Finance vs. Accounting: Key Differences to Help Choose Your Next Field With Confidence
We have addressed some of the biggest and most common concerns that many people have when trying to compare accounting and finance. From varying skill sets, different salary expectations, and more, we’ll walk you through the ins and outs of both career paths.
This is the ultimate guide to study before you make a commitment either way. You should have a thorough understanding of each career choice before you choose a path. This just could be one of the biggest decisions of your life.
So why not let us take you through both disciplines and help you choose between them?
Finance vs. Accounting by Definition
They may seem identical but the definitions of accounting and finance are quite different. Let’s take a look.
Accounting: Accounting is the practice of measuring, preparing, analyzing, and interpreting financial statements. This information helps measure the performance of a business and its financial position.
The data is also important for the payment of taxes. Accountants use balance sheets, cash flow statements, and ledgers to track daily operations. They focus mainly on the past performance of businesses and individuals.
Specializations in accounting include:
- Financial accounting: This is the use of balance sheets, income, and cash flow statements to provide information. This data is used by stakeholders such as investors, tax authorities, and creditors.
- Managerial accounting: Managerial accountants use the same information as financial accountants. Internal staff then use the information to make decisions about business operations.
- Cost accounting: This involves studying balance sheets and income and cash flow statements to find ways of minimizing the cost of production.
Finance: Finance deals with investments and the management of assets. A financier will focus on decisions about working capital for businesses and individuals.
They deal with inventory, credit levels, cash holdings, and financial strategy. Finance will usually focus on the future performance of a business or individual.
Finance can be divided into three sub-categories:
- Personal Finance: This includes long-term financial planning for individuals. Some of these include retirement and the purchase of financial products such as mortgages.
- Corporate Finance: This involves the financial activities of the running of a business. These activities can include investment strategy and budgeting.
- Government Finance: Public finance examines tax and government policies. The information studied will affect how resources are allocated.
By looking at the different definitions, and a summary of the skill sets, you can see which career path best suits you. You can align your skills, financial needs, ability to travel, and career aspirations with the correct job.
Finance vs. Accounting Salary
Salaries in both professions will depend on the experience of the individual as well as the industry for which they work.
Entry-level accountants earn an average of $40,777 and the topmost level accountants can make up to $83,800.
In New York, some accountants can earn more than $60.000. The region with the lowest accounting salary is in North Carolina with an average of $44,281.
According to the Bureau of Labor Statistics, the nationwide average for an accountant’s salary is $71,550.
The truth is – depending on the type of career you choose, these numbers can have a wide range.
BLS states that accountants in insurance and finance firms earn the highest salary at $74,690.
It’s important to note that auditing clerks earn the least and with negative job prospects, it’s a career that’s on the decline.
Technological improvements have automated some of the roles, hence the decline in open opportunities. This could also affect the accounting industry to a lesser degree.
People who have specialized in finance can earn a lot of money as they move up the ladder.
|Median Annual Salary (USD)||Number of Jobs in ’18||Job Outlook ’08 – ’28||Employment Change ’18 – ’28|
|Personal Financial Advisors||$87,850||271,700||7%||19,100|
Similarly, there are different levels of financiers, all earning varying salaries.
If compensation is a big factor when considering a profession, becoming a financial manager is your best option. Actuaries are some of the highest-paid financial workers, earning from $150,000-$250,000.
The Different Finance vs. Accounting Job Roles
Accountants need to be extremely precise as they often deal with large amounts of money. Even the slightest error can result in a business or client losing money. The role requires attention to detail and a high level of organization.
Accountants often work alone so this role is perfect for introverts who will mainly create written reports for senior management.
Financiers on the other hand need excellent communication skills and must be able to interact extensively with senior executives. The job requires presentation and interpersonal skills as they present reports to an audience.
This is ideal for extroverts who are confident and able to handle high-pressure situations.
Your interests, education, and skill sets may influence how you view the different roles required by accountants and financiers. Take a look at our list of job roles below.
- Analyze and interpret financial reports to advise managerial teams
- Raise capital through debt or equity
- Create and put in place a corporate strategy
- Budgeting and forecasting (monthly, quarterly, annually)
- Handle mergers and acquisitions
- Risk management
- Evaluate and advise on investments
- Implement cost-reducing solutions
- Collect, organize, and track financial information
- Prepare financial reports that meet government and stakeholder requirements
- Prepare financial reports for internal use by staff
- Conduct audits to ensure legality and adherence to policies
- Prepare tax returns and report income to the IRS
- Advise clients and firms on how to minimize tax liability
Accounting vs. Finance Personality Types
Not everyone can be an accountant or a financier. There are personality traits that will make some people more apt to perform well in each career.
We’ve taken a look at one of the most popular personality tests used by organizations across the world. It helps employers decide if a potential employee is fit for the role. This sort of personality testing can help you determine which profession you are more likely to enjoy or excel in.
The Myers-Briggs Type Indicator shows how people use their perceptions and judgment. The MBTI instrument measures preferences, not ability or character.
Used by Fortune 500 firms the MBTI personality test is helpful before placing an individual in any specialized role.
