Branches of

Accounting
Lesson 2
Learning Objectives:

√ Differentiate the branches of accounting

√ Explain the kinds/types of services rendered in each of these branches
Branches of Accounting
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.

• Financial Accounting
• Management Accounting
• Government Accounting
• Auditing
• Tax Accounting
• Cost Accounting
• Accounting Education
• Accounting Research
Branches of Accounting (Continuation)
Financial Accounting
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. 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
with accounting standards developed by standard-setting bodies. In
the Philippines, there is a Council created to set these standards.
Branches of Accounting (Continuation)
Financial Accounting (Continuation)
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 these information for their decision-making needs.
Branches of Accounting (Continuation)
Management (or Managerial) Accounting
Management accounting 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.
Branches of Accounting (Continuation)
Government Accounting
Government accounting 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.
Branches of Accounting (Continuation)
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.
Branches of Accounting (Continuation)
Auditing (Continuation)
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.
Branches of Accounting (Continuation)
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.
Branches of Accounting (Continuation)
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 to produce one can of sardines is
PHP50, then the owner can set the selling price at PHP60.
Branches of Accounting (Continuation)
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.
Branches of Accounting (Continuation)
Accounting Research
Accounting research focuses on the search for new
knowledge on the effects of the 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 include information systems,
auditing and assurance, corporate governance, financials,
managerial, and tax.
Branches of Accounting (Continuation)
Accounting Research (Continuation)
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.
END OF LESSON 2

THANK YOU!