Finance and Accounting - What is the Difference between the two? Featured
Many dont see any difference between Accounting and Finance. The truth is - Finance and Accounting and Not the Same!
Lets discuss how they differ to understand how each of them adds value and what is the difference between the two.
✅ The Accounting approach is backward looking
>> Accounting is concerned with compliance against accounting principles and reporting obligations.
>> Accounting focuses on smoothing economic activity results over time to match revenues and expenses.
>> Accounting is conservative in the recording and reporting of the results of economic activity.
✅ The Finance approach is forward-looking.
>> Finance has evolved in response to Accountings accrual framework to uncover a businesss accurate measure of profitability.
>> Finance prioritizes cash and focuses on value creation through capital allocation.
✅ Finance and Accounting require quite different technical training.
>> In Accounting, the critical technical areas are Financial Accounting, Audit, Tax, Business Law, and Management Accounting
>> In Finance, the key technical areas are Corporate Finance, Capital Budgeting, Capital Markets, Portfolio Management, and Financial Modelling
✅ Finance and Accounting require quite different soft skills.
>> In Accounting, you need to be Detail Oriented, Conservative thinking, Organized, Process Driven and Analytical
>> In Finance, you need to be Research Oriented, Analytical, Risk-taking, Innovative thinking, and Results driven
✅ Finance and Accounting define value differently.
>> In Accounting, value is based on the conservatism principle.
>> In Finance, value is driven by the valuation process.
➡️➡️Ultimately, however, Finance and Accounting are complementary functions in a business.
>> Theyre both invested in the profitability and success of the company
>> They feed off each other because reliable accounting data is critical for financial planning, while good planning enables better accounting processes and the most accurate reporting
>> They partner to drive profitability and growth in the business.
To recap:
1. Accounting is different from Finance.
2. Accounting looks back to report the past.
3. Finance looks forward to shaping the future.
4. They complement each other to grow the business
Important Links:
Lets discuss how they differ to understand how each of them adds value and what is the difference between the two.
✅ The Accounting approach is backward looking
>> Accounting is concerned with compliance against accounting principles and reporting obligations.
>> Accounting focuses on smoothing economic activity results over time to match revenues and expenses.
>> Accounting is conservative in the recording and reporting of the results of economic activity.
✅ The Finance approach is forward-looking.
>> Finance has evolved in response to Accountings accrual framework to uncover a businesss accurate measure of profitability.
>> Finance prioritizes cash and focuses on value creation through capital allocation.
✅ Finance and Accounting require quite different technical training.
>> In Accounting, the critical technical areas are Financial Accounting, Audit, Tax, Business Law, and Management Accounting
>> In Finance, the key technical areas are Corporate Finance, Capital Budgeting, Capital Markets, Portfolio Management, and Financial Modelling
✅ Finance and Accounting require quite different soft skills.
>> In Accounting, you need to be Detail Oriented, Conservative thinking, Organized, Process Driven and Analytical
>> In Finance, you need to be Research Oriented, Analytical, Risk-taking, Innovative thinking, and Results driven
✅ Finance and Accounting define value differently.
>> In Accounting, value is based on the conservatism principle.
>> In Finance, value is driven by the valuation process.
➡️➡️Ultimately, however, Finance and Accounting are complementary functions in a business.
>> Theyre both invested in the profitability and success of the company
>> They feed off each other because reliable accounting data is critical for financial planning, while good planning enables better accounting processes and the most accurate reporting
>> They partner to drive profitability and growth in the business.
To recap:
1. Accounting is different from Finance.
2. Accounting looks back to report the past.
3. Finance looks forward to shaping the future.
4. They complement each other to grow the business
Important Links:
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