BRANCHES

OF
ACCOUNTIN
G
 BRANCHES OFACCOUNTING
“Accounting is divided into several branches
to better serve the needs of different users with
varying information needs.

These branches sometimes overlap and

they are often closely intertwined.”
 BRANCHES OFACCOUNTING
• Financial Accounting
• Management Accounting
• Government Accounting
• Auditing
• Tax Accounting
• Cost Accounting
• Accounting Education
 MANAGEMENTACCOUNTING
-emphasizes the preparation and analysis of
accounting information within the organization.

The objective of managerial accounting is to

provide timely and relevant information for
those internal users of accounting information,
such as the managers and employees in their
decision-making needs.
 MANAGEMENTACCOUNTING
Oftentimes, these are sensitive information and is
not distributed to those outside the business- for
example, prices, plans to open up branches,
customer list, etc.

Managerial accounting involves financial

analysis, budgeting and forecasting, cost analysis,
evaluation of business decisions, and similar areas.
 GOVERNMENTACCOUNTING
- is the process of recording, analyzing,
classifying, summarizing, communicating and
interpreting financial information about the
government in aggregate and in detail reflecting
transactions and other economic events involving
the receipt, spending, transfer, usability and
disposition of assets and liabilities.
 GOVERNMENTACCOUNTING
This branch of accounting deals with how the
funds of the government are recorded and reported.

Government accounting deals with these

transactions, the recording of inflow and outflow of
funds of the government
 AUDITING
There are two types of auditing: external and internal
auditing. External auditing refers to the examination of
financial statements by an independent CPA (Certified
Public Accountant) with the purpose of expressing an
opinion as to fairness of presentation and compliance
with the generally accepted accounting principles
(GAAP). The audit does not cover 100% of the
accounting records but the CPA reviews a selected
sample of these records and issues an audit report.
 AUDITING
Internal auditing deals with determining the
operational efficiency of the company regarding the
protection of the company’s assets, accuracy and
reliability of the accounting data, and adherence to
certain management policies. It focuses on
evaluating the adequacy of a company's internal
control structure by testing segregation of duties,
policies and procedures, degrees of authorization,
and other controls implemented by management.
 TAXACCOUNTING
Tax accounting helps clients follow rules set by
tax authorities. It includes tax planning and
preparation of tax returns.

It also involves determination of income tax and

other taxes, tax advisory services such as ways to
minimize taxes legally, evaluation of the
consequences of tax decisions, and other tax-
related matters.
 COSTACCOUNTING
Sometimes considered as a subset of
management accounting, cost accounting refers to
the recording, presentation, and analysis of
manufacturing costs. Cost accounting is very
useful in manufacturing businesses since they have
the most complicated costing process.
 COSTACCOUNTING
Cost accountants also analyze actual and standard
costs to help managers determine future courses of action
regarding the company's operations.

Cost accounting will also help the owner set the selling
price of his products. For example, if the cost accounting
records shows that the total cost to produce one can of
sardines is PHP50, then the owner can set the selling price
at PHP60.
 ACCOUNTING EDUCATION
This branch of accounting deals with developing future
accountants by creating relevant accounting curriculum.

Accounting professionals can become faculty members

of educational institutions.
 ACCOUNTING EDUCATION
Accounting educators contribute to the development of
the profession through their effective teaching, publications
of their research and influencing students to pursue
careers in accounting.

Accounting teachers share their knowledge on

accounting so that students are informed of the importance
of accounting and its use in our daily lives
 FINANCIALACCOUNTING
Financial accounting is the broadest branch
and is focused on the needs of external
users.

Financial accounting is primarily concerned

with the recognition, measurement and
communication of economic activities.
 FINANCIALACCOUNTING
This information is communicated in a
complete set of financial statements.

It is assumed under this branch that the

users have one common information need.
 FINANCIALACCOUNTING
The Philippine Financial Reporting Standards (PFRS)
and Philippine Accounting Standards (PAS) are the new
set of Generally Accepted Accounting Principles (GAAP)
issued by the Accounting Standards Council (ASC) to
govern the preparation of financial statements.

These standards are patterned after the revised

International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) issued by the
International Accounting Standards Board (IASB).
 FINANCIALACCOUNTING
PFRS stands for Philippine Financial
Reporting Standards, which are applicable to
all entities in the Philippines.

