Key Differences to Know Between Economics and Accounting


Careers in the financial sector make up a huge segment of the corporate sphere. Of course, that’s understandable because the business world is all about making money. You would be forgiven for confusing one profession in the industry with another. Take, for instance, economics and accounting.

Economics and accounting are somewhat related and are often key drivers of the economic and monetary policies of any type of enterprise. In fact, many people use the words economics and accounting interchangeably, which reveals that some people actually think that they are one and the same.

When learning either accounting or economics in school, you will come across several related concepts that cut across both subjects. Courses in either profession start by covering introductory topics including financial principles, math, and quantitative skills. Both disciplines also share similar skills such as communications, sound decision-making, and an analytical mindset.

While the skills in both professions may overlap, they are two quite different disciplines and thus, it’s important to get some valuable insights about them. Read on for more insight.

Accounting

Accounting is an old discipline and can be traced to thousands of years. Accounting services in Singapore provide the foundation or platform for decision-making through the process of recording, summarising and displaying historical financial transaction information. The recording process of accounting is known as financial accounting or bookkeeping, and is very important to business owners who want a formal documentation of business transactions from which they can deduce basic information like:

  • The amount of money they owe to tax authorities, suppliers, employees, banks and others
  • The amount of account receivables or money owed by customers
  • The amount of equity invested by the business owner in the company
  • Whether the business is making profits or losses

Such details are crucial for an enterprise. A lack of proper accounting would make it difficult for any business to ascertain, for example, the actual amount it requires to pay a particular supplier from whom they’ve made a number of purchases in the last few weeks. Businesses need a reliable way to capture data connected to financial transactions and that’s where accounting comes in handy.

Past accounting details are summarised in a financial balance statement. Basically, financial statements outline the various financial transactions of a company during a given period, for example, income and expenses. Moreover, these statements also reveal the true financial position of the company on a given date. Thus, financial statements can ultimately guide investment decisions by business owners. For example, whether to cut, increase, sell or diversify their investment in the business.

Economics

Economics addresses concerns by societies regarding how and what to generate for survival, plus various ways through which societies produce and allocate goods and services. The expression ‘goods and services’ implies anything that’s generated in the economy including government services such as health care, roads, prison system and more. An economy is any system that is able to determine what is generated, how it is generated, and who gets to use it.

Like other social sciences, economics seeks to explain its findings by studying human interaction.

  • What is the amount of money that the tax increment will raise?
  • Will more people relocate their businesses across the state line in an attempt to avoid the tax?
  • Will enterprises record lower sales and thus, pay lower business income taxes?

These are the kinds of questions that economics deals with, but it doesn’t often produce absolutely correct or precise explanations. The reason being human behavior in whichever economy is as complex and puzzling, just as in everything we do. However, the good news is that economics can explain the possible outcomes of the sales tax increment. Additionally, economics makes use of functional analytical tools and theories for understanding human behavior in view of acquisition and spending funds.

No one knows when the next recession or expansion will arrive. More sadly, the world doesn’t know how to eradicate crime, hunger, poverty and other evils bedeviling the economic realm.

While economics and accounting services in Singapore share comparable skill sets, there are some key differences between the two in terms of how proficiently math or data is applied. However, both professions can provide useful insight to business owners and policy makers.

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