Accounting and Accountancy. Have you ever been confused by these two terms? This update will show you the difference between accounting and accountancy and make it all crystal clear.
Take, for example, one is often regarded as the parent and the other as the child. Do you however know the rationale behind this analogy? Can you tell them apart?
If you continue reading though, not only will you know about everything that Accounting and Accountancy entail (including the reason for the parent-child analogy)–but you’ll also see their similarities and differences, while being able to correctly apply the right term in relevant situations. Let’s get started already.
Meaning of Accounting
Accounting is simply the process or work of keeping the financial records of an enterprise or organization. Essentially, three stages are involved.
There’s of course the first stage where financial activities/events are being identified and systematically recorded aka bookkeeping.
There’s the second stage where recorded information is classified/organized.
Summary, the final stage, is where useful information is obtained.
The other benefits of Accounting besides providing financial information to the concerned parties (managers, investors, clients, etc.) include showcasing the financial position of the business at the end of the financial year; also, keeping effective control over the business.
Meaning of Accountancy
So what Accounting succeeded in doing is making available carefully prepared, ready-to-use financial data. This is just useful information though.
To make this information usable (for decision making), it needs to be analyzed and interpreted in accordance with certain principles, techniques, and rules. Accountancy is what happens when that happens.
To further put things in perspective…
- Accountancy provides background to an Accounting system being a complete knowledge of the conceptual understanding of Accountancy and its practical use. It covers bookkeeping and Accounting, and other such practices/duties including but not limited to financial reporting, tax document preparation, management accounting, advisory, and auditing. Accounting is concerned with the ‘what to do’ and ‘how to do’ facets of Accounting. This is why it’s often said that Accountancy has a wider scope; that it begins where Accounting stops; or, that Accountancy is the parent of Accounting.
- From 1 above, it can be inferred that:
(a) Accountancy is a body of knowledge of accounting principles that is applied in maintaining the books of accounts of a business.
(b) Accountancy discloses how to set up financial records, sum up its data, and convey results to concerned parties.
(b) Accountancy is a profession that defines the duties and roles of an accountant who is required to prepare, check, interpret and communicate financial accounts.
(c) Accountancy teaches how to do Accounting.
Characteristics of Accounting and Accountancy
While discussing Accounting and Accountancy under the first two subheadings, some key things were highlighted. It turns out, Accounting and Accountancy share similarities in, for one, what it’s trying to achieve and who stands to gain. The following is true (assuming you didn’t catch it the first time around) are of Accounting and Accountancy.
- Details of financial activities and adherence to standards and rules is key to Accounting and Accountancy.
- Accounting and Accountancy are necessary for measuring transactions.
- The financial transactions are recorded in the subsidiary books or journals.
- Accounting and Accountancy make it easy to handle a business.
Differences between Accounting and Accountancy
Having discussed Accounting and Accountancy alongside the similarities they share. The following, without further ado, are differences between Accounting and Accountancy as discussed under some key highlights including objectives, nature of work, scope, tools, etc.
The main objective of Accounting is to maintain a fair record of each and every financial activity taking place in a business. Conversely, Accountancy seeks to provide details about the financial state of business to all its stakeholders through the analysis and interpretation of their books of accounts.
Nature of work
In Accounting, financial records are collected, classified, and summarized.
On the other hand, Accountancy incorporates accounting and other duties like tax and auditing alongside the setting of accounting principles, standards, and conventions that should apply in the accounting process and other areas of the Accountancy field.
The scope of Accounting is narrow while that of Accountancy is wide. This means that while Accounting is concerned with just the practical aspect of dealing with the financial transactions of an organization, Accountancy is concerned with both the practical and the theoretical parts.
Accounting depends on bookkeeping while Accountancy depends on both bookkeeping and accounting.
The main tools in Accounting are income statements and balance sheets while the main tools in Accountancy are concepts, conventions, rules, etc.
Accounting does not help in decision-making as its scope is limited to maintaining the financial records of businesses. Contrariwise, Accountancy supports the decision-making process through the analysis and interpretation of the collected data.
Accounting is a discipline that is concerned with the nature of work performed by accountants. Accountancy is the profession or duties of an accountant.
While Accounting deals with the practical part, Accountancy deals with both the theoretical and practical parts. Put it simply, Accounting is what we practice, but Accountancy is what we study and apply.
Generally, both terms can be used interchangeably. When speaking about the occupation or duties of an accountant, though, most stick with “Accounting”. There could also be a cultural element to it, with Americans preferring the use of Accounting, whereas the Britons are cool with Accountancy.