For some people it's easy to assume disciplines like accounting and finance are basically the same thing. While closely related, however, there are several key differences between the two for prospective students to take into account. The decision to specialize in either accounting or finance can impact the type of coursework a student may take as well as their potential professional path after graduation.
Additionally, the decision to specialize in either accounting or finance has the potential to influence what kind of exam students will have to take to be certified in their respective specialization.
We talked to experts from accounting and finance departments from two universities to help provide clarity on these two fields. Dr, Oliver Feltus is chair of the Department of Accounting, Finance and Information Systems at Eastern Kentucky University, and Dr. Linda Burilovich teaches accounting at Eastern Michigan University. We tapped their expertise on a variety of related subjects including the difference between accounting and finance, important skills and preparing for the CPA exam.
Many students initially aren't sure about the differences between accounting and finance. In your opinion, what is the primary difference between the two?
Dr. Oliver Feltus
Eastern Kentucky University
"Finance and accounting are two halves of the financial book. Perhaps the simplest way to differentiate the two is that accounting is more focused on the past and finance is more focused on the future.
Accounting is a system for the delivery of financial information. It involves the recording of transactions and preparation of the financial statements, along with financial statement analysis regarding financial health of firms. Accountants are tasked with ensuring that events have been accurately recorded and that the financial statements accurately reflect the financial condition of the business.
Finance takes the organized information provided by accounting and uses it to help run a company on a daily basis and make long term financing and budgeting decisions. Finance is dedicated to ensuring that there will be sufficient cash flowing into a business in the future to achieve the goals of the business. Because Finance deals with the future, it must deal with risk and uncertainty. Anticipating, evaluating, and managing these risks and uncertainties is a large part of the responsibility of financial managers."
How might these differences affect student's education and career paths after graduation?
"Students in accounting are preparing to enter careers which will lead them into public accounting, private accounting, or governmental organizations. From the smallest start-ups to large corporations, everyone who keeps financial records or pays taxes requires the skills of an accountant.
In Public Accounting (CPA firm), students can specialize in: Auditing, Taxation, Management Consulting Services, Forensic Accounting, Litigation Support, Financial Planning, and Business Valuation.
Private Accounting (working in business, industry, or nonprofit organizations) gives students careers opportunities in: General Accounting, Cost Accounting, Taxation, Internal Auditing, Computer Systems Analyst, Security Analyst, and more.
Local, state, and Federal governments need accountants in many different agencies: Federal Bureau of Investigation, Internal Revenue Service, General Accounting Office, and many others.
Students in Finance are preparing for careers in areas such as Financial Planning, Corporate or Public Finance.
In Financial Planning, financial advisors help individuals make decisions about things like: paying for education, financing a home, buying insurance, and investing or saving for retirement. Students may find careers in banking, real estate, insurance, or as a Certified Financial Planner (CFP).
Corporate Finance is all about managing a company's sources and uses of cash to maximize the value of the company and protect against financial risk. Students can find careers with any organization that has to borrow or invest funds: large and small businesses, nonprofit organizations, hospital, etc.
Public Finance is concerned with the financial dealings of states, as well as related public entities such as school districts or government agencies."
What do you think are the skills that are the most important for accounting or finance majors to be successful in their respective careers or educational careers?
Dr. Linda Burilovich
Eastern Michigan University
"It is most important for business professionals to have good communications skills. This is especially true for accounting professionals who must not only communicate effectively with clients but readily interpret the rules that apply in various business settings. For example, financial statements must comply with Generally Accepted Accounting Principles, tax returns must comply with the Internal Revenue Code and its underlying regulations, and other regulatory reports are often governed by legal rules that must be interpreted in the process of their preparation.
Other necessary skills include a proficiency in technology and good understanding of quantitative analysis. Students who also develop their interpersonal skills and professional profile ultimately tend to have the most career success. Two areas that have acquired significant prominence over the last decade include global awareness and a set of ethical values. In both accounting and finance there must be a continuing personal development in these areas if an individual wishes to pursue a successful career in today's business environment."
What advice would you give to students preparing for the CPA exam or CFA exam?
"Best advice -- Study, study, study! It is generally best to take either of these exams as soon as possible after completing the educational requirements to sit for the exam. It should be understood that most students who pass these exams also complete a review course prior to sitting for the test. These courses are focused on the specific areas to be tested. Review courses usually include practice exams which are important, not only because they test the student's knowledge of exam material, but because they provide opportunity to become accustomed to working at a pace that will allow completion of the exam within the allotted time.
The CPA Exam includes four major areas of testing: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. These four sections represent a total of 14 hours of testing.
The CFA Exam includes sections that test ethics, securities analysis, corporate finance, economics, quantitative methods, financial reporting and analysis, equity investments, fixed income, derivatives, alternative investments, portfolio management and wealth planning. It is offered annually at test centers in June and progressive levels must be passed sequentially."
Interview with Dr. Oliver Feltus, December 2014, conducted by Eda Liu
Interview with Dr. Linda Burilovich, December 2014, conducted by Eda Liu