Bulacan Polytechnic College San Rafael Campus
First Semester S.Y. 2017 - 2018
Fundamentals of Accountancy, Business and Management 1
Instructor: Ms. Ma. Irene G. Gonzales, LPT
To all my GAS 12 students, here is a copy of my presentation in Branches of Accounting. You may click the DOWNLOAD button and PRINT the document for your personal copy. Thank you.
Reference:
Fundamentals of Accountancy, Business and Management 1
Joselito G. Florendo
Rex Book Store
2. Fall of Enron
• In 2001, a large American energy company
misrepresented its earnings and modified its balance
sheet to show favorable performance and it led to its
bankruptcy and downfall.
• Forensic accounting played a role in understanding
the causes of Enron’s demise.
• This branch of accounting combines accounting,
auditing, and investigative skills in conducting
investigations.
3. 8 Branches of Accounting
1. Financial Accounting
2. Management Accounting
3. Government Accounting
4. Auditing
5. Accounting Research
6. Accounting Education
7. Tax Accounting
8. Cost Accounting
4. I. FINANCIAL ACCOUNTING
A branch of accounting primarily handling the
recording of financial transactions of a business.
Financial
transactions
Standardized
accounting
reports
Financial
statements
5. I. FINANCIAL ACCOUNTING
Financial statements should provide
information useful to a wide range of users in
their economic decisions.
This is the main reasons why accounting
standards such as PFRS and PAS are created.
They supply guidelines on HOW companies
should prepare their financial statements.
6. I. FINANCIAL ACCOUNTING
Standardized financial statements allow the users to
COMPARE THE RESULTS of different companies
regardless of size and nature.
Enhances the COMPARABILITY of different
companies
Improve the UNDERSTANDABILITY of the company’s
financial statements
Creditors – will be able to assess the RISKINESS of a
company
7. I. FINANCIAL ACCOUNTING
MAIN GOAL
To provide the information needs of external users
that have no capability to request information directly
from management.
8. Primary Users of General Purpose
Financial Statements
Primary Users of Special Purpose
Financial Statements
Investors
Creditors
Shareholders/Stockholders
Government Agencies
Auditors
other interested outside
parties
Top management (e.g.,
Board of directors of a
company, CEO, CFO, COO)
Department managers
(e.g., sales manager,
production manager)
other internal parties
used to evaluate the
performance of the
company
utilized to guide in the
decision-making process
9. II. MANAGEMENT ACCOUNTING
Focuses on the preparation of financial reports used
by managers in their day-to-day decision making
Reports generated are for internal users only
Need not to follow accounting standards
10. MANAGEMENT REPORTS
Can be done daily, weekly, or whenever managers
require a specific report
Contain information regarding the ff:
Amount of cash on hand
Level of sales revenue for a particular period
Costs incurred
Comparison of actual results with budgeted
amounts
11. FINANCIAL VS. MANAGEMENT ACCOUNTING
Financial accounting summarizes financial
information gathered within a specified period. Thus,
provides information that is HISTORICAL.
Management accounting information is FORWARD-
LOOKING. It contains forecasted information used by
managers in planning.
12. ROLES OF MANAGEMENT ACCOUNTANTS
According to the Chartered Institute of Management
Accountants (CIMA)
Advise managers about the financial implication of
projects
Explain the financial consequences of business decisions
Formulate the business strategy
Monitor spending and financial control
Conduct internal business audits
Explain the impact of the competitive landscape
Bring a high level of professionalism and integrity to the
business
13. MANANGEMENT ACCOUNTING SKILL SET
Strategic business and management skills:
ANALYSIS. Analyze information and use it to make
business decisions.
STRATEGY. Strategies that will increase the
company’s wealth and create value for the
company’s shareholders.
RISK. Identify risks and give recommendations on
how to manage such risks.
14. MANANGEMENT ACCOUNTING SKILL SET
Strategic business and management skills:
PLANNING. Apply accounting techniques in the
planning and budget creation phase of a business.
COMMUNICATION. Identify what information the
management needs and explain the numbers to
non-financial managers.
15. ETHICAL CODE
Even though management reports do not follow the
requirements imposed by accounting standards like
PFRS and PAS, management accountants are still
expected to follow the CIMA code of ethics.
16. III. GOVERNMENT ACCOUNTING
Encompasses the process of analyzing, recording,
classifying, summarizing, and communicating all
transactions involving the receipt and disposition of
government fund and property and interpreting result
thereof (Section 109 of Presidential Decree 1445).
