what is the diffrence between accounting and finance?
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Here is a detailed definition that helps you to know
everything about accounting and finance.
Accounting is the methodical or precise recording,
reporting, and assessment of financial deals and
transactions of a business. Accounting also involves the
preparation of statements or declarations concerning assets,
liabilities, and outcomes of operations of a business.
Personal finance is a management of assets and liabilities
in an efficient way. In a way, they are related to each
other and yet they also have differences between each other.
What is the connection between accounting and finance?
Accounting is an essential part of finance. It is a
sub-function of finance. Accounting produces information
about the operations of a business. The end-product of
accounting is composed of financial declarations such as
balance sheets, income declarations which include the profit
and loss accounts, and the declaration of changes in
financial position which includes sources and uses of funds
declaration. The data kept in these declarations and reports
aids financial directors in analyzing the previous
performance and future inclinations of the company and in
satisfying certain legal duties and responsibilities, such
as payment of taxes and many more. Therefore, accounting and
finance are practically closely connected.
One difference is associated with the treatment of funds and
the other is associated with decision making. In accounting,
the system of determination of funds; that is, income and
expenditures, is based on the accrual system. Revenue is
acknowledged at the point of sale and not when it was
collected. Expenses are acknowledged when they are incurred
than when they are paid. However, in finance, the system of
determination of funds is based on cash flows. The revenues
are acknowledged during the actual receipt in cash as in
cash flow and the expenses are acknowledged when the actual
payment is made as in cash outflow.
Another difference between accounting and finance is with
respect to their purposes. With accounting, it aims to
collect and present financial information. It furnishes
constantly improved and easily interpreted previous data,
present and future inclinations of the company. Meanwhile,
financial director’s prime duty and responsibility
associates to financial strategy, managing and controlling,
and decision making. Therefore, in a sense, finance starts
where accounting ends.
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