Financial Reporting vs. Financial Accounting: What's The Difference? (2024)

When carrying out financials for your business, it can be confusing trying to determine the difference between accounting and reporting. However, being able to understand the difference can help you make the most out of your financial tools and you can better understand your business.

Financial reporting software can transfer your financial reporting and accounting into a much easier task by keeping all of your information up to date and in one place. Let’s explore how this can be implemented across financial accounting and reporting.

What is financial reporting?

Financial reporting is the process of tracking, analysing and reporting your company’s financials. Reporting focuses on surveying the information you’ve gained through accounting processes. This analysis enables your business to assess your financial position, evaluate past performance and forecast future performance. Essentially, reporting takes a more overarching view of a business's financial position, which can help identify any areas of concern or strength. There are different types of financial reports, including:

  • Cashflow forecast — one of the main objectives of financial reporting is cashflow forecasting, which takes a short to medium-term view of cashflow. This ensures that a business is maintaining a strong cash flow without any immediate concerns.
  • Sales forecast — this financial reporting shows where future sales are expected to come from. This focuses on the customer pipeline, looking at the likelihood of conversion and adding value to the business.
  • Risk reporting — reporting on potential present or future financial risks is valuable information that the wider business should be aware of. This will help safeguard against any future potential financial pitfalls.
  • OKR (objectives & key results) reporting — reporting on future objectives and key results can help boost focus within the business, making future goals both clear and achievable.

What is financial accounting?

Financial accounting focuses on collecting a business's financial data in preparation for reporting, and keeping track of income and expenses. A central aspect of financial accounting is collecting key data, including receipts, invoices and reports that relate to business income and expenses. Accounting also involves maintaining and managing financials whether this is done manually or via cloud accounting software. Some key accounting roles include:

  • Collecting financial data on income and expenses.
  • Managing the general ledger to keep all transactions in one place.
  • Generating the income statement, balance sheet and statement of cash flow.

What are the differences between financial reporting and financial accounting?

So, what are the key differences between financial reporting and accounting? And how might you use them in your business? Let’s explore some key differences below:

  • Storing vs. analysing — accounting is for generating and storing financial information to be later analysed via financial reporting.
  • Compiling information — financial reporting is for compiling all information, which isn’t possible with financial accounting.
  • Accounting rules — with financial accounting, specific rules need to be followed in order to remain consistent and keep business accounts running smoothly. If rules aren’t followed, calculations can be completely disturbed, which results in inaccurate financial reports.
  • Forecasting — financial reporting focuses on forecasting future finances and influencing future expenditures. Accounting gathers this information so that it can be analysed with reporting in the future.

The key objectives of financial reporting and accounting also differ from one another:

Accounting

  • Keeps a record of financial history
  • Provides a picture of a company’s financial position
  • Gathers financial information in an easy-to-understand format

Reporting

  • Predicts the financial future
  • Analyses and interprets a company’s financial position
  • Focuses on cash flow and economic value

Is financial accounting or financial reporting more helpful for businesses?

Both financial accounting and reporting are important for your business and each serves its own purpose to shed light on your business finances. I, in fact, they go hand in hand. Financial accounting is vital for the day-to-day running of a business. Keeping books up to date and maintaining consistent processes is key to keeping track of income and expenses and being able to prepare reports.

Financial reports are important because they can communicate to the wider business and investors how a company is performing. They can also help businesses to plan ahead, predict future outcomes and learn from past mistakes. Stability and consistency lie at the heart of a successful business in regard to financials. Both financial reporting and accounting are vital components of this.

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Financial Reporting vs. Financial Accounting: What's The Difference? (6)
Financial Reporting vs. Financial Accounting: What's The Difference? (2024)

FAQs

Financial Reporting vs. Financial Accounting: What's The Difference? ›

Compiling information — financial reporting is for compiling all information, which isn't possible with financial accounting. Accounting rules — with financial accounting, specific rules need to be followed in order to remain consistent and keep business accounts running smoothly.

