What does finance and accounting mean?

Not only professionally, but also in everyday life, one repeatedly skims over terms that one basically does not understand in their entirety. Most of the time, you have a rough idea of what something means and that is enough to get you through the bureaucratic endurance 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.

The financial system

That finance almost all economic sectors together that deal with finance in some way (or the subject). This is differentiated into 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 revenues.
Private finance stands for all areas that deal with the finances of private individuals.

It is important to note that "finance" does not only mean investments, shares, the stock exchange or Bankingbut also taxes and insurance.

Thus, securing liquidity, financial management, treasury, controlling but also the accounting Sub-areas of finance.

The accounting system

Accounting is ? as already mentioned ? part of the financial system. It describes all procedures that are used to record and monitor business activities. This includes, on the one hand, the processes that are directed outwards, but also those that are processed internally. For example, money transactions and orders for goods or deliveries are documented. This is important for a company because all transactions can 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. Income, expenses, as well as the turnover figures (profit statement) are part of it. 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 the company's management, as already mentioned, for the purpose of planning and control. For this purpose, all information relating to the company's performance, processes and profits is recorded, documented and processed. In this way, structures can be further developed, better coordinated, monitored and made more successful.

Of great importance here is the Controlling concept, which can be determined through cost and activity accounting and the plan for improving the Business processes represents.