A career in accounting or finance may be wise if you love working with financial data. As the areas overlap, you could be unclear about which degree to pursue. Therefore, it's imperative to stop your program search and dig deeper into knowing each of the aspects. This article explores the distinctions between degrees in accounting and finance, outlining possible employment options and earnings potential for each.
Did You Know? Accounting and finance are two different professions, although having many similarities.
Accounting vs. Finance: The Fundamentals
The primary distinction between both is that people who work in accounting often focus on documenting and reporting financial transactions. In contrast, those who work in finance typically focus on planning and managing such transactions for an organization. In other words, finance is managing money, whereas accounting is organizing and managing financial information.
Also read: Costing: Definition, Objectives, and Advantages
What Is Accounting?
The term "accounting" refers to a procedure that entails a variety of phases involved in monitoring financial and corporate operations. In Accounting, we maintain a record of the financial transactions organized by date. Then, we categorize, condense, analyze, and interpret them. The users are then informed of the outcomes of these financial transactions.
Importance of Accounting:
The importance of accounting is in classifying each of the business transactions. It keeps a group of all similar accounting entries in one place, and segregates others accordingly. Lets look into the objectives and the phases of accounting to understand this better.
Objectives of Accounting
Accountancy seeks to:
- Keep a comprehensive record of all financial transactions.
- Determine the consequence of the recorded transaction
- Determine the business's financial position and provide users with information to make informed decisions.
- Understand the company's financial standing.
Phases of the Accounting Process
Accounting information must be communicated for appropriate parties after analysing. Accounting reports should be created and distributed including basic income statements and balance sheets.
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Recording
The fundamental stage of accounting known as the recording is often referred to as bookkeeping. During this phase, all financial transactions are systematically and chronologically recorded in the proper records or databases.
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Classifying
Sorting and assembling related things under the specified name, category, or account are steps in the classification phase of accounting. This stage employs a systematic study of the collected data, and wherein all transactions are compiled in one location.
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Summarising
Each accounting period, such as a month, quarter, or year, is summarised in the accounting process's summarising phase. Both internal and external users of the financial statements must be able to understand and apply the data easily.
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Interpreting
The accounting process' interpretation phase, which deals with assessing financial data, is a crucial part of the decision-making process. This last function analyses the data in a way that enables end-users to make defensible decisions about the financial stability of a company or individual account and the profitability of business activities. Then, this information is utilized to create future strategies.
Although communication is not technically part of the accounting process, it is just as important. After analysis, the accounting data must be correctly conveyed to the relevant parties.
Uses of Accounting
- Measurement: It assesses the historical performance of the company. Additionally, it displays its financial situation as of right now.
- Forecasting: Future performance and trends may be predicted using data from the past.
- Decision-making: Accounting gives all users relevant facts for smart and logical decision-making.
- Comparison and evaluation: The accounting data may compare past and present performance. Additionally, it aids in the assessment of financial outcomes.
- Control: It is essential for spotting shortcomings in the working system. Additionally, it provides feedback on how well the measures are taken to close those loopholes.
- Government regulations and taxes: As we are all aware, some entities are required to maintain their books of accounts. It is because it enhances government control. Additionally, it facilitates audits and tax collection.
Career Opportunities in Accounting
The employment options open to accounting and finance graduates show the distinctions between the two fields.
Employment in Accounting
Accounting is a career path that can help you earn high incomes and have a promising future. There are a lot of accounting jobs available to graduates of different educational programs. Accounting is a growing field due to the rapid development of technology and new ways to manage accounts such as cloud computing, mobile devices, and virtual currency. A career in accounting is a smart decision considering the accounting outlook for a job.
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Certified Public Accountant (CPA)
CPAs draft tax returns, balance sheet statements, and other financial papers for public presentation. They could work for private businesses, public institutions, or both. To get the designation of CPA, candidates must complete licensing criteria that vary from state to state.
To find unlawful acts, such as tax fraud, embezzlement, and other illegal financial transactions, forensic accountants examine financial documentation. Many forensic accountants are employed by law enforcement organizations and give expert testimony in court.
