Accounting vs Finance

Accountants are professionals who deeply understand the company's financial statements, including balance sheets, income statements, and cash flow. 

Accountants must be aware of international standards and accepted accounting principles (GAAP). They also analyze data to make strategic decisions for the company.

Accounting can be divided into two categories:

Financial Accounting: Prepare financial statements to provide internal and external user information. This type of information is available to a wide range of users, including management teams, stockholders, employees, governments, banks, etc.

Financial accountants' focus is on reporting financial and operating conditions, primarily for external reference.

Management accountants: It mainly provides information to the company's management as a basis for decision-making by various departments within the enterprise. 

For management accountants, it mainly services internal users. There is no standard model, and accounting standards do not govern it.

The essence of finance is the circulation of value. There are many types of financial products, including banking, securities, insurance, trust, and so on. It involves many academic fields, including investment, banking, securities, insurance, trust, and so on.

It is a transaction activity, but transactions do not create value, so why is there any profit in financial transactions? The reason is that financial transactions are a way to realize future income, which means tomorrow's money is spent today. 

Simply put, the frequency of financial transactions is an important indicator reflecting the economic prosperity of a region, an area, and even a country.

Traditional finance is a discipline that studies the circulation of monetary funds. The essence of modern financing is the capitalization process of business activities.

Accounting's main takeaway

It is the measurement, processing, and communication of financial and non-financial information about economic entities such as businesses and corporations. 

Often measures the results of an organization's economic activities and communicates this information to various stakeholders, including investors, creditors, management, and regulators.

Financial accounting focuses on reporting an organization's financial information, including preparing financial statements, to external information users, such as investors, regulators, and suppliers.

Accounting objectives are the tasks or standards that accountants work is required to accomplish, also known as financial reporting objectives.

The goal of accountants is to provide users of financial reports with information related to the financial status, operating results, and cash flow, reflecting the performance of the management team and helping users of financial reports to make economic decisions.

1. Main measurement tool: Currency

Any economic business, when recording, must use a certain unit of measurement. 

There are three types of measurement units: 

• physical quantity, 
• labor quantity, and 
• monetary quantity (value quantity)

Accountants should carry out comprehensive bookkeeping activities. Under the commodity money system, money has a special role because it is:

• the common measure of the value of all other things of value;
• medium of exchange;
• store of value;
• Methods of payment for settlement of claims and debts.

Therefore, the use of currency as the primary and unified unit of measurement for accountants has become one of the characteristics of accounting. 

Of course, the two measurement units of physical quantity and labor quantity are also used, but the monetary unit of measurement is the most important.

2. Record the process of economic activities based on evidence and clarify the responsibilities of economic activities

In economic activities, enterprises and other units must obtain or fill in legal written certificates every time an economic business occurs. 

These documents not only record the process of economic business but also clarify the responsibility of economic activities. 
 Accountants must be based on legal vouchers to keep accounts and settle accounts. 

Accountants are not allowed to make any formal records without legal credentials. This is another characteristic of accountants, which shows that accountants' records are all well-founded and can faithfully reflect the real situation of economic activities.

3. Accounting's reflection on economic activities is continuous, systematic, and comprehensive

To correctly reflect the economic activities of enterprises and other units, accountants should record and calculate continuously, systematically, and comprehensively according to the order of economic business occurrence and provide necessary information for the management team. 

The so-called continuous refers to the reflection in the order of occurrence (confirmation) of economic business, which is uninterrupted from beginning to end.

The so-called systematic refers to the scientific, regular, and not disorderly classification of various economic activities by accountants using a set of specialized methods. Organize and record, and finally, provide systematic information.

The so-called comprehensive means that all valuable information for decision-making should be reflected in detail so that decision-makers can choose, and the reflection is not biased. It cannot be arbitrarily chosen, let alone omitted.

In addition, it should also reflect the material consumption of different types, different names, and different measures, as well as various complex economic activities to provide a comprehensive value index. 

Finance's Main Takeaway

It is a general term for currency circulation and credit activities and their associated economic activities.

In a broad sense, it generally refers to all economic activities related to the issuance, custody, exchange, settlement, and financing of credit currency. It includes buying and selling gold and silver.

It can be summarized as the issuance and withdrawal of money, the issuance, and recovery of loans, the trading of gold, silver, and foreign exchange, the issuance and transfer of securities, insurance, trust, international currency settlement, etc.

