In this article, we are going to look at what the difference is between accounting and finance. These two terms, accounting and finance, both have a broader aspect. Both hold equal importance in the field of finance and complete each other. Accounting shows us organizations financial situation using present and past data, whereas finance is looking forward.

What is accounting?

Accounting is the art of keeping records of business transactions in a systematic manner. It allows us to know about the financial position and profitability of the company at the year-end. Proper accounting involves some steps such as identifying, recording, classifying, summarizing, analyzing, interpreting, and communicating.

1. Identifying –

First, we have to understand what to record. We need to select the events and transactions that are financial in nature.

2. Recording –

Recording recognized events and transactions in a systematic manner, like as they occur and when they occur, for this we use subsidiary books and journals.

3. Classifying –

After identifying and recording, here comes the classification of the transaction into its similar type. They can be classified into 3 types of accounts, such as real, personal, and nominal.

4. Summarizing –

Classified data further needs a summarization. Summarization involves preparation of financial statements.

5. Analysing –

After summarizing, we need to classify the data in a systematic and simplified manner, and this is what analyzing is.

6. Interpreting –

Interpreting is explaining analyzed data, like the meaning and importance of relations that are made on the basis of analyzing. It helps users get accurate judgments.

7. Communicating –

The last one, but the important one, is communication. This communication is conducted with the help of accounting reports. These reports are used by users and management of the company. The users, such as creditors and debtors.

Objectives of Accounting

1. Accounting aims to record monetary transactions in a systematic manner.
2. Accounting determines the financial position of the company.
3. It determines the company’s solvency status.
4. Accounting gives information to its users.

What is finance?

In the simplest, we can understand finance as money management in business. As per business, it’s a medium of growing the business by making the required resources available. This process also involves the arrangement of funds for any kind of expenditure for expansion and acquisition.

Types of Finance

1. Personal Finance:

Personal finance involves maintaining the finances of the individual and helping to get the desired financial goal.

2. Corporate Finance:

It is about funding the expenses that are incurred by the company; it results in increasing the value of the firm over time.

3. Public Finance:

Public finance has an impact on the overall economy. It’s all about how state, local, and central governments manage their finances to provide services to the public.

Conclusion

From the above context, we can conclude that accounting is about recording the transaction in a systematic manner and finance is about being used to take decisions for management and users, and both hold utmost importance in the field of finance. So for achieving desired financial goals, both proper accounting and skilled finance are required.

Akanksha Kulkarni