If you are looking into getting a business degree, two of the majors with the highest demand are accounting and finance degrees. However, the distinction between these two fields of study might not be clear to incoming college students. Thus, one might wonder: Should I study for an accounting or finance degree?
In this article, you will know the key differences between accounting vs finance to help you make the right choice for your education. Get a glimpse of the coursework that you can expect in a bachelor’s program and certifications you can pursue to boost job prospects. Finally, get some insights into career options, starting salaries, and job outlook so you can plan for the future after college.
Business degrees remain as a popular field of study for college-bound students. Proof of this can be seen in the number of business degrees conferred by schools in the past few years. For the school year 2016 to 2017 for example, data from the National Center of Education Statistics (NCES) show that there were 381,000 business degrees conferred, the highest out of all fields of study in postsecondary education in the U.S. The number of bachelor’s business degrees awarded for the school year 2017 to 2018 was likewise the highest for all fields of study in the U.S. at 386,201.
The demand for business degree holders also remains high in the job market. The National Association of Colleges and Employers (NACE) for instance, noted that starting in 2017, there has been a shift in demand away from tech majors to business degrees. Based on NACE’s Job Outlook 2018 survey, 65.2% of employers surveyed will hire those with finance majors while 60.6% are looking to hire accounting majors.
Source: National Association of Colleges and Employers
Before delving into the nitty-gritty of accounting vs finance, it helps to understand the basics first, starting with their definition.
Various authors define finance differently. Khan and Jain offer a simple definition which states that “finance is the art and science of managing money.” On the other hand, Guthumann and Dougall define business finance as “the activity concerned with planning, raising, controlling, administering of the funds used in business.”
Accounting organizations likewise define accounting in different ways. In 1941, the American Institute of Certified Public Accountants (AICPA) defined accounting as “the art of recording, classifying, and summarising in a significant manner and in terms of money, transactions, and events which are, in part at least, of financial character, and interpreting the results thereof.” But due to changes in economic development, this definition became broader. Later in 1966, the American Accounting Association (AAA) defined accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of information.”
Based on these definitions, one can see that the study of accountancy is more narrow since it is focused on documenting the flow of money in and out of an organization. In contrast, finance is more broad as it is concerned about planning and distributing organizational assets.
Accounting degrees can vary from school to school. Most schools offer it as Bachelor of Science in Accounting. However, there are others who have a Bachelor of Arts in Accounting. Such a degree will give the student the freedom to add electives, which will determine his minor or double major. Another option is to take up a bachelor’s degree in business administration with a major in accounting.
Four-year programs typically require students to complete 120 to 128 credits. For those who plan to take the qualifying exam to be a certified public accountant, most states require that they complete 150 credit hours. Students can expect the curriculum to revolve around core concepts, such as managerial accounting, cost accounting, and the like. They will also learn about international financial reporting standards, as well as Generally Accepted Accounting Principles (GAAP) for U.S. students.
On the other hand, schools typically offer a Bachelor in Finance. Other schools allow you to take finance in combination with another course so you can graduate with a double degree.
Like accounting degrees, a Bachelor in Finance degree usually requires 120 to 128 credit hours. Core courses include economics, econometrics, statistics, financial reporting, and portfolio management. Certification will depend on the area of finance you want to specialize in. For example, if you plan to focus on portfolio management and investment analysis, you can take a certification as a Chartered Financial Analyst. On the other hand, if you plan to go into wealth management, being a Certified Financial Planner will give you an edge.
With a Bachelor in Finance degree, you can take on any of these roles:
Financial analysts go over a company’s financial data. They combine this with research on economic conditions to come up with recommendations for key business decisions. These decisions include buying and selling a company’s stock (Segal, 2020) or finding ways to increase profitability and manage assets efficiently.
Financial traders buy and sell securities on behalf of investors. They spend a lot of their time analyzing the financial market to make decisions about when to buy and sell financial products. They aim to maximize profitability while minimizing risks for clients.
Budget analysts help organizations keep track of their spending. They develop budgets and review budget proposals. They look for ways to drive profitability or maximize the allocation of funds.
Financial managers are responsible for supervising the financial activities of an organization. They go over financial reports and develop long-term, strategic plans. In addition, they guide management in making financial decisions. Providing intelligence and foresight are the kinds of value-adding activities that are becoming growing domains in finance (Fuller et al., 2019).
Personal financial advisors assess a client’s assets, liabilities, income, and expenses and create a tailored financial plan for them (Kagan, 2020). They then research and recommend investments to clients, taking into consideration their goals, risk tolerance, and risk capacity (Fontinelle, 2020). Lastly, they monitor clients’ accounts and adjust the plan in case of major life changes (Truity, n.d.).
