Career in Finance vs. Career in Accounting

There's a lot of overlap between the two fields. A more traditional accounting route would be to work for a Big 4 or similar accounting firm. A traditional finance route would be to get into banking (investment, corporate).

That said, many people do "finance" or "accounting" jobs while holding the opposite degrees -- there's plenty of accounting majors working at investment banks, and there's plenty of finance majors doing corporate accounting or working at a Big 4 firm. I personally chose finance because I felt it was more broad, but accounting really helps with the fundamentals of businesses. Take classes in both, see what you like more, and work hard.

Ditto to the above. In addition to having a lot of crossover between people in both majors when they enter the workforce, you may also see people go from one to the other over the course of their careers.

Both are great majors. Consider if you'd like to get any certifications at some point as the choice of major may play into your ability to sit for the exams vs. needing to take extension classes from a university at a later time.

MikiTheMonkey:

As a first-year student, I am still unsure whether I want to go into a finance specialization or an accounting specialization. I know I want to do something involving numbers and math, but since both involve numbers, and since I enjoy both subjects, I am still unsure where to go…

What are the career prospects for finance and accounting majors respectively? Which one will get me a higher salary? In which industry is it easier to find a job?

P.S. I know this is a finance blog and most users here are in finance jobs, so you will most probably support finance. Yet, I still encourage you to provide a FAIR comparison. As a finance specialist, what are some of the things you DON’T like in the finance field?

Accounting - they count the beans

Finance - how to create more beans

Not sure what your major is or where you are attending school, but at my current school, all business majors are required to take 4 intro business classes(management, marketing, finance, accounting) and economics before even "entering" the business school and choosing your final major. Before taking these classes I thought I was interested in management but after these classes I found that I excelled at accounting and truly enjoyed finance. Obviously these are all extremely basic classes and just give a brief overview of the overall subject, but it was an eye opener. I would recommend taking both an accounting and a finance class this year if possible. You will find they are very closely connected(financial statements from accounting are the basis of the majority of the finance class, etc..) but you may find that you hate accounting and would not like it as a career. Again, this probably won't give you a full view or concrete your career choice but it is a start. I think I am very fortunate to go to a school that requires this intro course work before making a final decision on your major, I feel like it really saved me from getting a useless degree in some ways. Hope this helped.

These days you don't have to be a Finance major to even go into finance anymore.

Depending on your school, I think accounting is the best option. If you're at a target school you could be a History major and with relevant internships and a convincing story you'll have a shot at the top jobs. If you're at a non-target (use search function if you don't know the difference) I would go for the major that gives you more optionality down the road. Accounting will be more menial and tougher, requiring you to study a bit more, but it will open many doors to BOTH accounting and finance careers. I know for a fact accounting firms such as the Big 4 require hires to be accounting majors for most roles such as Audit/Tax/TAS., as they want to know you're on the CPA track. But banks don't care if you're an accounting/finance/poli-sci/econ/anthropology major as long as you have solid experiences/strong interest in the role.

I also want to highlight the fact that accounting is a topic that will build on your courses and provides a solid foundation for anything you want to learn about business, and finance anybody can learn by reading investment books/guides/watching YouTube videos/taking the CFA/reading on WSO. I've noticed my peers who are finance majors struggle with grasping advanced accounting nuances as quickly as vice-versa.

As they say, "accounting is the language of business."

You have today.

Accounting- everything before today. Finance- everything after today.

I double majored in both, and having been an "accountant" I will say that most roles out there are not strictly accounting roles. What I mean is, pure accounting is recording journal entries and running them through to compile a financial statement. However, most jobs at the Big 4 or in public accounting are audit, tax, advisory, reviews or compilations, which have some accounting aspects but are not strictly accounting as in the classes you take in college.

This is a great question and, as others have noted, there are quite a few overlaps between the two functions. In particular, both are concerned with analyzing and quantifying the operating performance and financial strength of a company.

