Know the Difference Between Finance & Accounting So that you Can Choose the Right One to Study in Malaysia
If you’re considering a career in accounting or finance, now is the right time to study the course as they are high in job demand and salary. Job seekers for these fields will quickly find out that most employers in Malaysia require at least a bachelor’s degree for many entry-level positions. If you find that you are interested in areas like budgeting, historical financial analysis, or financial projections, a business degree is likely the right path for you. But which should you pursue: a bachelor’s degree in accounting or finance?
Students who enjoy working with financial figures, choosing a career in accounting or finance could be a great decision for you after secondary school. But, you may be unsure about which degree to earn, as the finance and accounting fields are similar and overlap. Therefore, it’s essential to find out the differences and understand them so that you can decide which one best fits you.
The accounting and finance disciplines are closely related, which can make it tough to decide which degree will help you reach your goals and land the job you want. In this article, we break down the differences between the two disciplines so you can align your interests and skills with a degree that will put you on the path to success.
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Finance vs. Accounting: What are the Differences so that You Can Choose the Right One to Study
Accounting and finance professions, at their core, are similar. Both accounting and finance deal with money, involve the recording of financial transactions, require critical thinking skills, and incorporate information technology to help small businesses and major corporations track and organize financial information.
The disciplines are also interrelated and rely on one another. For example, a finance professional often needs the data compiled by an accountant to provide accurate projections about a company’s future viability.
While there are many similarities between accounting and finance, they are two distinct disciplines. The main difference between them is that those who work in finance typically focus on planning and directing the financial transactions for an organization, while those who work in accounting focus on recording and reporting on those transactions. Put another way, accounting is the organization and management of financial information, whereas finance is the management of money.
Accountants create financial reports and record financial transactions. For example, public accountants prepare tax returns for individuals and businesses, managerial accountants analyze an organization’s financial health, and forensic accountants investigate financial documents to uncover illegal activities. In general, accountant jobs emphasize recording and reporting the flow of money through financial statements.
Professionals in finance focus less on reporting and more on managing an organization’s money. They research and direct an organization’s financial transactions, acting as money managers. Financial managers and financial advisors, for instance, oversee an individual’s or organization’s assets and liabilities, helping clients reach their financial goals.
Both accountants and finance professionals work for financial services organizations, businesses, and government agencies. However, they provide different services for their clients. For instance, while you can visit an accountant for help with your taxes, you might visit a financial advisor to help save for retirement. Additionally, while organizations rely on accountants to track cash flow and ensure compliance with tax regulations, they may turn to finance professionals to manage monetary resources.
Finance and accounting are terms often used interchangeably. While both are related to the administration and management of an organization’s assets, each has a different scope and focus. When it comes to evaluating the financial health of your company or department and making strategic financial decisions, it’s important to have at least a working knowledge of both disciplines.
To understand the difference between finance and accounting, you first need to know what each term means.
What is Finance?
Finance refers to the ways in which a person or organization generates and uses capital—in other words, how a given party manages their money. It is a broad term associated with managing money and acquiring needed funds, including budgeting, forecasting, lending, saving, investing and borrowing.
Finance focuses on the future performance of the organization, including:
- Long-term financial projections
- Allocation and management of assets and liabilities
- Fiscal performance forecasts
- Future growth planning strategy
Financial concepts and principles, such as the time value of money and intrinsic value, are based on microeconomic and macroeconomic theory.
The field of finance can be broken down to hone in on the specific types of parties involved, including personal finance, corporate finance, and public finance. While these categories typically include a similar set of activities, each type of finance has nuances that reflect the different regulations, considerations, and concerns of each population.
According to Investopedia, the finance industry consists of three sub-categories:
- Personal finance involves financial planning for individuals.
- This can include long-term financial management plans, such as retirement, purchasing of financial products, such as mortgages, and banking.
- Corporate finance involves the financial activities for running an organization, which can include investment strategy and budgeting.
- Public (government) finance includes the tax, spending, budgeting and other policies that relate to how the government allocates resources.
Careers in Finance
Finance is a broad field involving the management of money that can encompass anything from corporate finance to personal financial planning. Financial professionals are often involved in raising capital (through debt and equity) to fund the operations of the business while seeking to optimize risk-adjusted returns. These professionals will also often have a direct hand in shaping a corporation’s strategy, and can significantly impact major endeavors such as mergers and acquisitions.
Careers in finance may include jobs such as:
- Investment banker
- Financial broker
- Financial manager or planner
- Financial advisor
- Financial analyst
Those who work in finance often deal with others outside the organization, such as government agencies, banks, investment firms and services, stockholders and suppliers.
