Difference between accounting and finance

Accounting and finance both are similar in a way that both deals with monetary section of a business enterprise. In fact finance is a broader term which also covers accounting in it.

Now the question arises what is the difference between accounting and finance?

The two terms can be differentiated based on the below points:

Firstly, the two terms seem differ on the basis of their concern.

Accounting is a systematic process of recording, summarizing, analyzing, and reporting all business transactions of a firm.

Finance is concerned with taking decision, balancing the sources of fund and making best utilization of funds.

Secondly, their purpose of existence is different.

The main purpose of accounting is to create a financial picture of a business at the end of a specific time period.

Finance deals with making financial strategy about the money management of a business. Money management concept covers allocation of assets and liabilities, determination of sources of fund, evaluation of projects etc.

Thirdly, both terms can be differentiated based upon the tools used.

In accounting, an accountant use accounts and financial statements to show the performance report of a business.

Mainly ratios and financial methods are used by finance department to compare and predict the performance of a firm.