If you enjoy working with financial figures, choosing a career in accounting or finance could be a great decision for you. But, you may be unsure about which degree to earn, as the fields overlap. Therefore, it’s essential to pause your program hunt and ask yourself some crucial questions.
Finance vs. Accounting: The Basics
While there are many similarities between accounting and finance, they are two distinct disciplines. The main difference between them is that those who work in finance typically focus on planning and directing the financial transactions for an organization, while those who work in accounting focus on recording and reporting on those transactions. Put another way, accounting is the organization and management of financial information, whereas finance is the management of money.
What is Finance?
Finance is a broad term associated with managing money and acquiring needed funds, including budgeting, forecasting, lending, saving, investing, and borrowing. Financial concepts and principles, such as the time value of money and intrinsic value, are based on microeconomic and macroeconomic theory. According to Investopedia, the finance industry consists of three sub-categories:
Personal finance involves financial planning for individuals. This can include long-term financial management plans, such as retirement, purchasing of financial products, such as mortgages, and banking.
Corporate finance involves the financial activities for running an organization, which can include investment strategy and budgeting.
Public (government) finance includes the tax, spending, budgeting and other policies that relate to how the government allocates resources.
Careers in Finance
Careers in finance may include jobs such as:
Financial manager or planner
Finance Required Skills
According to staffing agency Robert Half, soft skills are just as critical for finance professionals as technical knowledge. In a 2018 article on their blog, interpersonal skills, communication ability, and problem-solving skills are listed as essential skills for a career in finance, along with financial reporting, analytical expertise, and business acumen.
What is Accounting?
Accounting is the identifying, recording, and communicating of an organization’s economic results. A vital function for any business, accounting measures business activities, processes the information into reports and communicates the results to decision-makers.
There are different areas of specialization in accounting, according to Investopedia:
Financial accounting includes the generation of financial statements that typically involve a balance sheet, income statement, and cash flow statement. This information is used by external decision-makers, such as investors, creditors and taxing authorities.
Managerial accounting often involves the same data as financial accounting, but it is used by internal stakeholders to make decisions on business operations. This can also include forecasting, budgeting, and other financial analysis tools.
Cost accounting involves determining the cost associated with producing a product and helps businesses decide if they should produce the product and what the product should cost.
Careers in Accounting
Careers in accounting include:
Financial reporting accountant
Cost accounting manager
Accounts receivable clerk
Accounts payable clerk
Technical accounting manager
Required Skills for Accounting
Similar to pursuing a career in finance, aspiring accounting professionals need to have a combination of accounting expertise, general business knowledge and soft skills to be successful. According to a 2016 Robert Half survey, over half of CFOs valued hard and soft skills equally when filling positions.
Robert Half states that hard skills in demand for accountants include expertise in technology and software systems, including Excel, ERP experience, SQL, Microsoft Visual Basic and business intelligence software. Soft skills include communication, leadership, and customer service.
Accounting vs. Finance Coursework
Although there is some overlap in coursework for accounting and finance degrees, the curriculum for a finance degree tends to be more mathematics-intensive and focused on financial markets, portfolio and investment management theory, financial management, investments, and security analysis and valuation. Courses for finance degrees are often more evaluative and analytical than accounting courses.
Accounting degrees include more coursework on quantitative analysis, internal auditing, income taxation, and accounting practices and methods. Accounting tends to be more process-oriented and many degree programs offer fewer electives than finance degrees since there are more required classes for accounting majors. A degree in accounting and a degree in finance prepares students for different career opportunities, and prospective students should explore both fields carefully before deciding upon either course of study.