Background of the Study

1. An investigation of the relationship between accounting and finance: Who is benefitting who?.

2. The ethics that go into tax evasion?.

3. Analysing international accounting standards: What is effective, and what needs more work?.

4. Where is the field of accounting currently headed: Future predictions?.

According to Brief and Peasnell (2013), accounting and finance both are not same but highly related to each other. From the very beginning, the world of business is very much depended on both of these terms. However, these terms may cause confusion in the minds of people who are unfamiliar with the actual meaning of the terms. Sometimes, people use the term “accounting” in place of “finance” and vice-versa (Droms and Wright 2015). This creates wrong concepts in the minds of the people. However, in order to understand the meaning and usage of these two concepts it is very necessary to study the two terms in detail and try to investigate upon the relationship between these two.

This study had been focused on the topic “An Investigation of the Relationship between Accounting and Finance”. Along with the investigation on the relationship, the study had also focused on the analysis between accounting and finance, as to which one is benefiting the other. However, this particular chapter of the study had introduced the background of the study along with the rationale, in which the main issue behind this research had been stated. At the same time, this chapter had also stated about the aim, objectives, questions, significance and structure of the project.

In the words of Cleary and Quinn (2016), finance is a wider term that includes the elements of accounting along with the other factors. On the other hand, Shim (2016) stated that accounting is the most vital part of finance and without the data and information of accounting finance cannot take any decision. However, in this context, Fields (2016) argued that finance does not include the subject of accounting only, but it includes statistics, taxation, economics and costing also and all of these subjects are the essential parts of finance.

Problem Statement

Vysochan (2016) opined that many non-finance or non-accounting people are there, according to whom finance and accounting are same. In reality, they have very close relationship but they are not same. However, this relationship is not very clear to every people and much confusion is there regarding the relationship between these two terms. At the same time, some people believe that accounting is beneficial for finance and on the other hand, some believe the opposite. Therefore, in order to get a clear knowledge about accounting and finance, it is very important to investigate about the actual relationship between accounting and finance and in order to do that this particular study had been conducted.

The main problem that had been identified behind this study was the confusion in the minds of the people regarding the concepts of accounting and finance. As the problem is in the understanding of the basic concepts of these two terms, the relationship between these two is also very unclear. Hence, people cannot understand whether accounting is benefiting finance or the opposite happens.

What is the issue: There was a vital issue behind this particular research project. The business world is growing day-by-day and so in this growing and competitive business world, it is very important for the business organizations to do each activity carefully (Brief and Peasnell 2013). Therefore, in this increasing trend, the unclear basic knowledge of accounting and finance is a big issue.

Why it is an issue: Due to the wrong concept, many times the companies recruit wrong people in various positions. For example, sometimes the companies recruit accounting people in the vast area of finance and due to that in many cases, the financing decisions become ineffective or wrong. This creates an impact on the future of the business and so it is a big issue.

Why it is an issue now: At the same time, if this matter is discussed on today’s context, it can be identified that in today’s competitive context, a single wrong or imperfect decision can ruin the future prospects of the companies. This means any wrong decision due to the wrong concept regarding accounting and finance, could lead to troubles for the organization in future. Therefore, the misconception between accounting and finance is a vital issue now.

Research Rationale

What could the research shed light on: However, this study had tried to identify the actual relationship between accounting and finance by investigating upon their concepts, characteristics, elements and uses. The study has also analyzed many existing or previous literature to get the theoretical knowledge of the two terms so that the relationship becomes clearer.

The aim of this research was to identify the relationship between accounting and finance and identify which one of the two terms is more beneficial to the other.

The objectives of this study have been stated below:

To identify the basic concepts and characteristics of accounting and finance.

To identify the advantages and disadvantages of accounting and finance in the real business context.

To analyze the inter relationship between finance and accounting.

To find out some areas those are important and must be focused on in order to get a better understanding of the relationship between finance and accounting.

The questions of this research have been stated below:

What are the main and primary characteristics and elements of accounting and finance?

How the business organization gets benefited by using the knowledge of accounting and finance?

How accounting and finance are related to each other?

How the people can understand the relationship between accounting and finance clearly?

It had been stated that the aim of the research was to identify the relationship between accounting and finance. In order to reach the aim of the study, investigation had been carried on the characteristics, advantages and disadvantages of the two terms. With the help of these investigations, the researcher had the clear idea and the differenbetween ces accounting and finance. This clear understanding would be helpful for many people those could not differentiate between the two terms. At the same time, the study has also been very much effective for understanding the benefits accounting and finance, which are very helpful in present business context.

The structure of the can be identified in the following diagram:

Figure 1: Structure of the study

(Source: Created by author)

The above diagram has shown the structure of the study, which is very systematic. The first chapter is “introduction”. This chapter actually had introduced the overall dissertation by stating about the aim and objectives of the study along with the background, rationale, questions and significance of the same.

Research Aim

The second chapter is the “literature review”. This chapter discusses the existing literature which forms the base of the secondary data and theoretical background for the study. The third chapter states about the methodology that the study has followed. This chapter also states about the philosophy, approach, design, data collection method, data analysis methods of the study. The fourth chapter of the study shows the data analysis and findings and the fifth or the last chapter concludes the overall project and had provided some suggestions or recommendations to help in understanding the relationship between accounting and finance.

During this chapter, it had been identified that the main issue behind this study was the misconceptions in the minds of the people regarding the terms – accounting and finance. It had also been identified that the study has aimed to identify the relationship between these two terms and has followed a specific structure in order to reach the research aim effectively.

