CHAPTER 2

BRANCHES OF
ACCOUNTING
PREPARED BY:

GERALD C. ALMUETE, CB, LPT

SUBJECT TEACHER, FABM1
At the end of this chapter, the learners
should be able to:
1. Define branches accounting;
2. Differentiate the branches of
accounting; and
3. Explain the kind/types of services
rendered in each of these branches.
 INTRODUCTION
In the Philippines, the Philippine Institute
of Certified Public Accountants (PICPA)
is an association of Certified Public
Accountants engaged in the various fields
of accounting. PICPA classifies these
fields or branches of accounting into four
main sectors, namely: public accounting
(public practice), private accounting
(commerce and industry), government
accounting, and accounting education.
 PUBLIC ACCOUNTING
In public accounting, the accountant
performs or offers to perform any activity
that will result to the issuance of an attest
report that is in accordance with
professional standards. Such activities
include consulting services, personal
financial planning services, the
preparation of tax returns, and advice on
a tax matters for a fee.
Usually, a public accountant works in a
firm offering its services to various
clients. Certified Public Accountants
(CPAs) refer to those who had passed the
licensure examination for accountants.
In the Philippines, some known public
accounting firms are SyCip Gorres
Velayo & Co., Isla Lipana & Co., Reyes
Tacandong & Co., PunongBayan &
Araullo. Navarro Amper & Co., R.G
Manabat & Co., and BDO Alba Romeo &
Co., CPAs, among others.
Examples of public accounting are as
follows:
• External Auditing
-In external auditing, public accountants
examine the financial statements in order
to express opinion on whether statements
have been fairly presented or not. The
auditor critically examines the accounting
records of the client to check if business
transactions have been properly recorded.
The auditor then issues an independent
audit report of his or her findings.
• Tax Preparation and Planning Service
-some Certified Public Accountants
(CPAs) also offer tax services wherein
they advice and help their clients in tax
planning and preparing tax returns.
In this branch of public accounting, the
accountant is a tax specialist. He or she is
expected to be knowledgeable about
revenue regulations and tax laws. He or
she also represents the client in any tax-
related case filed the Bureau of Internal
Revenue (BIR).
• Management Advisory Services
-Management consulting is an area in public
accounting that involves financial planning
and control, and the development of
accounting and computer systems. The
accountant advises management on matters
such as the installation of an accounting
system, finance, budgeting, business
processes, introduction of new products, and
other business activities.
 PRIVATE ACCOUNTING
Private accounting involves setting up
systems of recording business
transactions that are aggregated into
financial statements. It includes the
development and interpretation of
accounting information intended to assist
management in operating the business.
A private accountant is a salaried
employee who deals with the company’s
day-to-day accounting needs. He/she is
trained in the processing of accounting
transactions such as billings and account
payables. His or her knowledge may be
limited to the areas of accounting for
which they are responsible.
The branches of accounting under private
accounting are as follows:
• Financial Accounting
-This branch of private accounting
provides economic and financial
information for investors, creditors, and
other external users. It uses a system of
reporting designed to meet the
information needs for external users.
Financial accounting is governed by an
established body of standards and
principles. It focuses on the recoding and
classifying of business transactions while
applying generally accepted accounting
principles (GAAP).
Financial accounting ends in the
preparation and presentation of general
purpose financial statements. These
documents should show the business’
financial position, operating results, and
cash activities. It is also best to include
supporting explanatory notes to these
financial statements to further explain its
reports or findings.
Information from this branch of
accounting helps investors and creditors
in deciding where to place their scarce
resources. Such decisions are crucial
since it determines which companies and
industries will receive the financial
resources needed for economic growth.
• Cost Accounting
- Cost accounting focuses on
accumulating manufacturing costs for
financial reporting and decision-making
purposes. It covers the reporting of
financial information relevant to
manufacturing operations. It provides
management with the necessary tools and
information for planning and controlling
activities.
The primary role of a cost accountant is
to determine the inventory cost for
financial reporting purposes.
• Budgeting
-Budgeting provides a detailed collection
and reporting of the expenditures and
revenues involved in a business or
company operations.
This branch of private accounting tracks
the financial details of the firm, including
the money taken in and the money spent
by the company and the staff. It also
assists the management in quantifying
goals concerning revenue, cost of sales or
services, and operating expenses.
• Accounting Information System
-Accounting information system collects
and processes transaction data. It also
disseminates information to interested
parties. It involves the designing of both
manual and computerized data processing
systems.
• Tax Accounting
-It deals with the preparation of various
tax returns and doing tax planning for the
business. This is similar to the tax
services done in public accounting.
• Internal Auditing
-This branch of private accounting
reviews the business operations to check
if they are complying to management
policies. It also evaluates the efficiency of
business operations. Normally, an internal
auditor is a hired employee of a company.
 GOVERNMENT ACCOUNTING
Government accounting is a system used
in government offices to record and
report financial transactions. It is the
systematic process of collecting,
recording, classifying, summarizing, and
interpreting the financial transactions
relating to the revenues and expenditures
of government offices.
Government accounting reveals how
public funds have been generated and
utilized. It is employed in both national
and local governments.
CPAs are needed in all levels of
government. He or she could be a
provincial accountant, a Commission on
Audit (COA), auditor to various
government agencies, a BIR examiner to
local and national businesses,
a budget officer of the Department of
Budget and Management (DBM), or a
bank examiner of a Bangko Sentral ng
Pilipinas.
 ACCOUNTING EDUCATION
This branch of accounting is responsible
for training future accountants. It engages
in teaching accounting, financial
management, taxation, and other related
business course. As per Commission on
Higher Education (CHED) Memorandum
Order (CMO) No., 3, Series 2007, a CPA
in accounting education should possess
the educational qualifications,
professional experience, classroom
teaching ability, computer literacy,
scholarly research productivity, and other
attributes that are essential for the
successful conduct of a professional
accounting program.
CPAs are encouraged to be part of the
academe and become an integral force in
inspiring learners pursue a career in
accounting. Accounting educators could
be teachers, administrators, or
researchers. Accounting research, though
a separate discipline, usually falls under
this branch. Accounting research is
broader in scope and wider in coverage.
It encompasses research interests in the
areas of financial accounting,
management accounting, auditing and
assurance, and taxation, among others.
 CPAs in SPECIALIZED AREAS
1. Forensic Accounting
- Forensic accountants provide the
detective work needed to investigate and
examine evidence of white-collar
financial crimes such as stealing and
fraud. They often act as expert witnesses
in legal proceedings and prepare evidence
to be presented in court.
2. Information Technology Services
-Businesses often seek individuals who
can design and implement customized
software systems. CPAs who possess
strong skills in information technology
can work with e-commerce ventures and
consult with others to determine which
decisions are the most financially and
technologically sound for a company.
3. Environmental Accounting
-CPAs involved in environmental
accounting determine how companies can
be both profitable and environmentally-
responsible. They do environmental
compliance audits and set up preventative
systems to ensure compliance and avoid
future environmental-related claims or
disputes.
4. International Accounting
- International accountants are
knowledgeable in international trade rules
and regulations, international mergers,
government regulations, tax laws, and
overseas transactions. CPAs who work in
this area often travel abroad and can
speak and understand different languages.