Skip to main content

The difference between accounting and finance

Many of us get confused when we hear about accounting and finance that they are 80ish percent the same. Lets make a simple conclusion. Yes you can categorize them as a family to safeguard your business funds but they are distinguished into two main areas.

Finance - In general any finance related activity or *Capital Management* which relates to the future is called finance. Your concern about your business is empowering, expanding and growing your business and thats where financing plays its role. Some examples would be taking over a business, getting loan to boost your business equity size. The best word to keep this mind is thinking about the FUTURE. 

Accounting - its not bad to look at accounting briefly as an opposit word for finance. Accounting is all about PAST and more about reporting whats been happening financially in the past in a business. Your buisness equipments like raw materials and inventories have been paid in the past and they are recorded by your accountant or yourself. This is about accounting and recording the past.

Not to forget that these precious jobs are somehow interrelated and they can empower your business when they play their roles together. In short, you need to know what was your business needs in the last year (accounting) to decide on your spendings and business expansion fir the next year (finance). 
Labels:

Popular posts from this blog

What is Cumulative Return?

Cumulative return represents the total change in the value of an investment over a specific period, expressed as a percentage. It's essentially the overall profit or loss you've made on an investment from the beginning to the end of the period. Here's a breakdown: What it measures:  The total return of an investment, accounting for both capital appreciation (increase in value) and any income received (like dividends or interest). How it's calculated:  The basic formula is: Cumulative Return = [(Ending Value - Beginning Value) / Beginning Value] * 100 For example: You invest $1,000. After 5 years, your investment is worth $1,500. Cumulative Return = [($1,500 - $1,000) / $1,000] * 100 = 50% Key Considerations: Time Period:  Always specify the time period over which the return is calculated (e.g., "5-year cumulative return"). Simplicity:  Cumulative return gives a simple, overall view of performance, but it doesn't tell you  how  the returns were generated or...
Read more

What's The Difference Between Adjusted Close Price and Close Price?

The  Close Price  and  Adjusted Close Price  represent the price of a stock at the end of a trading day, but they differ in how they account for corporate actions that can affect a stock's price. Here's a breakdown: Close Price:  This is simply the final price at which a stock traded during regular trading hours on a given day. It's the raw, unadjusted price. Adjusted Close Price:  This price takes into account corporate actions like: Dividends:  Cash payments made to shareholders. Stock Splits:  When a company increases the number of its shares outstanding by dividing each existing share into multiple shares. Stock Dividends:  Distributing additional shares to existing shareholders instead of cash. Rights Issues/Offerings:  Giving existing shareholders the right to purchase additional shares at a discount. Spin-offs:  Creating a new independent company by distributing shares of that business to existing shareholders. How the Adjust...
Read more

How to record Goods & Service Tax

GST has been introduced in many countries for many years. It might have other names in other countries or similar concept for its implication. Recording it might be a bit of confusion for some. The best way of recording it is to split it into 2 parts - 1. GST Collections 2. GST Outlays The main characteristics GST Collections are -  + Recorded as liability + Collected from buyers, clients, customers GST Outlays -  + Recorded as asset + Claimbale from tax office It should be carefully collected and paid to prepare accurate financial statements. Have this as a solid base in mind for your future calculations. 
Read more