Introduction

This chapter discusses the existing literature related to the topic of this particular study. This chapter of this study includes the discussions made  regarding the concepts and characteristics of terms accounting and finance. Along with these, the discussion had also covered the advantage, disadvantage, differences, and relationships of these two terms. At the same time, the theories related to finance and accounting were also the part of this discussion.

Previous studies

In the study “The Relationship between Accounting and Taxation Insight the European Union: The Influence of the International Accounting Regulation” by Dan Dacian Cuzdriorean and Dumitru MatiÅŸ it has been identified that accounts and tax in a financial statements of individual or company are different in recognition as well as there are differences in measurement of accounting profit and tax profit. The study also conducted the relationship between accounting and taxation in the environment of Romanian accounting that discloses the adoption and affect of IFRS or IAS. In the global economy, accounts and tax are a part of finance in an enterprise but it cannot be said that they are related and similar. Accounting profit is considered on an accrual basis while taxation profit measurement does not contain certain accounting transactions (Oeconomica.uab.ro 2016).

Research Objectives

In another study of “The Role of Personal Liability as a Critical Variable in the Definition of Small Business from the Perspective of Financial Management” by D. L. Newman the relevance of finance of small business for the capital structure, incomes and expenditures decisions for operating the business and dividend policy has been discussed. The theory has expressed the difference between the owner and the firm and accordingly the liability is separate. In this study, the accounting discussion has been made in context to finance therefore, no differences or dissimilarities have been pointed out in the study (Newman 1996).

Conceptual Framework

Figure 2: Conceptual framework

(Source: Created by author

Discussion on the Elements of Accounting and Finance

As discussed in the research study about an investigation of the relationship and differences between accounting and finance. Finance refers to the overall management and financial decisions of a business enterprise while accounting refers to recording and recognizing of the financial events happened in the operation and marketing of the business (Anbar and Eker 2016). The basic elements of accounts and finance are discussed as under.

Elements of Accounting:

Assets: Assets are the most important resources used by organizations to conduct its business the value of which is recognized in the financial statement. However, the recognition can be done only if the owner has its ownership and controlling rights as well as there should be “future economic benefits” present in the assets (Khan et al.  2015).

Liabilities: Liabilities are the obligation of the company or individual that needs to be paid off because of borrowed funds or purchases made in credit payment (Afonso et al. 2015).

Revenues: Revenues are the cash inflows of the business operations of company that are recorded in the profit and loss account or income statement of the financial statements. Revenues are the sales proceeds of the products of the company trades into, that means any sale proceeds on sale of assets cannot be recorded as revenue (Floyd and List 2016).

Expenditures: Another important element of accounting is expenditures that comprises of the purchases and other recurring indirect expenses related to the operation of business (Meder 2015).

Research Questions

Capital: Capital is the most important element of accounting since the business operates with the funds employed by the owner called capital. It is recorded under the head shareholders’ fund in the balance sheet of the company (Nimtrakoon 2015).

On the other hand, elements of finance are as follows:

Investments: Investment is one of the vital elements relating to business finance because it is the estimation of funds that a company can invest in order to operate its business and the amount of funds it requires to borrow (Dalwai Basiruddin and Abdul Rasid 2015). This is a financial decision that is taken by the finance management of the company and recording of the capital amount at the end of the accounting year is called accounting.

Financial Stability: In order to run an organization it is important to stabilize its financial activity that is managed by the finance executives of the company (Hamid, Ting and Kweh 2016). Financial stability is measured by computation of net profits earned during the accounting years as well as analyzing the reserve funds and other capital inflow and outflow of the business.

Ascertainment of Profit: A business is formed in order to generate profit hence, the finance executives should manage and evaluate the expected and efficiency of the business to generate profits and to maximize the profit as well (Zhou 2016). The profit should be ascertained by considering all the accounting elements and taxation elements.

Working capital: Working capital means the availability of current asset funds in order to meet the current obligations of the organization. Working capital is determined as the ratios of currents assets to current liabilities and the standard ratio as per the industry should be one or more than one (Loughran and McDonald 2016).

Evaluation of the Primary Characteristics of Accounting and Finance

The purpose of accounting is to record and recognize the useful information and transactions taken place in the organization that presents certain primary and qualitative characteristics of accounting. On the other hand, finance provides overall business decisions, recommendations, and financial management to operate the business.

Primary Characteristics of Accounting are as Follows:

Significance of the Study

Understandability: The primary characteristics or objective of accounting is providing understandability to the users of the financial reports of the company (Beaumont 2015). It states that the users of the report are able to understand the information and financial data provided in terms to make decisions about the company.

Relevance: Another characteristic of the accounting is relevance of the information provided in financial statement. It means that the accounting records provide the relevant data and entries in context to the “predictive value, feedback value and timeliness”. Accounting is prepared on an accrual basis so that it can reflect the total inflows and outflows related to that accounting year even if the payment or receipt of cash is made before or later to the reporting accounting year (Gippel, Smith and Zhu 2015).

Reliability: Accounting records should present the information that provides reliability to the users of the financial statements so that the company provides true and fair view (Guariglia and Mateut 2016). The accounting information should be verified and authenticated so that it comply with the standards and principles as per the international financial reporting standards and principles.

Apart from these there are secondary characteristics also, that is consistency and comparability which reflects the comparing values of two accounting periods so that the decision making process becomes more accurate.

Primary Characteristics or Features of Finance are as Follows:

Financial Activity: Financial activity involves planning and managing the finance of the enterprise required to run its business operation. It is a critical and important characteristic of finance, hence it can be said that finance and accounting are not the same (Philippon 2015). To run business, finance is the most important and vital tool that needs to be managed properly so that the costs involved can be controlled as well as the profits can be maximized. 

