FIELDS OF ACCOUNTING

• Public Accounting. In this field, the accountant

offers his varied services to the public for a
fee. Like other professionals, an accountant
needs to pass the licensure examination given
by the Board of Accountancy of the
Professional Regulation Commission and
become a Certified Public Accountant before
he can legally practice public accounting. The
following are the most common services
offered in public accounting.
SERVICES OF PUBLIC ACCOUNTING
• Auditing – is the principal service that a public accountant
offers. In making an audit, he carefully examines tests and
checks the accuracy of the reports and the financial data
from which these reports were taken. He expresses his/her
opinion on the fairness of the audited reports.
• Management advisory services – this includes the design,
installation and improvements of the firm’s general
accounting system and other system deemed necessary for
controlling and distributing manufacturing costs. In
addition, advises on financial planning, budgeting,
forecasting, and inventory control are offered.
• Tax Services – this includes preparation and filing of income
tax returns.
 FIELDS OF ACCOUNTING
• Private Accounting. It is a field of accounting
where accountants are employed and are
rendering accounting services in a private
firm. The number of accountants in a private
firm may vary depending on the size and
needs of the business. In big private firms,
accounting department, under a head or
comptroller, the work may be divided into
several fields as:
 SERVICES OF PRIVATE ACCOUNTING
• General Accounting – includes the recording of transaction and
preparing financial reports.
• Cost Accounting – deals specifically with the manufacturing phase
of the business. This has to do with the determining and controlling
cost in producing a product or service.
• Budgeting – provides management a plan for future operations.
Summarizes and provides a report comparing the actual
expenditures with the budget plan provided.
• Internal Auditing – deals with checking and verification of the
internal financial records and reports.
• International Accounting – This field of private accounting is very
particular to multinational business organizations. Accountants in
this field see to it that they prepare accounting in accordance with
the international accounting standards.
 FIELDS OF ACCOUNTING
• Government Accounting. It is a field of
accounting which has almost the same work
description as private accounting, only they are
employed by government agencies. Of the
government institution, the Bureau of Internal
Revenue, the Budget Commission, and the
Commission of Audit employ the greatest
number of accountants.
• Accounting Education. It is a field of accounting
where CPAs serve as mentors to accounting
students in various colleges and universities.
 FORMS OF BUSINESS ORGANIZATION
• According to Ownership
• Single or Sole Proprietorship. This type of business is
owned only by one person. Usually the owner is also
the manager of the business. He usually supplies the
capital or borrows fund from the banks or other
lending institution.
• Partnership. This is a business organization with two or
more owners. The owners, called partners, agree on
the capital contributions, management of the firm,
distribution of profits and losses, and other incidental
matters pertaining to the operation of the firm.
 FORMS OF BUSINESS ORGANIZATION
• Corporation. This type of business organization not less than five persons.
It is organized by operation of law as entity separate and distinct from its
owners. Corporations are owned by their stockholders, who share in
profits and losses generated through the firm’s operation. Corporation
has distinct characteristics from the single proprietorship and the
partnership.
• Legal existence. A firm can buy, sell, own, enter into a contract and sue
other persons and firms, and be sued by them.
• Great source of capital. Capital may be raised by selling shares of stock to
the public as a whole.
• Limited liability. A firm and its owners are limited in their liability to the
creditors only up to the resources of the firm, unless the owners give
personal-guarantees.
• Continuity of existence. A firm can live beyond the life spans and capacity
of its owners, because its ownership can be transferred through a sale or
gift of shares.
 FORMS OF BUSINESS ORGANIZATION
• According to Business Nature
• Service Concern. This deals with the rendering of
services to the customers.
• Trading or Merchandising. This type of business
deals with the buying of goods and selling the
same goods in the same form for profit.
• Manufacturing Concern. This involves purchases
of raw materials and converting these raw
materials into finished products.
 BUSINESS AS AN ACCOUNTING
ENTITY
• In accounting, the business is always assumed to
be distinct and separate from its owner or
owners. Which mean that the personal
properties of the owner are different from his
personal obligations, as well as the expenses
incurred by the business. The transactions
therefore, entered into by the owner in behalf of
the business should be recorded in the books of
the firm. This principles holds true to all types of
business, whether sole proprietorship,
partnership, and corporation.
 TRANSACTIION
The data that we record in the accounting
books are called transactions. Transactions are
the economic activities of the firm. These
activities could involve one enterprise and
another enterprise which is called external
transaction or it may be activities within the
enterprise which is called internal transactions.
When there is a transaction there is an
exchange of Value for value. In every
transaction, there is always a value received
and a value parted with. These values received
and parted with may either be money, property,
or services.
 ACCOUNTING ELEMENTS OR
VALUES
In accounting, all transactions and
events are classified into three
values or elements, namely: assets,
liabilities, and capital.
 ACCOUNTING ELEMENTS
• Asset. These are property or rights on
property owned by the business or upon
which the business has a vested equitable
interest. They include properties and other
things of value the ownership title of which is
in the name of the business. Assets can be
grouped into current assets and non-current
assents.
 FORMS OF ASSETS
• Current Assets. Are those assets which can be
reasonably converted into cash within a short
period of time, usually within one accounting
period or within the regular operation of the
business or normal operating cycle of the
business. Regular operation of the business or
normal operating cycle of the business is the
period between the render of service, in case of
service concern, to the receipt of cash, and the
period between the acquisition into cash, in case
of merchandising and manufacturing concern.
 FORMS OF CURRENT ASSETS
• Cash or Cash on Hand and In Banks. This includes currency of cash
items on hand, peso or foreign currency deposits in banks which
are unrestricted and immediately available for the use in the
current operations of the business.
• Receivables. Represent amounts collectible from customers arising
from sales of merchandise, claims for money lent, or the
performance of services. Such is presented in the balance sheet as
account receivable. If the receivable is supported by promissory
note, it is presented as note receivable.
• Inventories. It constitutes items of tangible properties 1.
merchandise inventory/finished goods – held for sale in the
ordinary course of business; 2. goods-in-process – in the process of
production for such sale; 3. raw materials – to be currently
consumed in the production of goods or services to be available for
sale.
 FORMS OF ASSETS
• Noncurrent Assets. Are those assets not
classified as current. They include plant,
building, equipment and others, since they
have useful life that exceeds beyond one year,
and are not intended for sale.
 ACCOUNTING ELEMENTS
• Liabilities. Liabilities are debts or obligations of
the business to a party other than the owner.
There are two classifications of liabilities:
current or short term liabilities and fixed or
long term liabilities.
 FORMS OF LIABILITIES
• Current or short-term Liabilities. Are those which are due for
payment within a short period of time or within one year from the
balance sheet date. These obligations require a current asset for
payment. Included here accounts payable, notes payable, accrued
expenses and unearned income.
• Accounts Payable is indebtedness arising from purchase of goods
and services in the ordinary course of business.
• Notes Payable is a short-term indebtedness supported by written
promises to pay.
• Accrued Expenses are expenses already incurred but not yet paid as
of the balance sheet date.
• Unearned income arises when payments for undelivered goods or
services not yet rendered are received.
 FORMS OF LIABILITIES
• Fixed or Long-term Liabilities are those mature
beyond one year from the balance sheet date.
Examples are mortgage payable, bonds
payable, and notes payable due beyond one
year.
 ACCOUNTING ELEMENTS
• Capital. Capital represents the investment in
the business. It represents the equity of
owners in the property of the business after
the amount of debts to outsider is deducted.
Other terms which can be used synonymously
are Owner’s Equity and Proprietorship.
 ACCOUNTING EQUATION
BOOKKEEPING AND THE ACCOUNTING
EQUATION
Practically all modern accounting systems
make use of the “double-entry bookkeeping”
method. The double-entry bookkeeping
method is based on the nature of a
transaction. As there are two values involved
in a transaction, i.e., value received and value
parted with, there should also be two parts for
the recording of a transaction – a left side and
a right-side.
 ACCOUNTING EQUATION
The accounting equation is fitted into
this method of bookkeeping. It also has a
left-side and a right-side. The left-side is
used to represent items recorded on the
left side by the double-entry bookkeeping
method and the right-side is for the items
normally recorded on the right side by
the bookkeeping process.
 IMPORTANCE OF ACCOUNTING
EQUATION
Business transactions affect the assets,
liabilities, and proprietorship of business.
These effects can be expressed in the
accounting equation.
ASSETS = EQUITIES
“Equities” include all the vested rights of
persons in the assets of the business. Stated
differently, equities include all the amounts
owed by the business to all persons which may
be classified into the following:
 IMPORTANCE OF ACCOUNTING
EQUATION
1. Equities of outsiders or amounts
owing to persons other than the owners
of the business, technically known as
“liabilities”

