The 1994 movie, Stargate, represented a gate that led to two dimensions. In today’s time, the stargate opens to accounting on one end and planning on the other.
Accounting starts today and goes back to records of the past with increasing detail. Planning, on the other hand, starts today and heads straight to the future with increasing summary and aggregation.
However, many find the two to have similar looking tables. The accounting system has an income statement, a balance sheet, and a Cash Flow statement. The business plan has these three statements “proforma” or projected results. Although these three statements are almost identical in form, presentation, and order of appearance, the information they carry are not the same.
This conceptual difference is important as they don’t mix well. Planning approached from an accounting point of view is not good. Accounting is done by reporting from a database of transactions.
Planning is steering the business to a future direction. Planning is concerned with decision-making, progress tracking and change management. Though accounting is also about information and management, there are legal considerations related to it. Accounting also has to go into very deep into detailing while planning requires balance between concept and detail. There are times when too much detail is not productive.
Accounting has to be accurate. There is no room for mistakes and errors. This is because taxes and dues to the government are derived from the figures. Planning, however, can be wrong. In fact, it is often wrong. There is always room and chance for corrections. This is because it deals with assumptions that aim to steer the company to a certain direction. And assumptions need constant reconstruction until the best direction is achieved by a company.
Article Source: Business Insider - Planning vs. Accounting: 2 Different Dimensions. And Why You Care »