PAS, on the other hand, refers to Philippine

Accounting Standards, which are applicable to
entities that are not considered as public
interest entities (PIEs).
 FINANCIALACCOUNTING
Examples of these financial statements include:

• Balance Sheet (statement of financial position)

• Income Statement (the profit and loss statement, or P&L)
• Cash Flow Statement
• Statement of Changes in Shareholder’s Equity
• Statement of Comprehensive Income
• Notes to Financial Statement
 FINANCIALACCOUNTING
1. Balance Sheet (Statement of Financial Position)
- It provides a snapshot of a company's finances (what
it owns and owes) as of the date of publication.

- This statement includes the amounts of the company’s

total assets, liabilities and owner’s equity which in
totality provides the financial position of the company on
a specific date.

Assets=Liabilities+Shareholders’ Equity
 FINANCIALACCOUNTING
Components of a Balance Sheet
Assets
Accounts within this segment are listed from top to bottom in
order of their liquidity. This is the ease with which they can be
converted into cash. They are divided into current assets, which
can be converted to cash in one year or less; and non-current or
long-term assets, which cannot.
 FINANCIALACCOUNTING
Components of a Balance Sheet

Here is the general order of accounts within current assets:

• Cash and cash equivalents are the most liquid assets and can include
Treasury bills and short-term certificates of deposit, as well as hard currency.
• Marketable securities are equity and debt securities for which there is a liquid
market.
• Accounts receivable (AR) refer to money that customers owe the company.
This may include an allowance for doubtful accounts as some customers
may not pay what they owe.
• Inventory refers to any goods available for sale, valued at the lower of the
cost or market price.
• Prepaid expenses represent the value that has already been paid for, such
as insurance, advertising contracts, or rent.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Liabilities
A liability is any money that a company owes to outside parties,
from bills it has to pay to suppliers to interest on bonds issued to
creditors to rent, utilities and salaries. Current liabilities are due
within one year and are listed in order of their due date. Long-
term liabilities, on the other hand, are due at any point after one
year.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Current liabilities accounts might include:
• Current portion of long-term debt is the portion of a long-
term debt due within the next 12 months. For example, if a
company has a 10 years left on a loan to pay for its
warehouse, 1 year is a current liability and 9 years is a long-
term liability.
• Interest payable is accumulated interest owed, often due as
part of a past-due obligation such as late remittance on
property taxes.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Current liabilities accounts might include:
• Wages payable is salaries, wages, and benefits to
employees, often for the most recent pay period.
• Customer prepayments is money received by a customer
before the service has been provided or product delivered.
The company has an obligation to (a) provide that good or
service or (b) return the customer's money.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Current liabilities accounts might include:
• Dividends payable is dividends that have been authorized
for payment but have not yet been issued.
• Accounts payable is often the most common current liability.
Accounts payable is debt obligations on invoices processed
as part of the operation of a business that are often due within
30 days of receipt.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Long-term liabilities can include:
• Long-term debt includes any interest and principal on bonds
issued
• Pension fund liability refers to the money a company is
required to pay into its employees' retirement accounts
• Deferred tax liability is the amount of taxes that accrued but
will not be paid for another year. Besides timing, this figure
reconciles differences between requirements for
financial reporting and the way tax is assessed, such as
depreciation calculations.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Shareholder Equity

Shareholder equity is the money attributable to the owners of a

business or its shareholders. It is also known as net assets
since it is equivalent to the total assets of a company minus its
liabilities or the debt it owes to non-shareholders.
 FINANCIALACCOUNTING
Components of a Balance Sheet
Shareholder Equity

Retained earnings are the net earnings a company either

reinvests in the business or uses to pay off debt. The remaining
amount is distributed to shareholders in the form of dividends.
Treasury stock is the stock a company has repurchased. It can
be sold at a later date to raise cash or reserved to repel a
hostile takeover.
 FINANCIALACCOUNTING
Example of a Balance Sheet
 FINANCIALACCOUNTING

2. Income Statement (the Profit and Loss(P&L)

Statement)
- Contains the results of the company’s operations for a
specific period of time. This can be prepared on a monthly,
quarterly or yearly basis.
Income Statement
Analysis of the Balance Sheet and Income Statement
What Is an Income Statement?
An income statement is one of the three important financial
statements used for reporting a company’s financial performance over a
specific accounting period. The other two key statements are the balance
sheet and the cash flow statement.
The income statement focuses on the revenue, expenses, gains, and
losses reported by a company during a particular period. Also known as
the profit and loss (P&L) statement or the statement of revenue and
expense, an income statement provides valuable insights into a company’s
operations, the efficiency of its management, underperforming sectors, and
its performance relative to industry peers.
Analysis of the Balance Sheet and Income Statement
What Is an Income Statement?

