Provided by Judy Fitzgerald, CPA1
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If you're somebody who loves math and statistics, a course in accounting or finance might be just right for you. But which one do you choose? They both have interesting career growth opportunities but deal with different areas of business. Therefore, it is definitely worth analyzing them to make the right decision.
We deep dive into the differences between accounting and finance, as well as the reasons why each field might be suitable for your specific needs.
Differences Between Finance and Accounting
The similarities in accounting and finance lie in the fact that they both deal with numbers and data. However, there are distinct differences in how accountants and finance professionals add value to organizations.
Accounting deals with the collection, arrangement, interpretation, and management of financial data. Accountants are essential to businesses because they create and track data that helps companies reduce spending and improve profitability. They oversee annual financial reports, manage debt, report yearly earnings, and perform financial audits.
On the other hand, finance deals with fund management and financial planning. Finance experts aim to make plans to allocate and grow wealth based on accounting data. They also help organizations improve their bottom line by foreseeing future market trends and making smart financial investments in the present.
Why Choose Finance?
A finance degree can help start your career as a financial analyst, investment banker, or financial advisor. Here's why finance might be the right major for you:
1. Lucrative Salary With Room to Grow
Finance careers offer higher than average salaries in many countries worldwide, especially if you have graduated from a top-tier school. Graduates in finance often work in corporate environments, such as banks, financial institutions, and investment firms, which are brimming with high-paying jobs and better opportunities.
The field also offers constant growth as you network with other people to enhance your skillset. It allows you to implement the skills you've learned in ever-changing environments.
2. Deeper and Practical Learning
Majoring in finance is ideal if you are interested in the theoretical side of finance and harbor a passion for the field and learning in general. Moreover, the money management skills and up-to-date information on current market trends that you'll learn are not only required to succeed in the field of finance but can help you manage your personal wealth, too. Regardless of which career you take up in the future, a finance degree won't be for naught.
3. More Value to Businesses
Accountants generally work with the technical aspects of finance, such as creating balance sheets and cash flow statements. However, this data may not be useful when seen only through the eyes of companies. They need financial analysts to break it down and identify market trends that will help them make critical decisions.
As a finance major, you can use your in-depth knowledge to grow wealth and expand company holdings. On the whole, you will play a crucial role in advising organizations on how to invest and allocate resources effectively. Companies know the value a finance degree holds: the market demand for financial analysts is projected to grow by 5% between 2019 and 2029.2
Career Prospects in Finance
There is a vast range of careers that graduates in finance can excel in, divided into 3 broad areas:
Public Finance: Public finance deals with utilizing government resources from areas like tax collection and municipal budgeting to carry out operational tasks like public spending, sector investment, and urban development.
Personal Finance: Personal finance deals with managing and planning wealth for a single person. It deals with areas like home loans, car loans, savings investments, and retirement planning.
Corporate Finance: Corporate finance focuses on the monetary operations of organizations and companies. This includes creating quarterly and annual reports and portfolio management. Large scale company budgeting is also included under corporate finance.
Why Study Accounting?
An accounting major allows you to become a bookkeeper, treasurer, clerk, or tax compliance worker. Here are some reasons why you should study accounting in college:
1. High Demand
Accounting is an essential component of running any business. Every firm requires accountants to take stock of resources, generate data, fulfill tax obligations, and prevent companies from making expensive errors. The high demand means that you can easily score a well-paying accounting job after graduation.
While you may not get as lucrative a salary right off the bat as you would with finance, there are many well-paying and respectable accounting jobs for graduates. Salaries for graduates can increase significantly over time with added experience.
2. Stable Career Path
Since bookkeepers, auditors, treasurers, and tax accountants are all indispensable to organizations, you won't have to worry about job security with an accounting degree. The field often provides for steady career growth and skillset expansion.
Estimates show that the value of all accounting software in the world will top $11.8 billion in the next 8 years.3 Strong knowledge of software tools like Microsoft Excel, Visual Basic, and SQL are relevant skills that will boost your value in the field.
3. Can Transition Into Finance
Accounting grads can transfer to finance, but not the other way around. Finance deals with budgeting, resource management, and market projections - all of which require proficiency in basic accounting, mathematics, and numbers.
Accounting majors that possess good financial knowledge and a strong accounting skillset are better positioned to succeed in finance and banking. The ability to foresee trends in the market before they play out is also a valuable skill to corporations all around the world.
Career Prospects in Accounting
There are three main branches of accounting, namely:
Cost Accounting: Cost accounting deals with discerning the cost to produce a particular product and whether or not a company should deem it worthy of doing so. It works to evaluate purchases and accommodate them into corporate budgets.
Financial Accounting: Financial accounting works with balance sheets and cash flow statements. They also concern themselves with income statements and expenditure estimations. Financial accounting is essential for budgeting and overall economic planning for corporations.
Managerial Accounting: Managerial accounting deals with appropriating funds based on market data to make financial decisions. This includes market insight for future investments, budgeting, and market reports.
Conclusion
Accountants prepare and organize data that financial analysts can study and apply to aid a company in money management. They work together in a company and aim to complement each other.
Both careers offer rewarding salary packages and bonuses, and there's plenty of scope for expansion and growth no matter which field you choose. The degree that you ultimately pick will depend on your interests, strengths, and weaknesses.
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Notes:
1 Judy Fitzgerald is a licensed CPA in North Carolina. After spending some time in public accounting and then consulting, she noticed how financially illiterate people were. Hence, she started writing about crunching numbers and the performance of financial markets in order to educate people that need help.
2 U.S. Bureau of Labor Statistics: Occupational Outlook Handbook. Business and Financial. Financial Analysts.
3 Arrowsmith, R. 2018. Accounting Software. Accounting Today. (July).
Related summaries:
Krippel, G. L., J. Moody and S. Mitchell. 2016. CPA credential delivers high value. Journal of Accountancy (May): 32-36. (Summary).
Martin, J. R. Not dated. Accounting and Finance Certifications. Management And Accounting Web. Accounting & Finance Certifications
Martin, J.R., Not dated. Controllership and Treasurership Functions. (Summary).