What does finance and accounting mean?

Not only professionally, but also in everyday life, we often skim over terms that we don't really understand as a whole. In most cases, you have a rough idea of what something means and that is enough to get you through the bureaucratic long run to your destination. In our experience, finance and accounting are among these terms. The very fact that finance and accounting must be seen separately is a new approach for some people.

The financial system

That finance almost all economic areas that deal with finance in some way (or the topic). A distinction is made between public and private finance.

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Public finance is sometimes also referred to as financial management and describes the tasks of the Ministry of Finance at federal and state level to regulate government revenue.
Private finance stands for all areas that deal with the finances of private individuals.

It is important to note that "finance" does not just mean investments, shares, the stock market or Banking transactionsbut also taxes and insurance.

Liquidity assurance, financial management, treasury, controlling but also the accounting Sub-areas of finance.

The accounting system

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As already mentioned, accounting is part of finance. It describes all procedures used to record and monitor operational activities. On the one hand, this includes processes that are directed outwards, but also those that are carried out internally. For example, cash transactions and goods orders or deliveries are documented. This is important for a company as it allows all transactions to be presented to the tax office, banks or other institutions.

Another important area of accounting is the Documentation of data for planning and controlling the company. Here, too, a distinction is therefore made between internal and external accounting.

The external accounting system

External accounting - or external financial reporting - describes the presentation of the internal financial situation to external bodies as described above. This includes income, expenditure and sales figures (profit and loss account). Therefore, financial accounting and the Annual financial statement are equally counted as external accounting. External accounting is also subject to the German Commercial Code.

Management Accounting

Internal accounting, on the other hand, which is usually known as "management accounting", is used by company management, as already mentioned, to planning and control. All information relating to the company's performance, processes and profits is recorded, documented and processed for this purpose. This allows the structures to be further developed, better coordinated, monitored and made more successful.

Of great importance here is the Controlling conceptwhich can be determined by cost and performance accounting and which defines the plan for the improvement of the Business processes represents.