Branches of

Accounting
Ms. Ericah Ramirez
ABM 12
FINANCIAL
ACCOUNTING
• Is the Broadest branch and is focused on the needs of
external users.
• the primary concerned with the recognition,
measurement and communication of economic
activities.
MANAGERIAL
ACCOUNTING
• emphasizes the preparation and analysis of
accounting information within the organization.
• Involves financial analysis, budgeting and
forecasting, cost analysis, evaluation of business
decisions and similar areas.
GOVERNMENT
ACCOUNTING
• deals with how the funds of the government are
recorded and reported.
• 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.
COST
ACCOUNTING
• Subsets of management accounting
• recording, presentation, and analysis of
manufacturing costs.
TAX
ACCOUNTING
• helps clients follow rules set by tax authorities
• includes tax preparations of tax returns
 AUDITING
There are two types of Auditing
• External - examination of FS by independent CPAs
• Internal - deals with determining the operational
efficiency of the company
ACCOUNTING
EDUCATION
• deals with developing future accountants by
creating relevant accounting curriculum.
• Accounting professionals can become faculty
members of educational institutions
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
Graded Recitation
FINANCIALS
1. Preparation of general purpose financial statement.
MANAGERIAL
2. Evaluation of the performance of a sales department.
A.RESEARCH
3. Develop standards to address a new business set up.
TA X A C C O U N T I N G
4. Review tax compliance of the business.
5. Evaluate whether a branch of the business complies with the collection
. INTERNAL AUDITING
and deposit policy of the company
6. Review whether the FS are presented fairly and in compliance with accounting
EXTERNAL AUDITING
standards.
GOVERNMENT
7. Report on the spending of government funds. ACCOUNTING
COST
ACCT
8. Report total cost of materials and labor used in the production.
9. Conducting lectures on accounting topics. A C C O U N T I N G E D U C AT I O N
VENN DIAGRAM
Cost Accounting

• Anything the sacrifice by the

Financial Managerial
company
Accounting • Provides all info about the Accounting
• Recording of needs of FA & MA • Performs
business Decision making
transactions
Users of
Accounting
Information
Managerial Internal
Users
accounting
Owners Managers
• Provide capital to the business • They plan and organize the
firm
• The one decides about the
company

Employees
• Assessing companies
profitability
 FINANCIAL accounting
Suppliers Tax Authorities
• Can they pay for the • Are they compliant? Do
External Users goods and services I they pay the right
provided amount of taxes?

Investors Employees Government

• Should I invest in this • It’s the company I am • Do they follow rules and
company or not? working are stable? regulations

Creditors Customers General Public

• Can they pay their • Those dependent in the • What are the new
obligation when they fall firm are curious about business trends?
due? business continuity

What they need is the INFORMATIONS about the BUSINESS in TOTALITY?

Forms of
Business
Organizations
 Sole Proprietorship – CORPORATION – also COOPERATIVES –
PARTNERSHIP – also
also referred as referred as also referred as
referred as PARTNER
TRADER INCORPORATORS MEMBERS

easy to establish More cash Limited liability Lower cost further

Advantages
Quick recessions More business opp source of capital mktg res democratic
Full control New perspective ownership transfer org

Disadvantages Limited life Double taxation Big investors don’t

Loss autonomy
independent get much attracted
Unlimited liability unlimited liability
management lack of membership
Limitation of capital emotional issues
forming a corp costs and participation
 SOLE
PARTICULARS PARTNERSHIP CORPORATIONS COOPERATIVES
PROPRIETORSHIP
Number of Possible
1 2 or more At least 5 15 or more
Owners

Management (who Owner but he may hire Partners but they may Board of Directors or Board of Directors or
manage the business) Managers hire Managers Operating Managers Operating Managers

Death of the Partner or As stated, in the Articles of As stated, in the Articles

Termination of the
Death of the Owner Withdrawal of the Incorporation, no tot exceed of Incorporation, no tot
Business
Partner 50 years exceed 50 years

Government Agency
assigned primarily to In limited capacity, DTI In limited capacity, DTI SEC CDA
regulate

Sell of the business ( it’s new Sell of the business or

interest of a partner Cannot transfer nor sell
Transfer of Ownership entity under the new owner’s Sell stocks
(consent of other his membership
name)
partner is necessary

Limited to the stock Limited to capital

Liability of Owners Unlimited Liability Generally unlimited investments of the contribution of the
shareholder member
Types of
Business
According to
Activity
THREE MAJOR TYPES OF
BUSINESS
service companies
merchandising companies
mANUFACTURING
companies
 Can the three types go together?
A music production and recording company is handling singers and talents.
These singers and talents perform at concerts produced by the company.
The firm has a record bar where they sell CDs of different artist.
Lastly, the company is also producing CD albums of the latest songs of the singers.