Investment Activity: Next feature of finance is investment activity. As the discussion made above, investment is a vital activity or factor of company because the operation and economy of the company depends on the investments made by the owners as it reflects the efficiency of the company to run the business activities and to maintain sustainability (Ball, Grubnic and Birchall 2014).

Structure of the Study

Raising the Finance: It is the most important characteristic of finance because this activity presents the options and suggestions to raise the finance if in case the invested finance is not sufficient. Financial activity in this case suggests the types of shares to be issued by the company, types of bonds or debentures and borrowed funds (Khan et al.  2015).

Marketing Activity: Finance of a business organization also identifies, decides and recommends the marketing related information and ideas so that the business can generate maximum revenue and accordingly maximize its profits (Gippel, Smith and Zhu 2015). Apart from that, the finance department also determines the ideas and types of fixing price to the products to grab the market industry and attract its customers.

Disadvantages of Accounting and Finance

According to the above discussion on the characteristics of accounting and finance, it can be said that the characteristics of these two terms indicate that the business organizations can get several benefits from accounting and finance. However, in this context Khan et al. (2015) mentioned about some negativity or disadvantages of accounting and finance. These disadvantages are stated below:

Disadvantages of accounting:

The main disadvantage that the business organizations face while using accounting in the business operations is non-recording of the non-monetary events or transactions. Accounting records and recognizes only those events or transactions, which can be measured in monetary terms. However, there are some events or parts of the business that cannot be measured in terms of money (Floyd and List 2016). For example, the quality that means the skills and knowledge of the human resource of the companies are not recorded or measured by accounting. However, the skills and knowledge of the human resource are one of the most important parts of the business organizations.

Another disadvantage of accounting is based on some estimations those are sometimes unrealistic. If the knowledge and skills and knowledge of the accountant or finance manager are not up to date, then the estimations done by the accountant or finance manager can be wrong or unrealistic (Dalwai, Basiruddin and Abdul Rasid 2015).

Apart from the above two disadvantages, another disadvantage of accounting is there and it takes place due to the window dressing done by the accounting or related people within the organization. This is generally done in order to show the good financial position of the company. However, this may lead to the false or wrong result of the calculations done in accounting.

Disadvantages of Finance

Like accounting, finance has also some disadvantages or negativity. The disadvantages of finance are stated below:

The first disadvantage of finance is that activity of finance requires much knowledge (Guariglia and Mateut 2016). It has been stated before that finance includes economics, taxation, statistics and accounting. Therefore, if a person wants to deal with finance or financial activities, then he or she needs to have good knowledge regarding all of these areas. This is very difficult and in most of the cases, the people can be specialized in one or two areas and with that knowledge they try to manage all the other areas and so this creates mistakes.

Next disadvantage of finance is that the activities included in finance are very much time consuming. In order to solve any financial problem within the organization, the management of the companies needs much time to solve the problem. Sometimes, this timeframe becomes so longer that the effects of the problem affect the financial growth of the business (Philippon 2015).

Another disadvantage of finance is that finance is very complex and not understandable for every people. As finance includes various subject areas under the same roof, the level of complexity is very high in this case. Due to this complexity, if any fraud or mistake took place in financial part of the company, then it becomes very difficult to identify the root of the mistake or fraud along with the reason and solution (Beaumont 2015).

Theories Related to Accounting and Finance

Basic theories of accounting and finance have been represented in consideration to the standards and principles of accounts. Whereas in case of financing theory, there are several approaches and hypotheses used by authors. The accounting theories are usefulness, qualitative characteristics, assumptions, historical cost and principles (Anbar and Eker 2016). Usefulness theory states that the accounting statements and records of an organization should present the useful and necessary information to its users. Secondly, the qualitative characteristics theory represent the reliability, consistency, relevance of the accounting statements and records so that it discloses true and fair view to the stakeholders of the company and its users.

Another theory represents necessary assumptions that are considered while recording and recognizing accounting transactions for the purpose of financial statement. The assumptions should be relevant, authenticated and viable as per the scenarios of the business operations. Lastly, the accounting theory also states that it should be based on the historical costs and principles (Ball, Grubnic and Birchall 2014). For example, assets of the company or manufacturing equipment costs should be recorded using historical costs and if it is recognized using fair value then the historical cost should be stated in the notes to provide information to users.

On the other hand, in case of financial theory there are different theories presented by authors in context to determination and recommendations of financial decisions of the business. These theories are “Arbitrage Pricing Theory”, “Binomial Options Pricing Theory”, “International Fisher Effect Pricing Theory”, “Black Models”, “Cumulative Prospect Theory”, and “Gordon Model for dividend calculation and pricing effect”. Different theorists present these theories as how to determine the pricing of products in order to generate maximum turnover with the consideration of necessary assumptions (Beaumont 2015).

Differences Between Accounting and Finance

As discussions stated in the study, accounting and finance are two different concepts. Accounting is recording and recognizing of the transactions and events in a summarized way whereas finance is an activity in order to determine and recommend cash inflows and outflows in business operation (Philippon 2015). Another important difference is that accounting is prepared for the transactions related to the end of an accounting year whereas the finance is related to the future prospect of the business in terms of planning of cash inflow and outflow.

Accounting is a preparation of compilation of business events in the financial statement that consists of basic elements that is balance sheet, profit and loss account and cash flow for the previous year ended. However, financial activity is planning and recommendation in order to raise the funds, employment of investment funds, working capital funds, so that the business can operate smoothly. Accounting is prepared for the useful information to its users in order to help them with fair decision-making.

