THE KEY

DIFFERENCES
BETWEEN
FINANCE &
ACCOUNTING

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Accounting Vs. Finance

How are they different?

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 Accounting

Approach: Historical & Current Financial

Information

Focus: Compliance

Direction: Backward

Verb: Report

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 Finance

Approach: Current & Future Cash Flows

Focus: Value creation through capital allocation

Direction: Forward

Verb: Plan

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 Accounting
Evolved through accounting principles:

1. to smooth out the results of economic

activity over time to match revenues and
expenses.
2. to be conservative in the recording and
reporting of the results of economic activity.

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 Finance
Evolved in response to accounting principles:

1. to transition from profits to cash through

EBITDA, operating cash flow, and free cash
flow.
2. to distribute and invest financial resources
with the goal of increasing efficiency and
maximizing profits.

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Key Soft Skills in Accounting
1. Detail Oriented
2. Conservative thinking
3. Organized
4. Analytical
5. Efficient
6. Process driven
7. Business acumen
8. Communication
9. Problem solving
10. Critical thinking

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 Key Soft Skills in Finance
1. Research Oriented
2. Analytical
3. Risk-taking
4. Innovative thinking
5. Results driven
6. Business acumen
7. Collaboration
8. Communication
9. Problem solving
10. Negotiation

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 Specialized Technical
Knowledge in Accounting

1. Financial Accounting
2. Audit
3. Tax
4. Business Law
5. Management Accounting

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 Specialized Technical
Knowledge in Finance

1. Corporate Finance
2. Capital Budgeting
3. Capital Markets
4. Portfolio Management
5. Financial Modelling

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 Value in Accounting

Driven by the conservatism principle:

1. lower of projected asset values and

higher of estimated liability values
2. when value isn't known it's recorded as
$0 to ensure the business doesn't
overestimate assets and underestimate
liabilities.

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 Value in Finance

Driven by the valuation process:

1. future cash flows are projected over a

period of time.
2. a discount rate is applied to the stream
of cash flow values to bring their value
into the present.
3. the discount rate is reflective of
opportunity cost, inflation, and risk.

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 Accounting vs. Finance

How are they working together?

1. both invested in the profitability and

success of the company
2. reliable accounting data is critical for
financial planning
3. partnership with coordinated efforts

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The Financing Advisory Firm for Growing Businesses