Management Accounting determination of tax

● Involves the accumulation and consequences of certain

communication of information for proposed business endeavors.
use by internal users. ● Preparation of tax returns. Failure to
● Preparation of specifically tailored pay tax returns results in a penalty
management reports. and imprisonment of not less than 6
● Required by the management to aid years but not more than 10 years.
them in performing their ● Preparation of tax advice.
management functions. ● All businesses are required to file tax
returns.
Government Accounting ● Some taxpayers may require the
● Refers to the accounting for professional advice of a tax
government and its instrumentalities, practitioner regarding the
focusing attention on the custody of management of taxes.
public funds.
● General record keeping and
preparation of financial reports for Cost Accounting
the government and its agencies. ● Systematic recording and analysis of
● Also includes the preparation of the costs of materials, labor, and
budgets and accountability reports. overhead incident to the production
● of goods or rendering of services.
Auditing ● Analyses of cost of products or
● Involves the inspection of an entity’s services.
financial statements or business ● Businesses use cost accounting to
processes to ascertain their analyze the cost of their products or
correspondence with established services and the effect of those in
criteria. cost in, among others, earning and
● Expression of an opinion on the pricing policies.
correspondence between
management assertions and Accounting Education
established criteria. ● Refers to teaching accounting and
● The most common form of an audit accounting-related subjects in an
opinion is the Independent Auditors organized learning environment.
Report which is attached to audited ● The teaching of accounting and
financial statements. related subjects.
● Businesses with gross annual ● Required by business students,
sales or receipts exceeding business owners, accounting
3,000,000 pesos to required to have professionals in their Continuing
their financial statements audited by Professional Development (CPD),
an independent CPA. and other interested parties.

Tax Accounting
● Preparation of tax returns and
rendering of tax advice, such as the
Accounting Research
● Pertains to the careful analysis of
economic events and other variables
to understand their impact on
decisions.
● Accounting research papers,
articles, and similar publications.
● Required by business owners,
professional organizations,
other interested parties.
Form of Business Organizations
A business is an activity where goods or
services are exchanged for money.
A businessman or entrepreneur is a
person who is engaged in business.
Sole or Single Proprietorship
● A business owned by only one
individual.
● The simplest form of a business
organization.
● The business owner is called the
“sole proprietor.”
● Registered in the Department of
Trade and Industry.
ADVANTAGES:
1. You are the boss and you keep all
the profits.
2. Decision making is simple
3. The lower extent of government
regulations and lower taxes.
DISADVANTAGES :
1. You assume all the risk of loss.
2. You take all responsibility and
rely mostly on yourself in making
decisions.
3. Difficult to raise capital because
you rely mostly on your personal
assets and loans to finance the
business.
PARTNERSHIP
● A business that is owned by two
or more individuals who entered
into a contract to carry on the
business and divide among
and themselves the earnings.
● Business owners are called
partners.
● Registered with the Securities and
Exchange Commission.
ADVANTAGES :
1. Better business decisions can be
made because “two heads are better
than one.”
2. Share the business risk and
responsibility of running the
business with your partner.
3. Only a contractual agreement
between partners is needed.
4. Greater capital compared to a sole
proprietorship.
5. The lower extent of government
regulation compared to corporations.
DISADVANTAGES:
1. Making economic decisions may
give rise to conflict among the
partners.
2. Limited life and can easily be
dissolved.
3. Lesser capital
4. It is a tax like a corporation
Corporation
● Owned by more than one
individual.
● Created by operation of law rather
than contract.
● Represented by a share of stocks.
● The owners are called
stockholders or shareholders.
● In the eyes of law, a corporation is
like a person separate from its
owners.
● Also has a judicial personality.
● The incorporators of a corporation
shall not be less than but not
more than 15 individuals.
● Registered with Securities and
Exchange Commission.
ADVANTAGES :
1. Limited liability of the owners
because stockholders are liable for
corporate debts only up to the
amount they invested.
2. Unlimited life in the sense that the
withdrawal, retirement, death, or
insanity of one doesn’t dissolve the
corporation.
3. If listed, you can reality transfer
your shares to other investors by
selling them in the stock market.
4. Greater capital and ease in raising
additional funds.
DISADVANTAGES :
1. Your “say” on corporate affairs
depends on the number of shares
you own. Those who own MORE
SHARES are the BOSSES and
enjoy a LARGER SHARE of the
corporation’s profit.
2. More difficult and more costly to
form because there are more formal
business requirements.
3. A greater extent of government
regulation and higher taxes.
4. You have to wait for the board of
directors to declare the dividends
before you can get your share in
the profit.
COOPERATIVE
● Owned by more than one
individual.
● Formed by the Philippine
Cooperative Code of 2008.
● The owners of a cooperative are
called members.
● Association of individuals who
joined together to contribute
capital and cooperate to achieve
certain goals.
● Members need to patronize the
cooperatives’ goods or services.
● Registered in Cooperative
Development Authority.
ADVANTAGES :
1. Your “say” on cooperative affairs is
not affected by the number of shares
you own.
2. Entitled to only one vote.
3. Exempt for paying taxes and may
receive assistance from the
government.
4. Easier and less costly to form
because of fewer business
requirements.
5. Limited liability.
6. Unlimited life.
DISADVANTAGES :
1. Prone to poor management.
2. Influential members tend to
dominate the election process.
 3. Election officers may be inclined
to act on their interests and will
lead to corruption.
4. The cooperative code put some
restrictions on the distribution of
a cooperative profit to its
members.
5. Difficult to sustain growth.
6. Restriction on the transfer of a
member’s shares.
TYPES OF BUSINESS
ACCORDING TO ACTIVITIES
SERVICE BUSINESS
● Offers services as its main
product rather than physical
goods.
● May offer professional skills,
expertise, advice, lending service,
and similar services.
ADVANTAGES
1. You don’t need to worry about
inventory, warehousing, and
distribution costs because you have
no inventory.
2. You may only need small capital.
3. You are perceived as an expert in
your chosen field.
ADVANTAGES
1. You may need a lower capital.
2. You can take advantage of price
fluctuations.
3. Lower cost of quality.
4. You don’t need expert skills to
start a merchandising business.
DISADVANTAGES
1. You need to have a retail store to
display your goods and the store
must be in a strategic location for
it to attract more customers.
2. Less flexibility in managing costs.
3. Keeping track of inventory is
tedious.
Manufacturing Business
● Buys raw materials and
processes them into final
products.
● Changes the physical form of the
goods it has purchased in a
production process.
ADVANTAGES
1. You have high growth potential.
2. Opportunity to establish a brand.
3. Self-satisfaction is high.
4. Have a better pricing policy.
5. Greater flexibility.

