Relationship between Accounting and Finance

Accounting and finance both are different subjects or field; however they both are closely related to each other. While accounting is concerned with recording of business transaction of a company and presenting it in the form of profit and loss account to show the profit or loss of the company during a year and also it involves preparation of balance sheet which reflects the financial position of the company at a particular date.

Finance is a broader concept and it makes use of all the data which is presented in the accounting like profit and loss, balance sheet, cash flow statement to make finance related decision like how to raise money for future projects of the company, how to utilize the resources of the company in order to efficiently and effectively produce the good so that company makes profit. Finance therefore is a future looking concept which makes use of past data in accounting to make decision related to future. Without accounting data finance will find it difficult to make above decisions and also accounting will not be effective if it is not used along with finance.

Finance apart from using accounting data also uses data from other fields like economics, statistics, costing, taxation and other such fields.

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