Fundamentals of SENIOR

Accountancy, Business HIGH

and Management 1 (FABM1) SCHOOL

Branches of Accounting Self-Learning

Module

and External Users 4

of Accounting Information Quarter 3
Fundamentals of Accountancy, Business and Management 1
Quarter 3 – Self-Learning Module 4: Branches of Accounting and External Users of
Accounting Information
First Edition, 2020

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Fundamentals of
S ENIOR
Accountancy, H IGH
S
Business and
CHOOL

Management 1 (FABM1)

Self-Learning
Module

4
Quarter 3

Branches of Accounting
and External Users
of Accounting Information
Introductory Message

For the facilitator:

Welcome to the Senior High School – Fundamentals of Accountancy, Business

and Management 1 Self Learning Module on Branches of Accounting and External
Users of Accounting Information!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 1

Self Learning Module on Branches of Accounting and External Users of Accounting
Information!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. differentiate branches of Accounting;
2. define external users;
3. enumerate external users; and
4. understand the information needs of external users for decision making.

PRETEST

Directions: Write TRUE if the statement is correct and FALSE if otherwise.

1. Financial Accounting focuses on the needs of external users.

2. External users do not have the authority to demand financial reports
tailored to their specific needs.
3. External users include potential investors, lenders, creditors, non-
managerial employees, customers, and board of directors.

4. Whether to hold or sell an investment in stock is an example of a

decision to make by an external user.

5. Audited financial statements are used to analyze a business’ ability

to pay its debts and is needed by an external user.

RECAP

Directions: Complete the statements below.

1. Accounting is as old as civilization because____________________________________
_________________________________________________________________________________.
2. Accounting history is important to accounting practice because________________
________________________________________________________________________________.
3. It is hard for us to imagine a business without Accounting because ____________
________________________________________________________________________________.
 LESSON

Branches of Accounting
1. Financial Accounting – is a branch of accounting that focuses on periodic
reporting of financial statements to users of financial information outside the
business organization. These financial statements are standardized to ensure
understandability. General-purpose financial statements are those that cater
to the common needs of a wide range of external users.

2. Management Accounting – focuses on internal reporting and analysis of

financial information such as cost accounting, design, and evaluation of
internal processes, budgeting, and forecasting. It involves the accumulation
of communication of information for use by the internal users for future
decisions.

3. Government Accounting - is a branch of accounting that focuses on the

custody and administration of public funds.

4. Auditing - is a process of objectively evaluating evidence and expressing an

opinion between management assertions and established criteria. It involves
an examination of financial reports whether these are presented fairly in
material respects.

5. Tax Accounting – refers to the preparation of tax returns and rendering of tax
service based on tax laws and regulations, to be submitted to the government.

6. Cost Accounting - refers to the systematic recording and analysis of the cost
of materials, labor, and overhead about the production of goods or rendering
of service.

7. Accounting Education - involves teaching accounting, auditing, management

advisory services, accounting aspect of finance, business law, taxation, and
other accounting related subjects. It is the process of facilitating the
acquisition of knowledge and skills regarding one or more other branches of
accounting.

8. Accounting Research- refers to the careful study and analysis of economic

events and other variables to understand their impact in making
business- related decisions.
 The table below shows the branches of accounting and the service provided
for specific accounting information users.

Branch of Accounting Accounting Service Users of Service

A. Financial Accounting General-record keeping All businesses use
(Journals, Ledgers) Financial Accounting in
record-keeping
Preparation of General
Purpose Financial At least annually,
Statements lenders, investors, and
government regulatory
bodies use General
Financial Statements.
B. Management Accounting Management reports Management Team for
which are specifically them to perform
tailored for Management management functions
Accounting
C. Government Accounting General-record keeping Government agencies
for the government and
its agencies. It includes
the preparation of budget
and accountability
reports.
D. Auditing Expression of opinion Businesses with gross
commonly known as quarterly revenues of
Independent Auditor’s ₱150,000 are required to
Report have financial statements
audited by Certified
Public Accountants
(CPAs).
E. Tax Accounting Tax Returns and Tax All businesses are
Advice required to file tax
returns. Taxpayers may
be required to have tax
advice regarding the
management of taxes.
F. Cost Accounting Cost Products or Services Businesses require cost
are being analyzed accounting for analysis of
the cost of products and
the effects of those costs
to business profitability
as well as pricing
policies.
G. Accounting Education Teaching Accounting Accounting practitioners,
and other related students, and business
subjects. owners
H. Accounting Research Accounting research Professional
papers and related organizations, business
publications owners, and other related
parties
External Users of Accounting
External users are users of financial information that do not have the
authority to demand financial reports that are tailored to their specific needs
because they are not directly involved in the management of the business.
1. Investors and Stockholders - these users are interested in whether they are
going to buy, hold, or sell investments in the business.
2. Creditors/Lenders - they need accounting information to help them assess
the business’ ability to repay loans and interest when they fall due.
3. Suppliers - these users need accounting information to assess the
business’s ability to pay the goods to be delivered or services to be rendered.
4. Government and its agencies - these are users of financial information for
taxation and licensing purposes.
5. General Public - financial information may provide public with recent
developments in the prosperity of the business.
6. Customers- these users need the information to assess whether the
business will continue in existence especially if these customers have long-
term involvement in the business.

