Finance vs. Accounting: Definitions and Differences
By Indeed Editorial Team
Updated 7 October 2022
Published 15 November 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Working a finance-related job and an accounting-related job can be a fulfilling and fast-paced opportunity. The two jobs are similar in some ways but also have some important differences. Learning about the two fields and what type of work each entails can help you decide which one is best for your interests and goals. In this article, we compare the fields of finance vs. accounting, explain what each career path involves and discuss some of their key differences.
Finance vs. accounting definitions
Before comparing finance vs. accounting, it's important to understand what both accounting and finance are. Here are the definitions of each:
Accounting is about the recording and maintenance of a business's records. Accountants may find employment in both companies and by individuals that have assets and cash flow, of which they keep a record. Accountants may find jobs in-house by the company or the company may outsource the accounting responsibilities to a third-party agency.
If you become an accountant, your responsibilities may include making sure you record your clients' financial transactions properly in the general ledger. As an accountant, you may require being very detail-oriented to avoid any errors which could cause problems for your clients. You may also have good mathematical skills because accountants deal with numbers daily.
Finance is a broad term that deals with the management of assets, investments and money for corporations, banks and even governments. Many companies have a finance department with dedicated staff members that manage the company's cash flow and other assets. The head of the finance department is usually the Chief Financial Officer.
As a finance professional, you may find work in investment banks, financial planning and analysis firms and wealth management companies. Further, as a finance professional, your ability to recall accurately and keep track of facts and figures could be your best asset. While accountants' main concerns are with the books of a company, your goal may be to ensure that your clients' capital is enough to support their endeavours. You may also advise them so they invest their funds efficiently. You may seek to create value by smart management of your clients' finances and holdings.
What are the similarities between finance and accounting?
Both finance and accounting professionals work with the flow of money and assets. Both career paths focus on money. Professionals in accounting and finance deal primarily with numbers instead of words. Further, employers in both fields may accept individuals with an undergraduate degree or equivalent diploma. If you're interested in a career involving numbers and money, you may explore opportunities in either path.
What are the differences between finance and accounting?
There are several important differences between these fields, and learning about them can help you choose which one you want to pursue. Accounting focuses on the day-to-day cash flow and value statements. Finance focuses on the long-term management of assets, the associated liabilities and the planning for growth in the future. Another important difference is that finance takes a more long-term outlook on a situation, while accounting is a detailed analysis of the current financial position. Here are some of the other differences between the two professions:
To pursue a professional career in accounting, you may require obtaining a bachelor's degree in accounting. To have a job in finance, you may choose to take a business degree with a major in finance. Alternatively, you could pursue a tertiary education in economics, which also deals with numbers.
Apart from completing your undergraduate studies, you may choose to pursue postgraduate degrees or other professional certifications in the form of a master's programme. For example, there are chartered financial analyst courses for individuals who have an interest in pursuing a career in finance. Individuals in the accounting field may choose a more tailored alternative to being a certified public accountant.
The employment opportunities open to finance professionals and accountants are different. Individuals who are from a finance background may find employments in corporations, banks and firms that do asset management. Accountants may apply to private accounting firms or third-party agencies that specialise in accounting. An individual with an accounting background may also choose to do freelance accounting work for private individuals or clients on a flexible schedule.
Related: How To Become a Freelance Accountant
The thought processes of both accountants and finance professions differ. As an accountant, you may have an interest in what are the rules and processes an individual or organisation follows. You may check if the balance sheets tally and whether a purchase is a liability or an asset. Some concerns you may have include how to amortise a certain asset and whether to write off a debt or wait a few more months to see if the client or company pays the debt. An accountant may also be in charge of writing the annual report of the company.
A finance professional is more interested in financial analysis. They draw conclusions based on the facts and data available to them. They may suggest trends and conclusions or forecasts for the company's growth. These professionals may do projection as part of their roles and responsibilities. A financial professional may be able to advise the company on what kinds of decisions tend to generate more revenue and profit and which decisions don't perform as well financially. Offering new opportunities and advice on the risk and rewards is one way a finance professional may add value.
Outlook on finances
An accountant's outlook on finances is backwards-looking. They're concerned with previous transactions and the proper documenting of these transactions. These transactions affect the way of balancing a company's books and how to generate the annual reports. An accountant is unlikely to engage in forecasts or predictions of the future based on past records.
A finance professional considers the future to predict what may happen in a few years. These financial projections can relate to cash flow projects, revenue generation projections or the returns on an investment that the company makes today. Financial professionals are more interested in the future outlook of their clients' holdings. A good financial professional can competently and accurately speculate the growth of their clients' assets and how to constantly grow the existing pool of assets.
Accountants and finance professionals take on different roles within a business or a corporation. An accountant may have the role and responsibility of showing how the company is doing financially and how their current state of affairs looks like. If you become an accountant, your primary role for a business may be to represent its day-to-day finances in an understandable form.
The business role of a financial professional is to create value for the company and make new suggestions. Looking at the current capital allows a financial professional to explain how the current state of affairs can translate into an even better position for the company in the future. What direction the financial predictions take also depend on the company's growth goals. For example, if the company is looking to enter a new market, the finance professional may forecast how the company does in the new market with no historical data as a reference.
How much do accountants and finance professionals make?
The salaries of accountants and finance professionals vary depending on the number of years of experience they have and the number of hours worked. Your employer, education and any specialities can also impact your compensation. Here are some salary ranges of individuals working in accounting and finance fields respectively:
Here are some common accounting jobs and their respective salaries:
Accountant assistant: $2,715 per month
Accountant clerk: $3,468 per month
Accountant intern: $1,392 per month
Accountant manager: $5,791 per month
Accountant technician: $4,449 per month
Accountant: $3,802 per month
Here are some common finance jobs and their respective salaries:
Finance manager: $5,972 per month
Financial analyst: $4,922 per month
Financial assistant: $2,796 per month
Financial clerk: $2,112 per month
Financial controller: $8,011 per month
Financial intern: $1,387 per month
Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.
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