Institutions engaged in financial activities mainly include banks, trust, and investment companies, insurance companies, securities companies, as well as credit cooperatives, financial companies, financial leasing companies, and foreign exchange exchanges.

There are five elements:

1. Financial objects: money (funds). The currency circulation regulated by the currency system has advance, turnover, and value-added properties;

2. Financial methods: represented by credit methods mainly based on lending. The objects of transactions in the financial market are generally written proofs of credit relations, contract documents of creditor's rights and debts, etc.;

Direct financing: without the involvement of intermediaries; 

Indirect financing: financing through intermediaries.

3. Financial institutions: usually divided into banks and non-bank financial institutions;

4. Financial market: including the capital market, currency market, foreign exchange market, insurance market, derivative financial instrument market, etc.;

5. Institutions and regulatory mechanisms: supervise and regulate financial activities.

Finance job description

A job in this area is a type of career choice. This guide will outline the various aspects of a career in this industry.

Firstly, a typical day in a professional's life can vary depending on what type of business they work for and their level. 

A financing professional may start their day reading through reports to see how well the company is doing financially. They might then spend time preparing financial reports, looking at costs and budgets, and analyzing past performance to predict future trends. 

Other activities include sourcing new funding opportunities, managing projects, and ensuring financial statements meet regulations and expectations.

There are two types of professionals in this field: portfolio managers and investment bankers. 

The first group manages investment funds for people or companies with large amounts of money available to invest. 

These professionals typically work long hours during important trading periods such as stock market openings and closings, weekends, and evenings when markets around the world are open for trading. 

However, they also work during less busy times, such as Mondays and Fridays when U.S markets are closed.

Finance objectives vs. accounting objectives

The main objective of financing is to forecast the future, while accounting's main goal is to provide information about the past.

Accountants provide a formal record of financial transactions, assets, and liabilities for both private businesses and public companies. 

It records all economic events to provide an independent basis for assessing the financial position of a business or entity at a given date. 

This is typically done with three primary financial statements: income statement, balance sheet, and cash flow statement.

Finance, on the other hand, analyzes past performance to try and predict how different factors may affect future performance. 

Professionals monitor trends in revenues and expenditures over time to allow a company's managers to draw conclusions about their most profitable opportunities for investment.

Accountants are experts in understanding what happened in the past, while financing experts analyze what they think will happen in the future. 

These differing objectives result in different measurement methods, tools, and approaches when analyzing data from a business's operations.

Accounting vs. finance careers

Accountants' careers are more stable and have a higher starting salary than finance careers. You will have a steady growth path as an accountant with a consistent salary. If one company isn't the right fit, you could always move to a different company.

In contrast, finance careers have a high job turnover rate, and can be difficult to find employment because of the market's unpredictability. The industry is volatile and has a high fluctuation rate, making it difficult to predict where jobs will be in the future.

Nevertheless, many people still see it as the better choice because it is more lucrative and offers higher salaries. A financial professional can earn around $60-80k annually, while an accountant earns about $50-65k annually.

Because of a pay gap, many people see working in the finance industry as a better career choice because of its potential for greater advancement opportunities and higher salaries.

Others say accountants are rewarded for their analytical skills and strategic thinking rather than just their ability to crunch numbers on Excel spreadsheets like those in finance positions. 

This means accountants may be able to advance into management positions like Chief Financial Officer (CFO) or Chief Marketing Officer (CMO).

How to get a job?

Careers typically require a bachelor's degree. Getting a job as a financial analyst with as little as an associate degree is possible, but the level of work may be limited. In addition, there are some other requirements that you need to meet.

For someone to become a financial analyst, they must have at least three years of experience in finance or accounting or related fields and also have a bachelor's degree. 

There are other expectations for obtaining this position which includes working knowledge of principles and practices of general concepts, economics, and business law.

You can become qualified for a job in finance by gaining an education, getting the proper experience, and following the appropriate steps. If you manage to do this, it will be easy to find a job in this industry.

Accountants have a wide variety of career opportunities. They can work for businesses(industry) or in public service (firms) and specialize in auditing, taxation, or financial analysis.

The best way to be an accountant is to earn a degree, complete any necessary exams, and then get experience working for an accountant or company with an accountancy department.

Researched and authored by Yiqing Qiao | LinkedIn

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