Finance professionals often evaluate, control or govern the monetary resources, investments and assets of an organization with a focus on profitability. They may also be involved in the early stages of expansions and acquisitions and often play a key role in helping an organization respond to trends in the marketplace to either capitalize on upturns or help the organization withstand downturns.
- Fund Manager: Fund managers oversee a fund’s portfolio, its investment strategies, and its trading activities. They often manage pensions or mutual funds and receive a percentage of the fund’s profits as part of their compensation.
- Risk Analyst: Also known as risk managers, these workers attempt to limit the damage caused by financial loss or market changes. They apply risk analysis techniques to measure an organization’s financial risk and use strategies to manage exposure to financial harm.
- Portfolio Manager: Also called investment managers, these professionals create and apply investment strategies for clients, including individual investors and organizations. They analyze market performance to maximize returns for their clients.
Finance Job Functions & Responsibilities
- Funding the business
- Raising capital (debt and equity)
- Optimizing the firm’s Weighted Average Cost of Capital
- Seeking the best risk-adjusted returns
- Corporate strategy
- Budgeting and forecasting
- Mergers and acquisitions
Finance Required Skills
Interpersonal skills, communication ability and problem-solving skills are listed as essential skills for a career in finance, along with financial reporting, analytical expertise and business acumen.
What is Accounting?
Accounting, refers to the process of reporting and communicating financial information about an individual, business, or organization. Accounting is the identifying, recording and communicating of the economic results.
Rather than making strategic financial decisions, accounting is concerned with capturing an accurate snapshot of a party’s financial position at a specific point in time—a practice which results in the information that finance activities are generally based upon.
This information is based on:
- Historical financial analysis
- Annual, quarterly, and monthly budgeting
- Business planning
- Cash flow analysis
- Day-to-day financial operations
A vital function for any business, accounting measures business activities, processes the information into reports and communicates the results to decision-makers.
The typical activities involved in accounting include recording transactions, collecting financial information, compiling reports, and analyzing and summarizing performance. The results often include thorough financial statements—including income statements, balance sheets, and statements of cash flow—that are used to understand an organization’s position at a given time.
Accounting is often broken down into two segments: Managerial accounting and financial accounting.
The main difference between managerial and financial accounting lies in the organization and presentation of information. Managerial accounting focuses on internal accounting processes and results in reports that are used by management, while financial accounting focuses on aggregating information into financial statements, which are used both internally and externally.
There are different areas of specialization in accounting, according to Investopedia:
- Financial accounting includes the generation of financial statements that typically involve a balance sheet, income statement and cash flow statement. This information is used by external decision-makers, such as investors, creditors and taxing authorities.
- Managerial accounting often involves the same data as financial accounting, but it used by internal stakeholders to make decisions on business operations. This can also include forecasting, budgeting and other financial analysis tools.
- Cost accounting involves determining the cost associated with producing a product and helps businesses decide if they should produce the product and what the product should cost.
Careers in Accounting
Many people consider accounting to be a subset of finance, while others refer to it as the “language of business.” In the business world, those who work in accounting use a standard set of rules and principles, known as the Generally Accepted Accounting Principles (GAAP), to track and report on the financial transactions of a business and often manage the general ledger, cash flow and tax obligations.
They typically work with journal entries, bank reconciliations, invoicing and similar processes that relate to the daily operation of a business. They may also create quarterly and annual financial reports, analyze profitability, manage debt, audit internal transactions and report earnings.
- Certified Public Accountant: CPAs create financial documents for public disclosure, including tax returns and balance sheet statements. They may work for individuals, corporations, and government agencies. CPAs must complete a licensure process to earn this title — licensing requirements differ by state.
- Forensic Accountant: Forensic accountants investigate financial documents to uncover illicit activities, including tax fraud, embezzlement, and other illegal financial transactions. Many forensic accountants work for law enforcement agencies and testify as expert witnesses during trials.
- Management Accountant: Management accountants analyze an organization’s financial documents to provide information for business managers. They evaluate budgeting goals, audit financial performance records, and plan for business expenses.
Careers in accounting
- Financial reporting accountant
- Cost accounting manager
- Accounts receivable clerk
- Accounts payable clerk
- Technical accounting manager
- Tax accountant
Accounting Job Functions & Responsibilities
- Tracking of revenues and expenses
- Internal reporting
- Financial reporting
- Risk management
Required Skills for Accounting
Similar to pursuing a career in finance, aspiring accounting professionals need to have a combination of accounting expertise, general business knowledge and soft skills to be successful.
