Many people are asking about the differences between accountancy and accounting. In this accountancy vs. accounting article, we give a detailed analysis of the two terms, their relationship and differences.
If you’re considering a career in accounting, bookkeeping, management, or finance, or if you’ve already started your education in one of these fields, you’ve probably come across two related but distinct terms: accounting and accountancy.
Accountancy Vs. Accounting – Definition of Terms
In simple terms, accountancy is the study of principles that guide the creation and use of financial records. Whereas accounting is the process of maintaining financial statements and balance sheets.
Accountancy vs. accounting –Many people use the terms interchangeably, but there are some key distinctions. Accountancy, in broad terms, refers to the principles that guide the creation and use of financial records, whereas accounting refers to the process of keeping those records. Accountancy can include forecasting, budget planning, and cost analysis, all of which are important concepts for executives and business managers.
Let us, therefore, closely examine the terms accounting and accountancy and their relevance to business professionals.
What is Accountancy?
Accountancy is concerned with the principles of gathering and analyzing financial data. Accountancy provides a framework and practices for accountants to use in identifying, collecting, recording, and reporting financial information. Accountancy encompasses a wide range of related professions, including bookkeeping.
Accountancy also includes the analysis of financial activity using accounting data. Accountancy is necessary if you work as a business manager. As a business manager, you will use specific accounting principles to make informed decisions based on financial reports and data collected by bookkeepers and overseen by accountants.
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Accountancy in Practice
Accountants, auditors and bookkeepers working for publicly traded companies must adhere to a standardized set of rules — referred to as generally accepted accounting principles (GAAP) — set by the Financial Accounting Standards Board (FASB).
These principles are as follows:
1. Principle of Regularity
The organization’s accounting upholds GAAP standards.
2. Principle of Consistency
The organization’s accounting processes and standards are uniform.
3. Principle of Sincerity
The organization’s accounting provides accurate financial records.
4. Principle of Permanence of Methods
The organization’s accounting practices are consistent.
5. Principle of Noncompensation
The organization’s total performance is fully reported without an assumption of debt compensation.
6. Principle of Prudence
The accounting data recorded is realistic and timely.
7. Principle of Continuity
The short-term and long-term financial data classifications are based on the notion that the organization’s business will continue.
8. Principle of Periodicity
The periods of accounting are consistent and routine.
9. Principle of Materiality
The value of all assets is set at cost, and all financial reports are based on the truth.
10. Principle of Utmost Good Faith
Everyone involved in the accounting process is acting with honesty.
The FASB’s standards are also adopted by many non-publicly-traded companies to ensure consistency and transparency around accounting practices.
What is Accounting?
Accounting is the process of keeping financial records and producing reports for a company or organization. Accountants may record transactions or use software to record income and spending while also populating financial statements, depending on their job duties.
Administrative tasks such as creating invoices and recording transactions on a spreadsheet are typically handled by a bookkeeper. An accountant’s primary responsibility is to use this data to generate reports and perform other functions that help a company’s decision-making.
Who is an Accountant?
An accountant is a professional who performs accounting functions, such as preparing and maintaining accurate financial records for a business.
Objectives of Accounting
Here are a few objectives (goals) for an accounting professional:
1. Creating Financial Statements
Accountants prepare monthly, quarterly, and annual financial statements. The balance sheet, as well as the income and cash-flow statements, are the three most common documents.
These statements are required for executives, shareholders, and other decision-makers to understand a company’s financial health. Publicly traded companies must also make their financial statements available to the public.
2. Creating Reports for Management
An accountant may create specialized reports that show specific data to a company’s executives and managers.
3. Ensuring Tax and Regulatory Compliance
The Securities and Exchange Commission (SEC) requires public companies to submit financial reports, and all businesses must file accurate tax returns. The job of an accountant is to ensure that everything is correct and that all legal requirements are met.
Accountants typically use advanced software and database applications to find and organize financial data, as well as to create reports and visual aids.
4. Measuring Cost
An accountant may be required to investigate and evaluate the total costs of running a business.
An accountant, for example, might add up all the costs of creating a product or providing a service, such as marketing, R&D, and manufacturing. This process can assist decision-makers in determining a reasonable price for the product or service.
Read More: How To Become ACCA-Certified Accountant In Nigeria 2022
Types of Accounting
During an undergraduate degree program, you will learn the fundamentals of accounting.
Accountants, on the other hand, may specialize in one or more types of accounting during their careers.
Here are ten types of accounting you may encounter in your career.
1. Financial Accounting
For most people, financial accounting is the most familiar type of accounting. It entails recording monetary transactions and data as well as producing reports such as income and cash flow statements.
2. Governmental Accounting
Governmental accounting entails performing accounting services for federal, state, and local governments, as well as government agencies, using specific rules and practices.
Accountability, transparency, adherence to laws, and determining the feasibility of social or political decisions are all priorities in this specialty.
3. Public Accounting
Public accounting is a specialty in which an accountant or accounting firm acts as a third party to provide services to individuals or businesses. A public accountant can help with payroll, tax preparation, auditing, and income statement preparation, among other things.
4. Cost Accounting
Cost accounting is the process of calculating the total cost of a company’s operations. An accountant, for example, could add up the total fixed and variable costs for the production of a single product to assist company decision-makers and marketers in determining a reasonable price.
5. Forensic Accounting
Forensic accounting is a specialty that entails investigating a company’s, individual’s, or organization’s finances to look for irregularities. In this profession, you report your findings to legal teams or law enforcement agencies, and you may be called to testify in court about your investigations.
