CHAPTER II:

BRANCHES OF
ACCOUNTING
FUNDAMENTALS OF ACCOUNTING,
BUSINESS, AND MANAGEMENT I –
ABM 11
LEARNING OBJECTIVES:
You should be able to:
1. Define Branches of Accounting
2. Differentiate the Branches of Accounting
3. Explain the kind/types of services rendered in each of these
branches

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PICPA (Philippine Institute of Certified Public Accountants)
Classified Accounting into 4 Main Sectors/ Fields:

1. Public Accounting (Public Practice)

2. Private Accounting (Commerce and Industry)
3. Government Accounting
4. Accounting Education

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I. PUBLIC ACCOUNTING
◈ The accountant performs or offers to
perform any activity that will result in the
issuance of an attest report that is in
accordance with professional standards.
◈ Usually, a public accountant works in a firm
offering services to various clients.
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Examples of Public Accounting Services:

◈ External Auditing
- Public accountants examine the financial statements
in order to express an opinion on whether
statements have been fairly presented or not.
- The auditor critically examines the accounting
records and then issues and independent audit
report of his/her findings.
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Examples of Public Accounting Services:

◈ Tax Preparation and Planning Service

- The accountant is Tax Specialist. He/ She is
expected to be knowledgeable about revenue
regulations and tax laws.
- He/ She represents the client in any tax-related case
filed by the Bureau of Internal Revenue (BIR)

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Examples of Public Accounting Services:

◈ Management Advisory Services

- Management consulting involves financial planning
and control, and the development of accounting and
computer systems.
- The accountant advises management on matters
such as the installation of an accounting system,
finance, budgeting, business processes, others.
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II. PRIVATE ACCOUNTING
◈ Involves setting up systems of recording
business transactions that are aggregated into
financial statements.
◈ A private accountant is a salaried employee
that deals with the company’s day-to-day
accounting needs.
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Branches of Private Accounting:

◈ Financial Accounting
- Provides economic and financial information for
investors, creditors and other external users.
- Financial Accounting is governed by an established
body of standards and principles (GAAP or
Generally Accepted Accounting Principles.)
- It ends in the preparation and presentation of
general purpose financial statements. 11
Branches of Private Accounting:

◈ Cost Accounting
- Focuses on accumulating manufacturing costs for
financial reporting and decision-making purposes.
- The primary role of a COST ACCOUNTANT is to
determine the inventory cost for financial reporting
purposes.

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Branches of Private Accounting:

◈ Budgeting
- It provides a detailed collection and reporting of the
expenditures and revenues involved in a business or
company operations.
- Assists the management in quantifying goals
concerning revenue, cost of sales or services, and
operating expenses.
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Branches of Private Accounting:

◈ Accounting Information System

- AIS collects and processes transaction data. It
disseminates information to interested parties.
- Involves the designing of both manual and
computerized data processing systems

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Branches of Private Accounting:

◈ Tax Accounting
- Deals with the preparation of various tax returns
and doing tax planning for the business.
- Similar to tax services done in public accounting

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Branches of Private Accounting:

◈ Internal Auditing
- It reviews the business operations to check if they
are complying to management policies.
- Evaluates the efficiency of business operations
- Internal Auditor is a hired employee of the
company.

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III. GOVERNMENT ACCOUNTING
◈ It is a system used in government offices to
record and report financial transactions.
◈ It reveals how the public funds have been
generated and utilized. Employed in both local
and national governements.
◈ E.g. Provincial Accountant, a Commission on Audit
(COA) auditor, a BIR Examiner, Budget officer of DBM,
Bank examiner of BSP 17
IV. ACCOUNTING EDUCATION
◈ Branch of accounting that is responsible for
training future accountants. It engages in
teaching accounting, financial management,
taxation, and other related business course.
◈ Accounting educators could be teachers,
administrators, or researchers.

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CPAs in SPECIALIZED
AREAS
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SPECIALIZED AREAS

FORENSIC INFORMATION
ACCOUNTING TECHNOLOGY SERVICES
Designs and implement
Provide detective work customized software systems.
needed to investigate and CPAs who possess strong skills
examine evidence of in information technology that
white-collar financial will help company to have a
financially and technological
crimes such as stealing accounting system.
and fraud. 20
SPECIALIZED AREAS

ENVIRONMENTAL INTERNATIONAL
ACCOUNTING ACCOUNTING
Determines how International Accountants are
companies can be both knowledgeable in
profitable and international trade rules and
environmentally- regulations, international
mergers, government
responsible.
regulations, tax laws and
overseas transactions. 21
End of Chapter II

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 CHAPTER III:
USERS OF
ACCOUNTING
INFORMATION
FUNDAMENTALS OF ACCOUNTING,
BUSINESS, AND MANAGEMENT I –
ABM 11
LEARNING OBJECTIVES:
You should be able to:
1. Define Internal Users and give examples
2. Define External Users and give examples
3. Identify the type of decisions made by each group of users
4. Describe the type of information needed by each group of users

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“
Accounting communicates financial
information to decision makers.
Users of accounting information are
collectively referred to as
STAKEHOLDERS (Internal &
External Users” 26
INTERNAL USERS
(makes decision in behalf of the company)

1. MANAGERS/ B. MIDDLE-LEVEL C. LOWER-LEVEL

MANAGEMENT
- Plan, organize and
run the business.
A. TOP
MANAGEMENT
(Chief Executive Officer-
CEO, Chief Financial
Officer-CFO)
-uses the information to
oversee the perfomance of the
whole organization and
strategize.
MANAGEMEN MANAGEMENT
(Department Heads, (Supervisors and Team
Branch Managers, Leaders)
Junior Executives) -they oversee the day-
-they ensure that their to-day operations and
unit’s performances are direct employees in the
aligned with the performance of tasks
organization’s
objectives
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INTERNAL USERS
(makes decision in behalf of the company)
2. EMPLOYEES/
LABOR UNIONS
- Asses the company’s
profitability and stability and
their consequences on future
salaries and job security
3. OWNERS
- They are providers of the
CAPITAL of the business.
- Acctg. Information helps
them to make investing
decisions.
- Interested in Return on
Investment
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Common
Information
needs of the
Internal
Users

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EXTERNAL USERS
(makes decisions based on the company’s financial information)
1. POTENTIAL & 2. CREDITORS & 3. CUSTOMERS
EXISTING INVESTORS POTENTIAL - Need information to
- Need information to CREDITORS assess the financial
help them decide on - Need information to position of their
whether to continue or assess their credit supplier which is
not their investments. worthiness and the necessary for them to
- They want to know the capability of the maintain stable supply
potential return on the company to pay its in the long term.
investment obligations

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EXTERNAL USERS
(makes decisions based on the company’s financial information)
4. SUPPLIERS 5. TAX AUTHORITIES 6. REGULATORY
-Need information to - They use financial BODIES
determine whether the reports to determine -they want to ensure that the
debts owed to them will the credibility of the company’s disclosure of
be paid when due or tax returns filed on accounting information is in
accordance with the rules and
whether the customers behalf of the company.
regulations set in order to
has enough funds or - Interested whether protect the interest of the
resources. they paid the correct stakeholders. E.g. SEC
amount of taxes (Securities and Exchange
Commission, BSP)
7. PUBLIC
-Need information to know how the business affects the economy possible
prospects for employmenta &/or educational purposes.
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THANK
S!
Any questions?
You can find me at Larmaine
Macadangdang (FB)