DISADVANTAGES:
DISADVANTAGES
1. You may not have flexible personal
1. You may need high start-up
time.
capital.
2. Services businesses normally suffer
2. Conceptualizing a viable
first from a decline in demand during
manufacturing business is
times of economic difficulty.
difficult.
3. Your business’ success depends on
3. You need to be continuously
your credibility.
innovative and abreast of
changes in technology.
MERCHANDISING BUSINESS
4. Warehousing and logistics costs
● Is one that buys and sells goods
can be high.
without changing their physical
5. You rely on raw materials
form.
BASIC ACCOUNTING CONCEPTS
Accounting is constantly changing
and new concepts are continuously
emerging.
1. SEPARATE ENTITY CONCEPT
● The business is viewed as a
separate person, distinct from its
owners.
● Only transactions of the business
are recorded in the books of
accounts.
● It is necessary so that the financial
position and financial performance of
the company can be measured
properly.
2. HISTORICAL COST CONCEPT
● Assets are recorded at their
acquisition cost.
3. GOING CONCERN ASSUMPTION
● Business is assumed to continue to
exist for an indefinite period of time.
● Measuring assets at historical cost.
OPPOSITE: LIQUIDATING
CONCERN - the business intends to
end its operations or if has no choice
but to do so.
● Measured at a net selling
price.
4. MATCHING PRINCIPLE
● Some costs are initially recognized
as assets and charged as expenses
when the related value is
recognized.
5. ACCRUAL BASIS OF
ACCOUNTING
● Economic events are recorded in
the period in which they occur
rather than at the point in the time
when they affect cash.
6. PRUDENCE
● The accountant observes some
degree of caution when
exercising judgments needed in
making accounting estimates under
conditions of uncertainty.
● The accountant needs to choose
between a potentially unfavorable
outcome versus a potentially
favorable outcome, the accountant
chose the unfavorable one.
7. TIME PERIOD
● The life of the business is divided
into series of reporting periods.
Reporting Period
➢ Series of equal short periods.
➢ Usually 12 months.
Calendar Year Period
➢ Starts on jan1 end on dec31 the
same year.
Fiscal Year Period
➢ Covers 12 months but starts on a
date other than Jan 1.
Interim Period
● A period that is shorter than 12
months.
8. STABLE MONETARY UNIT
● Assets, liabilities, equity, income,
and expenses are stated in terms
of common unit measures.
 9. Materiality Concept IMPLICIT CONCEPTS AND PRINCIPLES
● Guides the accountant when ● Concepts and principles are those
applying accounting principles. that are not specifically
● An item is considered material if its mentioned in the foregoing but
omission or misstatement could aee customarily used because of
influence economic decisions. their general and longtime
● Materiality is a matter of acceptance within the
professional judgment and based on accountancy profession.
the size and nature of an item being
judged.
PHILPPINE FINANCIAL REPORTING
10. Cost Benefit STANDARDS (PFRSs)
● The cost of processing and
communicating information ● Are Standards and Interpreations
should not exceed the benefits to adopted by Financial Reporting
be derived from the information’s Standards Councils.
use. ➢ Philippine Financial
Reporting Standards
11. Full disclosure principle ➢ Philippine Accounting
● Both the concepts if materiality Standards
and cost-benefit. ➢ Interpretations
● Information communicated to
users reflects a series if Standards
judgmental trade offs. ● Serves as guide when recording and
communicating accounting
12. Consistency Concept information.
● Requires a business to apply ● Provide more detailed application
accounting policies consitently , concepts.
from one period to another. ● Prescribe which principle is most
● Accounting policies used this appropriate for specific economic
year shallbe the same accounting transactions.
policies used last year.
Generally Acceptable
● Standards has been estalbilished
ACCOUNTING STANDARDS by an authoritative accounting
standard-setting body
EXPLICIT CONCEPTS AND PRINCIPLES ● Principle has gained acceptance
● Specifically mentioned in the due to practice over tine and has
Conceptuak Framework for been proven to be most useful..
Financial Reporting and in the
Philippine Financial Reporting
Standards (PFRs)
REGULATORY BODIES QUALITATIVE CHARACTERISTICS
OF USEFUL FINANCIAL
SECURTIES AND EXCHANGE INFORMATION
COMISSION
● Tasked with regulating Qualitative Characteristics
corporations including ● Traits that determine whether an
partnerships. information os useful to users.
● Requires corpotaions and
partnership to file audited financial Fundamental Qualitative Characteristics
statements. ● Make information useful to users.

