Finance vs. Accounting Degree in Canada

Both finance and accounting degrees offer valuable skills and career opportunities in Canada. The choice between the two depends on your interests, strengths, drive & risk appetite, and ultimately your career goals.

Differences and Overlap

Accounting and finance are two closely related fields within the business world, but they often have distinct focuses and responsibilities. Broadly put, accounting is typically concerned with the recording of transactions in a manner which reflects the economic reality of events occurring in the real world and creating or presenting them in the form of financial statements. Finance, put broadly, is the next step thereafter – the application or use of this information for decision making.

The differences and overlap are broken out further below:

Focus:
Accounting primarily deals with recording, classifying, and summarizing financial transactions. It involves the systematic recording of financial information, ensuring accuracy and compliance with relevant regulations and standards.

Finance is broader and more strategic than accounting. It's concerned with managing and optimizing financial resources to achieve the organization's goals. Finance professionals make decisions related to investments, funding, and capital management.

Responsibilities:
Accountants are responsible for tasks such as bookkeeping, maintaining financial records, preparing financial statements (like balance sheets, income statements, and cash flow statements), and reconciling accounts. They also handle tasks related to taxes, audits, and financial reporting.

Finance professionals are involved in tasks like financial analysis, risk assessment, investment evaluation, budgeting, strategic planning, and managing the company's financial operations. They're focused on maximizing profitability and shareholder value.

Nature of Work: Accounting is more focused on recording and reporting financial transactions accurately, while finance involves making strategic decisions to optimize the company's financial performance. 

Looking Forward or Backwards: Accounting often deals with historical data, ensuring past transactions are accurately recorded. Finance, on the other hand, is forward-looking, involving planning and decision-making for future financial activities.

Scope: Finance has a broader scope, encompassing areas like investments, risk management, and strategic planning. Accounting is more centered on the accurate representation of financial data. 

Decision-Making: Finance professionals are more involved in high-level decision-making that directly impacts the organization's financial strategy. Accountants contribute to these decisions by providing accurate financial information.

Top Finance Jobs vs. Top Accounting Jobs

Top finance jobs generally outshine top accounting jobs when it comes to compensation and prestige, though this also usually includes a heavier workload. Top finance graduates in Canada may land positions in investment banking, private equity, or perhaps even consulting, all of which will pay new graduates a six-figure salary straight out of school. Comparatively, there are few (if any) accounting jobs that can offer the same lucrative compensation to new graduates. Typically, top accounting jobs for new graduates are audit positions at Big 4 firms or generic financial analyst positions at top companies or their rotational programs. These can certainly be strong starts to a successful career but typically pay in the $50-70K for new joiners depending on the company and market, which is a substantial step down from what the top finance jobs pay. Further, the top finance jobs listed above will typically be more intense from a work expectations and competition standpoint where employees are often subject to an “up or out” model where if you are not good enough to move up in the organization, you should expect to move out of it entirely. Comparatively, accounting jobs tend to offer a somewhat more stable environment.

Expected Value & Likelihood of Success: Accounting Shines?

As described above, top finance jobs are typically considered to be a better deal than top accounting jobs, however, there are a limited number of “top” jobs in a relatively small economy such as Canada, meaning that only the very top candidates will be able to compete for them. For this reason, we must consider what happens to those graduates who do not land these top jobs as they ultimately make up the majority of people who work in these fields. We can approach this through the idea of assessing the “expected value” of entering the finance field vs. accounting.

The expected value of a decision is a concept used in decision theory and probability theory to quantify the average outcome or result that can be expected from a certain decision, taking into account all possible outcomes and their respective probabilities. Mathematically, the expected value (EV) of a decision is calculated by multiplying each possible outcome by its corresponding probability of occurrence and then summing up these values. The formula for calculating the expected value is:

Expected Value (EV)=∑(Outcome)×(Probability of Outcome)

The reason this is relevant for this comparison is because despite the fact that top finance jobs outshine top accounting jobs, there are far more top accounting jobs in Canada than there are top finance jobs. For example, the number of entry-level jobs in investment banking across Canada is likely around 50 per year give or take the state of the economy. Compare this number to the number of Big 4 audit hires which spans well into the multiple hundreds if not even thousands per year. Further, it seems that the drop-off in appeal from the top tier of finance jobs to the second and third tier is far more dramatic than in accounting, and anecdotally it seems that the average finance graduate who was unable to land a solid finance job often ends up competing with accounting graduates for jobs that lean towards a more accounting nature simply because there are more of them up for grabs in Canada.

For the reasons above, I personally think of graduating with a finance degree as more of a “boom or bust” situation, where the top candidates will secure incredible opportunities but the majority would have been better off graduating from an accounting program and having a better shot at placing themselves on a strong career trajectory right out of school.

Interchangeable? Mainly in One Direction

While there is certainly strong overlap between the skills and knowledge of a finance graduate and an accounting graduate, the flow of people with the educational background of one transitioning to the other consists almost entirely of accounting-to-finance transitioners.

Accountants can transition into finance roles more easily than individuals with a finance background transitioning into accounting roles due to several reasons:

Fundamental Knowledge: Accounting forms the foundation of financial knowledge. Accountants are trained to understand financial statements, reporting standards, and basic financial principles. This foundational knowledge is crucial in finance as well, making it relatively easier for accountants to grasp financial concepts.

Transferable Skills: The skills acquired in accounting, such as budgeting, financial reporting, and auditing, can be applied to various finance roles. However, finance roles often require specialized skills related to financial markets, investment strategies, and risk management that might not be as easily transferable to accounting.

On the other hand, finance professionals transitioning into accounting roles might face more challenges because of the specialized nature of certain accounting tasks:

Deep Accounting Knowledge: Accounting involves intricate rules, standards, and regulations that require specialized training and expertise. Finance professionals might not have the in-depth accounting knowledge needed for roles like auditing, tax accounting, or forensic accounting.

Specific Software Proficiency: Many accounting roles require familiarity with accounting software and tools specific to the field. Finance professionals might not be as familiar with these tools unless they have received training in accounting software.

Regulatory Expertise: Certain accounting roles, such as tax accounting, require a comprehensive understanding of ever-changing tax laws and regulations. Finance professionals might not have the same level of expertise in this area.

Industry Standards: Accounting often involves adhering to specific industry standards and guidelines. Professionals from a finance background might not be as familiar with these standards.

To further drive this point home, consider the top credentials in each field: the CFA and CPA. The CFA allows anyone to pursue it so long as they have an undergraduate degree of some kind whereas the CPA requires a very specific set of undergraduate courses.

While both accounting and finance share some overlapping skills, the differences in specialized knowledge and industry-specific requirements can make it easier for accountants to transition into finance roles compared to the reverse. Nonetheless, with proper training, education, and experience, individuals from either field can expand their expertise and successfully transition into roles that bridge accounting and finance.

Summary

In summary, it would be fair to say that if you have a strong preference in either field, the decision should be simply to follow your interests. However, if you’re unsure of where you want to go, pursuing an accounting degree is likely to keep more doors open down the road than a finance degree. If you are confident you will succeed, going down the finance road may have a larger payoff, however, accounting is likely the overall safer bet in terms of getting your career off to a strong start, and very much keeps the finance door open for a transition after a few years if desired.

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