Finance may be understood as an activity within the organization which is usually dealt by the finance executives and experts so that business can generate maximum revenue and earn maximum profits and other necessary steps to sustain in the market (Guariglia and Mateut 2016). It can also be said that accounting is a process through which the inflows and outflows of cash and employment of funds is ascertained for the accounting year already ended but finance is a process through which cash inflow and outflow can be managed so that the organization can earn maximum profit.

Identifying the Gap between the Previous Studies and the Current Study

In the previous studies, the researchers mainly focused on the similarities between finance and accounting as a part of the business activity. According to the researchers, accounting and finance are the same content of business organizations that represents the financial performance of the company whereas in this research study it has been pointed out that accounting and finance are two different content of business organization. Accounting refers to the recording and measurement of the cash inflows and outflows that had been occurred during the accounting year and finance relates to the decision making process in future prospect in order to evaluate the profit maximization.

Additionally, the previous studies presented the analysis and evaluation of accounts in terms of financial performance of the company that comprises of capital structure, assets and liabilities, and incomes and expenditures involved whereas there is no difference in explaining the finance part of the enterprise. In this present research study, different theories of accounts and finance as well as differences and characteristics of accounting and finance have been pointed out separately.

Summary

In presenting the literature review chapter of the research study, it can be summarized that accounting and finance are not same in an organization. In fact, accounting and finance are two different components of a business entity that is related in some way but differs in many ways. Accounting represents the useful information of compilation of all the financial data of the accounting year that ended while finance relates to proposed planning and decision-making process to analyze the cost and income structure of the business. The chapter also presented the gap between the previous studies and this research study along with the differences between accounting nd finance for a better understanding.

Introduction

This particular chapter of the study has stated about the methodology based on which the investigation and data analysis of the research has been done. The methodology of the research has included the use of specific philosophy, approach and design of research. At the same time, this chapter also provides a clear idea regarding data collection method and data analysis technique which have been followed during this particular study. The detailed discussion on the research methodology had been done below:

Method Outline

This research project has followed a particular outline in order to reach to the actual goal or aim of the study. The method of the study has included a step by step procedure. In the first step the research had chosen the philosophy, approach and design for the research, which formulates the type of the study or the type of the investigation of the study. In the next step, the research has concentrated upon the data collection for the study and after the data collection; the data analysis takes place.  At last, the research had identified the results of the analysis.

Research Philosophy and Justification

Philosophy is one of the essential parts of a research project. Mackey and Gass (2015) stated that there exists various types of research philosophies and they are positivism research philosophy, realism philosophy and interpretivism research philosophy.

Figure 3: Research Philosophies

(Source: Taylor, Bogdan and DeVault 2015)

Positivism is that philosophy, which is based on the scientific evidence, logic and truth. The extended version of positivism is post-positivism philosophy. On the other side, the realism philosophy is dependent on reality. According to realism, the things which exist in the universe are real (Archer et al. 2015). Apart from the philosophies of positivism and realism, there is another philosophy of research, which is known as the interpretivism philosophy of research. In this particular research philosophy, the researcher tries to interpret all the elements of the research.

However, this particular study has followed the positivism philosophy only. The main reason behind this selection was that the positivism philosophy is based on scientific reasoning. At the same time, this particular philosophy analyzes the elements logically and based on the real evidence.

Research Approach and Justification

This research project had also chosen a particular research approach in order to conduct the investigation in a systematic manner. Mainly two types of research approaches are there and those are – deductive research approach and inductive research approach (Smith 2015).

Figure 4: Research approaches

(Source: Silverman 2016)

In case of the deductive research approach, the researcher tries to reach the aim of the study by developing some research questions or hypotheses. After that, the researcher tries to test the hypotheses or solve the research questions based on the existing literature and theories. On the other side, in the inductive research approach, the researcher formulates some new theories by conducting detailed observations of the facts or reality (Flick 2015).

This particular study has followed the deductive research approach because this approach was much easier than the inductive research approach. At the same time, with the help of deductive research approach, the researcher could reach the aim of the research by formulating some research questions, which is simpler than the formulation of new theories in inductive approach (Taylor, Bogdan and DeVault 2015).

Research Design and Justification

The research designs are of three types and they are descriptive design, explanatory research design and exploratory research design.

Figure 5: Research design

(Source: Mackey and Gass 2015)

Descriptive research design is that in which the researcher collects and analyzes the research data without manipulating the environment. In the descriptive research design, the researcher had the opportunity to analyze the elements of the research in a detailed manner (Silverman 2016). On the other side, there is another research design, which is known as the exploratory research design. This is such a design of research that provides the opportunity to the researcher to explore something during the research.

In case of the studies, which have very few earlier or existing literatures or have no existing literature, exploratory research is more fruitful (Taylor, Bogdan and DeVault 2015). Apart from the descriptive design and exploratory research design, there is another research design known as the explanatory research design. In case of the explanatory research design, the researcher tries to achieve the research objectives by identifying and analyzing the cost effect relationship between the research variables.

However, in this particular research, the researcher has chosen the descriptive research design. This is because the descriptive research design helps in detailed analysis on the research variables. At the same time, the descriptive research design also helps to reach to the research aim by observing the things minutely and this research design does not manipulate the research environment or external factors.

Data Collection Method

A research can include and conduct the study based on mainly two types of research data (Smith 2015). One is known as the primary data or new data and the other one is known as the secondary data or the existing data. Primary data or the new data are generally gathered by survey, interview, focus group analysis and many more (Flick 2015). On the other side, the secondary data is generally collected by the existing sources like, books, journals, articles, newspapers, websites and other channels.