BUREU OF INTERNAL REVENUE Relevance

● Tasked in collecting national ● Information is relevant if it can
taxes and administering the affect the decision of the users.
provision of tax code. a. Predictive Value - if it can help users
to make predictions about future
BANGKO SENTRAL NG PILIPINAS outcomes.
● Tasked in regulating banks and b. Confirmatory Value - if it can help
other entities performing banking users confirm their pst predictions.
functions. c. Materiality - depends on the facts
● Influences the selection and abd circumstances surrounding a
application of accounting policies specific entity.
by these businesses .
Faithful Representation
COOPERATIVE DEVELOPMENT ● Information is faithfully represented
AUTHORITY (CDA) if its is factual , meaning represents
● Tasked in regulating cooperatives. the actual events that have taken
place.
CONCEPTUAL FRAMEWORK a. Completeness - all information
● Prescribes accounting concepts necessary for users have to be
that are relevant to the complete understanding of financial
preparation of financial information
statements. b. Neutrality - information is selected or
● Not a standard. presented without bias .
● General frame of reference un c. Free from error - is not materiality
developing or applying the missated.
standards.
Enhancing Qualitative Characteristics
● Support fundamental
characteristics
● Enhance the usefulness of
information

Comparability
● If it can help users to identify
similarities and differences in
between different sets of
information.
Verifiability
● If different users could reach a
general agrement as to what the
information intends to represent.
Timeliness
● If it available to users to be able to
influence their decisions.
Understandability
● If it is presented in a clear and
concise manner.