Fundamentals of

Accounting for
Junior High School
AIROTCIV IVY BLAISE P. MANGAWANG, MBA

Instructor
Overview

1 Introduction to Accounting
2 Branches of Accounting
3 Users of Accounting Information
4 Forms of Business Organization
5 Types of Business According to Activities
6 Accounting Concepts and Principles
Overview

7 The Accounting Equation

8 Types of Major Accounts
9 Books of Accounts
10 Business Transactions and Their Analysis – Service Industry Part I
11 Business Transactions and Their Analysis – Service Industry Part II
12 Accounting Cycle of a Merchandising Business
Brainstorming

Let’s have a recoup!

Chapter 2 – Branches of Accounting
01 Financial Accounting
02 Management Accounting
03 Government Accounting
04 Auditing
05 Tax Accounting
06 Cost Accounting
07 Accounting Education
08 Accounting Research
Credit
FINANCIAL ACCOUNTING
It is a branch of accounting primarily handling the recording of
financial transactions of a business.

These financial transactions are later summarized into

standardized accounting reports, known as financial
statements, for the benefit of internal and external users.

 Philippine Financial Reporting Standard (PFRS)

 Philippine Accounting Standards (PAS)
 Generally Accepted Accounting Principles (GAAP)

Note:
 General Purpose Financial Statement – for the disclosure
of financial information to people who do not have the
capability to request or acquire information directly from
the company.
 Special Purpose Financial Statement – for people who
have direct connection with the company to request
financial information
Primary Users of General Purpose Primary Users of Special Purpose
Financial Statements Financial Statements
• Investors • Top Management
• Creditors • Middle Management
• Shareholders/Stockholders • Other interest parties
• Government Agencies
• Auditors
• Other interested outside
parties
MANAGEMENT ACCOUNTING
It is a branch of accounting which focuses on the
preparation of financial reports used by managers in their
day-to-day decision-making.

Reports generated using this branch are for internal users

only. As such, management reports need not follow
accounting standards such as PFRS and PAS.

Management Accounting VS Financial Accounting

(In Nature and Information needed)

Management Accounting – information is forward-

looking. It contains forecasted information used for
planning.

Financial Accounting – summarizes financial data within a

specified period, thus, needs information that is historical.
 Roles of Management Management Accountants’
Accountants Skill Set

Based on Chartered Institution of Management Management accountants should be able to possess

Accountants (CIMA) that different strategic and management skills that is
to:
● Advise managers about the financial
implications of projects ○ Analyze
● Explain the financial consequences of business
○ Strategize
decisions
○ Take risk
● Formulate business strategy
● Monitoring spending and financial control ○ Plan
● Conduct internal business audits
○ Communicate
● Explain the impact of the competitive landscape
● Bring a high level of professionalism and integrity
to the business
GOVERNMENT ACCOUNTING
According to Section 109 of Presidential Decree 1445, it
is defined as an “accounting system which encompasses
the process of analyzing, recording, classifying,
summarizing, and communicating all transactions
involving the receipt and disposition of government fund
and property and interpreting the result thereof.”

It is used by all national and local government agencies.

Objectives of Government Accounting

Section 110 of Presidential Decree 1445

● To provide information concerning past

operations and present conditions

● To provide a basis for guidance for future

operations

● To provide for control of the acts of public

bodies and offices in the receipt, disposition,
and utilization of funds and property

● To report on the financial position and the

results of operations of government agencies
for the information and guidance of all
persons concerned
 New Government Accounting Government Accounting
System (NGAS) Process

It starts after the declaration of the General

Appropriations Act (GAA).
It concerns the stewardship of the government of
public resources if country’s fund are used for public
 GAA – it is the enacted budget of the
projects that will benefit many constituents
country for the upcoming year. It has a
force of law and it states how much an
This system of placing accountability in each agency
agency can spend for the year.
discourages misappropriation and misuse of public
funds.
The government accounting process involves:

 Commission on Audit (COA)

 Department of Budget
and Management (DBM)
 Bureau of Treasury (BTr)
 All other government
agencies
Important Notes:
 COA – is responsible for the keeping of the government’s general
accounts. The agency is responsible in disseminating accounting
rules and regulations to be used by all government entities.

 DBM – in accordance with Section 2, Chapter 1, Title XVII, Book IV of

the Administrative Code of the Philippines, the DBM shall be
“responsible for the formulation and implementation of the National
Budget with the goal of attaining our national socio-economic plans
and objectives. The Department shall be responsible for the efficient
and sound utilization of government funds and revenues to
effectively achieve the country’s development objectives.”

 BTr – is responsible for the safekeeping of the national funds. It serves

like a bank where government funds are kept. Likewise, the agency is
responsible for the management and control of the disbursements of
such funds and maintaining accounts of financial transactions of all
natural government agencies.
AUDITING
It is a branch of accounting that deals with the reliability and
relevance, truthfulness, and fairness of the presentation of
financial statements.

It is an unbiased examination and evaluation of the financial

statements of an organization (Investopedia.com)

It is a process that includes numerous steps to determine

whether or not a company’s financial statements are
presented truthfully.