In case of this particular study, the research had been conducted based on the existing or secondary data only. This was because the topic of the study was basically based on the theoretical knowledge and concepts of accounting and finance and the relevant data could be gathered only from the secondary sources. The researcher has studied various books, journals, articles and websites in order to gather the secondary data.

Data Analysis Technique

The data of the research can be analyzed based on the two techniques only, one is quantitative data analysis technique and another is qualitative data analysis technique (Mackey and Gass 2015). In case of quantitative data analysis technique, the researcher analyzes the data based on the mathematical and statistical techniques. On the other side, in case of the qualitative data analysis technique, the data is analyzed based on the facts and theories (Silverman 2016).

In case of this research project, the researcher has analyzed the research data with the help of qualitative data analysis technique. This is because it was not possible for the researcher to analyze the theories and concepts in a mathematical or statistical manner. On the other side, the quantitative data analysis was much critical than that of the qualitative data analysis technique. Due to these reasons, the researcher selected the qualitative technique for analyzing the data.

Ethical Considerations

Ethics is a very essential part of the research, which is needed to be maintained during a research project (Mackey and Gass 2015). Maintenance of ethics is very important in every stage of the research project. The acceptability of a research project depends on the ethics. However, during this particular research, the researcher too has followed some steps in order to maintain the ethical ground of the study.

Firstly, the researcher has taken permission from the appropriate authorities in order to start the project. After that, at the time of collecting the secondary data from various sources, the researcher always tried to collect the data from the reliable sources. At the same time, the researcher also took care of the validity of the data and its sources. On the other side, the researcher also maintained the ethical ground at the time of choosing the technique of data analysis.

Limitations in Research Methodology

Limitation in the methodology of any research project is not a very uncommon thing. Every research methodology has limitations to some extent. During this research, the main limitation that the researcher faced was the time limitation. The methodology that the research had chosen was a bit lengthy. However, the available time for the researcher was less than the required time. At the same time, the methodology of the research demanded secondary data. However, collecting relevant secondary data from the valid sources was a tedious and time consuming task.

Timeframe

Activities	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6	Week 7	Week 8	Week 9
Literature review for the research project
Identifying the gap in the existing literature
Setting the aim, objectives and questions of the research project
Selecting the methodology for the research
Collecting the secondary data from various sources
Analyzing the secondary data by qualitative data analysis technique
Find out the results of the study
Linking the objectives of the study with the findings
Concluding the study and making the recommendations
Preparing the final project
Submission of the research project

Table 1: Gantt chart

(Source: Created by author).

Summary

During this particular chapter of the study, it has been identified that the researcher has followed the positivism research philosophy, deductive research approach and descriptive research design. On the other side, the research was based on the secondary data, which was analyzed through qualitative data analysis techniques. The researcher maintained all the possible steps which were necessary for maintaining the ethical ground of the study.

Introduction

This chapter has shown the data analysis part of the research project. During this particular chapter, the analysis has been made on the secondary data that the researcher collected from various sources. The analysis of the data has been done with the help of qualitative data analysis technique. With the help of the qualitative analysis of the secondary data, an attempt has been made to identify how the terms accounting and finance are dependent on each other and wherein their difference lies.  The analysis of the data had been shown below:

Secondary data analysis

Qualitative Analysis of the Research Data

Influence of Accounting Approaches and Principles on Finance

In has been identified in the very first chapter of this study that finance is a term or subject that includes various elements like, economics, statistics and many more along with accounting. This means, accounting is a part of finance or financial system. However, in the words of Scarpellini, Valero-Gil and Portillo-Tarragona (2016), the financial system or financial activities or finance is influenced by the approaches and principles of accounting.

According to Christensen, Nikolaev and Wittenbergâ€ÂMoerman (2016), the sociological approach of accounting states that accounting is an ethical approach and it must be done considering the social welfare as the central point. At the same time, the economic entity principle of accounting suggests to consider the existence of the business organization separate from the owner of the organization. These types of principles and approaches of accounting influence the business organization to operate their business ethically. For example, presently, most of the business organizations consider themselves as the social entity. This type of thinking clearly indicates that the business organizations are influenced by the social approach of accounting. Due to this influence, the management of the business organizations always try to conduct their financial activities in such a way so that it can cater to the wellbeing of the society. If organizations aid in the well being of the society, it may receive support from the same. Hence, the number of customers of the organizations increases and ultimately their financial position is improved (Oulasvirta 2016).

On the other hand, Hussan and Sulaiman (2016) mentioned that the financial position or finance is also influenced by the economic approach and full disclosure principle of accounting. Economic approach of accounting helps in positive development of the economy, which is a part of finance or financial system. At the same time, Oulasvirta (2016) stated that the full disclosure principle influences the management of the business organizations to disclose each activity of information related to their business activities to the stakeholders. This denotes the transparency in the business activities of the organizations, which in return provides financial stability to the organizations. However, if the organizations fail to disclose the information properly, then it might result in financial degradation of the business organizations (Hussan and Sulaiman 2016). For example, in the year of 2003, an improper financial disclosure has been identified by KPMG in the accounting records of Xerox. Due to this corporate scandal, the company was charged by a high amount of money as the penalty. This actually affected the financial position of the company.

Therefore, from the above discussion, it can be clearly identified that finance is highly depended on the approaches and principles of accounting. If the accounting principles and approaches are not followed properly, then the financial results and situation become poor. At the same time, if maximum organizations in the country fail to follow the accounting principles and approaches properly, then it can affect the financial system of the country from the negative side.

