THE DIFFERENT BRANCHES

OF ACCOUNTING
THE DIFFERENT BRANCHES
OF ACCOUNTING
1. Financial Accounting
2. Management Accounting
3. Government Accounting
4. Auditing
5. Tax Accounting
6. Cost Accounting
7. Accounting Education
8. Accounting Research
9. Accounting System
PUBLIC ACCOUNTING
In public accounting, the accountant performs or offers to perform any activity that
will result to the issuance of an attest report that is in accordance with professional
standards.

Such activities include consulting services, personal financial planning services, the
preparation of tax returns, and advice on tax matters for a fee.

Usually, a public accountant works in a firm offering its services to various clients.
Certified Public Accountants (CPAs) refer to those who had passed the licensure
examination for accountants.

Examples: External Auditing, Tax Preparation and Planning Services and

Management Advisory Services
PRIVATE ACCOUNTING
Private accounting involves setting up systems of recording business transactions that
are aggregated into financial statements. It includes the development and
interpretation of accounting information intended to assist management in operating
the business.

A private accountant is a salaried employee who deals with the company’s day-to-day
accounting needs. He/she is trained in the processing of accounting transactions such
as billings and account payables. His or her knowledge may be limited to the areas of
accounting for which they are responsible.

Examples: Financial Accounting, Cost Accounting, Budgeting, Accounting

Information System, Tax Accounting and Internal Auditing.
FINANCIAL ACCOUNTING
- deals with the preparation and interpretation of financial information reflected in
the financial statements.
- this area is often referred to as general accounting. The person that specializes on
this field is usually called general accountant.
- All items appearing on the face of the financial statements should be in accordance
with Philippine Financial Reporting Standards(PFRS) requirements and it
include disclosure requirements as governed by the generally accepted accounting
principles(GAAP).
- The financial information provided by financial accounting is used for decisions
making by both internal and external users.
- Financial accounting is primarily concerned with the preparation of the
financial statements.
MANAGEMENT
ACCOUNTING/ADVISORY SERVICES
- involves the application of analytical tools and techniques to economic data in
order to provide assistance to the management in the performance of its basic
functions.
- Management accounting is also termed as managerial accounting.
- The person performing this area of specialization is usually addressed as
management accountant or management consultant.
- Management accounting provides the quantitative information.
- The primary concern of management accounting is the internal user of
financial statements—the management.
GOVERNMENT ACCOUNTING
- is the systematic process of recording, classifying, and summarizing all transactions
involving receipts and dispositions of government funds and property.
- The government does not aim to realize profit but to render service.
- Government accounting is primarily concerned with the custody of government
funds and the purpose for which they are intended.
- The agencies responsible in performing government accounting functions are the
Commission of Audit(COA), the Department of Budget and Management (DBM),
and the Bureau of Treasury(BTr).
AUDITING
- is an independent verification and examination that assures fairness of
presentation of financial statements.
- Auditing serves as an assurance to the different users that the financial
statements prepared by the management are reliable.
- The person that performs the examination of the financial statements is called an
auditor.
- Usually the auditor expresses an opinion as to the fairness of the financial
statements.
- Auditing can be broadly classified into internal audit or external audit.
TAX ACCOUNTING
- is primarily concerned with the application of and compliance with taxation
laws and regulations.
- Business entities and individual persons are mandated to file tax returns for all
types of transactions covered by taxation laws, and pay corresponding taxes.
- The taxes imposed and collected by the national government are broadly classified
into income tax, business tax, and transfer tax.
- The primary concern of tax accounting is the proper application of tax laws and
revenue regulations in the computation of taxes due the national government.
- The person who specializes in tax accounting is usually called a tax specialist or
tax consultant.
COST ACCOUNTING
- is a technique for determining the cost of the product, service or process through
direct measurement, arbitrary assignment, or systematic rational allocation.
- The primary concern of cost accounting is the determination of the cost of product or
services.
- The term “cost” refers to the amount being forgone or sacrificed in order to attain
certain benefits.
- The information on cost is necessary in setting up the price of the product or service.
Without cost information, the management is forced to make a wild guess in aiming at a
decision.
- The person handling cost accounting is usually called a cost accountant or cost
specialist.
ACCOUNTING EDUCATION
- is a teaching profession rendered by certified public accountant(CPA) in various
schools, colleges, and universities.
- The professional accountant imparts knowledge to students enrolled in an
accounting subject either in basic accounting or in higher accounting subjects.
- A Certified Public Accountant is a graduate in Bachelor of Science in
Accountancy (BSA) who successfully passed the CPA Licensure Examination.
ACCOUNTING RESEARCH
- involves conducting a careful and diligent study aimed at
discovering and interpreting facts, revising accepted theories
in the light of new facts, or the practical application of such
new or revised theories for the generation of a new knowledge.
ACCOUNTING SYSTEM/ACCTG
INFORMATION SYSTEM
- refers to the different integrated and interrelated systematic procedures of
accumulating economic data designed for proper information and decision making.
- CPAs are involved in the installation of accounting systems of a business
organization.
- The accounting system is broadly classified as either manual-operated or
electronic-based.
- Most small business enterprises adopt the manual accounting system of gathering
accounting information because of the high cost involved in electronic-based
accounting system.
SPECIALIZED AREA:
FORENSIC ACCOUNTING
Forensic accountants provide the detective work needed to investigate and examine
evidence of white-collar financial crimes such as stealing and fraud.