The income statement is an integral part of the company performance

reports that must be submitted to the Securities and Exchange
Commission (SEC).
While a balance sheet provides the snapshot of a company’s financials
as of a particular date, the income statement reports income through a
specific period, usually a quarter or a year, and its heading indicates the
duration, which may read as “For the (fiscal) year/quarter ended June 30,
2021.”
Analysis of the Balance Sheet and Income Statement
What Is an Income Statement?

The income statement focuses on four key items: revenue, expenses,

gains, and losses. It does not differentiate between cash and non-
cash receipts (sales in cash vs. sales on credit) or cash vs. non-cash
payments/disbursements (purchases in cash vs. purchases on credit). It
starts with the details of sales and then works down to compute net
income and eventually earnings per share (EPS). Essentially, it gives an
account of how the net revenue realized by the company gets transformed
into net earnings (profit or loss).
Analysis of the Balance Sheet and Income Statement
Revenue and Gains
The following are covered in the income statement, though its format may
vary, depending upon the local regulatory requirements, the diversified scope of
the business, and the associated operating activities:

1. Operating Revenue
Revenue realized through primary activities is often referred to as operating
revenue. For a company manufacturing a product, or for a wholesaler, distributor,
or retailer involved in the business of selling that product, the revenue from
primary activities refers to revenue achieved from the sale of the product.
Similarly, for a company (or its franchisees) in the business of offering services,
revenue from primary activities refers to the revenue or fees earned in exchange
Analysis of the Balance Sheet and Income Statement
Revenue and Gains

2. Non-Operating Revenue
Revenue realized through secondary, noncore business activities is
often referred to as nonoperating, recurring revenue. This revenue is
sourced from the earnings that are outside the purchase and sale of goods
and services and may include income from interest earned on business
capital parked in the bank, rental income from business property, income
from strategic partnerships like royalty payment receipts, or income from an
advertisement display placed on business property.
Analysis of the Balance Sheet and Income Statement
Revenue and Gains
3. Gains
Also called other income, gains indicate the net money made from other
activities, like the sale of long-term assets. These include the net income
realized from one-time nonbusiness activities, such as a company selling its
old transportation van, unused land, or a subsidiary company.

Revenue should not be confused with receipts. Payment is usually

accounted for in the period when sales are made or services are delivered.
Receipts are the cash received and are accounted for when the money is
received.
Analysis of the Balance Sheet and Income Statement
Expenses and Losses

A business's cost to continue operating and turning a profit is known as

an expense. Some of these expenses may be written off on a tax return if
they meet Internal Revenue Service (IRS) guidelines.
Analysis of the Balance Sheet and Income Statement
Expenses and Losses
1. Primary-Activity Expenses
These are all expenses incurred for earning the average operating
revenue linked to the primary activity of the business. They include the cost
of goods sold (COGS); selling, general, and administrative (SG&A)
expenses; depreciation or amortization; and research and
development (R&D) expenses.

Typical items that make up the list are employee wages, sales
commissions, and expenses for utilities such as electricity and
transportation.
Analysis of the Balance Sheet and Income Statement
Expenses and Losses
2. Secondary-Activity Expenses
These are all expenses linked to noncore business activities, like interest
paid on loan money.

3. Losses as Expenses
These are all expenses that go toward a loss-making sale of long-term
assets, one-time or any other unusual costs, or expenses toward lawsuits.
Analysis of the Balance Sheet and Income Statement
Income Statement Structure
Mathematically, net income is calculated based on the
following:

Net Income = (Revenue + Gains) - (Expenses + Losses)

Analysis of the Balance Sheet and Income Statement
Analysis of the Balance Sheet and Income Statement
Uses of Income Statements

Though the primary purpose of an income statement is to convey details of

profitability and business activities of the company to the stakeholders, it also
provides detailed insights into the company’s internal activities for comparison
across different businesses and sectors. By understanding the income and
expense components of the statement, an investor can appreciate what makes a
company profitable.
Analysis of the Balance Sheet and Income Statement
Uses of Income Statements

Based on income statements, management can make decisions like

expanding to new geographies, pushing sales, expanding production capacity,
increasing the use of or the outright sale of assets, or shutting down a department
or product line. Competitors also may use them to gain insights about the success
parameters of a company and focus areas such as lifting R&D spending.
Analysis of the Balance Sheet and Income Statement
What Is the Difference Between Operating Revenue and Non-Operating
Revenue?

