Exploring Different Paths of Business: Accounting & Finance

By: Aditya Bharadwaj & Nikhil Mandava

Accounting and finance both have many commonalities.

In a business or company, accounting and finance are both required to complete money transactions and management.

Similarities

Comparing these fields, both involve some analysis of a company’s money and cash flow. Adding on, to achieve competent results, basic arithmetic on a daily basis is essential in either career cluster. Also, the consistent use of excel is evident in both fields for collecting and analyzing data. Once these mathematical values are produced through calculations or excel, both accountants and financial workers will use tangible objects such as charts, forms, or graphs to model cash flow and revenue over a specific period. Another common feature of accounting and finance is the use of financial documents to display data. Though financial statements are usually used in accounting, there can be many situations appropriate for utilization in financial tasks.

Also, many of the same character attributes are required in both accounting and finance. Both accountants and financial employees have to be attentive as they are required to complete various calculations in their specific field. Other qualities that both areas need to have include determination, compassion, and leadership when it comes to consultation.

Differences

As mentioned previously, accounting and finance have numerous similarities, but there are also many underlying differences between the two. Accounting, unlike finance, is about the day-to-day flow of money through and out of a company. Finance, as talked about before, is more based on a long-term outlook. Accountants are tasked with managing and working with this constant flow of money for a person or business. There are specific financial statements that accountants use to track the continuous change in a company’s money use.

Accounting

Accountants have to be very attentive while working on these statements. Accountants work with income statements, which list a company’s income and spending amounts, and balance sheets, which have assets, liabilities, and shareholder’ equity for a specific business or individual. Lastly, an accountant also uses cash-flow statements, which are similar to income statements. For a company to be organized and well-equipped for the future, quality accountants are required.

Depending on the type of company or business, different types of accountants work with the same type of financial statements but are required to do various tasks.

First of all, there are public accountants. These workers are tasked with preparing tax returns for individuals and businesses.

Another common type of accountant is a managerial one, who analyzes an organization’s financial health. The last accountant type researched was a forensic accountant. These workers focus on investigating financial documents to track down criminal activities that may be taking place. Overall, in accounting, many financial terms and activities are interwoven in it. For example, a lot of accounting is creating financial reports and recording financial transactions.

To further quantify my research about the accounting field, I was able to get in touch with an individual who has been working in the accounting domain for many years. I had the pleasure of getting in touch with Chaim Goldmunzer. Chaim Goldmunzer has been working at an accounting firm called Goldmunzer & Company, founded in 2007. From Mr. Goldmunzer and many of his clients, it was evident that Goldmunzer & Company operates at the highest level. Unlike other ordinary accounting firms, this one established by Mr. Goldmunzer provides valuable consultation and plans for clients to be successful, as well as what a typical accountant would provide. This firm, in particular, always looks to take the extra step to help its members. Along with this compassionate mindset from the firm, Goldmunzer & Company’s clients also have access to Chaim’s experience and knowledge in the field. Their long-term strategy is to be reliable for their customers and effectively, making them well-equipped to run their businesses robustly for a long time.

From many of Goldmunzer & Company’s clients, more about Chaim’s and his firm’s motives were displayed. I was also able to understand more about the type of relationships and work that accountants like Chaim do for individuals. Mr. Goldmunzer, in the accounting department, displayed consulting skills. He never cuts corners and is very determined to help those who put trust in him. These are two skills that are not technical but important for all accountants to have. A lot of emphasis and appreciation was shown for Mr. Goldmunzer’s advice from many of the firm’s customers. Chaim gave a few members excellent business guidance that helped their businesses out. Lastly, Chaim’s professionalism was a common motif in all the reviews that were observed. This is another quality that all accountants must have and display to their clients.

In the accounting field, there are technical tasks that must be done. Still, specific character attributes must be projected from accountants to accomplish the highest quality of work for clients and in this career.

While accounting mainly consists of the analysis of past reports, and the most prestigious accounting firms are the “Big 4”, finance is quite different. The field of Finance uses the same tools, like excel and mathematical modeling to predict a company or firm’s future earnings. Unlike accounting, there are several different fields one can go into for Finance, and the work done in each field can differ significantly more than that of accounting.

The first type I will talk about is the typical job one may find themselves at after getting recruited to Wall Street from an elite business school, Investment Banking.

Investment Banking

The main task of investment bankers is to communicate with officials from different companies or firms and decide/report whether that firm is worth investing in. A new grad may start out as an Investment Banking Analyst, and work their way up to a Managing Director, where they could make up to a seven figure salary.

Investment Banking jobs at top firms like Goldman Sachs are notorious for putting their interns through grueling hours and an unreasonably large amount of work (upwards of 100 hours a week).

After working as a junior level analyst at an investment bank for some time, a student may go back to school to earn their MBA and go to work at a private equity firm.

Private Equity firms & Venture Capitalists

Private Equity Firms and Venture Capital Firms are very similar — they both analyze and predict the possible success of new startups, and based on how prosperous they think the startup will be, they invest money in it accordingly. In return the PE and VC firms end up owning a significant percentage of the startup’s stock once it’s able to enter the stock exchange.

The best way to explain their work in lay man’s terms is Shark Tank. In the show Shark Tank, founders of startups or small businesses pitch their business plan to experienced judges, who will then offer them sums of money to support their company in exchange for a percentage stake in the company in the future.

That being said, PE and VC are only tangentially related to finance, as making deals with these startups involves many different people from a variety of different backgrounds, academically speaking.

Wealth and Asset Management

Wealth and asset management are more directly related to finance, though. In short, they involve managing someone else’s money. Wealth management is focused on taking care of the finances of generally elderly people (retired), and providing suggestions for investments their clients should take in order for them to make a net profit in the long run.

Quantitive Finance

The final type of “finance” is quantitative finance. However, this type is hardly finance based at all, as it is primarily a combination of applied mathematics, statistics and computer science. In fact, these quantitative jobs would prefer someone with a math/CS background over someone with a finance background.

This is because the quantitative analysts and traders are using graduate level math skills to make models of where they think the market is going to go. They then build algorithms to execute trades in the market based on these models.

This profession is dominated by massive hedge funds that are fueled by people with PhDs in computational math and computer science, and they boast high 6 figure salaries with 5–10 years of experience in the field. The common trend between all of these fields of finance, even if they are not extremely related to finance itself, is that they are using techniques to maximize their profits or earnings in the future, whereas accountants do analysis of financial statements from the past.

Accounting and finance are essential to the sucesss of a business and without them, money and expenses and the overall structure of a business would fail.