Lesson 2:

Branches of Accounting

Users of Accounting
Information
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Bookkeeping
Accounting Financial
Research Accounting

Accounting Management
Education
Branches Accounting

of
Taxation
Accounting Cost
Accounting

Financial
Auditing
Management
Government
Accounting
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Bookkeeping
Is a mechanical task involving the collection of basic
financial data.
General Journal
General Ledger
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Financial Accounting
Is focused on the recording of business
transactions and the periodic preparation of
reports on results of operations, changes in equity,
financial positions and cash flows.

Financial accountants accord importance to

Generally Accepted Accounting Principles (GAAP)
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Management Accounting
Is an integral part of management process. It
provides information primarily to internal
management.
It measures, analyzes and reports financial and
non-financial information which is then used by the
management for planning, control and decision-
making.
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Cost Accounting
Is the collection, allocation, and control of the costs
to produce or supply a product or service.
This accumulation and explanation of actual and
prospective cost data is important to control
current operations and to plan for the future.
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Financial Management
Can be defined as the management of the finances
of an organization to achieve the financial
objectives of the entity.
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Government Accounting
According to Sec. 109 of Presidential Decree 1445,
government accounting encompasses the
processes of analyzing, recording, classifying,
summarizing and communicating all the
transactions involving the receipt and disposition
of government funds and property, and
interpreting the results thereof.
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Auditing
Is a systematic process of objectively obtaining and
evaluating evidence regarding assertions about
economic actions and events to ascertain the
degree of correspondence between those
assertions and established criteria and
communicating the results to interested users.
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Taxation
Taxes are the lifeblood of the government and their
prompt and certain availability are an imperious
need. Taxation is the process or means by which
the sovereign, through its law making body, raises
income to defray the necessary expenses of the
government.
Tax accounting includes the preparation of the
relevant tax returns and the consideration of the
tax consequences of proposed business
transactions or alternative courses of action.
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Accounting Education
Guarantees the continued development of the
profession by endeavoring to clarify and address
emerging issues through research and sharing the
results obtained with their colleagues.
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Accountancy Research
Is the systematic process of collecting and
analyzing information to increase ones
understanding of the functions of a professional
accountant and contribute to the solution of
problems besetting the practice of the profession.
 Users of
Accounting
Information
Internal and External Users
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Are individuals and others that have current or potential financial

interest in the reporting entity but are not involved in the daily operations
of the entity. The information needs of these users are diverse so that
only the primary or the general-purpose financial statement
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Need information to help them determine whether they should buy, hold or sell.

Are interested in information that enables them to determine whether their loans
and the related interest will be paid when due.

Have an interest in information about the continuance of an enterprise, especially

when they have a long-term involvement with, or are dependent on, the enterprise
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Are interested in information that enables them to determine whether amounts owing
to them will be paid when due.

Are interested in the allocation of resources and, therefore, the activities of the
enterprise. They also require information in order to regulate the activities of the enterprises
determine taxation policies and as the basis for national income and similar statistics.

Financial statements may assists the public by providing information about

the trends and recent developments in the prosperity of the enterprise.
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Includes the board of Management

directors, chief accountants design and
executive officers, use an information
chief financial officers, system that primarily
vice presidents, helps in planning and
internal auditors, control decisions.
business unit
managers, plant
managers and
supervisors.
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Activity Structure Examples

Service Selling peoples time Hiring skilled staff Software
and selling their time development
Accounting
Legal

Buying and selling Buying a range of Wholesaler

Trader/ products raw materials and Retailer
Merchandiser manufactured goods
and consolidating
them, making them
available for sale in
locating near to their
customers or online
for delivery
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Manufacture Activity Structure Examples

Designing products, Taking raw materials Vehicle Assembly
aggregating and using equipment Construction
components and and staff to convert Engineering
assembling finished them into finished Electricity, water
products. goods Food and drink
Chemicals
Media
Pharmaceuticals

Raw Materials Growing or Buying blocks of Farming

extracting raw land and using them Mining
materials to provide raw Oil
materials
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SOLE
PROPRIETORSHIP

This business
organization has a single Place your screenshot here
owner called the
proprietor who generally
is the manager. Sole
proprietorhips tend to be
small service-type
businesses and retail
establishments.
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Advantages Disadvantages
SOLE
PROPRIETORSHIP 1. Easy to set-up and 1. Unlimited personal
discontinue liability
2. Requires a small 2. Limited management
amount of capital to skills
start
3. Limited access to
3. Profits all accrue to capital
the owner
4. Lacks continuity in
4. Total control on the case of death or
part of the owner incapacity of owner
PARTNERSHIP 24

In a contract of
partnership, two or more
persons bind themselves
to contribute money,
property, or industry to a
common fund, with the
intention of dividing the Place your screenshot here

profit among themselves.

Two or more persons may
also form a partnership
for the exercise of a
profession (Civil Code of
the Philippines, Article
1767).
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Mutual Contribution
There cannot be a partnership without contribution of money, property or industry to a common fund.
Division of Profits or Losses
The essence of partnership is that each partner must share in the profits or losses of the venture.

Mutual Contribution
There cannot be a partnership without contribution of money, property or industry to a common fund
Co-ownership of Contributed Assets
All assets contributed into the partnership are owned by the partnership by virtue of its separate and
distinct juridical personality. If
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Mutual Agency
Any partner can bind the other partners to a contract if he is within his express or implied authority.
Limited Life
A partnership has a limited life. It may be dissolved by the admission, death, insolvency, incapacity,
withdrawal of a partner or expiration of the term specified in the partnership agreement.

Unlimited Liability
All partners (except limited partners), including industrial partners are personally liable for all the debts
incurred by the partnership
Income Taxes
Partnerships, except general professional partnerships, are subject to tax at the rate of 30% of taxable
income
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1. Brings greater financial capability to the business

2. Combines special skills, expertise and experience of the partners
3. Offers relative freedom and flexibility of action in decision-making
4. Risks are shared

1. Easier and less expensive to organize

2. More personal and informal
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1. Profits are shared.

2. Easily dissolved and thus unstable compared to a corporation.
3. Mutual agency and unlimited liability may create personal obligations.
4. Less effective than a corporation in raising large amounts of capital.
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Corporation
A corporation is an
artificial being created
by operation of law,
Place your screenshot here
having the right of
succession and its
powers, attributes and
properties expressly
authorized by law or
incident to its existence.
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Attributes of a
Powers,
Corporation Artificial attributes
being and
properties
Created by
operation of
law

Right of
succession
1. The corporation has the legal capacity to act as a legal entity
2. Shareholders have limited liability.
3. It has continuity of existence.
4. Shares of stock can be transferred without the consent of other shareholders.
5. Its management is centralized in the board of directors.
6. Shareholders are not general agents of the business.
7. Greater ability to acquire funds.
1. A corporation is relatively complicated in formation and management.
2. There is a greater degree of government control and supervision.
3. It requires a relatively high cost of formation and operation.
4. It is subject to a heavier taxation than other forms of business organizations.
5. Minority shareholders are subservient to the wishes of the majority.