The personality type ISTJ (Introversion, Sensing, Thinking, Judging) is, well-suited for accounting positions. These people are systematic, analytical, and have a high work ethic.
Known as ‘The Inspector’, they are traditionally serious and loyal. Leaning towards facts, they perform accounting jobs efficiently. Accuracy is key when they have to look through many documents and information.
Financiers are shown to be INTP personality types. This stands for introversion, intuition, thinking, and perceiving.
Let’s take a closer look at some of the different personality traits which accountants have vs. financiers.
- Risk manager
- Able to use rule-based thinking
- Attentive to detail
- Can conceptualize scenarios
- Business development skills
- Problem-solving skills
Before diving in, why not take the MBTI test to better understand your personality. Free versions are also available online although they are not the original test.
You can also check at your school’s career center or your work’s HR department if they offer the test.
The results may surprise you and they will be key in avoiding a career incompatible with your personality. It will show you your strengths and weaknesses and guide you into a job that suits you specifically.
Financial Analyst vs. Accountant
After taking the test, you should have some direction as to which job you would like to pursue. Though similar, these two professionals perform very different jobs.
Let’s take a brief look at the major differences in daily duties and work environments.
Financial analysts have a broader job description and their roles are less fixed. They deal with the management of assets and liabilities. This enables them to make future predictions and advise management. They develop investment strategies and are in charge of how to make use of company resources.
Some financial analysts’ duties include:
- Analyzing stock fluctuations.
- Creating simulations to forecast the outcomes of financial transactions.
- Reviewing spending and revenue projections.
- Liaising with management teams to offer advice on financial decisions.
Accountants have a more structured role and are heavily involved in taxes. They deal with the day-to-day flow of money in and out of a business.
Some duties performed by accountants include:
- Organizing company accounts.
- Reviewing records to reduce spending and increase profits.
- Developing and managing working budgets.
- Preparing taxation procedures.
Generally, both types of employees work 40-50 hours per week. Accountants have a busy February to April tax season where they may work up to 70 hours a week, depending on the number of clients they work with.
The work environment also differs as financial analysts often have their own offices. Many accountants, especially at entry-level, work in cubicles, although many high-level accountants will likely have the luxury of their own office.
Can I Combine Finance and Accounting?
The careers are somewhat related, and some employees may perform some of the same tasks.
The topmost position of either of these professions is that of Chief Financial Officer. It is essentially a combination of finance and accounting in one position.
With the right experience and educational background, you could have the opportunity to manage a business’s finance or accounts departments.
CFOs are tasked with the financial planning of a business. They also need to oversee the organization’s cash flow.
To get to this leadership position, you will need to understand both job roles. You will need to supervise employees and perform tasks required in each profession. CFOs need a combination of skills including:
- Leadership skills
- Management skills
- Accounting skills
- Data skills
- Strategy skills
Besides a Bachelor’s degree, to reach this management position, often you will need a Master’s Degree. An Executive MBA is a good option if you already have some work experience.
The Difference Between Finance and Accounting Degrees
Both jobs need a basic Bachelor’s degree but further education courses differ. For financiers, it is advisable to be a member of the CFA Institute. Accountants, however, are usually required to complete a CPA certification.
See the details below:
So which degree is best? Everything is relative and will depend on your strengths.
Generally, accounting majors at the undergraduate level are not easy. Students say finance on the same level is much easier.
If you are starting your undergraduate level, it may be advisable to take a joint degree. It will provide you with general knowledge of both professions and help you choose the best path.
Accounting does not increase in difficulty at higher levels. But finance does, gradually.
Benefits of Studying Accounting
Accountants are necessary for all businesses and the profession is currently growing. According to the BLS, accountancy is expected to grow up to 10% between 2016 – 2026.
Having the right information can help you choose which industry you want to work in. This is a way for you to begin to define a clear career path.
Usually, after graduation, you may start as an entry-level associate with high growth and earning potential.
Additional certifications will help you advance your career and get a job almost anywhere in the country.
Another option is to start your own business. If you have an entrepreneurial streak, you can become your own boss after a few years of work experience.
If you enjoy systematically working with rules accounting is the course you should study.
Benefits of Studying Finance
Finance offers a wider range of study options compared to accounting. You will cover a variety of specializations used in the business world. You will also be exposed to areas such as economics and banking.
By studying finance, you will gain the necessary analytical skills to interpret data.
The knowledge will also be useful in your personal life. You will learn how to make smart investments and handle your finances effectively.
The career opportunities for graduates are immense and the earning potential is higher than many other careers. You will also learn how to make extra wealth and not just rely on your salary.
The Best of Both Worlds?
Advice online seems to lean towards studying both degrees.
So now, what is the best way to advance your career? An MBA or EMBA degree is common for both accountants and financiers. It will give you the extra edge over and above your basic degree.
For this with some years of experience, an Executive MBA will allow mid-career professionals to work and study at the same time.
If you do not have extensive experience, a free online MBA is your best option. By choosing students from the world’s top universities, Quantic School of Business and Technology gives you a chance to network with fellow students either face to face or online.