Finance vs. Accounting: Understanding the Differences

When considering a career path, have you ever asked yourself about the difference between finance vs. accounting? Finance and accounting are both parts of the FAME (Finance, Accounting, Management, and Economics) classification of industries. They are the components of FAME that are most closely related, and many universities consider the requirements for these fields so similar that they have the same degree program. Understanding the difference between finance and accounting can help you decide if one of these is a suitable career path for you. In this article, we provide a comparison of finance vs. accounting, discuss why knowing the differences between the two is important, and explore how to choose the industry that is best for you.

Why it's important to compare finance vs. accounting

Understanding the differences between finance and accounting can help you determine which field you would enjoy working in the most. While the education requirements for roles in these fields are often similar, the work experiences between the two may vary.

What is accounting?

Accounting is the recording and maintaining of financial records for a business or individual. Those who work in accounting often prepare balance sheets, profit-and-loss statements, tax reports, and other documents. They can also make or receive payments, analyze existing financial records, and identify any errors or discrepancies. Some common job titles in the accounting industry include:

• Accountant

• Staff accountant

• Payroll accountant

• Auditor

• Internal auditor

• Chartered professional accountant (CPA)

• Accounts payable clerk

• Accounts receivable clerk

• Finance clerk

• Financial Services assistant

• Accounting assistant

Read More:

• How to Become an Accountant (With Career Opportunities)

• Average Salary of an Accountant

• 33 Great Jobs in Accounting (With Salaries and Duties)

What is finance?

Finance involves managing assets and making financial decisions. Those who work in finance help investors make good investment choices and make sure that they have enough capital to support their endeavours. Professionals in the field of finance can also advise both individuals and companies about when to sell assets for the best returns. They help manage mergers and acquisitions for many organizations, and they assist clients in buying and selling stocks, bonds, and other financial instruments. A certified financial analyst (CFA) is a financial analyst with independent certification. Here are some other common finance job titles:

• Controller

• Vice president of finance

• Chief financial officer (CFO)

• Investment banker

• Financial advisor

• Financial planner

• Finance coordinator

• Risk manager

• Loan officer

Read More:

• A Guide to Finance Careers

• Top Common Finance Titles (With Salaries and Primary Duties)

• Best-Paying Jobs in Finance (With Salaries and Duties)

Finance vs. accounting: What are the differences?

Though there are many differences between finance and accounting, the main thing to note is that those in the finance industry offer more long-term advice, and focus on promoting future growth, whereas accountants advise for short-term impacts. Those in finance give investment and other financial advice to businesses and individuals. They help predict the financial outlook of a company and advise you on good investments. Professionals in the field of accounting often create and provide the documents that people working in finance need.

Accountants provide short-term financial advice to help employers comply with applicable laws and save money on taxes. Rarely do they help with decisions that could have a long-lasting impact. Here is a further comparison of finance vs. accounting:

Employers

Finance professionals often work for investment banks, wealth or asset management firms, banks, insurance companies, or corporations. Accountants, on the other hand, are more likely to gain employment in accounting firms. Many people in the accounting industry work as independent contractors or own their own businesses.

Focus

Financial professionals use their insight and experience, technical analysis, specialized software, and knowledge of current events to make investment decisions. They focus on analyzing data to predict future events, particularly fluctuations in stock prices and the values of other investments. Comparatively, accountants are more concerned with the past. They study past financial records and track figures and facts, ensuring that record keeping is accurate for current transactions. They also make sure that businesses follow accounting-related laws and regulations. Financial professionals often use the financial summaries created by accountants to make decisions. Those working in accounting then help execute those decisions.

Education

Finance industry professionals will typically have a university degree in economics, accounting, finance, business, or a similar field. Many people in the field of finance have a Master of Business Administration (MBA), which is a common requirement for investment bankers.

