Accounting vs Financial Accounting – Difference and Comparison

What is Accounting?

Accounting is the management of today’s transactions, pecuniary resources, and preparing financial statements.

Accounting includes recording, creation and summation for the preparation of financial statements, which are used for understanding the financial status of the business i.e., where the business is going is it towards profit or loss?

Accounting focuses on Reliability and Accuracy in financial analysis and is used in the public, private, or government sector. Financial reports obtained through accounting procedures are read by investors, lenders, or creators, and the reports are believed to be fair and have accurate information.

There are different areas for specialization in Accounting.

  1. Financial Accounting: Includes preparation of the financial statement and makes essential decisions related to finance, investments in the business.
  2. Management Accounting: This fact includes the same data as financial accounting but it is used by other shareholders to make an essential decision on business operations.
  3. Cost Accounting: it often involves determining the cost of a company’s product and deciding if they should increase production and at what cost.

If anyone wants to make a career in accounting there are lots of opportunities available. Accounting professionals can become accountants, auditor’s tax consultants.

What is Financial Accounting?

Financial accounting, deals with budgeting and preparing different investment plans for different businesses. Balance sheets, capital statements are used as accounting tools for preparing financial statements.

Financial accounting is designed to manage and control and to make important decisions related to capital management, financial analysis, and planning, and to help with different investment plans for different businesses, also used in banking, capital market consulting, etc.

In financial accounting, financial professionals can pursue careers such as investment bankers, financial analysts, or financial advisors. Financial accounting is considered crucial as it helps in analyzing and controlling the budget to choose better investment plans with low risk to the company.

Difference Between Accounting and Financial Accounting

  1. Accounting is a method of keeping a record of transactions and giving financial statements whereas financial accounting helps in managing funds with different investment plans at low risk.
  2. Accounting is considered a subcategory of Financial Accounting.
  3. In Accounting balance sheets, capital statements, etc are used as tools, while in Financial Accounting, capital budgeting, financial analysis, risk analysis are used as financial tools.
  4. Accounting focuses on reliability and accuracy while Financial Accounting focuses on financial analysis, risk management of different investment plans, etc.
  5. Accounting is used to understand the financial health of a business whereas Financial Accounting helps to manage money through better low-risk management investment plans.

Comparison Between Accounting and Financial Accounting

ParametersAccountingFinancial Accounting
DefinitionAccounting entails day to day’s transactions and preparing financial statements for that.Financial accounting helps in doing budgeting and preparing different investment plans for different private, public, or government sectors.
ScopePreparation of financial statements is required within the scope of accounting work.In Financial Accounting, the scope of work includes financial analysis, planning, investment management, etc.
UseUsed in public, private, or government accounting departments or corporations.Used for Banks, consulting firms, and other companies.
AimAccounting aims to record the creation and presentation of current financial statements about a business.Financial accounting aims to manage and control and make essential decisions related to finance investments in the business.
FocusAccounting focuses on reliability and accuracy.Financial accounting focuses on analyzing planned investments, etc.

References

  1. https://books.google.com/books?hl=en&lr=&id=9gx-CgAAQBAJ&oi=fnd&pg=PT8&dq=accounting+and+financial+accounting&ots=i4sAQip0MP&sig=uLZJF6nF6Hoy45d0gomcVDYYvAI