What is the difference between accounting and finance? When it comes to educational pursuits, specifically those pertaining to degree programs, this is a very common question. On the surface, accounting and finance seem synonymous, since they both heavily involve data, number-crunching, and quantitative analysis. They also are frequently grouped together in academic programs as “FAME” subjects, an acronym which stands for finance, accounting, management, and economics.
While undoubtedly similar, there are more differences between accounting and financial degree programs than there are parallels. Yet at the same time, it’s not uncommon for those with degrees in accounting or financial management to cross paths, in terms of their day-to-day duties and the professionals with whom they interact. It’s important to establish the differences now so you can begin your career path on the right foot, a process made possible by obtaining the proper skills and expertise.
The University of Alabama at Birmingham Collat School of Business offers a variety of 100% online bachelor’s degree programs, two of which are accounting and finance. This article will help you better understand what each program offers, how accounting and finance compare and contrast with each other, and what the day-to-day activities in finance and accounting jobs actually involve.
What Is the Difference Between Accounting and Finance?
Perhaps the most salient difference between accounting and finance is what the two careers encompass. Whereas finance is broader and can involve a number of different roles and responsibilities, accounting is more narrowly defined and task-based. For example, as Accounting.com points out, accounting jobs usually entail creating reports such as tax returns for clients, who may be individuals or business owners. People in these roles also establish a paper trail for clients, especially business owners, by keeping track of financial transactions over certain time periods for tax preparation, reporting, and record-keeping purposes.
While financial professionals may also create reports, their responsibilities are more management focused. For a company to operate, it must remain profitable by effectively balancing cash flow, savings, and expenditures. This is easier said than done, as anyone who has launched a business can attest. A financial advisor may be tasked with this ongoing money management responsibility.
Here are a few of the day-to-day activities accountants and auditors perform, as outlined by the U.S. Bureau of Labor Statistics. See if you can identify how they differ from financial advisors, whose duties are also detailed below:
Accountants and Auditors:
- Prepare and file income tax returns.
- Assess what taxes are owed by their clients.
- Identify tax breaks and deductions that can help their clients save money.
- Maintain financial records and transaction logs.
- Inspect account books to ensure that they are accurate and in compliance with regulatory requirements.
- Make recommendations to clients, be they individuals or business owners, that can help them stretch their dollar further.
- Meet with clients to find out what their financial goals are and develop plans for how to reach those objectives.
- Provide clients with a better education or understanding of how to invest their money wisely, such as in stocks, mutual funds, bonds, or other investment vehicles.
- Assess how clients are performing financially and offer solutions on where there’s room for improvement.
- Answer questions related to investments or finance-related business decisions.
This isn’t to suggest that finance and accounting careers involve only these activities. For instance, in management accounting, accountants combine quantitative and qualitative analysis to help their clients make smarter financial decisions, according to the BLS. A management accountant may also identify certain risks, a task which is more commonly associated with financial advisors.
For the most part, though, the key distinction between accountants and financial professionals resides in reporting and managing; accountants do more of the former and financial professionals do more of the latter.
What Is the Difference Between an Accounting Degree and a Finance Degree?
This is another area where it can be easy to confuse the two fields. As with the tasks that accountants and financial professionals perform, there is some overlap in the curricula of these two majors. But while accounting is more centered on accounting processes, finance encompasses a greater diversity of topics and disciplines.
This applies to the degree programs at the University of Alabama at Birmingham Collat School of Business. The foundational and core courses in each of the degree programs are mostly the same, including Business Foundations, Essentials of Financial Literacy, Principles of Accounting, and Quantitative Analysis.
But as students complete these initial courses — which are more grounded in the fundamentals of money matters — the curriculum becomes more industry specific.
For example, students pursuing degrees in accounting will take Financial Accounting, Accounting Information Systems, Cost Accounting, and Internal Auditing. These courses build on one another and are meant to supply students with a more thorough understanding of the accounting profession while they obtain the skills needed to excel as an accounting professional.
Students pursuing finance majors, on the other hand, take Financial Research Methods, Equity Portfolio Management, Principles of Real Estate, and Intermediate Financial Management.
Each of the degree programs — accounting and finance — is specially designed to not only expand students’ general knowledge and proficiency but also to maximize their ability to perform for their employers. Those employers may be banks, private companies, nonprofit organizations, government agencies, corporations, or brokerage firms.
What Can You Do with an Accounting Degree?
Now you know more specifics regarding how degrees in accounting and finance majors compare and contrast. But what can you actually do with an accounting degree? While accounting may be more narrow in its scope, there are many different types of accountants. Perhaps the best known are public accountants, who provide general accounting services for lots of different clients and entities.
Some accountants prefer to target their services to a particular audience. For example, government accountants examine the records of government agencies. They may also audit private businesses overseen by the government, be it at the local, state, or federal level.