The key difference is that accounting focuses on actual, historical data in order to assess financial strength while finance is forward looking. In other words, finance forecasts the operating performance of an entity in order to facilitate some sort of market transaction (be it a recapitalization, restructuring, sale to a strategic or financial buyer, IPO, etc.). Accounting is analytical and rules based while finance is analytical and transaction/sales based.

To elaborate, as an accounting professional, you're worried about conducting your analysis in a way which is consistent with exogenous standards and regulations, typically set by government bodies (SEC, GAAP, IFRS, PCAOB, etc). Your clients come to you because they are compelled to do so by an external authority. Conversely, in finance, your clients come to you because they want you to maximize value to their firm. They do not require your services. They employ you because of a certain set of expertise that can promote the company's growth and value.

There are pros and cons to both. Accounting is a more stable, analytical function with a higher success rate. Finance is a flashier but riskier function with a higher failure rate. Finance is more selective relative to accounting but it typically pays more. Finance is also more volatile as new technologies disrupt the industry and eliminate functions (for example, high frequency trading eliminating the role of traders; passive indexed funds replacing active managers; more and more firms are handling their own IPOs as opposed to engaging bankers, etc.).

In a nut shell, as an estimate, accounting professionals typically cap out at about $300,000 - $400,000 a year with an 80% success rate. Finance professional's don't really cap out - fund managers and banking directors make tens of millions of a dollars each year, but the success rate is much lower (probably around 10%).

Hope this helps.

I'm going to shed some light on accounting based off of what I've heard from some friend from school. It isn't all that bad it's bad out to be, and honestly if you're good at it you can make a great living out of it, depending on your specializations down the road.

Usually a lot of accounting students have a hard-on for going down the Big 4 track with the hopes of making partner. This job path is fairly stable, but will get very competitive and stressful at the higher levels, and for the amount of stress that you'll have to endure between busy seasons, studying for the CPA, and dealing with oftentimes lethargic management, this isn't always the best thing to do. You can look up what partners at the Big 4 generally make. From some acquaintances in the Big 4, hours will be very dependent on client expectations and when busy season happens.

Something I was thinking about this morning is the possibility of working for a private accounting company that has a specialization in servicing high net worth individuals. Particularly, if you get into business with some tax lawyers, I'd imagine you could open up your own practice and specialize in this. Your career would be what you make of it.

Lastly, you could go into the accounting department of something like a F500 and then be on the Chief Audit Officer track, or you could also transition into corporate finance , treasury, financial planning & analysis, or whatever else at a F500, which would lead to the CFO track.

Everyone else here has mentioned some great things you can do with finance, and personally it's more interesting, but this isn't to say that accountants never thrive, just take everything with a grain of salt.

Check this afternoon’s webinar Webinar: A Look Across Industries - IB, S&T, AM or MBA vs. CFA?...which is right for you? -- 7pm EST, 1/17/18

I think I can add to some of the points discussed here a little bit. I majored in finance, did a masters of accounting and work in FDD, which is technically still accounting, but for M&A transactions and requires an understanding of finance/deals to service PE funds.

The people here talking about how accounting is counting beans while finance is forecasting how many beans there will be in the future are generally correct, but it's more nuanced than that. A lot of the work I do in FDD actually revolves around understanding the business's operations and translating these inner-working into financial statements to communicate the firm's performance. As such, we actually have a decent amount of input into issues we've encountered with Target companies and help the "pure" finance teams (i.e. IB/PE firms) understand how to model the firms they want to buy as a result.

A simple example relates to inventory, which has a direct impact on the working capital peg set. As the accountants, we might look at the company's inventory price variance policy, realize standard costs are below actual costs, and the company isn't capitalizing these variances into inventory at period-end. Therefore, working capital is understated (inventory should be higher) while EBITDA is lower since they're expensing everything on the P&L.

This is just a small example of how accountants can add value beyond providing assurance that the financial statements comply with GAAP. If they're good and can think outside of simple debits/credits and GAAP guidance, they can provide a better understanding of financial performance, despite not making any forecasts. A lot of accountants in industry also work cross-functionally with other departments to improve certain operating deficiencies or understand why certain BUs, etc. are failing, which is very valuable knowledge for leaders of an organization.