Analyzing the Benefits that the Business Organizations get from Accounting and Finance

The discussion covered in literature review and the above sections of the study have shown that accounting and finance both help the business organizations in conducting the business activities in a proper way. This denotes that the business organizations get several benefits from accounting and finance. The benefits can be of different types and these are stated below:

Benefits from Accounting:

Vysochan (2016) stated that the main advantage that the business organizations get from accounting is the systematic and easy recording of information. The principles and guidelines in accounting, guide the accountants of the business organizations as to how they can identify the actual market position of the companies by doing simple calculations of accounting only. In this context, Fields (2016) noted that in the current business scenario, following the accounting principles and techniques is mandatory and so it does not matter whether accounting calculations are simple or not.

On the other hand, Christensen, Nikolaev and Wittenbergâ€ÂMoerman (2016) commented that the management of the organizations could get access to reliable data of the organization at the time of decision-making if the company follows the accounting system properly. However, Shim (2016) argued that the management can get the reliable information at the time of decision-making only when the company follows a specific accounting technique. Otherwise it can be a mess because there are various techniques of accounting available to the business organizations and if the organizations use accounting by mixing up different techniques then the results might be wrong.

However, Guariglia and Mateut (2016) suggested that the business organizations must follow the system of accounting properly because accounting techniques help the business organizations to maintain the previous data and information in an objective manner. This objective nature of the accounting information helps the firms or companies to prepare standard reports at the end of the year (Scarpellini, Valero-Gil and Portillo-Tarragona 2016). Therefore, from this analysis, it can be identified that though there are some problems in accounting, it is still very helpful if the organizations follow the accounting techniques properly.

Benefits of Finance

Finance is the most important part of a business organization. Within the business organizations, finance includes taxation, budget, policies, payment system and many more. The main advantages that the organizations get by including the specific financial system in the business are stated below:

The first benefit or advantage that the business organizations get is flexibility in the business operation. A particular financial system within the business organization provides specific systems for different activities of the business. In this context, Beaumont (2015) added that the financial system or finance helps the business organizations to forecast the budget and cash flow for the future years.

Along with this, Gippel, Smith and Zhu (2015) mentioned that the idea of finance helps the management of the organizations to take advanced strategies for the easy growth of the business. According to Philippon (2015), finance helps the management of the business organizations to ascertain and analyze the performance of the company in mathematical and statistical way. At the same time, finance helps the organizations to ascertain their contribution towards the economic growth of the country (Difference Between 2016).

Therefore, from the above, it can be said that like accounting, finance is also very much useful or beneficial for the business organizations as well as for the overall country. Hence, in order to achieve success in business, accounting and finance both are essential.

Analyzing the Inter Dependence between Accounting and Finance

It has been identified in many previous studies that many people consider finance and accounting to be different words with similar meaning. However, in reality, though they may be different from each other but both are depended on each other. If the dependence between accounting and finance is analyzed, then it can be identified that success of finance depends on the proper use of accounting techniques and principles (Guariglia and Mateut 2016). On the other hand, the choice of accounting principles and techniques are influenced by the financial system and standard applied by the organizations.

In the words of Loughran and McDonald (2016), accounting is a part of finance. Without accounting, finance is incomplete and without finance, there is no existence of accounting. In support of this, Hamid, Ting and Kweh, (2016) mentioned that finance is a broader concept that includes economics, taxation, statistics and many more along with accounting while, accounting includes mainly three elements which include classification, recording and recognizing.

However, in this context, Floyd and List (2016) commented that from an organization’s point of view, finance is the whole system that reflects the results of accounting and operational performance of the company along with the efficiency level of the same. On the other side, accounting in organizations helps the management to maintain the financial system and financial performance at a higher level. Therefore, from this discussion, it can be clearly said that there is a higher interdependence between accounting and finance.

Effects of the Accounting Standards on the Financial Reporting of the Organizations

Scarpellini, Valero-Gil and Portillo-Tarragona (2016) mentioned that the standards of accounting are designed in order to achieve the financial objectives of the organizations. Financial objectives are generally referred to as the financial reporting done by the organizations. In general sense, higher the quality of accounting standard, higher is financial reporting of the business organizations. In order to achieve higher quality of financial reporting, recently some changes have been made in the financial standards. Moreover, the International Financial Reporting Standards or IFRS has also been adopted (Catalogue.pearsoned.co.uk 2016).

Christensen, Nikolaev and Wittenbergâ€ÂMoerman (2016) noted that after the implementation of IFRS and improvement in GAAP, the level of earnings management has been lowered and the value of relevant earnings have been increased, which could be considered as a positive sign of implementing IFRS. At the same time, Mates et al. (2016) also added that due to the adaptation of the IFRS, the business organizations have been able to reduce the level of cost of capital. As a result, the income level or the profit levels of the companies have increased in most of the cases. However, Oulasvirta (2016) argued that implementation of IFRS does not reduce the cost of capital of the companies rather it causes in larger earnings management due to the less correlation between cash flow and accruals.

On the other hand, Alver and Alver (2016) mentioned that due to the implementation of the International Financial Reporting Standards, the economic benefits have been achieved by the business organizations, which is an indication of the positive financial reporting system. In the study namely “The Effects of Accounting Standards on Financial Reporting Quality – Evidence from Germany” by Julia Zicke, it has been identified especially in case of Germany, that the changes in the accounting standards caused the changes in the quality of financial reporting. The author or the researcher also identified that there are mainly two reasons behind this. The first reason is that in Germany, many changes in the system of accounting have been made in order to implement the IFRS and GAAP and the second is due to the implementation of IFRS, significant changes have taken place in the accounting regulations of the country (Poseidon01.ssrn.com 2016).

