Overview
This lecture introduces the common branches of accounting, compares bookkeeping and accounting, and outlines the four main sectors of accountancy practice under Philippine law.
Common Branches of Accounting
- Financial accounting prepares general-purpose financial statements for external users, governed by Philippine Financial Reporting Standards (PFRS).
- Management accounting provides special-purpose information for internal users like managers for planning, controlling, and decision-making.
- Cost accounting systematically records and analyzes production costs (materials, labor, overhead) for planning, control, and performance evaluation.
- Auditing evaluates management assertions against criteria and expresses opinions, mainly through audit services.
- Tax accounting deals with tax return preparation and tax advice.
- Government accounting handles public fund administration in government and its instrumentalities.
- Fiduciary accounting manages accounts/property entrusted to a person for another's benefit.
- Estate accounting involves handling affairs of a deceased’s estate for distribution to heirs.
- Social accounting reports a business’s social and environmental impact to society.
- Institutional accounting focuses on non-profit organizations (excluding government).
- Accounting systems design and install procedures for accumulating financial data, often now computerized.
- Accounting research analyzes economic events and their impact, common in academic settings.
Bookkeeping vs. Accounting
- Bookkeeping is the process of recording business transactions up to summarization (e.g., trial balance).
- Accounting encompasses bookkeeping plus interpretation and analysis of financial information.
Four Sectors in Accountancy Practice
- Public Practice: CPAs offer services like audit and consultancy to multiple clients or as independent practitioners.
- Commerce and Industry: Accountants are employed in private companies handling internal accounting functions.
- Academe/Education: Accountants teach or do research in schools, colleges, and universities.
- Government: Accountants work in government agencies or government-owned corporations as CPAs.
Key Terms & Definitions
- Financial Accounting — Prepares financial statements for external parties using standard rules.
- Management Accounting — Produces specialized reports for internal management use.
- Cost Accounting — Focuses on identifying and controlling production costs.
- Auditing — Examines financial records to give an independent opinion.
- Bookkeeping — Records and summarizes basic business transactions.
- RA 9298 — Philippine Accountancy Act defining practice and sectors for CPAs.
Action Items / Next Steps
- Familiarize yourself with the identified branches and sectors of accountancy.
- Review basic differences between bookkeeping and accounting.
- Prepare for future lectures on the Philippine Financial Reporting Standards and the accounting cycle.