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Difference Between Accounting and Finance

accountingHere is a detailed definition that helps you to know everything about accounting and finance.

Accounting is the methodical or precise recording, reporting, and assessment of financial deals and transactions of a business. Accounting also involves the preparation of statements or declarations concerning assets, liabilities, and outcomes of operations of a business. Personal finance is a management of assets and liabilities in an efficient way. In a way, they are related to each other and yet they also have differences between each other.

What is the connection between accounting and finance? Accounting is an essential part of finance. It is a sub-function of finance. Accounting produces information about the operations of a business. The end-product of accounting is composed of financial declarations such as balance sheets, income declarations which include the profit and loss accounts, and the declaration of changes in financial position which includes sources and uses of funds declaration. The data kept in these declarations and reports aids financial directors in analyzing the previous performance and future inclinations of the company and in satisfying certain legal duties and responsibilities, such as payment of taxes and many more. Therefore, accounting and finance are practically closely connected.

One difference is associated with the treatment of funds and the other is associated with decision making. In accounting, the system of determination of funds; that is, income and expenditures, is based on the accrual system. Revenue is acknowledged at the point of sale and not when it was collected. Expenses are acknowledged when they are incurred than when they are paid. However, in finance, the system of determination of funds is based on cash flows. The revenues are acknowledged during the actual receipt in cash as in cash flow and the expenses are acknowledged when the actual payment is made as in cash outflow.

Another difference between accounting and finance is with respect to their purposes. With accounting, it aims to collect and present financial information. It furnishes constantly improved and easily interpreted previous data, present and future inclinations of the company. Meanwhile, financial director’s prime duty and responsibility associates to financial strategy, managing and controlling, and decision making. Therefore, in a sense, finance starts where accounting ends.

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23 Comments

  1. I just wanted to know the difference between acconting and financing?

    • Accounts is the process of day to day transations where basics, where as finance is the genarating of funds and utliize the funds for busines broad prospective.

  2. great article!

  3. Precise and concise post, outstanding!

    Thank you

  4. The clarity is evident!

  5. An excellent article on defining the two related issues of accounting and finance. Well put, thanks.

  6. Yes, thanks alot dear coach for your valuable info, to me, it was much facinating and knowledgeable ,

    I wanted to know only the differences between Acc, & finance ?

    That solved thanks too much,

    Bundle of thanks

  7. Excellent article. Clearly described the differneces btwn. Accounting and Finance.

  8. a beautiful answer.. thanks

  9. accounting is the finalize report of the profit and expense of the busines and the finance mean how to manage the cash flow and how to utalize the money and how to increase the money?

  10. nice and educatable article..
    nice answer ever

  11. quite useful……. and helping material

  12. This is absolutly good. Keep it up guys

  13. Accounting is the process of recording the day to day operations to generate information while the decision making like (budgeting, generation & allocation of funds etc) on the basis of such information is called Finance…

  14. In brief its a excellent article. Thank you very much indeed .

  15. Accounting Finance
    Definition Accounting is a process of recording day to day transactions. Finance is generating of funds and utilize the funds for business broad prospective.
    Purpose Measuring, preparation, analyzing, and interpretation of financial statements. To collect and present financial information. Decision making regarding working capital issues such as level of inventory, cash holding, credit levels, financial strategy, managing and controlling cash flow.
    Goal To see how the company is performing, to monitor day to day accounting operations, and for taxing. To forecast the future performance of the business.
    Tools Balance sheets, profit and loss ledgers, positional declarations, and cash flow statements. Performance reports, ratio analysis, risk analysis, estimating break evens, returns on investment, etc.
    Determination of funds Revenue is acknowledged at the point of sale and not when it was collected. Expenses are acknowledged when they are incurred than when they are paid. Revenues are acknowledged during the actual receipt in cash as in cash flow and the expenses are acknowledged when the actual payment is made as in cash outflow.

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