BRANCHES OF ACCOUNTING

OBJECTIVES:
ON THIS CHAPTER, WE WILL BE ABLE TO:

1. Differentiate the branches of

accounting
2. Explain the kinds/type of services
rendered in each of these branches
RESMEROS, RYAN BERNARD
 What is Accounting?
• Accounting is the process of recording
financial transactions pertaining to a
business.
• The accounting process includes analyzing,
summarizing, and reporting these
transactions to oversight agencies, regulators,
and tax collection entities.
What are the Branches of Accounting?
FINANCIAL ACCOUNTING
MANAGEMENT ACCOUNTING
GOVERNMENT ACCOUNTING
AUDITING
TAX ACCOUNTING
COST ACCOUNTING
ACCOUNTING EDUCATION
ACCOUNTING RESEARCH
  Financial Accounting
• Recording financial transactions by preparing
financial statements which serves as
information needs to be present to various
users such as investors, creditors, government
agencies, public, etc.
• Financial Accounting leads to preparation of a
general-purpose.
• Financial statement is compared to specific-
purpose financial statements.
EXAMPLES of Financial Accounting :

o BALANCE SHEETS

o INCOME STATEMENTS

o STATEMENT OF CASH FLOW

  Management Accounting
• Focuses in gathering financial and informative
data intended used by the management.
• Comparing the actual results against the
budgeted amounts and finding the difference
of variance.

The difference between actual and

budgeted income and expenditure.
 Variance can either be favorable or
unfavorable.

Example: The company makes a sales

forecast or sales projection of 120 units
while the actual sales volume turns out to
be 150 units. Budgeted overhead is
P80,000 while actual is P110,000.
 DIFFERENCE BETWEEN FINANCIAL AND
MANAGEMENT ACCOUNTING
Financial Accounting
Financial data or information have already
happened in the past or history of past
transactions.
Management Accounting
Financial data or information that have yet to
happen in the future.
EXAMPLES of Management Accounting:
o Product costing and valuation

o Cash flow analysis

o Break-even analysis

o Constraint analysis
  Government Accounting
• Deals with the proper custody of public funds
in both national and local government such as
cities, provinces, municipalities and barangays.
• The recording and management of financial
activities of governments at Commonwealth,
state and localities.
• Government accountants prepare and review
financial documentation for the government
and its taxpayers.
The following are offices that are charged
with accounting responsibilities.
 A.) Department of Budget and
Management(DBM)

• Primary government agency responsible for

the formulation and implementation of the
National Budget through the efficient and
utilization of government funds and resources
for the attainment of the country's
development objectives.
 B.) Bureau of the Treasury(BTr)
• It makes funds available for various government
programs and projects.
• It assists in the formulation of policies on borrowing,
investment, and capital market development; in
managing cash resources; in collecting taxes; and in
controlling and servicing public debt.
• Receive and keep national funds, manage and control
the disbursement
• Maintain accounts of financial transactions of all national
government offices, agencies and instrumentalities.
DONQUE, CHARAMIE
The Commission of Audit, in exercise of it’s
authority granted under the 1987 constitution
prescribed the New Government Accounting
System (NGAS) which was introduced on January
1, 2002.
• One of the reasons why the old accounting system
which existed more than five (5) decades has shifted
to NGAS was in order to respond to the need of
adopting a system to conform with International
Acconting Standards (IAS) and eventual
computerization.
However, the COA readopted the IAS on January 1,
2014 which was fully implemented on January 1, 2015
and they call it Philippine Public Sector Accounting
Standard (PPSAS).
 AUDITING
Is a branch of accounting that is divided into two types;
INTERNAL and EXTERNAL AUDITING.

The financial statements after the examination are called

Audited Financial Statements and accompanied by an
Independent Auditor's Report (Auditor's Opinion) which
adds credibility of the reports to be furnished to users of
financial statements such as management, customers,
government, investors, employees, public, suppliers and
other trade creditors, etc.
• To summarize, internal audit is performed by
its own employee who may not be a CPA while
external audit is performed by a non-
employee who is a CPA engaged by the
company to conduct an audit.
John Lloyd Ranoa
 TAX ACCOUNTING
is a branch of accounting that deals with the
inherent power of state to collect taxes. Tax
accounting produces tax returns to be filed to
appropriate government agencies.
 COST ACCOUNTING
is a branch of accounting that is primarily
concerned with gathering, accumulation and
control to determine the cost of production of
goods and services and setting-up of selling
price thereafter.
The three (3)elements of manufacturing
cost.
 Direct Material
• refers to cost of raw materials which are used
and consumed in production and can be
traced forming part of the finished product.
 Direct Labor
• refers to wages paid to workers who are
working directly on the product. The salaries
of plant supervisors, foreman, timekeeper,
janitors and the like are not considered as
direct labor because the nature of their work
cannot be charged to a specific product. They
are instead considered as "indirect labor".
 Manufacturing Overhead
• refers to all costs incurred in the manufacture
of products except direct materials and direct
labor. The incurrence of these costs have
helped in the completion of the product but
cannot be traced to what specific product it
can be charged of.
Julan Credo
Cost accumulation procedures used by manufacturing concern are
classified as either job order or process costing. These are outlined
below:
 JOB ORDER COSTING
• the job order cost procedure keeps the cost of
various jobs separate during their
manufacture. The method is applicable to job
order worker in factories, workshop and repair
shops. The cost unit is the job order contract
and the records will show the cost of each for
materials, labor and overhead.
 PROCESS COSTING
• This method is applicable to industries
producing chemicals, cement, textiles,
canning, breweries, sugar, flour, plastics,
shoes, etc. This process costing is used when
products are manufactured under continuous
processing or mass production method.
• The nature of manufacturing operation in firm
using process costing usually takes place in
several departments. Each department
performs specific operation towards the
completion of the product.
 Inventories of a Manufacturing Concern:

• 1. Finished Goods Inventory - these goods are

completely manufactured and are ready for
sale.
• 2. Work In Process - these are goods where
works have already been started but are not yet
completed.
• 3. Raw Materials - cost of raw materials that
were purchased but are not yet issued to
production department.
Rojan Bernaldez
 ACCOUNTING EDUCATION
• is a branch of accounting that deals primarily
with upgrading the quality of teaching in
accounting education through attending the
required Continuing Professional
Development (CPD) as prescribed by the
Board of Accountancy.
The following business courses will be offered
effective school year 2018, viz:
• 1) Bachelor of Science in Accountancy
• 2) Bachelor of Science in Management
Accounting
• 3) Bachelor of Science in Internal Audit
• 4) Bachelor of Science in Accounting
Information System
 FROM TO

1.