While accounting and finance may go together, there are key differences: accounting focuses the flow of money and out of a company or family, while finance is a more broad term that describes how one manages asset and liabilities. Whether you are considering different college majors or thinking about who to hire to help you manage your own finances, it is important to understand exactly what the two fields are and what specialists in each do. To find someone to help with your own money, consider using SmartAsset’s free financial advisor matching tool.
What Is the Difference Between Finance and Accounting?
The difference between finance and accounting is that accounting focuses on the day-to-day flow of money in and out of a company or institution, whereas finance is a broader term for the management of assets and liabilities and the planning of future growth.
If you want to exercise high-level control over a company’s strategy, finance could be for you. If you want to take a specific look at a company’s books, you’re probably more into accounting. It’s often said that accounting looks back to a company’s past financial transactions, whereas finance looks forward to planning the future acquisition of assets.
Accounting is more about accurate reporting of what has already happened and compliance with laws and standards. Finance is about looking forward and growing a pot of money or mitigating losses. If you like thinking in terms of a longer time horizon, you may be happier in finance than in accounting.
Should you want to study accounting you can expect to take classes in accounting practices and accounting ethics, business law, tax law and accounting theory. If you study finance you’ll likely spend some time on macroeconomics and international finance in your classes, as well as on financial engineering and corporate finance.
Accounting vs. Finance: Career Options
The difference between finance and accounting may just be a matter of idle curiosity for some of us, but if you’re choosing a college major or a career, it’s an important distinction. Particularly if you’re planning to take on student loans, you probably want to be sure that you’re choosing the right path.
Choose accounting and if you work for a big company you’ll likely report to the company’s Chief Financial Officer. You could have a job title like Controller, Tax Manager, Fund Accountant, Valuation Analyst or Financial Reporting Accountant. Alternatively, you could become a Tax Accountant, a Bookkeeper, Treasurer or Auditor, for yourself, a business, a non-profit or the government.
As an accounting professional, you’ll be tracking and reporting flows of money and ensuring compliance with best practices. You’ll rely on Generally Accepted Accounting Principles (GAAP) and you’ll likely come to be familiar with the tax code, too. Section 446 of the Internal Revenue Code will be your friend. That’s the section of the tax code that covers “General rules for methods of accounting.”
If you choose finance you have a different range of options. You could become a financial analyst, investment banker, financial examiner, personal financial advisor or money manager. You could work in consulting or corporate finance. Banking and insurance underwriting is also open to financing majors. And of course, entrepreneurship is another route that’s open to finance types.
Salaries for Accounting vs. Finance
There’s a wide salary range in the fields of both finance and accounting. Both fields have strong growth prospects between now and 2031, as projected by the Bureau of Labor Statistics (BLS). Let’s take a look at a few examples of salaries and growth prospects.
According to the BLS, the median pay for a Financial Analyst in 2021 was $95,570 per year, $45.95 per hour. Jobs are expected to grow from 2021 to 2031 by 9%, which is faster than average.
Accountants and Auditors have a median pay of $77,250 per year, $37.14 per hour. The number of jobs is projected to increase by 6% between 2021 and 2031, which is also an above-average growth rate.
Let’s take a look at an example on the lower end of the scale. According to the BLS, the median pay for Bookkeeping, Accounting, and Auditing Clerks in 2021 was $45,560 per year, $21.90 per hour. As you can see, the field of accounting has both high-salary, high-growth jobs and lower-salary, negative-growth jobs.
Salaries in finance tend to be high, but there are exceptions. One example is fundraisers. The median pay for fundraisers is $60,660 per year, $29.17 per hour. However, the job outlook is for 11% growth between 2021 and 2031, still above average. The BLS puts fundraisers in the “Business and Financial” category, but many fundraisers don’t have a finance degree.
The Bottom Line
If you work in accounting your recording and reporting of financial transactions will support the work of the finance team. Likewise, if you’re in finance you’re depending on the clear and accurate work of the folks in accounting. Both fields require a high level of skill, education and comfort with quantitative analysis. Additionally, both have the potential to provide challenging work with good compensation.
Tips for Accounting and Finances
- If neither finance nor accounting is up your alley, you might consider finding a financial advisor to help you with your money. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- One basic aspect of finance you can do yourself is make a budget. Use SmartAsset’s budget calculator to get a start on yours!
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