On the other hand, career options for accounting graduates include:
A Certified Public Accountant (CPA) is a professional who holds a bachelor’s degree in accounting, has passed the CPA exams, and has fulfilled the work and education requirements for a license (Boyd, 2020). CPAs perform auditing, consulting, taxation services, and more. They help individuals and businesses grow and succeed by providing them with financial reporting and advice. CPAs can go into corporate accounting, government accounting, public accounting, or forensic accounting.
Auditors ensure that financial records are accurate and comply with laws and regulations. They inspect books of accounts to detect fraud and other discrepancies. Different types of auditors include internal auditors or those who work in-house for an organization, and external auditors or those who work together with government agencies. They can also be government auditors or forensic auditors (Liberto, 2019).
An accounts payable specialist handles invoices, purchase orders, check requests, and other financial transactions on behalf of a company or organization. They see to it that vendor invoices are accurate and that payments from the company are sent to vendors in a timely fashion. In addition, they track expenses and account balances to come up with monthly financial reports.
Dealing with taxes can be overwhelming both for individuals and businesses. Tax accountants ease this burden by helping them file their tax returns (Johnson, n.d.). Using their knowledge of tax laws, they ensure the accurate calculations of income tax payments and refunds. They also provide assistance to organizations or clients if ever they need to go through the audit process.
This specialized type of accounting involves the use of an accountant’s auditing and investigative skills to detect corporate fraud, embezzlement, money laundering, and other white-collar crimes. Forensic accountants go over complex financial and business documents and summarize them into reports and presentations for use in court. They may also give court testimony and assist in the recovery of assets (Chen, 2019).
Finance and accounting degrees belong to the broad category of business major degrees. In 2019, average salary projections for business major degree holders rose by 1.7% compared to 2018, according to the National Association of Colleges and Employers (NACE).
Based on NACE data, those who had a bachelor’s degree in finance tend to have slightly higher starting median incomes than those with accounting degrees. In 2019, the median starting salary for finance majors was $57,750. On the other hand, the median starting salary for accounting majors was $57,250.
Source: National Association of Colleges and Employers
The same can also be said of finance and accounting master’s degrees. The median income for master’s degree holders of accountancy was $65,000 while those with master’s degrees in finance were at $68,550.
The U.S. Bureau of Labor Statistics (BLS) projects that jobs in business and finance operations will grow by 7% from 2018 to 2028. This projection is higher than the predicted growth of all occupations which is at 5% for the same period. Included in this projection are roles that require an accounting or finance degree.
Within the business and finance operations jobs, BLS data indicate that personal financial advisors had the highest median pay in 2019. In 2018, there were 271,700 personal financial advisor jobs. By 2028, this is expected to increase to 290,800 jobs or by 7%. One of the growth drivers for this job is an aging population, a large percentage of which include baby boomers who need a financial plan for retirement. The BLS noted that job prospects for personal financial advisors were “relatively favorable” versus other financial sector jobs. Candidates who pursue certification will likely have more opportunities.
Source: U.S. Bureau of Labor Statistics
On the other hand, accountants and auditors had the 7th highest median pay within all business and financial jobs in 2019 based on BLS data. In 2018, there were 1,424,000 accounting and auditing jobs. This is expected to grow to 1,514,700 by 2028 or by 6%. The growth drivers for these jobs are globalization, a flourishing economy, and increasingly complicated tax and regulatory requirements.
Interestingly, this predicted growth is in stark contrast to the World Economic Forum’s (WEF) prediction. The WEF stated by 2022, there will be a 26% decline in accounting, bookkeeping, and payroll clerk jobs due to automation and robotic technologies (World Economic Forum, 2018). However, Bowles et al., (2020), citing data from the Association of International Certified Professional Accountants, has also said that there is merely a shift in focus in an accountant’s role from mere information or document processor to that of a business partner. The U.S. BLS likewise predicts that accountants will take on more advisory and analytical duties with the rise of automation.
The BLS also noted that although there is a growing demand for accountants, the competition will be tough at top accounting and business firms. Thus, those with certifications, like CPAs, and those with master’s degrees will gain an advantage over those who have none.
Choosing between an accounting and finance degree can be a tough choice to make. However, knowing the key differences between accounting vs finance will help shape your decision. Primarily, the field of finance is broad, which means many options when one shifts careers. In contrast, accounting is a narrow field of study, leading to limited choices for specialization.
In terms of educational requirements, both have roughly the same number of units required, with the exception of aspiring CPAs. Both degrees also offer opportunities for post-graduate certifications, with finance offering more specialized licenses related to a subfield. When it comes to starting salaries, finance majors tend to outearn accounting majors. Job prospects depend on a specific role, but personal financial advisors and accounting roles were among the jobs with the highest median pay in the U.S. Personal finance advisor roles, in particular, have higher job growth projections than accounting roles.
Educational requirements and industry statistics can certainly provide an evidence-based approach to one’s decision-making process. But more importantly, one must also take into consideration one’s skills, strengths, and preferences to pick the right major.