Accountancy, Business, and Management Strand

Fundamentals of Accountancy, Business, and Management 1

S.Y. 2024-2025
MODULE 1 LESSON 3: BRANCHES OF ACCOUNTING

BRANCHES OF ACCOUNTING

Accounting is divided into several branches to better serve the needs of di4erent users with varying
information needs. The field of accounting is not uniform but rather composed of various specialized
areas, each catering to di4erent users who require specific types of financial information. These
branches might have some areas of common ground and frequently interact with each other. Overall, it
highlights the complexity and diversity within the accounting profession.

1. 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. 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.

Examples of these financial statements include:

• statement of financial position (the balance sheet)
• income statement
• statement of cash flows

2. MANAGEMENT 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. Management accounting involves financial analysis, budgeting and forecasting, cost
analysis, evaluation of business decisions, and similar areas.

3. GOVERNMENT ACCOUNTING

This branch of accounting deals with how the funds of the government are recorded and
reported. This includes separating funds for di4erent purposes, sticking to approved budgets, and
reporting on how money is spent. The goal is to make sure government finances are managed
responsibly and that citizens can see where their tax pesos are going. Government accounting deals
with these transactions, the recording of inflow and outflow of funds of the government.

It follows specific rules set by the Commission on Audit (CoA) to ensure that taxpayer money is
used properly and transparently.

4. AUDITING

Internal Auditing
Internal auditing is conducted by employees of the organization itself, known as internal
auditors. Internal auditors evaluate the internal controls, processes, and operations of the
organization. They assess risks, ensure compliance with policies and procedures, and help
improve e4iciency and e4ectiveness. Internal audits are primarily aimed at assisting
management in achieving organizational objectives, enhancing internal controls, and mitigating
risks.

2nd Semester 2024 – 2025

FABM 1 Page 1 of 2
 Accountancy, Business, and Management Strand
Fundamentals of Accountancy, Business, and Management 1
S.Y. 2024-2025
MODULE 1 LESSON 3: BRANCHES OF ACCOUNTING

External Auditing
External auditing is performed by independent professionals or firms external to the
organization, known as external auditors. External auditors examine/review the financial
statements and records of the organization to provide an unbiased opinion on their fairness,
accuracy, and compliance with accounting standards and regulations. Their primary
responsibility is to provide assurance to external stakeholders, such as investors, creditors, and
regulatory authorities, regarding the reliability of the financial information presented by the
organization. External audits are often required by law or regulation for certain types of
organizations, such as publicly traded companies.

5. TAX ACCOUNTING

Tax accounting involves managing and preparing taxes for individuals and businesses. It
ensures compliance with tax laws, minimizes tax liabilities through planning, provides advice on tax
issues, assists with audits and disputes, and stays updated on tax regulations. Its goal is to help
clients fulfill their tax obligations e4iciently and legally while optimizing their tax situation.

Tax compliance and consequences of non-compliance are monitored by the Bureau of Internal
Revenue (BIR) in the Philippines. The BIR is responsible for enforcing tax laws, ensuring that
taxpayers fulfill their obligations, and taking appropriate action against those who fail to comply.
This includes conducting audits, investigations, and imposing penalties or sanctions for tax evasion
or other violations. It plays a crucial role in maintaining the integrity of the tax system and promoting
fairness and equity in taxation.

6. COST ACCOUNTING

This is a type of accounting that helps businesses track and understand the costs involved in
making their products or providing services. Cost accounting is very useful in manufacturing
businesses since they have the most complicated costing process.

Cost accountants analyze actual and standard costs to help managers determine future courses
of action regarding the company's operations. It helps managers make decisions about pricing,
production, and resource use.

7. ACCOUNTING EDUCATION

This branch of accounting deals with developing future accountants by creating relevant
accounting curriculum. Accounting educators contribute to the development of the profession
through their e4ective 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 is like detective work in the world of finance. It's all about digging deep into
accounting practices, rules, and theories to find better ways of doing things. Researchers explore
topics like how companies report their financial information, the impact of accounting
regulations, or how to improve accounting systems. The goal is to uncover new insights and
solutions that can help businesses and accountants work smarter and more e4ectively.

2nd Semester 2024 – 2025

FABM 1 Page 2 of 2