The Difference Between Accounting and Finance
Finance is a relatively large field with numerous different approaches, philosophies, and opinions about how it should be done. Basically, finance is a field of expertise concerning the study, development, management, and allocation of financial resources. It deals primarily with financial decisions regarding lending, securities markets, and budgeting. The field is also broken down into various subdisciplines, including investment management, risk management, international finance, internal finance, and municipal finance.
The area of finance is very broad and covers a number of different topics. Two of the three main areas of finance are practical and fundamental. Practical finance deals with day-to-day financial activities like making loans, receiving loans, managing loans, paying loans, and investing in the stock and other financial investments. Fundamental finance, on the other hand, is the study of various economic theories and models. Both of these areas are constantly developing as more research is conducted on the market, the economy, and various other factors affecting the finance field.
Two of the most common career paths in finance include financial accounting and finance research and counseling. The two have different perspectives on the matter, with financial accounting typically focusing more on the details of individual investments while finance researchers tend to be more concerned with the overall efficiency of the finance system. However, there are other career paths in finance where the focus is broader, such as public policy, management, teaching, consulting, or research.
A career in financial accounting begins with an education in accounting, generally taking up to two years. Some college programs offer an undergraduate degree in accounting while others offer a graduate degree. After earning an accounting degree, a successful finance career requires the ability to communicate well. Graduates should be able to analyze financial information, communicate well, analyze that information, and then make effective strategic financial decisions. As well, an accountant should be detail-oriented and have good decision-making skills.
As part of the finance curriculum, students will study different kinds of financial statements, including corporate, government/non-profit, personal, sales, inventory, and business/corporate financial statements. Students will also need to learn about business banking and financial statements as a whole. Financial accounting focuses on the reporting and interpretation of accounting information. A successful finance career therefore requires the ability to communicate well, analyze information, and make effective strategic decisions.
There are also career paths in finance that vary according to concentration. While accounting is primarily concerned with financial information, there are also career paths in financial information or macroeconomics. Public policy specialists deal with issues that affect the economy at large, while management career paths often focus on running large companies. Consulting is another popular career path in finance because it involves assisting finance and accounting departments in efficiently and effectively managing and planning the company’s finances.
Finance professionals can specialize in a number of fields depending on their degree program and the number of years of experience they have. Those pursuing a finance career paths can choose to specialize in one of the three main areas of financial statements, cash flow, or budgeting. Those specializing in cash flow are expected to know all methods of calculating the cash flows of businesses. Those focusing on budgeting know how to set up budgets for businesses and determine which financing options are necessary to meet goals and organizational objectives.
Although most people have a general understanding of the difference between accounting and finance, a good understanding of each area is necessary for success in the field. People seeking careers in finance will need to take courses that teach them about taxes, management, economics, and other important areas. They will also need to learn about the concepts and strategies used within each of the three areas of finance. When those considering finance careers take the time to learn all the different aspects of accounting and finance, they will be able to develop excellent skills that they can put to use in their future career.