What is the Difference Between Finance and Accounting?

Finance VS Accounting

Accounting involves the creation, management, summation & communication of day-to-day transactions of a business ultimately leading to the preparation of financial statements.

On the other hand, finance has a wider scope and is mainly responsible to support in decision-making such as investment, divestment, cash management, Working capital management etc.

Difference between finance and accounting (table format)

Finance Accounting
1. Finance is a branch of economics which deals with the efficient management of assets and liabilities. 1. Accounting is the occupation of summarizing financial transactions which were classified in the ledger account as a part of book-keeping.
2. It is a pre-mortem study of the organization’s funds or asset requirements. 2. It is a postmortem task of the recording of what has actually happened.
3. The aim of finance includes decision-making, strategy, managing & controlling. 3. The aim of accounting is to collect and present financial information for both internal and external purposes.
4. Determination of funds is based on a cash flow system, actual receipts and payments are recognized for revenue and payments. 4. Determination of funds is based on the accrual system, i.e. revenue is acknowledged at the point of sale and not when it is collected. Expenses are also recognized when they are incurred.
5. Few tools of finance include Ratio analysis, Risk management, Returns on investment, etc. 5. Few tools of accounting include Trading account, P&L account, Balance sheet, Cash flow statement, etc.


Finance and Accounting are both distinct, but complementary to each other.


Short Quiz for Self-Evaluation



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