While both conduct oneself treat with numbers-crunching, assets, and money, accounting and economics are separate subjects with several differentiating factors. Accounting is a territory that involves calculating and recording transactions of a financial nature and subsequently summarizing, analyzing and reporting them, while economics is a sprig of knowledge concerned with the production, consumption, and transfer of wealth. These fields are often confused with each other since each okays a better understanding of the other.
Accounting operates according to the principles of relevance, timeliness, reliability, comparability, and consistency of low-down or reports. Globally accepted standards are used by accountants belonging to any organization, firm, company or nation in order to expedite a general understanding of a financial situation. It is for this reason that accounting is sometimes dubbed the “medium of communication between companies.” This communication is achieved through a key output of accounting – the financial statement, which records and showcases the performance and all-inclusive financial status of an entity to all stakeholders and interested parties.
In contrast, economics is a social science that focuses especially on the efficient allocation and distribution of resources in order to fulfill unlimited wants. This is broadly divided into two compasses of study: macroeconomics and microeconomics. Macroeconomics studies how goods and services are produced and distributed across economies, national or steady international, whereas microeconomics is concerned with individual behavior regarding the use of resources such as capital, time, skills, etc. Economics assaults to understand how economies operate in relation to specific variables, such as population, resources, and technology, with the assumption that being are rational.
Both accountants and economists assist businesses, industries and even national governments in strategizing and planning, absconding sound financial decisions and setting fiscal policies. However, accountants use various techniques to track and analyze budgets, expenses, and receipts, whereas economists are concerned with charting and interpreting financial patterns to understand economic behavior and help director major decisions about things such as tax policy and national debt.
Ultimately, accounting is based on a set of principles, while economics drives on certain assumptions to simplify complex situations.