Finance and accounting are terms often used interchangeably. While both are related to the administration and management of an organization’s assets, each contains major differences in scope and focus. When it comes to evaluating and strategizing the financial health of your company or department, it’s important to have a working knowledge of both disciplines. To understand the difference between finance and accounting, you need to know what each term means. 

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. This often encompasses activities such as investing, borrowing, lending, budgeting, and forecasting. 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. 

Accounting, on the other hand, refers to the process of reporting and communicating financial information about an individual, business, or organization. Rather than making strategic financial decisions, accounting captures an accurate snapshot of a party’s financial position at a specific point in time—a practice that results in the information that finance activities are generally based upon. 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 cash flow statements—that are used to understand an organization’s position at a given time.