 THE 3 MAJOR BRANCHES OF
ACCOUNTING process.
MAJOR BRANCHES OF ACCOUNTING
1. FINANCIAL ACCOUNTING
- Primarily concerned with the recording, preparation,
and presentation of business transaction in the form of
financial statement to provide business owners picture of
the operation results and the financial position of the
business in a certain period of time.
2. COSTS ACCOUNTING
- Deals with the measurement and recording of all the
costs incurred in a business to help the management in
controlling organization’s expenses. Records gathered
from cost accounting can guide managers in setting
prices for their products and services so that the business
can gather better or achieve greater profit.
3. MANAGEMENT ACCOUNTING
- The objective of management accounting is to provide
reports and information about business transactions to
the internal users. Data gathered from Financial and Cost
accounting are utilized to help managers and/or owners
to make decisions for the betterment of the business.
This type of accounting involves cost analysis, financial
analysis, evaluation of business decision, budgeting and
forecasting.
OTHER FIELDS OR AREAS OF ACCOUNTING
1. TAX ACCOUNTING
- All business entities are taxpayers. Tax
accounting therefore, is a special type of
accounting that focuses on taxes rather than on
financial statements.
2 objectives:
a. To minimize the business ‘s tax liabilities
through legal means.
b. To ensure that the business complies with tax
laws.
3. GOVERNMENT ACCOUNTING
- Concerned with the systematic collecting,
recording, summarizing and interpreting of financial
transactions related to the expenditures and revenues of
government institutions. Its objective is to disclose how
public fund are being generated and spent for the welfare
of the general public.
4. AUDITING
- Financial records are carefully examined to
determine the accuracy and fairness of these records.
Types of auditing:
1. External auditing – an auditing done by an
independent body to examine financial records and
statement in order to give out an opinion as to the
compliance of a business organization’s accounting
2. Internal auditing – refers to the evaluation of the
adequacy and efficiency of the internal control structure
of the company by examining its policies and
procedures, segregation of duties, and other controls
conducted and implemented by the management.
Accounting is the actual record – keeping process, while
auditing checks the validity of the accounting process.
5. ACCOUNTING EDUCATION
- Accountants in this field improve and develop
accounting curriculum for colleges and universities to
prepare students for the current and future challenges in
the profession.
6. FIDUCIARY ACCOUNTING – involves the
evaluation and handling of accounts that are managed by
an individual who has been entrusted with the
guardianship and custody of a business, possession, or
property by another individual.
Types of Fiduciary accounting:
1. RECIEVERSHIP – refers to the removal of
control of the business or property from the
owner/s.
They are usually appointed by a court or
company’s creditor to receive, administer and
preserve a business subjected to a court case.
2. TRUST ACCOUNTING – involves the
administration and management of funds by a trustee
for the benefit of individuals called beneficiaries.
3. Estate accounting – refers to the preparation and
management of financial accounts by a person
administering the properties of an individual who has
passed away.
7. FORENSIC ACCOUNTING
- Involves the investigation and analysis of
numbers and financial data and records that are usually
presented in courts for discussions. Forensic
accountants deal with very detailed analysis and large
volume of documents which make them an important
factor in identifying anomalies in business operations
that involve money.
USERS OF ACCT INFORMATION
A. EXTERNAL USERS
- These people are not directly involved in the
operation of the company or business entity. But they
have the access to the financial information of a
company they want to invest in.
1. CREDITORS
 One example of a creditor is the Bank that acts
as a business financier.
 Another example is a Supplier - they deliver
and sell their products on a Credit Basis.
2. INVESTORS 3. EMPLOYEES AND TRADE UNIONS

 These are the people who utilize their own
money and resources to invest into a company.
 They want to know the financial status of a
company to ensure the safety and security of
their investment.
3. GOVERNMENT AND TAX AUTHORITIES
– The earning capacity of a business is important to
employees and trade unions because their wages and
bonus depend on it. They need to know this information
to assess whether the employment conditions of the
business are beneficial for them or not. They can also
use this as a basis for negotiation of their wages with
management, if applicable.

 People in this area must determine how much a

business earns in order to assess its tax
liabilities.

4. COSTUMERS AND CONSUMERS

 Customers can access accounting information to

acquire a picture of the longetivity and
continuity of a business, especially to a long
term engagement bet. the customer and the
business enterprise.

5. COMPETITORS

 These are individuals or organization that

offer the same type of service to the same group
of customers. The better business financial
information they have the better competitor they
may be.

6. REGULATORY AGENCIES

 Stakeholders always rely on financial

information of a company bec. they wanted to
protect their interest in investing their resources.
They wanted to find out if the company is legal
in accordance with the rules and regulations that
protect them.

7. LAWMAKERS AND ECONOMIC PLANNERS

 Having a strong economic structure and keeping

abreast of global economic changes are utmost
importance for a nation’s economic planners and
lawmakers.

B. INTERNAL USERS

Are the people who are directly involved in the

business operation.

1. OWNERS

 An owner depends on financial information to

determine the profitability and longetivity of his
or her business. Ultimately, he or she is the one
who decides whether to pursue or maintain the
business or not.

2. MANAGERS

 Managers use financial information in carefully

planning for the improvement of the business.
This allows them to identify the areas which
require more attention and procedures that needs
to be checked. They use the information to
assess the performance of the business.