ABM 11: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1
CHAPTER 2
BRANCHES OF ACCOUNTING
In the Philippines, the Philippine Institute of Certified Public Accountant (PICPA) – is an
association of Certified Public Accountants engaged in the various field of accounting.
PICPA classifies these fields or branches of accounting into four main sectors namely:
Public Accounting (Public Practice)
Private accounting (commerce and Industry)
Government Accounting
Accounting Education
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.
A public accountant works in a firm offering its services to various clients.
Certified Public Accountants (CPAs) refer to those who passed the licensure examination for
accountants.
In the Philippines, some known public accounting firms are:
* SyCip Gorres Velayo & Co.
* Isla Lipana & Co.
* Reyes Tacandong & Co.
* Punong bayan & Araullo
* Navarro Amper & Co.
* R.G. Manabat & Co.
* BDO Alba Romeo & Co.
Example of Public Accounting Services are as follows:
(1) External Auditing
Public accountants examine the financial statements in order to express an opinion on
whether statements have been fairly presented or not.
The auditor critically examines the accounting records of the client to check if
business transactions have been properly recorded.
The auditor then issues an indeperdent audit report of his or her finding.
(2) Tax Preparation and Planning Service
Some CPAs also offer tax services wherein they advise and help their clients in tax
planning and preparing tax returns.
He / She is expected to be knowledgable about the revenue regulations and tax laws.
He / she also represents the client in any tax-related case filed by the Bureau of
Internal Revenue (BIR)
(3) Management Advisory Services
Management consulting is an area in public accounting that involves financial
planning and control, and the development of accounting and computer systems.
The accountant advises management on matters such as the installation of an
accounting system, finance, budgeting, business processes, introduction of new
products and other business activities.
PRIVATE ACCOUNTING
It 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
accounts payables.
His / Her knowledge may be limited to the areas of accounting for which they are
responsible.
Branches of Accounting under Private Accounting:
(1) Financial Accounting
It provides economic and financial information for investors, creditors and other
external users.
It uses a system of reporting designed to meet the information needs of external users.
It is governed by an established body of standards and principles.
It focuses on the recording and classifying of business transaction while applying the
generally accepted accounting principles.
Financial accounting ends in the preparation and presentation of general purpose
financial statements. These documents should show the business financial position,
operating results, and cash activities.
Information from this branch of accounting helps investors and creditors in deciding
where to place their scarce resource.
(2) Cost Accounting
It focuses on accumulating manufacturing costs for financial reporting and decision-
making purposes.
It covers the reporting of financial information relevant to manufacturing operation.
It provides management with the necessary tools and information for planning and
controlling activities.
The primary role of a cost accountant is to determine the inventory cost for financial
reporting purposes.
(3) Budgeting
It provides 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 also assists the management in quantifying goals concerning revenue, cost of sales
or service and operating expenses.
(4) Accounting Information System
It collects and processes transactions data.
It also disseminates information to interested parties.
It involves the designing of both manual and computerized data processing systems.
(5) Tax Accounting
It deals with the preparation of various tax returns and doing tax planning for the
business.
(6) Internal Auditing
It reviews the business operations to check if they are complying to management
policies.
It evaluates the efficiency of business operations.
Normally, the internal auditor is ahired employee of a company.
GOVERNMENT ACCOUNTING
Is a system used in government offices to record and report financial transactions.
It is the systematic process of collecting, recording, classifying, summarizing and interpreting
the financial transactions relating to the revenues and expenditures of government offices.
It reveals how public funds have been generated and utilized.
It is employed in both national and local governments.
CPAs are needed in all levels of government.
He / She could be:
* a provincial accountants,
* a Commision on Audit (COA) auditor to various government agencies,
* a BIR examiner to local and national businesses,
* a budget officers of the Department of Budget and Management
* a bank examiner of the Bangko Sentral ng Pilipinas (BSP)
ACCOUNTING EDUCATION
It is responsible for training future accountants.
It engages in teaching accounting, financial management, taxation, and other related
business course.
As per Comission on Higher Education (CHED) Memorandum Order (CMO) No. 3, Series
2007, “a CPA in accounting education should possess the educational qualifications,
professional experience, classroom teaching ability, computer literacy, scholarly
research productivity, and other attributes that are essential for the successful
conduct of a professional accounting program.”
CPAs are encouraged to be part of the academe and become an integral force in inspiring
learners pursue a carreer in accounting.
Accounting educators could be teachers, administrators, or researchers.
Accounting research is broader in scope and wider in coverage. It encompasses research
interest in the areas of financial accounting, management accounting, auditing and
assurance, and taxation, among others.
CPAs IN SPECIALIZED AREAS
(1) Forensic Accounting
It provides the detective work needed to investigate and examine evidence of white-
collar financial crimes such as stealing and fraud.
They often act as expert witness in legal proceeding and prepare evidence to be
presented in the court.
(2) Information Technology Services
Businesses often seek individuals who can design and implement customized
softwares systems.
CPAs who possess strong skills in information technology can work with e-commerce
ventures and consult with other to determine which decisions are the most financially
and technologically sound for a company.
(3) 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.
(4) International Accounting
International accountants are knowledgable in international trade rules and
regulations, international mergers, government regulations, tax laws, and overseas
transactions.
