Many do not know the difference between finance and accounting. In a company, usually the finance and accounting divisions are in the same division, namely the finance division. However, finance and accounting have different duties and responsibilities that are very risky when combined.
Yes, financial management is crucial in a company. If the company wants to run smoothly and develop as expected, and not experience fraud, you must implement good financial management. Financial management includes financial records, payments, billing, budgeting efficiency, and company budget adjustments.
Differences in Understanding Finance and Accounting
Finance is the part that manages and holds money directly, both in the form of currency and demand deposits. According to Ridwan and Inge, authors of the book Financial Management, the notion of finance is the art of managing money that affects the life of every person or organization.
While accounting is the art of measuring, communicating, and interpreting financial activities. When viewed on Wikipedia, the definition of accounting is the measurement, elaboration, and provision of certainty for financial information that will assist leaders in making decisions.
So, it can be concluded that finance manages financial inflows and outflows. Then accounting processes the financial activity data and presents it in financial statements.
Finance and Accounting Tasks
Carry out financial management
- Duties of the Finance Department
The task of the finance department is at the forefront of the finance division. Any money coming into the company will be accepted by the company's finances. Likewise for outgoing money, the finance department will pay it to each vendor and other parties.
In general, the finance party is in charge of holding the company's cash. Cash in the form of banknotes and coins for the company's petty cash needs will be stored, calculated, and used according to the company's needs by the finance department.
Finance is also in charge of managing the company's cash availability and recording all transactions correctly.
Another finance task is managing the finances stored in the company's bank account. Finance takes care of banking administration, such as making power of attorney, issuing check books, sending bank statements, and others. If there are bills to be paid, finance is in charge of taking care of the disbursement of these funds.
- Accounting Section
It's obvious, isn't it? The difference between finance and accounting can be seen from their duties. Accounting does not hold company money, either in cash or in bank account balances. Accounting also does not have a power of attorney to manage company bank accounts such as the finance department.
The task of accounting is to receive records of financial activities from the finance department. The records are in the form of the total beginning balance of petty cash and bank accounts, any expense transactions paid, financial income, and ending balances of petty cash and bank accounts.
Accounting is responsible for ensuring that all documents for proof of financial transactions from finance are complete and correct according to accounting standards. After everything is stated as complete and correct, accounting will enter each transaction into financial journals and general ledger items.
Accounting then processes financial data and presents it in the form of financial reports, such as balance sheets, income statements, and other reports, as needed. Examples of other reports that are usually made by accounting are sales receivable reports, tax reports, budgeting comparisons and realizations, and others. From these financial reports, management can make decisions to make adjustments to the company's budget.
In addition to having expertise in accounting, people in the financial sector must also have high honesty and integrity. Companies also need to establish strict procedures to close the gap for fraud. One way is to separate the finance and accounting functions.
The difference between finance and accounting has a supervisory function so that if one party makes a mistake, the other party can correct it. Supervision is also being tightened with the presence of an audit section or an internal auditor. So, the company's financial management can be carried out safely and smoothly.
