The Basics of Finance, Accounting, and Beyond
University of Phoenix
Americans constantly face the world of finance and accounting. Newspaper headlines, radio reports, evening television news-magazines, the internet, and even co-workers provide regular streams of information and opinions on money and the effect on the economy. There is always confusion as to what finance and accounting means exactly. Many people believe both these words have an identical definition. Some become frightened at the thought of the terms. The terms are easy to comprehend, once clearly defined, however. Although interrelated, finance and accounting mean different things. As a manager of any organization, one must realize the importance of knowing what the differences are.
Interestingly, the field of accounting has existed much longer than the field of finance. Accounting is "the process of identifying, measuring, and communication economic information about an organization for the purpose of making decisions and informed judgment" (Marshall, 2003). A key product of an accounting system is the set of financial statements. Providing financial data through income statements, balance sheets, and the statement of cash flow is the ultimate product from accounting information. The income statement provides detailed information of both the revenues and expenses for the organization while the balance sheet provides a cash balance at a given point in time. Then the statement of cash flow provides detailed accounts of how the company is spending its money. This practice also equates to cash activity.
Finance consists of three main interrelated areas. A money and capital market, which deals with macroeconomics topi ...