What's the difference between accounting, finance and budget? Are some of them included in the others?
closed as general reference by Kris, Zairja, Andrew Leach♦, MetaEd♦, Marthaª Nov 2 '12 at 17:07
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These terms all overlap to some degree because they all usually deal with money (though people sometimes use them to describe other resources, such as in computer networking, where there's no money but there is a bandwidth budget and bandwidth accounting).
First the definitions:
- (noun) a sum of money allocated for a particular purpose
- (noun) a summary of intended expenditures along with proposals for how to meet them
- (verb) to budget (make a budget)
- (noun) a system that provides quantitative information about finances
- (noun) the commercial activity of providing funds and capital
- (noun) the branch of economics that studies the management of money and other assets
- (noun) the management of money and credit and banking and investments
- (verb) obtain or provide money for a transaction
- (verb) sell or provide on credit
So your finances is your money, which you organize into a budget (spending plan), and you use accounting to track spending and income. If your budget (allocated sum) is empty, you might finance (obtain money or credit) your purchase.
Since these terms are related, they are sometimes used interchangeably when referring to budgeting or planning, because accounting and budgeting are a subset of finance management, and without accounting you can't budget. Once you've done the accounting you can budget for spending. Once you've budgeted you have a budget, and you can say that you have funds in a budget. In an organization you often have hierarchical budgets: the finance/accounting department of the CIA creates a budget and submits it to the government; the government then creates its own budget which contains the budgets of the CIA and the other departments such as the NSA, FBI, MIB, etc.
In general terms, accounting is the process of tracking your finances. Finances are any monetary transaction; a sale, a purchase, a return or exchange, or even finding a $10 bill on the street. A budget is a guideline for much money you expect to spend or receive as the result of a set of transactions in a given time period.
Everybody has finances; they receive income and purchase goods and services. Most people have some level of accounting for their finances, even if it's only their monthly bank statement or check register. Some people use budgets to try to manage their finances, some don't. In order to use a budget effectively, you need to have good accounting.
In the corporate environment, many places will use "Finance Department" and "Accounting Department" interchangeably.