Another type of accountant is a forensic accountant. Whereas a traditional accountant focuses much of their energies on ensuring their clients comply with tax laws, forensic accountants assess if tax filings have broken the law. This requires a more intimate knowledge of tax laws and coordination with law enforcement officials or entities, including police departments and attorneys.
External auditor, information technology auditor, and internal auditor are some of the other occupations and disciplines that people with degrees in accounting frequently pursue.
What Can You Do with a Bachelor’s Degree in Finance?
From a career options standpoint, finance majors are similar to business majors: They’re active in a host of different professions, which may not necessarily be specific to money management. For example, loan officers — who serve as go-betweens for those seeking loans and the organizations providing them — frequently come from a finance undergraduate background. And instead of managing money, loan officers make recommendations on whether loans should be extended to borrowers, be they individuals or businesses. This is another reason why real estate is a common course inclusion in finance degree programs — including the UAB online Bachelor of Science in Finance.
Cost estimation is a potential career path finance majors may travel down. As their title implies, a cost estimator provides employers with an educated idea of how much projects will cost them to complete. This requires high-level analysis and accuracy with cost considerations. Organizations including real estate entities or developers may employ cost estimators so they can ensure projects go according to budget.
Other potential professions for people with finance majors include credit analyst, personal financial advisor, purchasing manager, and wealth manager. Some of these professions require additional expertise, but a bachelor’s degree in finance often at least partially satisfies the prerequisites of those continuing education programs.
For example, to become a fully licensed and certified financial planner, the Certified Financial Planner Board of Standards mandates candidates to have three years of work experience, adhere to a code of ethics, and pass an exam. This test touches on many matters that financial planners help their clients with, such as retirement planning, insurance planning, and debt management. Having successfully completed a bachelor’s degree program not only satisfies the requirement financial planners need to become certified, but can also better prepare them for the CFP exam.
The above example is also applicable to accountants who seek to specialize or become more advanced in terms of what they can offer to employers and clients. Many accountants decide to become certified public accountants. CPAs can perform certain services that a traditional accountant cannot, such as representing a business that is being audited by the Internal Revenue Service. A CPA can also provide attestation services that a business may need to practice or be recognized by an oversight body or agency.
Because a CPA’s responsibilities entail greater mastery of accounting practices, CPAs are licensed. Licensure typically entails completing at least 150 semester hours of college coursework, as well as successful completion of a comprehensive CPA exam, which is mandated and put together by the American Institute of Certified Public Accountants.
Thus, while becoming a CPA requires education that goes beyond a bachelor’s degree, accounting undergraduate degree programs provide aspiring CPAs with the knowledge and foundational skills that can help them be successful in their efforts. Plus, CPA candidates don’t need master’s degrees in accounting; a bachelor’s degree is usually sufficient, though they may need to complete more credit hours to take the CPA exam.
In What Ways Do Salaries Differ Between Finance Careers and Accounting Careers?
In much the same way the job responsibilities of those in finance positions are generally more wide ranging than accounting, the same goes for what they stand to earn, based on the most recent statistics available from the BLS. The median annual wage for accountants and auditors in 2020 was $73,560. The lowest 10% of accountants made approximately $45,200 while the highest 10% earned nearly $128,700.
The amount of money an accountant makes in a typical year can depend on their expertise, how long they’ve been an accountant, their employer, and where in the country they live.
Because the jobs among finance majors are broader in scope and activity, their earnings can be lower or higher than a general accountant’s salary. Using the average pay range for cost estimators as an example, entry-level cost estimators may start out at approximately $40,400, according to BLS estimates. Cost estimator salary could also be as high as roughly $114,400.
The income ceiling for personal financial advisors is frequently higher. BLS statistics show that in 2020, the median annual wage for personal financial advisors was $89,330. The lowest 10% made $44,100, while the top 10% earned more than $200,000.
There are exceptions to every rule, but for the most part, the more expertise you have, the greater the potential returns tend to be in terms of salary. This goes for just about every profession, and accounting is no exception. Not only do certified public accountants make more than general accountants, but forensic accountants with certification from the Association of Certified Fraud Examiners usually earn more per year compared to their peers without the credential. A study from the ACFE shows that a CFE credential yields an annual income premium of 31%. Over the typical career, this translates to $600,000 more accrued by having a CFE credential vs. the same professional without this certification.
Obtain Your Online Bachelor’s Degree at UAB
No matter which degree program seems like it’s more in keeping with your career objectives and goals — be it finance or accounting — the University of Alabama at Birmingham Collat School of Business can provide you with the tools, concepts, and combination of hard and soft skills you need for a rewarding and accomplished career.
The 100% online curriculum is designed to fit into your schedule so you can go about your other day-to-day activities and complete the course requirements as quickly or as gradually as you’d prefer. Plus, should you decide to take your profession to the next level, your bachelor’s degree will prepare you for continuing education programs, whether you’re looking to take the CPA exam, certified management accountant exam, or the CFP exam for financial advisors.
Dare to do more and expand your career horizons further than you imagined by enrolling in either of these degree programs today.