Hard skills in demand for accountants include expertise in technology and software systems, including Excel, ERP experience, SQL, Microsoft Visual Basic and business intelligence software. Soft skills include communication, leadership and customer service.
Who Should Study Accounting?
Accountants pay close attention to detail and possess strong analytical abilities. If you answer yes to the following questions, there’s a good chance you might thrive in many accounting careers.
- Did you get at least a Credit in Maths for SPM or IGCSE O-Levels or UEC?
- Are you able to carefully follow rules?
- Are you accurate and reliable?
- Do you have a strong attention to detail?
- Are you good with numbers?
- Do you thrive when you have a routine?
- Do you have strong analytical skills?
What are the Differences Between Finance & Accounting?
There are some major differences in the ways finance vs. accounting professionals work with financial statements – accountants are primarily responsible for creating them, while finance professionals are primarily responsible for analyzing them.
If you enjoy collecting and organizing large amounts of data, such as all of a company’s invoices, receipts, and financial records, then being an accountant could be a good fit for you.
If you prefer analyzing and interpreting information to show how well a company is performing or coming up with ideas about how it could do better, then finance could be right for you.
Accountants, by nature, are backward-looking because they take historical financial information to prepare their reports. By the time their reports come out, the figures could be several months old.
Finance professionals, by contrast, are forward-looking because they have the nearly impossible task of trying to predict the future.
If you like studying the past, that could be a good sign you’d enjoy accounting work, while if you enjoy trying to think about the future will hold, you may prefer finance work.
Finance vs. Accounting Coursework
Although there is some overlap in coursework for accounting and finance degrees, the curriculum for a finance degree tends to be more mathematics-intensive and focused on financial markets, portfolio and investment management theory, financial management, investments and security analysis and valuation. Courses for finance degrees are often more evaluative and analytical than accounting courses.
Accounting degrees include more coursework on quantitative analysis, internal auditing, income taxation and accounting practices and methods. Accounting tends to be more process-oriented and many degree programs offer fewer electives than finance degrees since there are more required classes for accounting majors. A degree in accounting and a degree in finance prepare students for different career opportunities, and prospective students should explore both fields carefully before deciding upon either course of study.
differences in Employers and Clients
Both accounting and finance professionals have clients that are individuals, corporations (businesses), governments, and non-profits. When it comes to their employers, however, there are significant differences. The most common types of employers for each group are listed below.
- Banks (retail, commercial, and investment)
- Insurance companies
- Research companies
- Operating companies (regular businesses)
- Public accounting firms (that audit large companies)
- Personal tax filing firm
- Operating companies (businesses)
Finance vs. Accounting Summary
Below is a summary of the main differences you should be aware of:
|Clients||Individuals, businesses, governments||Individuals, businesses, governments|
|Main Employers||Public accounting firms, corporations, companies||Banks, Financial Institutions, Investment Firms, corporations|
|Financial Statements||Responsible for preparing them||Responsible for analyzing them|
|View Point||Backward looking||Forward looking|
|Focus||Accuracy, reliability||Insights, analysis|
|Business Purpose||Communicating the financial position||Figuring out how to add value|
|Thought Process||Rules based||Analysis based|
|Attention to Detail||High||High|
|Designations||In Malaysia, the word ‘Accountant’ is protected as provided for under the provisions of the Accountants Act 1967 which states that no one can hold himself out or practise as an Accountant unless he is registered as a member of the Malaysian Institute of Accountants.||Certified Financial Planner (CFP) and Registered Financial Planner (RFP)|
Differences in Personality (Finance vs Accounting)
One of the biggest differences in accounting vs. finance careers is the types of personalities that are drawn to each of them.
- High attention to detail
- Thinks about scenarios
- Concerned with adding value
- Business development skills
- Rules-based thinking
- Risk management
- Concerned with accuracy
Is it Possible to Combine an Accounting and Finance Degree in Malaysia?
If you feel like your skills in interests lie somewhere in-between Accounting and Finance (e.g., you have the technical skills to perform calculations quickly and accurately, but you also like analyzing the business effects and ROI of financial transactions,) you’re probably wondering which degree path is best, Accounting or Finance?
What if there was a way for you to study both subjects in the time it takes to study one?
Students can actually go for the degree in Accounting & Finance at top private universities in Malaysia. In addition, the Accounting & Finance degree programmes have the same 9 paper exemptions from ACCA as would an Accounting degree.