Accounting is a field that involves recording transactions of a financial nature and subsequently summarizing, analyzing and reporting them, while economics is a branch of knowledge concerned with the production, consumption and transfer of wealth. These fields are often confused with each other since they each enable a better understanding of the other field. While similar, accounting and economics are separate subjects with several differentiating factors.

Accounting operates according to the principles of relevance, timeliness, reliability, comparability and consistency of information or reports. Globally accepted standards are used by accountants belonging to any organization, firm, company or nation in order to facilitate a general understanding of a financial situation. It is for this reason that accounting is sometimes dubbed the "medium of communication between businesses." This communication is achieved through a key output of accounting, the financial statement, which records and showcases the performance and general financial status of an entity to all stakeholders and interested parties.

In contrast, economics is a social science that focuses primarily on the efficient allocation and distribution of resources in order to fulfill unlimited wants. This is broadly divided into two areas of study: macroeconomics and microeconomics. Macroeconomics studies how goods and services are produced and distributed across economies, national or even international, whereas microeconomics is concerned with individual behavior regarding the use of resources such as capital, time, skills, etc. Economics attempts to understand how economies operate in relation to specific variables, such as population, resources and technology, with the assumption that people are rational.

Both accountants and economists assist businesses and even nations in making sound financial decisions. Accountants use various techniques to track and analyze budgets, expenses and revenue, whereas economists are concerned with charting and interpreting financial patterns to understand economic behavior and help guide major decisions about things such as tax policy and national debt. Ultimately, accounting is based on a set of principles, while economics operates on certain assumptions to simplify complex situations.

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  5. What are some of the limitations and drawbacks of economics as a field?

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