Juggling the terms finance and accounting and using them interchangeably,is something that happens often. However, if you are starting your first job, setting up a business or choosing a major in college it helps to be able to differentiate the two terms.Figuring out the differences between finance and accounting, sets you on the path to get a better job and often results in the creation of more assets if you are managing your business. So if you are at the starting line of the finance and accounting world, here is how you can quickly learn the meaning the two terms.
Definitions of Finance and Accounting
Interchanging the terms finance and accounting happens when the fine lines that demarcate them are not understood. Once you delve deeper into the terms however their different definitions are quite apparent.
Accounting keeps a record of each financial transaction happening within a company or home and therefore provides an overview of day to day happenings. Additionally, accounting results in reports that provide a detailed look at assets which includes money. High accuracy is therefore a prerequisite in the accounting department,and an important function of it is to ensure employees are paid in time. Meeting with an accounting department representative therefore happens when joining or leaving a company.
Finance deals with managing, moving around assets and the planning of investments from a higher level to ensure the best benefits are reaped over the short and long term. Operating with a distribution plan the financial department which is headed by the Chief Financial Officer,ensures the spread of assets across a company happens smoothly. As a result all departments within a company have funds to keep operating.
Assets are Linked to Both Finance and Accounting
Looking at the bigger picture finance and accounting both are involved with assets. While finance involves the moving around of assets which are necessary for keeping a home or a business functioning. Accounting ensures that assets spent are tracked.
Finance and Accounting Departments
As you go in search for the finance and accounts department as you start a new job in a company, it is quite probable that you will find these departments are separate. The reason for this splitting is because each department is valuable on their own,vital for the functioning of the company and ensure it does not run a loss.
Which Department Is Involved In Employee Payroll?
Onboarding a new employee in a company, that is either big or small results in the accounting department getting involved. Even thought HR is directly in charge of the onboarding procedure and collects employee details which are input into specific software that manages payroll, the accounting department does the actual calculation of monthly salaries. The payroll accounting process includes calculating bonuses; commissions earned from sales, and ensures that taxes are deducted before salaries are paid to employees.
Choosing a Accounting or Finance Career
Finally if you are a student, choosing accounting or finance as a major in college will have a long term impact on your career path. Accountants and auditors on the average earn less than financial analysts but since the growth rate for both job types is around 11% you can rest assured that you will be employed in the future.