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There are eight (8) specialized accounting fields as follows:

1. Financial Accounting
2. Management Accounting
3. Government Accounting
4. Auditing
5. Tax Accounting
6. Cost Accounting
7. Accounting Education
8. Accounting Research

Financial Accounting
Financial accounting is a field of accounting primarily handling the recording of
financial transactions of a business. The financial transactions are later summarized into
standardized accounting reports, more popularly known as the financial statements, for
the benefit of internal and external users.
Financial statements should provide information useful to a wide range of users in
their economic decisions. Standardized financial statements allow the users to compare
the results of operations of different companies regardless of size and nature.
Likewise, standardized financial statements are also useful for creditors. Besides
enhancing comparability, standardized financial reports improve the understandability of
the company’s financial statements. Creditors will be able to assess the riskiness of a
company through the well-presented financial statements.
As stated, financial accounting caters to the need of both internal and external
users. However, it is relevant that financial accounting’s main goal is to provide the
information needs of external users that have no capability to request information directly
from management.

Primary Users of General Purpose Primary Users of Special Purpose

Financial Statements Financial Statements
 Investors  Top management (e.g., Board of
 Creditors Directors of a company, CEO,
 Shareholders/stockholders CFO, COO)
 Government Agencies  Department managers (e.g., sales
 Auditors manager, production manager)
 Other interested outside parties  Other internal parties

Predominantly, external parties use general purpose financial statements to

evaluate the performance of the company. On the other hand, specific purpose financial
statements are utilized by internal parties to guide them in the decision-making process
for the company.
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Management Accounting
Management accounting is a branch of accounting whose reports are presented to
the management (internal user) for decision making. The special reports will assist
managers in planning, directing and controlling the operation of the business as well as in
managing enterprise resources. The reports prepared are not following certain standard.
The reports are customized in accordance to the need of the user. The frequency of
reporting also depends on the need of the management. It may be daily, weekly,
monthly, semi-annually or annually.
Aside from the frequency and the intended users of reports, management
accounting differs from financial accounting in the nature of information produced.
Financial accounting summarizes financial information gathered within a specified
period. Thus, financial accounting provides information that is historical. Meanwhile,
management accounting information is forward-looking. It contains forecasted
information used by managers in planning.

Management Accounting Skill Set

In additional to strong accounting fundamentals, management accountants should
also possess the following strategic business and management skills:
a. Analysis. Management accountants should be able to analyzed information
and use it to make business decisions.
b. Strategy. Management accountants should be able to formulate business
strategies that will increase the company’s wealth and create value for the
company’s shareholders.
c. Risk. Management accountants should be able to identify risks that can
potentially have detrimental effects to the company. At the same time,
management accountants should give recommendations on how to manage
such risks.
d. Planning. Management accountants should be able to apply accounting
techniques in the planning and budget creation phase of a business.
e. Communication. Management accountants should be able to identify what
information the management needs and also explain the numbers to non-
financial managers.

Government Accounting
According to Section 109 of Presidential Decree 1445, government accounting is
defined as an accounting system which encompasses the process of analyzing, recording,
classifying, summarizing, and communicating all transactions involving the receipt and
disposition of government funds and property and interpreting the result thereof”.
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Section 110 of the same decree lays down the 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.
Government accounting is used by all government agencies (e.g., DepEd, DPWH,
and BIR) Due to the specialized nature of government transactions, stricter controls
should be put in place to prevent the misuse of the country’s resources.

Government Accounting Process

Government accounting starts after the declaration of the General Appropriation
Act (GAA). The GAA is the enacted budget of the country for the upcoming year. The
GAA has the force of law and it states how much an agency can spend for the year. It it
is indicated that P500M is available for the DPWH to implement its project, the agency
cannot spend more than this amount.
The government accounting process involves the Commission on Audit (COA),
the Department of Budget and Management (DBM), the Bureau of Treasury (BTr), and
all other government agencies.
The COA is responsible for the keeping of the government’s general accounts.
Think of our government as one big, non-profit organization. The COA is tasked to keep
and update the accounting books of the whole organization. Moreover, the COA
disseminates accounting rules and regulations to be used by all agencies.
In accordance with Sec. 2, Chapter I, Title XVII, Book IV of the Administrative
Code of the Philippines, “The Department of Budget and Management shall be
responsible for the formulation and implementation of the National Budget with the goal
of attaining our national socio-economic plans and objectives. The Department shall be
responsible for the efficient and sound utilization of government funds and revenues to
effectively achieve the country’s development objectives.
The Bureau of Treasury (BTr) is responsible for the safekeeping of the national
funds. It serves like a bank where the funds are kept. Although its main role is the
safekeeping of funds, the BTr is also responsible for the management and control of the
disbursements of such funds. Furthermore, the agency is also responsible in maintaining
accounts of financial transactions of all natural government agencies.

Auditing
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It is a branch of accounting can be classified into two (2) categories. They are as
follows:
a. External auditing. It deals with the independent verification and examination
of the accounting records. Its main purpose is to give an opinion on the fair presentation
of the financial statements. To be an external auditor, one of the required to pass the
Licensure Examination given by the Board of Accountancy in order to practice as a
Certified Public Accountant (CPA).
b. Internal auditing. In this branch of accounting, the internal auditor is an
employee of the company. Its main function is to see whether the different units of the
organizations comply with the internal policies of the company. The internal auditor is
not necessarily a CPA.