ACTIVITIES

Activity 1: Discussion Questions

Directions: Provide brief and concise answers to the questions below:
1. Who are the external users of accounting information?
2. How does accounting information help users arrive at certain business
decisions?

Activity 2: External Users

Directions: Identify the external users of the business questions that follow:
1. Should we make investments to HBC Company?
2. Does HBC Company have the ability to repay its loan?
3. Does HBC Company have future creditworthiness for us to decide to
continue to provide goods on credit?
4. Are these financial statements prepared by a Certified Public
Accountant for Tax Return purposes?
5. Can HBC Company continue to honor product warranties?
 WRAP-UP

To summarize what you have learned in the lesson, complete the statements
below:

1. The branches of accounting are

__________________________________________________________________________________
__________________________________________________________________________________
________________________________________________________________________________.

2. The external users are

__________________________________________________________________________________
__________________________________________________________________________________
________________________________________________________________________________.

VALUING

Reflect on this!

“Companies figured out that the easiest way to make money was to reissue records
that the accounting department had paid for years ago and already made a profit.”
– Chris Cornell
 POSTTEST

Directions: Match the items below by putting the letter on the space provided.

A. Stockholders
B. Creditors
C. Financial Accounting
D. Cost Accounting
E. Government Accounting
F. Management Accounting
G. Accounting Research
H. Tax Accounting
I. Accounting Education
J. Auditing

____________1. It refers to the branch of accounting that focuses on general purpose

financial statements.

____________2. It is a process of objectively evaluating evidence and expressing an

opinion between management assertions and established criteria.

____________3. It refers to teaching accounting and other related subjects.

____________4. It involves the accumulation and communication of information for

use by external users.

____________5. It is the analysis of the cost of materials, labor, and overhead.

____________6. It involves preparation of tax returns and rendering of tax advice.

____________7. It focuses its attention on the custody of public funds and the
responsibility and accountability of individuals entrusted with such
funds.

____________8. It pertains to the careful analysis of economic events to understand

its impact on decisions.

____________9. These are persons who supply goods on credit or lenders of money
such as banks.

____________10. These are users who need accounting information to help them make
decisions on what to do with their investments.
 KEY TO CORRECTION

5. Customers
4. Government 10. A
3. Suppliers 9. B
2. Creditors 8. G
1. Investors/Stockholders 7. E
ACTIVITY 2 6. H
5. TRUE 5. D
4. TRUE 4. F
3. FALSE 3. I
2. TRUE 2. J
1. TRUE 1. C
PRE-TEST POST-TEST:

References
Ballada, W. Fundamentals of Accountancy, Business, and Management 1.
DomDane Publishers.2017.

Banggawan, RB. Asuncion, DJ. Fundamentals of Accountancy,

Business, and Management 1. Real Excellence Publishing.2017.

Feme, PM. Cabuñag, HP. Fundamentals of Accountancy, Business and Management

1. Fastbooks Educational Supply, Inc.2017.

Ferrer, RC. Millan, CV. Fundamentals of Accountancy, Business, and

Management 1. Bandolin Enterprise.2017.
San Juan, DA. Fundamentals of Accounting. Elmoer Publishing.2018.

Rabo, JS. Tugas,FC.Salendrez, HE. Fundamentals

of Accountancy, Business, and Management 1. Vibal Group Inc.2016.

San Juan, D.A. 2018. Fundamentals of Accounting. Elmoer Publishing

“Accounting Is History, Right?” BeansTalk KnowHow, 10 Oct. 2019. Accessed on

July 6, 2020. beanstalkknowhow.com/blog/accounting-is-history-right/.

Bellis, Mary. "History of Accounting From Ancient Times to Today." ThoughtCo.

Accessed on June 20, 2020. https://www.thoughtco.com/history-of-
accounting-1991228.