To explain Finance vs Accounting in easy way, first we need to start with Accounting.
1. What is accounting?
Accounting is simply language of business. To illustrate more, if you own a company and want take loan from financial institutions (like banks) they will be require financial statement reports to understand how your company is operating and this report is prepared by accounting professionals.
Another meaning Accounting is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations.
2. What is the role of Accounting in Business?
Accounting is an information is an information system that produce reports to shareholders about the economic activities and performance of the business.
3. Who are the users of Accounting Information?
a. Internal users
Internal users of accounting information include all the management personal of a business enterprise who use accounting information either for planning and controlling current operations or for formulating long range plans and making major business decisions.
b. External users
External users of accounting information include shareholders, bondholders, Investors, Creditors, Bankers, government agencies and financial analysists.
4. What is Finance?
Finance is the study and discipline of money currency and capital assets.
Finance in simply way is the process of raising funds or capital for any kind of expenditures. Fi
Some of the most important Accounting Types are listed below.
Financial Accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements.
this is simple definition of Finance vs Accounting and let us discuss the types of Financial Accounting for more explanations.
There are two types of Financial Accounting as follows
Accrual is a method where all revenues recorded before cash received and all expenses recorded before payment is made.
In another words, Revenue is accounted when it is earned and expense is accounted when it is incurred.
Cash Basis Accounting records revenue when cash is received and expense records when cash is paid.
This method cannot recognize accounts receivable and and accounts payable.
In other words, Cash base Accounting is based on your organization’s cash activity. It trucks when cash received or cash paid.
Management Accounting also called managerial accounting is the field of accounting that prepares reports, statement, and documents which helps the decision makers to make better decision for better business performances.
Some functions of managerial accounting are
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Budget is a process of Estimating/forecasting the Company’s Future Business Activities on a period of time.
In another meaning Budgetary Accounting is a method to estimate the company’s future Income (the fund that comes from Sales of product and services) and Expenses (the money goes out to company’s expenses and bills)
Fund Accounting is an accounting method which is used by Non-Profit organizations to truck where the donor’s cash was assigned and utilized.
In another meaning, Fund Accounting is way of recording the transactions of the funds received from the Donors.
Governmental Accounting is a method of recording and reporting to all Financial transactions incurred by the government such as its income and expenditures.
What is the Tax Accounting?
Tax Accounting is an accounting method which is used to prepare and record the tax return of an organization and to comply with the rules and regulations set by the governments.
What is Auditing?
Auditing is a systematic examination of the books and records of a company in order to verify or check and to report upon result thereof.
In another meaning, Auditing is a method of examine and evaluate the company’s financial statements.
What are the Audit types?
The audit types are Internal and external Audit.
What is an Internal Audit?
Internal Audit is a method of Evaluating the company’s internal financial records and controls.
Public Accounting is a professional person or business that provides accounting services to other Business/organizations.
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