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Management Accountant
To offer information to corporate managers, management accountants examine the financial records of a firm. They assess financial performance metrics, examine accounting records, and draft plans to meet cost - effective goals.
Also read: Liabilities in Accounting - What are Accounting Liabilities? Explained in Detail
Important Features of Finance
Borrowing, lending, investing, raising funds, and selling and trading securities are all aspects of finance. These endeavors are designed to enable businesses and people to support specific initiatives or projects now, with repayment depending on revenue streams from those initiatives in the future. Without finance, individuals could not afford to buy homes (completely in cash), and businesses could not develop and prosper as they do now. As a result, finance enables the more effective deployment of capital resources.
The term "finance" refers to issues including the development, management, and study of money and investments. It entails employing future revenue streams to finance present initiatives through credit and debt, securities, and investment. Because of its temporal component, finance is strongly tied to the time value of money, rate of interest, and other related issues.
It is the process of setting up finances for all expenses and spending money. It entails allocating money in a way that will ultimately produce the maximum return. It involves more than simply managing money; it also entails growing it at the highest interest rate. All threats and uncertainties are considered for this purpose.
Typically, "finance" is divided into three major categories: Taxation systems, government spending, budgeting practices, stabilization tools and policies, debt problems, and other governmental difficulties are all considered to be a part of public finance. Managing a company's assets, liabilities, revenues, and debts is part of corporate finance. Personal finance is the term used to describe all financial choices and actions made by a person or family, such as saving for a down payment on a home, budgeting, purchasing insurance, and preparing for retirement.
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Career As CFO in Finance
The Chief Financial Officer (CFO) of the organization is in charge of more than simply day-to-day financial management. Instead, he or she is also in charge of formulating policies and making decisions. The CFO separates the financial functions into two distinct functions in a large organization. They are financial management and financial control management.
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Financial controller
The task of overseeing the creation of financial reports and delivering them to management falls within the purview of a financial controller. A controller develops corporate policy, supervises the audit, budget, and accounting divisions, and reports to the chief financial officer (if the organization has one). The financial controller's main duty is to generate and deliver reports on schedule.
Controllers are also in charge of making sure the business complies with legal requirements on taxes and other financial problems. They will be the ones submitting tax returns and providing compliance documentation directly. A controller has to have a degree in finance, economics, or business concentration. Additionally, they should be a certified public accountant (CPA), ideally with at least five years of accounting experience.
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Treasurer:
The controller is in charge of the accounting division, while the treasurer is in charge of the financial division. Their key duty is to support their company's financial growth and make sensible financial investments. The treasurer assists in the company's revenue expansion. In order to know where the greatest places are to invest the company's money, he or she cultivates and maintains contacts with banks and investment firms.
The treasurer is responsible for outlining the company's financial situation and its strategies for continuing to be successful and helpful to investors. By establishing and upholding positive connections with investment banks, the treasurer makes sure that the company's resources are allocated to the projects that will yield the greatest returns. Treasurers should have a degree in finance, accounting, economics, or a business-related field, just as the controller.
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Fund Manager
Fund managers are in charge of a fund's trading, investing strategy, and portfolio. They frequently oversee mutual funds or pensions and are compensated with a share of the funds' earnings.
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Risk analyst:
Also known as risk managers, these professionals try to lessen the harm brought on by monetary loss or market fluctuations. They utilize risk analysis tools to gauge the financial risk faced by a business and employ management tactics to reduce exposure to loss. Portfolio managers, sometimes known as investment managers, develop and implement investment strategies for a variety of customers, including businesses and individual investors. In order to optimize profits for their clients, they examine market efficiency.
Finance encompasses a broader range of topics because accounting is a component. Finance uses accounting data from balance sheets, income, and cash flow statements to make wise financial choices.
Also read: What are Accounting Standards - List of Accounting Standards in Detail
Conclusion
In conclusion, to find the best career fit, you must first assess yourself and make a list of careers you think might match your interests and skills in case of Finance, high education, training, and comfort with quantitative analysis are necessary for these vocations. Both have the potential to offer demanding labour with lucrative pay. Accounting serves as the corporate language via which users may access financial data. So, the main goal of accounting is to ascertain if there was a profit or loss for a specific period.
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