There are two kinds of audits:

○ INTERNAL AUDIT – performed by a person that is within
the company but is concerned with evaluating and
improving the effectiveness of risk management, control
and governance processes in an organization.
○ EXTERNAL AUDIT – performed by a person that has no
connection with the company, usually from a group of
external auditing body to enable transparency of results
Important Notes:
 Auditors – accountants that perform the auditing procedure.

 Auditors should act independently from the company being audited.

 Audit improves company’s credibility.

 Audited financial statements – Financial statements that underwent the process

of auditing.

 Auditors opinion – basis whether or not the financial statements are prepared
truthfully and without any material errors.
TAX ACCOUNTING
It deals with the preparation, analysis, and presentation of
various tax returns and tax payments. It also involves tax
planning for the business to ensure smooth functioning of
their finances.

In terms of recording of financial transactions, tax accounting

do it differently. Though it adheres some guidelines in the
PFRS and PAS, it is not required to implement everything
written in such standards.

 National Internal Revenue Code (NIRC) – the pronouncements

of this standards are solely for Tax Accounting. NIRC to Tax
Accounting as the PFRS and PAS to Financial Accounting.
Important Notes:
NIRC VS PFRS/PAS
Jollibee has its happy plus card. One day, a customer asked
the cashier to load his happy plus card an amount of P1,000
and pay cash. The customer plans to use the card for future
purchases.

○ PFRS/PAS – revenue is NOT recognized unless the balance in

the card is used.

○ NIRC – revenue is recognized the moment payment

is received.

Thus, if Jollibee recognized the revenue

immediately after payment, it is taxable.
COST ACCOUNTING
It is a branch of accounting that provides information for
management accounting and financial accounting (Horngren,
et al. 2011).

It focuses on accumulating product costs for financial

reporting and decision-making purposes.

It needs to determine the inventory cost for financial

reporting of company operations and for management to
come up with necessary tools and information for planning
and controlling activities.
Important Notes:
Terms used in Cost Accounting:

○ Cost – the resource sacrificed to achieve an objective (money,

resources, time, etc.)
○ Cost object – anything that you wish to find the cost of (cost of a pair
of jeans, cost of a pair of Jordan XI shoes)
○ Cost driver – an activity that is a cause of the incurrence of costs (the
number of working hours Is related to the amount of salaries of
company pays)
○ Direct cost – costs that can economically be traced to a cost object
(materials, labor, etc.)
○ Indirect cost – costs that cannot be traced to a cost object (cost of
supplies used in the factory, salary of supervisor overseeing factory
operations, etc.)
○ Fixed cost – costs that do not change within a relevant range of
activity (rent of a factory building, insurance costs, etc.)
○ Variable cost – costs that change as the level of activity or production
increases/decreases (materials cost, labor cost, selling cost, etc.)
ACCOUNTING EDUCATION
The Bachelor of Science in Accountancy (BSA) in the
Philippines is normally a 5-year program composed of subjects
in accounting, audit, administration, and business laws and
taxation.

The Bachelor of Science in Accounting Technology (BSACT) or

known now as the Bachelor of Science in Accounting
Information System (BSAIS) is a 4-year course relatively
connected to BSA, that develops computer software that
helps accountants to easily manage financial information.
ACCOUNTING RESEARCH
It is the branch of accounting that deals with the creation of
new knowledge.

It can be a basis on:

● deciding and implementing new accounting and auditing
standards
● presenting unusual economic transactions in the financial
statements
● learning how new tax laws impact clients and employers
● discerning how the accounting profession affects the capital
markets through academic accounting research
Important Notes:
CPAs in specialized areas:

○ Forensic Accounting – accountants under this field provides detective

work needed to investigate and examine evidence of white-collar
financial crimes such as stealing and fraud.
○ Information Technology Services – it involves designing and
implementing customized software systems
○ Environmental Accounting – it involves CPAs who can formulate
decisions for companies that can be both profitable and
environmentally-responsible.
○ International Accounting – compliance with international trade rules
and regulations, international mergers, government regulations, tax
laws, and overseas transactions.
BUDGETING
It provides a detailed collection and reporting of the
expenditures and revenues involved in a business or company
operations.

It tracks the financial details of the firm, including the money

taken in and the money spent by the company and the staff.

It assists the management in quantifying goals concerning

revenue, cost of sales or services, and operating expenses.
ACCOUNTING INFORMATION SYSTEM
It collects and processes transaction data.

It also disseminates information to interested parties.

It involves the designing of both manual and computerized

data processing systems.
REFERENCES

Florendo, J. (2016). Fundamentals of Accountancy, Business, and Management 1 – First

Edition. Rex Book Store, Inc., 856 Nicanor Reyes Sr., St., Sampaloc, Manila.

Rabo, J., Tugas, F., & Salendrez, H. (2019). Fundamentals of Accountancy, Business and
Management 1 – Revised Edition. Vidal Group, Inc., 1253 G. Araneta Avenue cor.
Ma. Clara Street, Talayan, Quezon City.
Thank you!

AIROTCIV IVY BLAISE P. MANGAWANG, MBA

Instructor I, OMSC
[email protected]