Accounting vs. Economics: An Overview
Accounting and economics both involve plenty of number-crunching. But accounting is a profession devoted to recording, analyzing, and reporting income and expenses, while economics is a branch of the social sciences that is concerned with the production, consumption, and transfer of resources.
Key Takeaways
- Accountants track the flow of money for businesses and individuals.
- Economists track the larger trends that drive money and the resources that money represents.
- Both help businesses and governments plan for the future, make sound financial decisions, and set fiscal policies.
Accounting
Most individuals deal with accountants only at tax time. But in the larger business world, accountants are a critical part of any organization. Their job is to track the flow of money into and out of an organization.
They use various methods to record and analyze budgets, expenses, and revenue and produce financial records based on the data they have analyzed. Their work is crucial for predicting the financial impact of any recommended change or potential future event on a business.
Accountants' books are by nature a historical record of an individual or organization's financial life for a specific period of time. The accounting standards, known as GAAP, are critical for tax compliance and for accurate financial reporting to shareholders.
In modern times, accounting operates according to principles of relevance, timeliness, reliability, comparability, and consistency of information or reports. Globally accepted accounting standards are followed in order to enable the exchange of information.
Notably, those standards are followed in quarterly and annual financial reports of publicly-listed corporations.
Accountants' books are by nature a historical record of an individual or organization's financial life for a specific period of time.
Economics
Economics, broadly speaking, is a field of study concerned with the distribution of resources among people. Outside academia, economists are involved in analyzing and understanding the way that goods and services are produced and distributed.
Economists have a critical role in developing economic policies for governments and projecting the impact of policy and regulatory changes. They are increasingly in demand in financial services and industry, where they interpret and forecast market trends.
Economics is broadly divided into two areas of study:
- Macroeconomics is concerned with the distribution of resources within an ecosystem, such as a nation. It includes the tracking and study of the many factors that affect how efficiently the economy works, such as the inflation rate and the productivity rate.
- Microeconomics is the study of the behavior of the individual within an economic ecosystem, or of any other single entity such as a business. It is concerned with the impact of individual decisions on the distribution of resources.
Key Differences
Both accountants and economists help businesses, industries, and governments to strategize and plan, make sound financial decisions, and set fiscal policies. Professionals in both fields base their analyses and projections on real-life markets, conditions, and events.
Accounting is the nuts-and-bolts field that tracks the inflow and outflow of money, while economists are typically more concerned with the big-picture trends that drive money.
