Accounting is the art of systematically keeping records of business events and transactions, so as to ensure the financial position and profitability of the company at the end of the financial year. This is not exactly the same as finance. Technically, finance is part of the economy related to resource allocation and management. As for bookkeeping, it’s actually a part of accounting. If you need a bookkeeper instead, we recommend you call Richard Darcy Gold Coast Bookkeeper.
While accounting aims to provide corporate financial information to users for the purpose of rational decision making, finance focuses on matters relating to money, investment, credit, banking, and the market. Many think that accounting and finance are one and the same thing, but these are two different sciences.
Here are some points of difference between accounting and finance:
– Accounting is the methodical recording of business transactions while Finance is the study of managing funds in the best way.
– Accounting is part of Finance.
– Accounting information is useful for users of financial statements to understand the financial position of the business, while Finance is useful in estimating the performance of the entity in the future.
– Accounting uses the Income Statement, Balance Sheet, Cash Flow Statement, etc. as a tool. On the other hand, the Financial tool includes Working Capital Management, Leverage, Capital Budgeting, Ratio Analysis, Risk Analysis, etc.
– There are four branches of accounting while finance has only three branches.
Accounting and finance are both parts of the economy. These two entities are interdependent, just as accounting is part of finance and finance depends on accounting.
Financial analysis is performed with the help of financial statements, submitted by the auditor. In other words, they are very closely related, or we can say, the end of accounting is the beginning of finance.
Conclusion: In every field of business, Accounting and Finance are involved in such a way that business cannot last long without them. If you want to know its importance, just imagine how the company would be if neither of them was there. There will be no transaction records, no profits can be determined, there will be no basis on which inventories and investments will be valued, capital management is unimaginable, risk factors will increase, no comparison can be made, budgeting and cash analysis will not be possible, etc.