On the other hand, due to the changes and improvements in the accounting standards, the companies became more careful about the maintenance of the transparency in their financial reporting. This has actually improved the quality of financial reporting in the organizations. Hussan and Sulaiman (2016) stated that with the improvement in the accounting standards, chances of accounting frauds have reduced than before. At the same time, the accountants of the organizations got specific guidelines for the accounting treatments of the business operations (Difference Between 2016).

Therefore, the above discussion has disclosed that financial reporting is highly impacted by the accounting standards. Along with this, it has also been identified that the improvements in accounting standards also improved the quality of financial reporting.

Analyzing the Extent to which the Statement of Financial Position and Performance of an Organization are Led by its Accounting Practices

According to Droms and Wright (2015), the statements of financial performance and position of the companies can be clearly ascertained by using the accounting principles and techniques properly. In other words, it can also be said that accounting practices help the management of the firms or companies to identify their financial positions. However, in this context, Cleary and Quinn (2016) mentioned that wrong use of accounting principles and techniques can generate wrong information regarding the financial position of the company.

For example, in the case of Toshiba, the higher authority of the company performed wrong accounting practices by showing excess profit amount and less expenses (Ifac.org 2016). Due to this, the financial position of the company became very strong to the stakeholders of the company. However, in reality, this was a false financial position of the company. Such instances of falsification can be extremely dangerous for  companies because it creates a barrier in understanding the future position of the company. Similar to this is another example, which included a corporate scandal by a technology based company in India, known as Satyam Computer Services (Hindustantimes.com 2016). Therefore, if the management or the higher authority of the companies or the accountants of the companies use the accounting practices in a positive manner, then the companies can understand the actual financial position of the organization. However, negative usage of the same may  lead to unpleasant issues for the companies (Difference Between 2016).

Therefore, from the above discussion, it can be said that the statements of financial position and financial performance of the companies are highly influenced by the accounting practices.

Analyzing Reasons Behind the Confusion Regarding Accounting and Finance

It had been identified that according to many people the terns finance and accounting seem to be synonymous in nature. . However, this concept seems to a complete misconception.  Mates et al. (2016) opined that this wrong concept could be found mostly in non-finance or non-accounting people. However, in this context, Christensen, Nikolaev and Wittenberg Moerman (2016) argued that the mistake regarding accounting and finance not only found in the non-finance or non-accounting people but in the finance people also. The main reasons behind such confusion are stated below:

One of the vital reasons is that most of the people have limited knowledge about the broad area of finance. In most of the cases, it has been identified that people believe that economics and finance are different because they think finance does not include economics. Therefore, due to this limitation of knowledge, the confusion is created between accounting and finance (Catalogue.pearsoned.co.uk 2016).

Another reason behind this confusion is that both the terms, accounting and finance are related to business. Moreover, both include calculations related to business performance and growth, due to which people think that accounting and finance are same.

On the other hand, as accounting is a part of finance, it also includes some of the tasks which are similar to finance. For example, ratio calculations are a part of accounting; however, with the help of ratio calculations, the management of the business organizations tries to depict the financial position of the organization. Due to this, people think that both of these are same (Difference Between 2016).

Therefore, from this discussion, it can be easily understood that mainly the knowledge limitation is the reason behind the confusion between accounting and finance. At the same time, due to the use or function of these two, the confusion is sometimes created in the minds of the people. However, in order to remover this confusion, a detailed knowledge regarding accounting and finance is highly essential.

Summary

In this particular chapter of the study, it had been identified that accounting and finance, both are depended on each other. At the same time, it has also been identified that in case of the business organizations, the accounting and finance both are extremely  useful and both these help in improving the performance of the businesses.  On the other hand, during the secondary data analysis, it has also been identified that with the improvements in the accounting standards, the quality of financial reporting has also been impred.

5. Conclusion and Recommendation

Conclusion

This study aims to investigate about the relationship between accounting and finance. During this study, some research objectives and research questions have been set in order to get a systematic flow of research. The main issue that has influenced the conduction of this particular study was the unclear knowledge of the people about the concept and relationship between accounting and finance. This has been a vital issue in present business scenario because in the current competitive and growing business world, the clear knowledge of the basics of business such as finance and accounting is essential. However, this study has tried to achieve the goal or aim by conducting a thorough analysis regarding these two different terms.

The main idea that the research got after the analysis during the study was that the terms accounting and finance are not same; however both terms are highly dependent on each other. Finance is a much broader concept than accounting and accounting is one of the parts of finance. The study has been done by following the philosophy of positivism along with the deductive approach and descriptive research design. The research was based on the secondary data only and this data were analyzed with the help of qualitative data analysis technique. The researcher has taken several steps in order to avoid the ethical issue. However, in order to check whether the study had fulfilled all the set objectives and in order to identify whether the answers of all research questions were achieved or not, it was very important to link the research objectives with the findings of the study. The objective linking had been stated below:

Objective Linking

The objective linking with the research findings were as under:

Objective 1: To identify the basic concepts and characteristics of accounting and finance.

The above was the first objective of the study and in order to meet this objective, the study has studied and analyzed the existing literature and other secondary data in chapter 2, that is, in literature review and in chapter 4, that is, in data analysis and findings portions. According to the “Discussion on the elements of accounting and finance” portion in the literature review, finance includes all the managerial activities and financial decisions taken within the business organizations. On the other hand, accounting includes the activities of recording and recognition of the financial events or activities those take place within the business enterprises. This portion of the literature review also gave knowledge about the basic or primary elements of these two terms. The primary or basic elements of accounting are – assets, liabilities, revenues, expenditures and capital. On the other hand, the elements of finance are  investments, financial stability, profit ascertainment and working capital.

