Accounting vs. Economics
People often confuse accounting with economics. What they perceive as accounting may actually be economics, or vice versa. More so, many professionals educate themselves under various fields concerning both subjects or disciplines, because learning one will surely entail getting to know the related concepts of the other.
So what is accounting, and when was it first conceptualized? Accounting, as a field of study, is already an old discipline. It has existed long before the concept of finance was developed. In fact, records of accounting can be tracked as far back as 7,000 years ago. It simply involves preparing records of accounting, and analyzing or understanding financial statements.
Accounting is governed by various principles that include: Relevance, timeliness, reliability, comparability and consistency of information or reports. Each firm, company, organization or nation, has its own accounting sector that prepares statements based on a globally accepted set of standards.
At the end of almost all accounting processes, there is a result. This key output of accounting is termed as a financial statement. These statements are used to communicate, and give light to the public, on how well the company performed, or tell them about the financial status of the firm. Hence, accounting is dubbed as the medium of communication between businesses. It is the language used to make everybody concerned understand.
Conversely, economics is a study, or a science, that deals with the issue of scarcity. The basic premise of this discipline, is that people and everybody concerned must employ certain means to counter the very limited resources available. It centers its study on the production, distribution and consumption of goods and services. The concept of economics also tries to understand how certain economies operate, and how economic variables interact with each other. In addition, the two major subdivisions of this discipline are microeconomics and macroeconomics.
Economics is also considered as a radical disciple, that is often criticized because of its use of assumptions. Many experts regard some of the most popular economic concepts, such as making the ‘rational choice’, as too unrealistic and unverifiable.
Overall, although accounting and economics are two very related disciplines, they still differ in the following aspects:
1. Accounting utilizes certain principles to support its actions, while economics makes use of assumptions that will tend to make certain situations simpler.
2. Accounting prepares, analyzes and understands financial statements, whereas economic studies the production, consumption, and even the distribution, of certain goods and services.