Now, identify the activities per above examples:

SERVICES Concert Performance

MERCHANDISING Record Bar
MANUFACTURING Production of CD Album
Can the three types work as a system?
A manufacturer of essential oils produces their products and sells them to different
groceries. These groceries then sells them to customers. A massage spa will then
purchase these essentials oils for use in the massage therapy services.

Now, identify the activities per above examples:

MANUFACTURING Essential Oil Company

MERCHANDISING Grocery

SERVICES Massage Spa

 Income Measurement
SERVICE MERCHANDISING / MANUFACTURING

Service Revenue XXXXX Service Revenue XXXXX

Less: Operating Expenses XXXXX Less: Cost of Goods Sold XXXXX
Net Income (Loss) XXXXX Gross Profit XXXXX
Less: Operating Expenses XXXXX
Net Income (Loss) XXXXX

A barber shop earned 60,000 during the Service Revenue 60,000

month of August. Salaries paid to barbers Less: Operating Expenses
amounted to 20,000. Utilities paid for Salaries Expense 20,000
Utilities Expense 6,000
6,000 and rent of the space for the barber
Rent Expense 5,000 31,000
shop is 5,000. How much is the net income Net Income (Loss) 29,000
of the barber shop
 Income Measurement
A grocery store earned 225,000 from selling
their goods during the month of April. These Service Revenue 225,000
goods sold were first purchased at an Less: Cost of Goods Sold 160,000
amount of 160,000. Salaries paid to Gross Profit 65,000
Less: Operating Expenses 35,000
employees is 25,000, utilities paid is 4,000 Net Income (Loss) 30,000
and rent of the selling area is 6,000. How
much is the net income of the grocery?

A car manufacturing company sold 2 cars Service Revenue 3,000,000

totaling 3,000,000 during the month of April. Less: Cost of Goods Sold
Car parts and materials used for these cars Materials 600,000
Labor 800,000
amounted to 600,000, labor cost paid 800,000
Overhead 100,000 1,500,000
and other indirect cost to manufacture the Gross Profit 1,500,000
cars amounted to 100,000. Salaries paid to Less: Operating Expenses
office employees amounted to 50,000, Salaries 50,000
Utilities paid is 20,000 and rent of selling area Utilities 20,000
and office space is 10,000. How much is the Rent 10,000 80,000
Net Income (Loss) 1,420,000
net income of the car company?
Accounting
Concepts and
Principles
 Rational Thinking

Conceptual framework Collective Reasoning

Agreed by all accountants

Sole
Proprietorship

Organization Partnership

Corporations
Accounting
Accounting Business Principles
Service -STANDARDS

Operations Merchandising

Manufacturing
 Periodicity
Business Entity Matching
Going Concern Concept (Time
Concepts Principle
Period Principle)

A business enterprise is separate Financial Statements are

Business is expected to Cost should be matched with
and distinct from its owners and divided into specific time
investors continue indefinitely the revenue generated
intervals

If Juan has 500,000. From his

money he establish a barber The salary expenses from
shop to 200,000. January to December 2015 When you provide tutorial
When preparing FS you services to a customer and
• Question: should assume that the should only be reported in
• 1. How much money he only have? 2015 there is a transportation cost
entity will continue incurred related to tutorial
• 2. How much money did he share to
his business?
indefinitely services, it should be
• 3. In total how much money did he recorded as an expense for
have? that period
Accrual Monetary Objectivity
Cost Principle
Principle Unit Principle Principle

Revenue should be recognized

when earned regardless of Financial Statements must be
Accounts should be Amounts are stated into a
collection and expenses should presented with supporting
be recognized when incurred recorded initially at cost single monetary unit
evidence
regardless of payment

1. Income is earned when the When Jollibee buys a Jollibee should report FS in
service is rendered regardless cash register, it should pesos even they have a When the customer paid
of when cash is collected be record the cash store in the US Jollibee for their order,
2. Expenses is incurred when register at its price when Jollibee should have a copy
the service is received they bought it of the receipt to represent as
regardless of when cash is paid evidence
Disclosure Conservative Materiality
Principle Principle Concept
Also known as prudence. In
In case of assets that are
case of doubt, assets and
immaterial to make a difference
All relevant and material information should income should not be
in the Financial statements, the
be reported overstated while liabilities
company should instead record
and expenses should not be
it as an expense
understated

A school purchased an eraser

with an estimated useful life of
In case of doubt, expenses three years. Since an eraser is
should be recorded at a immaterial relative to assets, it
The company should report all higher amount. Revenue should be recorded as an
relevant information should be recorded at a expense
lower amount
ABM 12

Thank you
very much!