Name: ________________________________________________________ Date:

Grade/Track/Section: ____________________________________________ Room No.: ________________

ACTIVITY NUMBER :2
SUBJECT : Fundamentals of Accountancy, Business and Management 1
TOPIC : Branches of Accounting
LEARNING TARGET : The learners demonstrate an understanding of the varied branches and
areas of accounting.
REFERENCES : ABM Part 1 Module for Grade 11
ABM in Context Learning Module for Grade 11
TYPE OF ACTIVITY : Concept Notes

CONCEPT NOTES:

Branches of Accounting
1. Financial accounting
It 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. 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. Financial
accounting conforms to accounting standards developed by standard-setting bodies. In the
Philippines, there is a Council created to set these standards.
Examples of these financial reports include:
• The balance sheet (statement of financial condition)
• Income statement (the profit and loss statement, or P&L)
• Statement of cash flows
Financial accounting is primarily concerned with processing historical data. Although financial
accounting generally meets the needs of external users, internal users of accounting information
also use this information for their decision-making needs.

2. Management (or Managerial) Accounting

It 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. 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.

3. Government Accounting
It 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. 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.

4. 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.
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.

5. Tax Accounting
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.

6. Cost Accounting
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.
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 show that the total cost to produce one can of sardines is PHP50, then
the owner can set the selling price at PHP60.

7. 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 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.

8. Accounting Research
Accounting research focuses on the search for new knowledge on the effects of economic events
on the process of summarizing, analyzing, verifying, and reporting standardized financial
information, and on the effects of reported information on economic events. Researchers
typically choose a subject area and a methodology on which to focus their efforts. The subject
matter of accounting research may includeinformation systems, auditing and assurance,
corporate governance, financials, managerial, and tax. Accounting research plays an essential
part in creating new knowledge. Academic accounting research "addresses all aspects of the
accounting profession" using a scientific method. Practicing accountants also conduct accounting
research that focuses on solving problems for a client or group of clients. The Accounting
research helps standard-setting bodies around the world to develop new standards that will
address recent issues or trend in global business.

PRACTICE (10 MINUTES)

Board work
Identify what branch of accounting renders this service:
_______________________________1. Preparation of general-purpose financial statements
_______________________________2. Evaluation of the performance of a sales department
_______________________________3. Develop standards to address a new business set up
_______________________________4. Review tax compliance of the business
_______________________________5. Evaluate whether a branch of the business complies with the
collection and deposit policy of the company
_______________________________6. Review whether the financial statements are presented fairly
and in compliance with accounting standards
_______________________________7. Report on the spending of government funds
_______________________________8. Report on the total cost of materials and labor used in the
production
_______________________________9. Conducting lectures on accounting topics

ENRICHMENT (10 MINUTES)

What branch of accounting do you want to focus on and why? (6pts)