Finance and accounting are two exceptionally attractive career options for anyone who loves to play with financial and mathematical figures. While these two fields of study sound similar (since they’ve so many overlapping areas of interest), they have significant differences as well. As it is difficult for an onlooker to differentiate between finance and accounting from the surface, this is the source of prime confusion for aspirants – which to choose: finance or accounting?
If you are one of those aspirants, wishing to make it big in the finance sector, this article is just the guide for you! In this post, we’ve outlined the core points of difference between the two so that you can identify towards which field your interests incline and then make an informed decision.
Finance vs Accounting: Fundamentals
The first significant difference between finance and accounting lies in their definitions. Both of them are separate disciplines even though their industries are similar.
Basics of Finance
Finance focuses on managing investments and money for companies, individuals, or government organizations. A finance professional would have to ensure that their client gets the required funds and achieves their financial goals. Financial professionals focus on creating value through capital management in such a way that produces higher than expected risk-adjusted returns.
Basics of Accounting
Accounting focuses on reporting, maintaining, and recording an individual’s or company’s financial records. Accounting professionals have to ensure that all the transactions are recorded accurately and are organized such they can be accessed easily. They maintain ledgers and create financial statements which reflect the financial health of their client.
Thus, while finance focuses on managing funds, accounting focuses on recording its transactions. This is a key difference between the two disciplines that determine which skills and education its professionals require.
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Finance vs Accounting: Branches
Both finance and accounting are divided into their separate sub-categories which differ considerably.
Finance is divided into the following categories:
- Public Finance
Public finance focuses on budgeting, tax, and spending of a government agency and how to handle the related policies.
- Personal Finance
Personal finance focuses on wealth management for an individual. This includes retirement planning, setting up funds, planning for mortgages, etc.
- Corporate Finance
Corporate finance is concerned with the financial growth of a company. It focuses on financial activities focused on investment strategy and management.
Like finance, accounting also has three categories:
- Cost Accounting
Cost accounting focuses on determining the cost of a product or service to help an organization decide the pricing of the same and strategies accordingly.
- Financial Accounting
Financial accounting focuses on creating financial statements such as balance sheets and cash flow statements which help one in gauging an organization’s financial position.
- Managerial Accounting
Managerial accounting uses the same data as financial accounting but instead of understanding the financial situation of the organization, they focus on using this data to make business decisions and solve problems.
Finance vs Accounting: Education
The education requirements of both of these sectors are unique. You can certainly pursue a career in accounting with a finance degree as most of their qualities are similar, but if you want a lucrative role, you’d need to specialize in the field.
Education for a Career in Finance
Financial careers require you to be adept at managing funds, financial analysis, and using data to forecast future earnings and results. Most finance professionals get an MBA in Finance. An MBA would teach you many industry-specific skills and is a must-have for plenty of financial careers.
Education for a Career in Accounting
To pursue a career in accounting, you’ll need to get a Bachelor of Commerce (BCom) minimum. Most employers prefer candidates with an M.Com in accounting as they are better equipped to take on senior roles.
Another popular pathway for an accounting career is by becoming a Chartered Accountant (CA). As a CA, you’d be responsible for handling a wide range of both financial and accounting responsibilities of businesses or individual clients.
You can complete the Certified Public Accountant course and clear the final exam to become a CPA. Certified Public Accountants are one of the most in-demand and internationally-recognized professionals in the finance industry.
Thus, finance requires you to have a management or business degree while accounting requires you to have a commerce degree or an accounting certification.
Finance vs Accounting: Employers
Finance and accounting services are required by almost all companies/organizations, irrespective of their size. Naturally, there are a plethora of employment opportunities for both finance and accounting professionals across all parallels of the industry. Usually, large companies keep separate finances and accounting departments as they handle large-scale financial and accounting operations.
However, when you look at industry-specific employers, there’s a huge difference between finance and accounting:
Employers in Finance
Prominent employers in the finance sector include:
- Financial services providers
- Investment bankers
- Wealth management companies
Goldman Sachs, JP Morgan Chase, and Merrill Lynch are some of the biggest names in the finance industry. They all focus on providing investment management services and/or banking services.
Employers in Accounting
In accounting, the primary employers are:
- Accounting firms
- Public accounting firms
The most prominent employers in the accounting sector are accounting firms which include popular names such as Grant Thornton International, Ernst & Young, and Deloitte.
Finance vs Accounting: Careers
When it comes to career prospects, there’s a huge difference in the kind of roles you can pursue in finance and accounting
Careers in Finance
Some of the prominent careers in the finance sectors are:
- Investment Banker
Investment bankers assist companies in raising capital through various strategies and implementations. They analyze a company’s capital requirements, assess their financial position, and help them with achieving their funding goal through equity, issuing bonds, or getting a loan.
- Fund Manager
A fund manager is responsible for handling a fund’s performance. They oversee the fund’s trading activities and strategies while ensuring that the fund grows with time. A fund manager would usually manage a mutual fund or a pension fund. They receive their compensation by sharing a certain percentage of the fund’s profits.
- Risk Analyst
Risk analysts are responsible for reducing the damages done by a financial loss or a similar event. Companies entrust them with analyzing potential deals and transactions for risks and use their insights to determine whether they should proceed or not. Risk analysts help companies in reducing their potential harm and are among the most sought-after professionals.
There are plenty of other careers for finance professionals such as financial advisor, wealth manager, asset manager, venture capitalist, etc., apart from the ones we discussed above.
Careers in Accounting
Some of the most popular career choices in the accounting sector include:
- Chartered Accountant
Chartered accountant’s audit accounts, offer taxation advice and handle taxation for their clients. They might also handle forensic accounting, corporate finance, and insolvency, among other things.
- Forensic Accountant
A forensic accountant is responsible for analyzing the transaction records of a company or individual to find any traces of illegal activity. They might work with government agencies or accounting firms.
- Certified Public Accountant
A CPA is responsible for handling tax returns and preparing financial statements for their clients. They may work with individuals, companies as well as government departments.
As you may have noticed, the prominent careers in finance are focused on financial analysis and management whereas the prominent careers in accounting are focused on taxation and recording transactions.
To conclude, while finance and accounting certainly have their differences, they complement one another quite well. This is mainly because, in the real world, finance and accounting operations largely go hand-in-hand. Also, both these branches offer lucrative career options to freshers and professionals, with plenty of scope for job growth.
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Ranked among the top B-schools of the UK, Liverpool Business School provides a 20-month MBA Finance course online, including a one-week immersion program at the university campus. The course comprises simulations and case studies from Harvard Business Publishing. During this program, the students get a chance to be mentored one-on-one by the industry leaders.