Accountancy vs. Accounting: What Are the Differences?
November 7, 2022
Accountancy vs. Accounting: What Are the Differences?
If money is changing hands as part of a business transaction, an accountant is usually there to keep track of it. It is necessary for every firm and organization to keep records of all financial transactions, and the task of reliably and effectively overseeing these financial accounts falls to accountants.
Without someone to track and assess this information, a company would not be able to see and assess its performance, its needs, or its obligations. Worse, mistakes could be made involving its financials or taxes, damaging the organization’s credibility or even its viability.
An accountant’s role is to ensure the accuracy of financial records, evaluate economic data risks, and allocate tax payments on time. They also assess financial processes and seek to ensure that businesses run smoothly. Most accountants are actually working in two fields at once: accountancy and accounting. While these terms may sound almost identical, they have different meanings that those seeking an accountancy degree should understand.
What Is Accounting? ¶
Accounting is the method of recording, analyzing, and summarizing financial data. It’s narrow in scope and is focused exclusively on categorizing and sorting financial data. Accounting is critical for decision making, cost planning, and measuring economic success in businesses of every size and type. While a bookkeeper can handle basic accounting needs, most businesses hire a Certified Public Accountant (CPA) to conduct more extensive or complex accounting tasks.
What Is Accountancy? ¶
Accountancy is the systematic knowledge of accounting that relates to the principles and techniques applied in an accounting system. Accountancy informs the practice of preparing accounts; summarizing their information, and communicating it to relevant parties. It provides the framework by which accounting performs its function
Accountancy also refers to communicating financial information about a business entity to interested parties such as shareholders, boards of directors, and managers. It’s not merely about crunching the numbers and sharing the results, but communicating those results to financial decision makers and directing their attention to the most important fiscal aspects so they can make sound decisions and investments.
Accountancy informs how accountants present financial data. Put another way, accountancy is the theory and expertise behind selecting information relevant to an organization, its decision makers, and its stakeholders, thus giving them reliable, actionable insights that return an anticipated result.
Accountancy and Accounting Similarities ¶
Understanding accountancy vs. accounting starts with the similarities between the two, because accountancy is like an umbrella under which accounting falls. Both accountancy and accounting focus on organizing and understanding financial data. On a basic level, both are necessary to properly run the finances of a company or organization, as they both work toward providing the most beneficial financial information to those making decisions.
Accurately notating the details of financial activities and adhering to standards and rules are critical for both accounting and accountancy. Both are necessary for measuring and understanding transactions, as the principles of accountancy inform the methods and best practices of accounting.
Accountancy and Accounting Differences ¶
Contrasting accountancy vs. accounting reveals that their differences are more prominent. While both terms cover the acts and procedures of working with financial data, the ways these actions and procedures are typically used show a big difference in scale.
1. Meaning ¶
Accounting is keeping a record of financial transactions while adhering to the norms, principles, and concepts of accountancy. On the other hand, accountancy is the systematic body of knowledge that uses various accounting principles, regulations, and conventions to guide the recording of financial information.
2. Scope ¶
Accounting is an activity based on the larger body of knowledge, including guiding principles of accountancy. Accounting is narrow in focus and limited to assessing and summarizing financial data. In contrast, accountancy also serves as a theoretical framework by which an accountant establishes the meaning and context for that financial data. “Accountancy” is also used to refer to the broader field of study of accounting practices, within which an accountant gains skill and expertise.
3. Relation ¶
Accounting and accountancy are the practical and theoretical sides of the same coin. Accounting is reliant on accountancy to provide its framework and guiding principles, such as accuracy, uniformity, and the other rules set down formally in the Generally Accepted Accounting Principles (GAAP). Similarly, accountancy is reliant upon the primary function of accounting to create summarized data, to which accountancy can then add meaning and direction.
4. Function ¶
Where accounting focuses on keeping a fair record of every financial activity in a firm, accountancy is concerned with giving information about the business’s financial status to all relevant parties. Accounting focuses on analyzing and communicating data, but accountancy provides the larger context by which an accountant determines how to present that data and judge what advice to give.
5. Tools ¶
The primary tools for accounting are financial statements, which include trade and profit and loss accounts, balance sheets, and cash flow statements. On the other hand, accountancy is characterized by the accounting principles, standards, norms, ideas, and conventions that come from its much more theoretical and conceptual nature.
One way to look at accountancy vs. accounting is to view “accountancy” as the theory and “accounting” as the practice.
Discover a Future in Accountancy ¶
When looking at the differences between accountancy vs. accounting, it’s easy to understand why one might misunderstand the meanings of the two terms. Not only do they both sound the same, but they both deal with similar functions of financial data analysis. However, those looking to pursue a career in accounting should understand how crucial the difference is between the two concepts, and why both are necessary tools for any modern accountant.
Through the Athens State University online Master of Accountancy program, students can understand the complex nature of accountancy and how it shapes how businesses read and respond to their financial information. This program focuses on the areas of accounting, auditing, and taxation to help provide students with a well-rounded education on crucial financial concepts.
Unlock your potential in accountancy with Athens State University.
Sources:
Business News Daily, “How to Define Accounting for Businesses”
International Federation of Accountants, “Redefining Accounting for Tomorrow”
Investopedia, “Accounting Explained with Brief History and Modern Job Requirements”
Key Differences, “Difference Between Accounting and Accountancy”
Trending Accounting, “Difference Between Accounting and Accountancy”