They often act as expert witnesses in legal proceedings and prepare evidence to be
presented in court.
SPECIALIZED AREA:
INFORMATION TECHNOLOGY
SERVICES
Businesses often seek individuals who can design and implement customized
software systems. CPAs who possess strong skills in information technology can
work with e-commerce ventures and consult with others to determine which
decisions are the most financially and technologically sound for a company.
SPECIALIZED AREA:
ENVIRONMENTAL ACCOUNTING
CPAs involved in environmental accounting determine how companies can be both
profitable and environmentally responsible.

They do environmental compliance audits and set up preventive systems to

ensure compliance and avoid future environmental-related claims or disputes.
SPECIALIZED AREA:
INTERNATIONAL ACCOUNTING
International accountants are knowledgeable in international trade rules and
regulations, international mergers, government regulations, tax laws, and
overseas transactions.

CPAs who work in this area often travel abroad and can speak and understand
different languages.
USERS OF FINANCIAL
INFORMATION
THE USERS OF INFORMATION ARE
BROADLY CLASSIFIED INTO THE
FOLLOWING:
1. EXTERNAL USERS- are not connected with the business, and their
financial interest would either be present or potential.
- secondary users of financial information. They may not be
directly involved in the company’s operations but their decisions may
significantly affect the business entity.

2. INTERNAL USERS- the primary users of financial information who are

inside the reporting entity and are directly involved in managing the
company’s daily operations to make strategic and operational decisions for
the company.
INTERNAL USERS
1. Investors/Owners/Stockholders – These parties provide the
financial resources to keep the business going. They decide
whether to invest or not depending on the estimated amount of
income on the investment.
2. Management- Managers evaluate their progress towards these
goals and use financial data as a guide for future management
actions.
3. Employees- even though they are not involved in the decision
making of the company, they are interested in the financial
information of the company to determine if they have a future in
the company.
EXTERNAL USERS
1. Financial Institutions/Creditors- use financial information to determine the capacity of
the business organization to pay its obligations and their interests at the appropriate time.
2. Government-for tax purposes and in checking of compliance with securities and
exchange commission (SEC) requirements.
3. Lenders- are interested in information that will enable them to determine whether their
loans, and interest attached to them, will be paid when due.
4. Suppliers and other trade creditors
5. Customers- continuance of a business, especially when they have long-term
involvement with, or are dependent on that entity.
6. Public- providing information about the trends and recent developments in the prosperity
of the entity and the range of its activities.