for being one and the same, while in reality both have very different outlooks and are both essential for the proper survival of a business.
For simpler understanding, we may say that procurement of funds as well as it’s usage determine the future of a business’s strategies. At the same time, a detailed study of a company’s accounts, and its understanding helps in knowing the major downfalls or boom phases of a business or a person’s financial stability. Hence, we can say that Finance and Accounts are both essential for the proper survival of a business.
Similarities:
- Both Finance and Accounting are essential for a company’s survival.
- Both Finance and accounting aim at a company’s or individual’s financial betterment.
- Both are determined using a company’s or an individual’s database.
- Both have an economic objective.
- Both lead to the preparation of financial statements for an individual or a company.
Differences:
| Category | Finance | Accounting |
| Employers | People employed for financial services are generally summoned by Large scale companies for the role of finance managers. | People employed for accounting are generally summoned by Public Accountancy Firms, or Corporations. They may be hired by businesses personally. |
| Financial Statements | People who offer financial services are responsible for studying the financial statements of a company and make future Financial Plans for their client or company they offer services to. | Accountants are responsible for preparing Financial Statements |
| Viewpoint | Finance Managers are responsible for making Futuristic Plans for a company | Accountants are responsible for studying the Past Statements of a company or an individual. |
| Focus | People in financial services focus on the future plans of a company and offer their insights. | People in accountancy services focus on the accuracy of their preparation of Financial Statements for their Clients |
| Thought Process | Financial Planning is done on the basis of experience and analysis | Accountancy is done on the basis of rules |
| Need in Business | Finance is needed to make decisions in a business for the future | Accountancy is needed to know the detailed incomes and expenditure of a business organization. |
Conclusion:
There is a thin line of difference between Finance and Accounting of a business, both being essential for it’s smooth working. Although they are both related to the economic and financial status of a business, they have a completely different outlook towards its study. One studies the past statements and one determines the future plans that must be taken by a firm.