What is the difference between finance accounting and financial accounting? ›

Finance: The Basics. The difference between finance and accounting is that accounting focuses on the day-to-day flow of money in and out of a company or institution, whereas finance is a broader term for the management of assets and liabilities and the planning of future growth.

What is the difference between financial statements and financial reporting quizlet? ›

"Financial statements": balance sheet, income statement, statement of cash flows, and statement of changes in owners' or stockholders' equity. "Financial reporting": includes the basic financial statements and any other means of communicating financial and economic data to interested external parties.

What is the difference between financial statements and accounting statements? ›

They both summarize a company's financial performance and position. While some may differentiate by using financial statements for external reports and accounting statements more broadly, they essentially refer to the same thing reports showing financial health.

What is the difference between financial reporting and financial analysis? ›

Financial reporting are simply the numbers the company reports to track its performance. Such as monthly, quarterly or annual accounts. Financial analysis is the analysis you do based on those numbers. You can analyse the individual product's performance, profitability, cash flow conversion, etc.

What is financial reporting? ›

Financial reporting is one of the most critical business processes that accounting, finance, and the business must understand and appreciate. Financial reporting is the comprehensive review of monthly, quarterly, or yearly financial data to drive better business performance and results.

What is the difference between finance and accounting give an example? ›

Accounting is a narrower field that focuses on professional processes to manage numbers and accounts, while finance uses the same information to analyze potential growth patterns in order to strategize company finances. Although these fields sound similar and utilize similar skills, they have their differences.

What are the differences between finance accounting and financial reporting structures? ›

The main difference between them is that those who work in finance typically focus on planning and directing the financial transactions for an organization, while those who work in accounting focus on recording and reporting on those transactions.

What is the difference between financial reporting and non financial reporting? ›

Hence, it is found that, in the case of financial reporting, the evaluation of the governing act is done only by shareholders, in the case of non-financial reporting, the evaluation is made by other stakeholders such as employees, customers, community etc.

What is the goal of the financial reporting? ›

The objective of financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity. Financial reporting requires policy choices and estimates.

What is financial reporting and why is it important? ›

In simple terms, a financial report is critical for understanding how much money you have, where the money is coming from, and where your money needs to go. Financial reporting is important for management to make informed business decisions based on facts of the company's financial health.

What are the different types of accounting and financial statements? ›

The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. These three statements together show the assets and liabilities of a business, its revenues, and costs, as well as its cash flows from operating, investing, and financing activities.

What are all 4 financial statements? ›

The 4 types of financial statements
  • Balance sheets.
  • Income statements.
  • Cash flow statements.
  • Statements of shareholders' equity.
Nov 1, 2023

What is the financial accounting and reporting? ›

Financial Accounting and Reporting (FAR) monitors all Education and General Funds, Designated Funds, Auxiliary Funds, Restricted Funds, and Agency Funds. FAR is responsible for maintaining a high level of understanding of the rules and regulations and providing technical assistance to the departments.

What is the difference between a report and a statement? ›

While annual reports offer a comprehensive narrative on various aspects of the business, financial statements focus on numerical data. By understanding their differences and following the tips provided above, businesses can effectively communicate their financial health to stakeholders.

What is financial statement analysis and reporting? ›

Financial Analysis and reporting is an integral part of overall financial analysis carried out by various business organizations in India and all around the world. It depicts the financial health of any company and helps the companies to augment their financial resources and management of generated funds efficiently.

What is the difference between finance and financial? ›

Finance is the management of: money, credit, banking, and investments. While financial just means that it relates to finance! Example: Do you have enough money to finance your trip to France?

What do you mean by financial accounting? ›

Financial accounting is a particular type of accounting that includes a method of documenting, summarising, and reporting the transactions arising from business operations for a period of time.

Is financial accounting a finance? ›

The main difference between finance and accounting is that finance can be thought of as the more general subject of the two areas, while accounting is specific to its practice. Many business programs are based on a foundation of what is known as the FAME subjects: finance, accounting, management and economics.

Which is better finance or accounting? ›

The field of finance offers more career choices but also less predictability. In some cases, careers in finance might offer higher pay. Careers in accounting can offer more predictable and stable work but less pay in many cases.

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