Accounting and economics are two of the top choices for people who consider a career in any kind of financial discipline.
The two paths have a lot of similarities but are inherently very different.
It is important that you recognize the difference between these two disciplines, not only to decide on a career in between the two disciplines but as a matter of simple general knowledge.
Accounting vs Economics
The main difference between accounting and economics is that accounting as a discipline is that focuses on monitoring the financial records of a company an organisation or an individual.
On the other hand, economics pays special attention to economic trends, how that affects the distribution of goods & the spending of money (frequently referred to as supply & demand) and formulate economic theories.
Accountants make sure that all balance sheets, tax documents and other such finanical documents and procedures adhere to any regulatory guidelines.
Economics tend to focus more on economic theories, financial trends and other global issues that impact production of goods and services, distribution & acquisition of goods and the money associated with them.
Comparison Table Between Accounting and Economics
|Parameters of Comparison||Accounting||Economics|
|Major Responsibility||Accounting deals with recording, summarising and reporting of financial business transactions.||Economics deals with the rules of supply & demand, analysing financial & economic trends and studying economic theories.|
|Fields of Study||Fields of study in accounting includes, but is not limited to hedge accounting, transaction recording rules, forensic accounting and financial accounting.||Macroeconomics and microeconomics are the two main fields of study in economics.|
|Utilization of Data||Accountants utilize data and information that is extracted from accounting principles and conventions. Such principles and conventions are to be followed by all accountants.||Economics makes use of research and assumptions to form conclusions, economic theories and to analyse trends.|
|Applications||Accounting in an organisation is used for budgeting, forecasting, investing & financing and other such decision-making.||Economics in an organization is used to identify and evaluate drivers of supply & demand for the products & services they offer.|
|Career Opportunities||Professionals in Accounting can work as accounts in an organisation, a government accountant, project accountant, an auditor, an investment analyst or a CPA.||Economists work as financial examiners, management analysts, economic researchers, budget analysts etc.|
What is Accounting?
Accounting is a discipline that deals with recording, summarising and storing of financial transactions of a business, an organisation or an individual.
Accountants’ books are a historical record of an individual’s or an organisation’s financial transactions for a particular period of time.
Accounting standards, known as the GAAP (Generally Accepted Accounting Principles) are vital for tax compliance and accurate financial reporting.
In the modern world, global accounting conventions must be followed to enable exchange of information in the growingly globalising world we live in.
Accounting is one of the most key functions of any business, or any organisation, for that matter.
In smaller business, it is generally handled by a bookkeeper or an accountant.
Larger firms tend to have entirely dedicated finance departments with dozens, or more members of staff. Some large firms also tend to outsource the process completely.
Accounting is also vital for investors. It is at the heart of modern financial markets.
Thanks to the discipline of accounting, investors are able to rely on timely and accurate financial information. There is also enough transparency needed to manage risks and plan projects.
Regulators also rely on accountants to obtain auditors’ opinions on companies and annual 10k filings.
What is Economics?
Economics is a social science that concerns itself with the production, distribution and consumptions of goods & services.
Essentially, it studies the law of supply & demand.
The principle of economics is that human beings will always have unlimited wants but the world has only so many resources.
Due to this, the principles of efficiency and productivity are taken in utmost consideration.
It studies how organisations choose to allocate their resources. These organisations can be individuals, businesses, non-profit organisations and even governments & nations.
The building blocks of economics is the study of labour & trade. It is the duty of the discipline to figure out where the allocation of labour and resources is most productive.
Economics as a discipline dates back all the way to the 8th century BC where a Greek farmer by the name of Hesiod said that scarcity can be overcome by proper allocation of material, labor and time.
Economics is further broken down into macroeconomics and microeconomics.
Macroeconomics focuses on the behaviour of the economy as a whole. Microeconomics tends to focus more on individuals and individual businesses.
Many types of economic systems have been debated, and put in practice in countries.
Some of these economic systems include primitism, capitalism, socialism, communism, etc.
These economic systems have been highly debated for centuries. In fact, they are still debated heavily to this day. These debates have been led to entire revolutions in countries that have resulted in a total upheaval of the governments of these nations.
Main Differences Between Accounting and Economics
- Accounting is responsible for recording, summarising and reporting of business transactions of an organisation. Economics on the other hand, focuses on analysing economic trends, the rules of demand & supply and formulating economic theories.
- Accounting is divided into various branches such as financial accounting, forensic accounting, hedge accounting etc.
Economics is bifurcated into macroeconomics and microeconomics.
- Accountants make use of standard accounting principles and conventions to record business transactions. Economics makes use of research data to analyse trends and fabricate new economic theories.
- Accounting is used for budgeting, decision-making for investing, forecasting etc.
Economics is used to identify key factors of demand & supply for products and resources offered by a business.
- Professionals of accounting can work as accountants for an organisation, government accountants, auditors, CPAs, investment analysts etc.
Economists work as financial examiners, management analysts, economic researchers etc.
Both – accounting and economics, are essential branches of any organisation for it work efficiently.
These professionals can be pivotal for any business, organisation or even the government.
Understanding the importance of these fields in depth can be hugely transformative for your business/organisation, or even for your own personal life.