2. Equities of owners, known in the

accountant’s language as “capital,”
“proprietorship,” or “owners’ equity
 IMPORTANCE OF ACCOUNTING
EQUATION
And since there are two sources of equities,
one from the creditors (liabilities) and the other
from the owner (proprietorship), then we can
express the accounting equation as:
ASSETS = LIABILITIES + PROPRIETORSHIP

The accounting equation may also be

expresses as:
ASSETS – LIABILITIES = PROPRIETORSHIP
 IMPORTANCE OF ACCOUNTING
EQUATION
The foregoing illustrations show the
most common effects of transactions in
the accounting equation. They
emphasize the fact that transactions do
not affect the equality of the sides of
the equation.
 IMPORTANCE OF ACCOUNTING
EQUATION
In as much as there are only three
major items (assets, liabilities, and
proprietorship) in the accounting equation,
and knowing that all transactions may affect
or involve only these values, then, it may be
concluded that all transactions can be
grouped into nine (9) types of effects as
follows:
 ACCOUNTING EQUATION
Increase in Assets = Increase in Proprietorship
Increase in Assets = Increase in Liabilities
Increase in some form of Assets = Decrease in
other forms of Assets
Decrease in Assets = Decrease in
Proprietorship
Decrease in Assets = Decrease in Liabilities
 ACCOUNTING EQUATION
Increase in Liabilities = Decrease in
Proprietorship
Increase in some form of Liabilities =
Decrease in other forms of Liabilities
Increase in Proprietorship = Decrease in
Liabilities
Increase in some forms of Proprietorship =
Decrease in other forms of Proprietorship