In chapter 4 of the study, it has been identified again and again that finance is a broader concept, which includes economics, statistics, taxation and accounting and so accounting is a part of finance. Apart from these, the “Evaluation of the primary characteristics of accounting and finance” part of the literature review has given an idea about the primary characteristics of accounting and finance. It has been identified that the primary characteristics of accounting involves relevance, understandability, reliability and the secondary characteristics of the same include consistency and comparability. In addition to this, the primary characteristics of finance include financial activity, investment activity, raising the finance and marketing activities. Therefore, from these, it can be surely said that the first objective of the study has been met by the findings and literature review of the study.

Objective 2: To identify the advantages and disadvantages of accounting and finance in the real business context.

The findings and the literature review of the research has also tried to meet the second objective of the study. The second objective of the study was concerned about the advantages and disadvantages of accounting and finance in the real business context. In the discussion made in chapter 4, that is, in the “Analyzing the benefits that the business organizations get from accounting and finance” part, it has been identified that there are many advantages or benefits which business organizations can avail from accounting. These advantages are systematic recording of financial information, timely decision-making for the business, maintaining objectivity of the business information and avoiding the mess in the business information.

On the other hand, the same part of the data analysis and findings chapter of the study has also identified the advantages that the business organizations can achieve from finance. The advantages stated in the chapter were flexibility in the business operations, projection of budget and cash flow, taking advanced business strategy and identification of contribution of the business organizations towards the economic growth of the country. At the same time, in the “Disadvantages of accounting and finance” portion of literature review it has been identified that there may be few disadvantages of accounting and finance which could cause problems for the organizations. The disadvantages of accounting include no recording of non-monetary events, wrong or unrealistic estimation and false result due to window dressing. At the same time, finance too has also some disadvantages such as requirements for specified knowledge, time consuming and complex in nature. Therefore, from this discussion it can be said that the second objective of the study has also been met.

Objective 3: To analyze the inter relationship between finance and accounting

This particular objective of the study too has been tried to be met during this study. The data analysis and findings portion of chapter 4, has analyzed the inter relationship between finance and accounting under the headings “Analyzing the extent to which the statement of financial position and performance of an organization are led by its accounting practices” , “Influence of accounting approaches and principles on finance” and “Analyzing the inter dependence between accounting and finance”. Under all these three parts, it has been identified that accounting and finance, both are depended on each other. In the first mentioned portion, it has been identified that the financial performance of the organization is led by the correct calculation in accounting. In a similar manner, the discussion under the other two headings have also identified the inter relationship between the two.

On the other hand, the literature review has also discussed about the interrelationship between the two terms not directly but in an indirect manner. From the discussion under the heading “Theories related to accounting and finance” it could be understood that the theory of accounting has been derived from the theories of finance. Therefore, from this discussion it can be said again that the third objective has also been met.

Objective 4: To find out some areas those are important and must be focused on in order to get a better understanding of the relationship between finance and accounting.

This objective of the study has been achieved by the overall discussion during the research project. The discussions under the literature review and data analysis and findings chapters of the study have clearly stated that the concept and meaning of finance and accounting are different from each other. The literature review of the study has clearly mentioned the major characteristics and elements of each of the two terms, which showed how finance is different from accounting or vice-versa. At the same time, under the heading “Differences between accounting and finance” a clear idea regarding the differences between the two terms has also been provided.

Along with the literature review, the data analysis chapter also stated the same. However, the main focus of the discussion under this particular chapter was regarding the inter relationship between accounting and finance; the differences between the two were also being cleared out from this. Hence, it has been clear that the fourth objective of the study too has been  met by the analysis in the study.

Recommendations

The Recommendations are as Under:

Understand the characteristics of finance and accounting: In order to understand the difference between the concept of accounting and finance, it is more important to have a clear idea regarding the characteristics of the two terms. This will help in understanding the internal difference between the two.

Clear knowledge about the elements of accounting and finance: Clear knowledge about these two elements is extremely necessary in order to understand the difference and inter relationship between the two terms. The idea about the elements will help to identify how the elements of accounting have been developed from the elements of finance.

Be sure that accounting and finance both are beneficial to each other: From the discussion in this project, it can be recommended that the people must be sure that accounting and finance both are mutually beneficial. In some areas, accounting is depended on finance and in some other areas, finance is depended on accounting. Hence, people must be sure that without one of the two terms, the other cannot be used properly and so the company focuses on both.            Make separate team for accounting and finance: As finance is a much broader area than accounting, the companies must build two separate teams or departments for these two areas. In case of accounting team, the management of the company must include individuals who have less knowledge in economics, statistics and taxation but good knowledge of costing and other areas of accounting. At the same time, the management of the companies must include the more knowledgeable persons in the finance team, so that they can handle the issues in a better manner.

Therefore, if the organizations rather the people of the organizations take care of the above areas, then the understanding regarding the relationship between finance and accounting would be clear.

Future Scope of the Study

This study had covered the discussion on few areas of accounting and finance. However, there is much scope of discussion regarding the relationship between finance and economic, finance and taxation, finance and statistic, accounting and economic, accounting and taxation, and accounting and statistics. Therefore, these all can be considered as the future scope of study for the future researchers. At the same time, the future researchers can use this particular study as their secondary source of data, which can be very much helpful for the future researches related to accounting and finance.

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