Financial Accounting vs Financial Management: An Introduction
The fundamental difference between Financial Accounting and Financial Management is that financial accounting is the process of recording, maintaining, and reporting of financial affairs of the company that depicts the clear financial position of the company, whereas, financial management refers to management of finances and investment opportunities of different individuals, organizations, and other entities.
Financial accounting and financial management are two separate functions of finance where financial accounting requires to report the past financial transactions, on the other hand, financial management requires to plan about future transactions.
Now, let’s begin to learn the differences between these two terms.
What is Financial Accounting?
Financial accounting is the process of measuring, processing, and recording financial transactions of an organization. The process involves summarizing, analyzing, and recording such information and reporting it to the management, creditors, shareholders, investors, and oversight officials.
The major objective of financial accounting is to report financial information or transactions using GAAP (Generally Accepted Accounting Principles).
What is Financial Management?
Financial management assists in managing the finances and economic resources of the organization. It is concerned about managing the economic activities of the organization efficiently in order to achieve short-term and long-term financial objectives. It also aids management in better financial and investment decision making.
The main objective of financial management is to generate wealth for the business and investors, earn cash and up to par returns at adequate risk by using organizational resources efficiently and effectively.
Financial Accounting vs Financial Management: Key Differences
Here is a cumulative list of differences between financial accounting and financial management:-
● Financial accounting is primarily focused on reporting whereas financial management involves assets and resources of the company and their effective utilization.
● The main objective of financial accounting is to provide financial information using standard procedures and rules whereas the main objective of financial management is to create wealth, cash, and returns by effective use of the company’s assets.
● Financial accounting reports the financial information to the management, creditors, investors, analysts, and regulators whereas financial management is used by the management of the company to forecast its future.
● Financial accounting involves reporting past financial transactions, on the other hand, financial management involves planning about future financial transactions.
Financial Accounting vs Financial Management – Final Thoughts
Both these specialties are imperative for an organization in their own capacity. While both are part of finance, financial accounting and financial management have their own differences that set them apart from each other. While financial accounting revolves around reporting financial transactions, financial management is all about managing the company’s resources to manage future growth.
If you want to build a successful career in any of these domains, it is recommended to take up financial management online training. Scout the internet for financial management online programs, find a credible one that suits your budget and begin your career in the field of finance. Financial management online training allows you to get hands-on knowledge about the key aspects of the financial world and helps you understand how to run this world effectively.