Accounting And Finance
...or "finance," you would probably get several different answers. In simple form, accounting involves the accumulation of historical information. Webster's dictionary defines it as "the occupation of maintaining and auditing records and preparing financial reports for a business. Finance, on the other hand, involves analyzing the historical information and using it to plan and make future decisions. This includes such areas as budgeting, forecasting, strategic planning and due diligence.
Distinguishing Between Accounting and Finance
Accounting is the language of business. It is used to communicate financial information about an organization. Accountants are trained to critically evaluate alternatives. They examine which approach will be best for a business when more than one approach can be logically supported. Accounting is also the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. Users of accounting information include the management of the entity or organization, the owners of the organization, potential investors and creditors of the organization, employees, and various federal, state, and local governmental agencies that are concerned with regulatory tax matters.
The central goal of finance is the relationship of risk and return. Finance is generally concerned with how individual and business organizations raise money and capital, and how those resources are allocated among competing investments and spending opportunities. At the individual level, making financial decisions involves planning for and borrowing to meet everyday living expenses and to accomplish long-term goals such as buying a home, college education, retirement, and financial security. At the organizational level, financial decision involves the...
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