Difference Between Accounting and Finance

Accounting and Finance may seem similar to some but they have different responsibilities and goals. It can be said that accounting and finance are interrelated and rely on one another. Accounting gives finance the required financial data to manage financial resources and make informed decisions. For managing and comprehending a business’s financial elements, both disciplines are crucial.

What is Accounting?

Accounting is the process of measuring and recording all the financial transactions that happened in a financial year. It includes summarising, analysing, and recording the data. It helps in getting a clear picture of the financial position of the business by seeing the value of a company’s assets and liabilities. Accounting is considered to be a discipline that is based on many different terms, rules, principles, and standards, which are needed to be followed to obtain the required information for the decision-making process.

What is Finance?

The management of financial resources and the procedures involved in making decisions about investments, capital raising, risk assessment, and financial planning fall under the umbrella of finance. It includes more than just accounting-related tasks. In order to increase a company’s value, finance focuses on analysing financial data, making strategic financial decisions, managing risks, assessing investment opportunities, and efficiently allocating financial resources. Enhancing profitability, producing cash flows, building shareholder value, and ensuring a company’s long-term financial stability are all goals of finance.

Difference between Accounting and Finance:

Basis	Accounting	Finance
Meaning	Accounting records, examines, and summarises financial transactions with a focus on giving accurate financial information.	Finance involves making decisions about investments, capital raising, risk assessment, and financial planning.
Focus	It focuses on the creation of financial statements, the upkeep of correct records, and the assurance of adherence to rules and principles of accounting.	It focuses on controlling financial resources, selecting wise financial actions, and improving financial performance.
Time Orientation	It primarily focuses on past financial data, giving a look back at the financial activity of an organisation.	It adopts a prospective viewpoint using financial data analysis and forecasting to enhance decision-making and financial planning.
Tools and Techniques	It utilizes bookkeeping, ledger entries, and accounting software and relies on standardised practices, rules, and frameworks like GAAP or IFRS.	It evaluates investments and makes investment decisions using financial modeling, valuation methodologies, risk analysis, capital budgeting approaches, and financial ratios.
Audience and Purpose	Accounting provides financial data for decision-making, financial planning, and performance evaluation to both internal and external stakeholders, including investors, creditors, and regulatory agencies. Internal stakeholders include managers, employees, and owners.	It focuses on delivering insights and analysis to assist investment decisions, capital allocation, and risk assessment while also fulfilling the needs of external stakeholders, such as investors, shareholders, lenders, and financial markets.
Example	Recording financial transactions, Preparation of financial statements, Bookkeeping, Financial Analysis, and Auditing.	Financial planning and budgeting, Investment analysis, Capital budgeting, Risk management, and Financial forecasting.