Many of us have encountered the terms Accounting and Accountancy being used interchangeably. While this is a common mistake many people make, as an accounting student, one thing everyone needs to be clear on is how both have their own separate definitions and uses. In addition, many people might use one instead of another because they both revolve around financial transactions and analyzing and interpreting financial results. However, for better clarity purposes, we will break down both these terms to help you understand what Accounting versus Accountancy entails. Once you develop the ability to distinguish between these both you will be able to relate to your degree in a better way.
Difference in Definitions
The term ‘accounting’ is used so widely that to define it properly, one needs proper context. For example, accounting can refer to the practice of accounting which is keeping a record of all financial transactions of a business. Other than this, accounting also refers to the profession of various individuals who work in different accounting roles. This includes bookkeepers and payroll administrators. Finally, in the academic sense, accounting is a degree that prepares students to work in the said field.
Accountancy, on the other hand, is the profession of an accountant. This term is used to distinguish between degrees in the fields focused on the academic side from professional degrees which provide accountants with training. Other than that, Accountancy is also a term that refers to financial statement management. So, while preparing a financial statement would be referred to as accounting, interpreting the information on it would come under Accountancy.
Difference Between Scope
There is a significant difference between the scope of Accounting versus Accountancy. Accountancy is an area of knowledge related to accounting that focuses more on the principles of accounting methodologies. On the other hand, accounting is a fragment of Accountancy that revolves around the practical application of accountancy rules.
To summarize, Accountancy is more inclined towards the theoretical, while accounting deals with the practical aspects of the field. The former is studying accounting theory, and the latter is putting everything you have learned into practical application. For example, if you plan on making a financial statement, the entire thought process and study that will go into this job will be called Accountancy. The act of making the financial statement will be included in accounting services.
Difference In Practice
Accounting, in practice, has many layers attached to it. The first phase of it includes recording and organizing financial information that comes from different sources. Accountants use the records of this financial information to analyze the performance of different businesses and summarize cash flows. While understanding what accounting means, we also must look at the different kinds of accounting. Financial accounting services refer to preparing financial statements like balance sheets and income statements for different stakeholders. Managerial Accountants help stakeholders make better-informed decisions by keeping different figures in mind and understanding them. Lastly, cost accounting revolves around a detailed cost analysis of a new product/service.
The practice of Accountancy includes processing and communicating financial information, preparing taxation documents, and managing financial records. A few principles of Accountancy are very similar to accounting concepts you learn over the course of your degree. A few of them are as follows:
– Principle of Regularity
-Principle of Consistency
– Principle of Permanence of Methods
– Principle of Non-Compensation
– Principle of Utmost Good Faith
Differences in Decision Making
Accounting in itself could be more helpful in the decision-making process. The number and statistics obtained as a result of accounting need to be analyzed before they can become valuable sources of information. However, Accountancy helps make decisions on the management level by presenting an analysis report regarding the financial state and well-being of the business. Therefore, Accountancy is generally more helpful in terms of making decisions.
The differences that exist between accounting versus accountancy are subtle and not very apparent. This also means that regardless of what term you use, the fact remains that the job market is thriving for professionals working in the said field. The employment numbers for accountants and auditors are only expected to increase. So, while you must understand the difference between accounting and Accountancy, remember that it is very minute and does not have lasting implications.