Operating revenue is realized through a business' primary activity, such

as selling its products. Non-operating revenue comes from ancillary sources
such as interest income from capital held in a bank or income from rental of
business property.
 FINANCIALACCOUNTING

3. Cash Flow Statement

- Provides an analysis of inflows and/or outflows of
cash from/to operating, investing and financing activities
 What you need to
know?
After going through this lesson, you are expected
to:
1.discuss the components and structure of a
cash flow statement;
2. prepare a cash flow statement
 W H AT I S
N E
FI
D E

Cash Flow
'S
LET

Statement
A cash flow statement (CFS) summarizes the amount of
cash and cash equivalents entering and leaving a
company.

The CFS highlights a company's cash management,

including how well it generates cash.

The main components of the CFS are cash from three

areas: Operating activities, Investing activities, and
Financing activities.
Operating
Activities
Cash Inflows
Sales of goods and service performed; from
fees, commissions and other revenues

Cash Outflows
payments to suppliers
payments to employees
payments to income taxes
payments to interest expense payments to
other operating expense
Investing
Activities Cash Inflows
Sales of property and equipment
Sales of investments in debt or equity securities
collection on notes/accounts receivables
in investment

Cash Outflows
payments to acquire property and
equipment payments to debt or equity
securities payments to notes/accounts
receivables
Financing
Activities Cash Inflows
Investments by owners
issuance of notes payable in financing

Cash Outflows
payments to owners in the form of
withdrawals Payment to settle notes payable
financing
The two methods in preparing Cash Flow
Statement
1. Direct – adds up all of the cash payments and receipts, including
cash paid to suppliers, cash receipts from customers, and cash paid
out in salaries. This method of CFS is easier for very small
business that use the cash basis accounting method.

2. Indirect – this technique starts with net income and

makes adjustments to net income to convert it to a cash
basis.
The CFS is distinct from the income statement
and the balance sheet because it does not
include the amount of future incoming and
outgoing cash that has been recorded as
revenues and expenses. Therefore, cash is not
the same as net income, which includes cash
sales as well as sales made on credit on the
income statements.
 FINANCIALACCOUNTING
4. Statement of Changes in Shareholder’s Equity
- (also referred to as statement of retained earnings).
This statement measures the changes in owners' equity
throughout a specific accounting period. All changes,
whether increases or decreases to the owner’s interest on
the company during the period, are reported here.
 FINANCIALACCOUNTING
4. Statement of Changes in Shareholder’s Equity
The formula for the Statement of Owners Equity is
simple:
Capital Balance at the start.
Add: Any added owner contributions to the business
should be incorporated.
Add: business's net income.
Less: Any withdrawals made by the owners.
Less: Losses incurred by the company.
=Ending Capital balance.
 TABLE OF
CONTENT
1 Add your text 4 Add your text
here here

2 Add your text 5 Add your text

here here

3 Add your text 6 Add your text

here here
COMPANY
PROFILE
Lorem ipsum dolor sit amet, consectetur
adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam, quis
nostrud.

Lorem ipsum dolor sit amet, consectetur

adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam, quis
nostrud.
 Larana
Inc.

WELCOM
TO OUR PRESENTATION
E
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do
eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud.
 Larana
Inc.

ABOU
OF OUR COMPANY
T
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do
eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud.
 Larana
Inc.

SERVICES
OF OUR COMPANY
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do
eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud.
START UP
FINANCE
Lorem ipsum dolor sit amet, consectetur
adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.

Lorem ipsum dolor sit amet, consectetur

adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.
ENTERPRISE
FINANCE
Lorem ipsum dolor sit amet, consectetur
adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.

Lorem ipsum dolor sit amet, consectetur

adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.
FINANCIAL
SECURITY
Lorem ipsum dolor sit amet, consectetur
adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.

Lorem ipsum dolor sit amet, consectetur

adipiscing elit, sed do eiusmod tempor
incididunt ut labore et dolore magna
aliqua. Ut enim ad minim veniam,
quis nostrud.
 Larana Inc.

O U R C O N TA C T
reallygreatsite.com hello@reallygreatsite.com

123-456-7890 123 Anywhere St., Any City