Accounting vs Finance vs Economics

Is accounting, finance & economics all the same kettle of fish? The truth, as often is, lies somewhere in between…

accounting-economics-finance

 

Common Misconceptions

  1. Accounting is the same as finance
  2. Finance & economics are unrelated
  3. Finance, accounting & economics… what… ?! They’re all the same ain’t it?!

 

Accounting simply Defined

Recording & reporting past transactions

Trivia: Accounting may have predated or even sparked writing from the times of ancient Egypt where bookkeepers recorded grain in royal storehouses meticulously & accurately. The accuracy correlates to the severe & swift punishment on errors (Hey, maybe we should implement that again today!

 

Finance simply  Defined

Managing money now & in the future

Trivia: The term “millionaire” first appeared in the book “Vivian Grey” by Benjamin Disraeli written in 1826

 

Economics simply Defined

Study of humans & choices

Microeconomics: individual, group or company vs Macroeconomics: country or region

Trivia: Bill Gates on average has earned $100k for every hour he has been alive…

 

Accounting vs Finance

Accounting is about the past while finance is about the future.

However both accounting & finance are concerned about assets & are often grouped together.

 

Finance vs Economics

Finance & economics are interrelated. For example, investors look at the economy because it influences markets significantly.

However, economics is more big picture while finance often focuses on companies, businesses & individuals.

 

I’m enlightened. Now how about Accounting vs Economics?

Accounting is based on set rules & principles while economics is based on assumptions to simplify complexity.

However, both accounting & economics help decision makers (for countries, businesses, etc) to make sound financial decisions.

 

How do I use this awesome info I have learnt?

  1. Read up about economics & finance. A good place to start is a business newspaper or business section in a paper (even if it doesn’t make sense at first, it slowly will start to)
  2. Spend time to think (or review) your life & financial goals. Know where you are in your financial plan. Work with a Personal Finances Advisor which will help you to achieve your goals (We’re not just saying this because we’re in this business!)
  3. Practice basic accounting to plan & work on your budget, income, risk, investment & retirement planning (Use Consult your PF Advisor can help do some of the heavy lifting ;))

 

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Helping you to simplify and grow your Personal Finances. Follow MyPF.my to get the latest Personal Finances updates and insights!

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