17. OBJECTIVES OF GOVERNMENT ACCOUNTING
1) To provide information concerning past operations
and present conditions
2) To provide a basis for guidance for future operations
3) To provide for control of the acts of public bodies
and offices in the receipt, disposition, and utilization of
funds and property
4) To report on the financial position and the results of
operations of government agencies for the information
and guidance of all persons concerned
18. NEW GOVERNMENT ACCOUNTING SYSTEM (NGAS)
It enhances responsibility accounting in all agencies
Responsibility Accounting
Relates financial results to a particular
responsibility center
If there is a problem with the handling of funds
by the DepEd, people in that agency will be the ones
accountable.
Discourages misappropriation and misuse of
public funds
19. GOVERNMENT ACCOUNTING PROCESS
It started after the declaration of the General
Appropriations Act (GAA).
The GAA is the enacted budget of the country for
the upcoming year.
The GAA has a force of law and it states how much
an agency can spend for the year.
20. GOVERNMENT ACCOUNTING PROCESS
Commission on Audit (COA)
Department of Budget and Management (DBM)
Bureau of Treasury (BTr)
21. GOVERNMENT ACCOUNTING PROCESS
COA
• Responsible for keeping the government’s general accounts
• Disseminates accounting rules to be used by all agencies
DBM
• Formulation and implementation of the National Budget with the
goal of attaining our national socio-economic plans and objectives
• Efficient utilization of government funds and revenues
BTr
• Safekeeping of the national funds
• Management and control of the disbursements of funds
22. IV. AUDITING
It is an unbiased examination and evaluation of the
financial statements of an organization.
Includes steps to determine whether or not a company’s
financial statements are presented truthfully.
23. IV. AUDITING
Auditors must be independent from the company
being audited.
TAKE NOTE
An audit of the financial statements improves
their credibility.
Audited financial statements – financial
statements that underwent the process of auditing
24. IV. AUDITING
Audited financial statements are accompanied by
the author’s opinion.
Author’s opinion will be the basis whether or not
the financial statements are prepared truthfully and
without material errors.
25. V. ACCOUNTING RESEARCH
Deals with the creation of new knowledge
Deciding and implementing new accounting and
auditing standards
Presenting unusual economic transactions in the
financial statements
Learning how new tax laws impact clients and
employers
Discerning how the accounting professions
affects the capital markets through academic
accounting research
26. VI. ACCOUNTING EDUCATION
Bachelor of Science in Accountancy (BSA)
Accounting
Audit
Administration
Business laws
Taxation
Banking and finance
Government
Non-profit organizations
Academe
27. VI. ACCOUNTING EDUCATION
Requirements
High school graduate
College entrance examination
Aptitude test for BSA
Interview
English proficiency examination
28. VI. ACCOUNTING EDUCATION
Board Exam
CPA Licensure Exam
7 subjects; 3 hours each subject
General average of 75% with no rating below 60% in
each of the seven subjects
29. VII. TAX ACCOUNTING
Enables the taxing authorities to collect taxes
Produces tax returns to be filed to the appropriate
government agencies
Follows the guidelines of the National Internal
Revenue Code (NIRC)
It adheres to some guidelines in the PFRS and PAS,
but it is not required to implement everything
30. Illustrative Example
• Starbucks offer its customer a card that you can use to pay
for your orders. The process is simple. You ask the cashier to
load the card; you pay for the amount of load; and then your
card will reflect the balance available for you to use. You can
use the card for future transactions with Starbucks.
• Under PFRS and PAS, Starbucks will not recognize the
amount you paid as a revenue until you use the balance in
your card in the future.
• Under NIRC, Starbucks recognizes the revenue when the
company received the payment from you. Thus, if Starbucks
recognizes the revenue, it is taxable.
31. VIII. COST ACCOUNTING
Provides information for management accounting
and financial accounting
For example, cost accounting helps measure the
cost of a bicycle-selling company.
This information supports management in
deciding how many bicycles to produce, the selling
price of the bicycle, or valuing the inventory of
bicycles in the company’s financial statements
32. TERMS USED IN COST ACCOUNTING
COST – the resource sacrificed to achieve an
objective (e.g., money, resources, time, etc.)
COST OBJECT – anything that you wish to find the
cost of (e.g., cost of materials, cost of labor, cost of
rent, etc.)
COST DRIVER - an activity that is a cause of the
incurrence of costs (e.g. number of working hours,
number of hours for over time, etc.)
33. TERMS USED IN COST ACCOUNTING
DIRECT COST – costs that can economically be
traced to a cost object (e.g., materials, labor, etc.)
INDIRECT COST – costs that cannot be traced to a
cost object (e.g., costs of supplies used in the factory)
FIXED COST – costs that do not change within a
relevant range of activity (e.g., rent of a factory
building, insurance costs, etc.)
VARIABLE COST – costs that change as the level of
activity or production increases (e.g., electricity and
water bill, labor cost, etc.)