What is the difference between accountancy and accounting?

If you are interested in an accounting, bookkeeping, management or finance career, or if you have already begun your education in one of these fields of study, you have undoubtedly come across two related but distinct terms: accounting and accountancy.

Many people use the terms interchangeably, but there are some important differences. In broad terms, accountancy covers the principles that guide the creation and use of financial records, while accounting refers to the process of maintaining those records. Accountancy can cover areas such as forecasting, budget planning and cost analysis, which are important concepts for those who want to be executives and business managers.

Here is a closer look at accounting and accountancy and their relevance to business professionals. 

Some common objectives for an accounting professional are:

• Creating financial statements: An accountant creates monthly, quarterly and annual statements. The three most common documents are the balance sheet and the income and cash-flow statements.

These statements are necessary for reflecting the financial health of a company to executives, shareholders and other decision-makers. Publicly traded companies also have to publish their statements for the public.

• Creating reports for management: An accountant might create specialized reports that show specific data to executives and managers at a company.
• Measuring costs: An accountant might need to explore and evaluate the total costs of running an operation.

For example, an accountant might add up all the costs of creating a product or offering a service, including marketing, research and development, and manufacturing costs. This process can help decision-makers come up with a fair price for the product or service.

• Ensuring tax and regulatory compliance: Public companies need to submit financial reports to the Securities and Exchange Commission (SEC), and all companies need to file accurate tax returns. An accountant’s job is to ensure that everything is correct and meets all legal requirements.

Accountants usually work with advanced software and database applications that help them find and organize financial data and create reports and visual aids. 

You will learn the fundamentals of accounting during an undergraduate degree program. In their careers, however, accountants might focus on one or more types of accounting.

Here are eight varieties of accounting that you could encounter in your career.

1. Financial accounting is the most familiar type of accounting for most people. It involves recording monetary transactions and data and creating reports, such as the income and cash flow statements.
2. Governmental accounting involves using specific rules and practices to perform accounting services for federal, state and local governments and government agencies. The focus in this specialty is accountability, transparency, adherence to laws and determining the feasibility of social or political decisions.
3. Public accounting is a specialty in which an accountant or accounting firm provides services to individuals or companies as a third party. A public accountant can provide a variety of services, such as payroll, tax preparation, auditing and income statement preparations.
4. Cost accounting involves calculating the overall cost of an operation for a company. For example, an accountant could add up the total fixed and variable costs for the production of a single product to help company decision-makers and marketers settle on a reasonable price.
5. Forensic accounting is a specialty that involves investigating the finances of a company, individual or organization to look for irregularities. In this career, you report your findings to legal teams or law enforcement agencies, and you may have to testify about your investigations in court.
6. Management accounting involves creating reports and performing audits to help inform the strategic choices of executives and other decision-makers.
7. Tax accounting involves the preparation of tax documents. A tax accountant makes sure that a company’s or individual’s tax filings meet all IRS regulations. A tax accountant also ensures their employer or clients get all the deductions and credit that they are due.
8. Auditing is an accounting practice that involves looking at financial records to ensure that they are accurate and comply with all relevant regulations.

Large companies or accounting firms may have specialist accountants who focus on specific areas, while other employers will hire generalists who can work on different types of accounting. 

Accountancy lays out specific principles for the collection and use of financial information. Accountants learn these principles and put them into practice in real-world situations to record financial transactions and create reports.

GAAP is an example of the intersection of accountancy and accounting. Accountants, bookkeepers and auditors need to use these principles while performing their jobs. 

Accountancy principles are useful for accountants, but you cannot get a degree in accountancy. In addition to a bachelor’s in accounting, you can study business management, finance and bookkeeping, which are fields that also use the principles of accountancy.

Here are some differences between accounting and accountancy besides degree availability.

• Accounting focuses on specific processes for recording transactions and creating reports. Accountancy concentrates on broader principles without getting into detailed specifics.
• Accounting focuses on collecting and reporting, while accountancy includes many other areas, such as forecasting, auditing, bookkeeping and financial decision-making.
• Accounting concentrates on the calculations needed in creating required statements and documents, while accountancy focuses on the broader regulations, ethics and principles behind these technical processes.

Despite these differences, accounting students will become intimately familiar with the principles of accountancy during their undergraduate studies and in their careers.