Those working in entry-level accounting positions, like account clerks, usually need a high school diploma. CPAs need to have a university degree and pass an exam. They often study accounting, finance, statistics, and similar topics. Depending on their province or territory, they also need between two years and 30 months of on-the-job training to receive their certifications. Auditors and accountants who want to act as trustees in bankruptcy cases need a separate license for that as well.

Related: 12 Jobs You Can Get With a Degree in Finance

Skills

If you are interested in working in either accounting or finance, you will find it helpful to have the following skills:

• Analytical or critical thinking skills: Both professions require interpreting data and making decisions and recommendations.

• Attention to detail: Working in these fields requires catching subtle errors and small changes.

• Excellent written and verbal communication: Accountants and financial professionals alike need to communicate well with clients and coworkers.

• Organization: People working in both of these fields need to keep track of and organize many types of records.

• Time management: It is important to meet deadlines and keep appointments when working in either finance or accounting.

• Adaptability: Adapting to changes in laws and industry outlooks is important for accounting and financial professionals.

• Teamwork skills: Accountants and finance professionals often work together and with others.

Along with these skills, if you choose to pursue accounting, you will also need an understanding of basic math to avoid errors and check for accuracy in your calculations. Other skills and abilities needed include:

• Persuasiveness: This skill is needed to persuade clients about the merits of investments.

• Leadership: Leadership skills are required by senior employees who manage a team of finance professionals.

• Outgoing, friendly personality: Being outgoing and friendly helps finance professionals meet more clients and get more accurate information about investments.

• Budgeting and managing cash flow: Finance professionals need to stay within client budgets.

• Finance software skills: In many positions, using proper software efficiently is essential for compiling and analyzing financial data.

Related: How to Write a Senior Financial Assistant Resume (With Tips)

Duties and responsibilities

When reviewing finance vs. accounting and deciding whether one career path might be right for you, an understanding of the typical duties is important. Both finance and accounting professionals need to keep up-to-date with their knowledge about financial products, different industries, and tax laws current. They spend most of their time working in offices, and some may work from home, part-time or full-time. They will also sometimes visit clients and businesses. Here are some of the typical duties of working in the finance industry:

• Planning, organizing, and directing the operation of an accounting or other financial department

• Talking to clients about their financial goals, the amount of risk they're comfortable with, and their current finances

• Developing and implementing the financial policies and procedures of an organization

• Using financial analysis software to compile data and determine the outlooks of different investments

• Creating charts and graphs to illustrate industry trends

• Recruiting, organizing, training, and managing staff members

Here are some common duties of working in accounting:

• Helping clients save regularly and select savings and retirement accounts

• Assisting clients with estate management, tax returns, and other financial tasks

• Completing monthly, quarterly, and annual accounting reviews or audits of financial activities

• Explaining the financial status of a business or individual in a clear, understandable way

Is finance or accounting the right fit for you?

When trying to decide which of these fields might be best for you, there are a few other important things to keep in mind. Accountants usually get all of the information they need from the records of businesses and individuals, so they rarely do research. This means that if you enjoy research it might not be the right field for you. Also, those in accounting do most of their work on a set schedule. Clients make appointments before seeing independent accountants, and accountants who work for businesses have regular deadlines for reports and financial documents. They are rarely required to amend reports or make other changes without plenty of notice.

On the other hand, in addition to keeping appointments and meeting deadlines, finance professionals need to track fluctuations in the market and advise their clients on short notice. Even waiting a few minutes to make a transaction may prevent a client from earning thousands of dollars. The reason for this difference is that the prices of stocks, commodities and other investments can fluctuate rapidly in a short period of time.

Finance vs. accounting: How do these professionals spend their days?

Accountants and financial advisors frequently work together, with finance professionals often using accountants' figures to inform their speculations. Accountants spend more time making calculations, and finance professionals use the information they get from accounting documents and financial analysis software. Those in the finance industry spend more time meeting with clients and doing research about investments than accountants. For example, before letting a client know which investment property to choose, an investment advisor would usually research past property values, property tax rates, the likelihood of flooding or inclement weather, and other factors.