6. Management Accounting
Management accounting entails producing reports and conducting audits to assist executives and other decision-makers in making strategic decisions.
7. Tax Accounting
The preparation of tax documents is part of tax accounting. A tax accountant ensures that a company’s or individual’s tax returns comply with all IRS regulations.
A tax accountant also ensures that their employer or clients receive all of the deductions and credits to which they are entitled.
Auditing is an accounting practice that entails reviewing financial records to ensure that they are accurate and in accordance with all applicable regulations.
Large companies or accounting firms may hire specialists who specialize in specific areas, whereas other employers will hire generalists who can work on a variety of accounting tasks.
Related: How to Prepare for a Financial Audit 2022
9. Social Responsibility Accounting
Social Responsibility Accounting is the process of disseminating the social and environmental impact of the organization’s economic activities. It is also known as social accounting or sustainability accounting.
10. Human Resource Accounting
Human resource accounting can be defined as the process of systematically valuing, recording, and presenting the worth of human resources in the company’s account books.
Accounting Cycle is a step-by-step process of entering and processing a firm’s business transaction, beginning with the transaction’s occurrence and ending with the presentation of the financial statement and making closing entries for the period. It consists of the following steps:
- Transaction identification.
- Journalizing or recording the transactions in a journal.
- Entering transactions into the ledger.
- Balance the ledger accounts by calculating the difference between the total amount in the debit column and the total amount in the credit column.
- Create a table containing the balances of all ledger accounts to see if the sum of all debit accounts equals the sum of all credit accounts.
- Include adjustment and passing rectification entries.
- Create a trading and profit and loss account to calculate the period’s profit and loss.
- Create a balance sheet to determine the enterprise’s financial position at the end of the fiscal year.
Accountancy Vs. Accounting – Similarities
Accounting and accountancy share several similarities.
Accountancy establishes specific guidelines for the collection and use of financial data. Accountants learn these concepts and apply them in real-world situations to record financial transactions and generate reports.
Generally Accepted Accounting Principles (GAAP) is an example of how accountancy and accounting intersect. Accountants, bookkeepers, and auditors must apply these principles in their work.
Accounting is intended to keep a complete record of business transactions in a sequential manner, which serves as the foundation for the preparation of the company’s financial statements. Its goal is to provide interested parties with information that will allow them to make sound financial decisions.
Accounting is a business language used to record and present the economic activities of a company. Accountants, on the other hand, choose the profession of accountancy.
Accountancy Vs. Accounting – Differences
The main distinctions between accounting and accountancy (accountancy vs. accounting) are as follows:
Accountancy principles are useful for accountants, but an accounting degree does not guarantee you being in accountancy. In addition to a bachelor’s degree in accounting, you can study business management, finance, and bookkeeping, all of which use accountancy principles.
Furthermore, accounting is concerned with specific procedures for recording transactions and producing reports. Accountancy focuses on broad principles rather than detailed specifics.
In addition, accounting focuses on data collection and reporting, whereas accountancy encompasses a wide range of activities such as forecasting, auditing, bookkeeping, and financial decision-making.
Also, accounting is concerned with the calculations required to generate required statements and documents, whereas accountancy is concerned with the broader regulations, ethics, and principles underlying these technical processes.
Regardless of these differences, accounting students will become intimately acquainted with the principles of accountancy during their undergraduate studies and careers.
Learn How to Become a Chartered Accountant Without a Degree in Accounting 2022 here.
How to Get a Job in Accounting (Accountancy Vs. Accounting)
Accounting careers necessitate specialized training. Enrolling in a bachelor’s degree program is the first step on this professional path.
Accounting degree programs teach you the generally accepted accounting principles (GAAP) as well as other record-keeping and reporting procedures.
Many employers prefer candidates with a bachelor’s degree in accounting.
For those looking for an entry-level job, there are also associate degrees in accounting or bookkeeping.
Finally, a master’s degree in accounting or an MBA can help you advance in your career.
Accountants can also obtain a professional designation. This designation is obtained by passing an exam to become a certified public accountant (CPA). Each state has its own requirements for CPA licensure. A bachelor’s degree in accounting is usually required as well.
Though some employers do not require a CPA, licensure is required for certain positions. To submit reports to the SEC, for example, you must be a certified public accountant.
Careers in Accounting (Accountancy Vs. Accounting)
The distinctions between accounting and accountancy are nuanced. Whatever term is used, the job market for professionals in this field is bright.
According to data from the U.S. Bureau of Labor Statistics, employment of accountants and auditors is expected to grow 7% from 2020 to 2030, adding nearly 100,000 new jobs during that time period (BLS). Individuals who enter the profession can work as financial or managerial accountants, internal or external auditors, or government accountants.
According to the Bureau of Labour Statistics, the median annual wage for accountants and auditors in May 2021 was $77,250. Accountants in finance and insurance earned the highest salaries, with a median salary of $79,310.
There are numerous job opportunities available for aspiring students and professionals looking to advance their careers, but getting a focused education is always the first step to joining any specialized workforce.
As we have seen in this accountancy vs. accounting guide, although the terms accountancy and accounting are frequently used interchangeably, each term has its own distinct definition and practical applications.
Both involve recording financial transactions, maintaining accurate records, analyzing financial data and interpreting the results.
The main distinction between accountancy and accounting is one of scope. Accountancy is the systematic field of accounting knowledge that includes the rules and principles that govern actual accounting procedures. Accounting is a subset of accountancy that involves the practical application of accounting principles to carry out the profession’s core responsibilities.
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