Tax Accounting
Taxes are the lifeblood of the government. Without the taxes the citizens pay, the
government cannot perform its functions. Thus, it is imperative that the collection of
taxes be unhindered. Tax accounting enables the taxing authorities to collect taxes that
differ from the amount due computed using the financial accounting standards. Another
key difference lies in the type of report generated. Financial accounting generates reports
known as the financial statements while tax accounting produce tax returns to be filed to
the appropriate government agencies.

Cost Accounting
It is a branch of accounting that deals with the recording, classifying, and
summarizing of the details of materials, labor and overhead necessary to produce and sell
a product or service. The emphasis is on the cost determination, cost analysis and cost
control. Cost accounting also provides information to management accounting in terms
of decision making when it comes to costing, pricing the goods and competition. On the
other hand, cost accounting is used in financial accounting for the purpose of valuing
inventories to be presented in the financial statements. Cost accounting is applied to
manufacturing companies.

Terms Used in Cost Accounting

These are just some of the 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 a pair of
jeans, cost of a pair of Jordan XI shoes)
 Cost driver. An activity that is a cause of the incurrence of cost (e.g., the number
of working hours is related to the amount of salaries a company pays)
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 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., cost of supplies
used in the factory, salary of supervisor overseeing factory operations, etc.)
 Fixed Cost. Costs that do not change within a relevant range of activity (e.g.,
rent of a factory building, insurance, etc.)
 Variable Cost. Costs that change as the level of activity or production increases
(e.g., material cost, labor cost, selling cost, etc.)

Accounting Education
The Bachelor of Science in Accountancy (BSA) in the Philippines is normally a
5-year program composed of subjects in accounting, audit, administration, and business
laws and taxation. Although the subjects usually highlight the business environment, the
scope of the topics in BSA also covers other fields such as banking and finance,
government, non-profit organizations, and the academe. Students of the course are also
trained to create and understand computerized accounting systems to cope with the
rapidly changing technology.
Most schools use a combination of diverse teaching techniques to explain
accountancy to students. Some of these methods are classroom discussions, case
analysis, individual and group reporting, feasibility studies, and lectures from renowned
individuals in the field. Other schools require students to undergo an internship program
equivalent to one subject. This is to enable the students to have a feel of the application
of accounting in real life.

Accounting as a Profession

Accounting has attained the status to be at par with law, medicine, and
architecture. The following attributes make accounting as a profession:

1. Competence in a particular skill acquired through training and education. To become a

Certified Public Accountant (CPA), an individual must obtained a bachelor’s degree in
accountancy and pass the Certified Public Accountant Licensure Examination. An
examination given by the Professional Regulatory Board of Accountancy.

2. The members of the profession have to adhere with the profession’s Code of Ethics. It
provides guidance to CPAs in performing the profession.

3. Acceptance of duties and responsibilities to the public as a whole. The profession is

calling for the integrity of fair presentation and preparation of the financial statements in
accordance with accounting standards. The stakeholders are relying to the reports
prepared by the accountants to be free from material error or fraud.

Admission Requirements for BSA

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According to the Commission on Higher Education (CHED), the standard of

admission to any BSA program should be sufficiently rigorous and demanding. Only
universities which can demonstrate the capability to teach accountancy in a sufficiently
high level are allowed to do so. Requirements at each school are different, but the
common requirements include:
 Must be a high school graduate
 Must have a college entrance examination of above average or depending on the
specific rating set by the school
 Aside from the college entrance examination, must pass the separate aptitude test
specific for BS in Accountancy
 Must pass the interview conducted by the college admission officer
 Some schools require a high school QPA of 85% and above with no grade less
than 80% in all subjects
 There are schools who require students to have an 85% or higher average rating in
the National Secondary Assessment Test (NSAT)
 As set by CHED, all schools must conduct an English Proficiency examination to
all BS in Accountancy applicants
 Admission for Philippine Educational Placement Test (PEPT) passers mainly
depends on the school’s discretion since some colleges and universities offer only
selected courses.

Board Exam
Before a BSA graduate can practice accountancy he/she needs to pass the
Certified Public Accountant Licensure Examination. The CPA Licensure Exam is a
comprehensive test composed of seven subjects. Each subject will be taken within 3
hours so the exam will be for 21 hours all in all. A candidate should achieve a general
average of at least 75% with no rating below 60% in any of the seven subjects in order to
pass the exam.

Accounting Research
Accounting research is a field of accounting that deals with the creation of new
knowledge. Combining the models produced by the hard sciences in research and testing
with financial statements, stock prices, surveys, and experiments, we can gain a specific
perspective and basis on the following:
 Deciding and implementing new accounting and auditing standards.
 Presenting unusual economic transactions in the financial statements.
 Learning how new tax laws impact clients and employees.
 Discerning how the accounting profession affects the capital markets through
academic accounting research.
Researchers in the accounting field also apply the scientific methods like their
counterparts in the sciences. With the constantly evolving field of accountancy, it is
expected that accounting research will continue to play a vital role in the future.
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Accounting VS Auditing
In a broad sense, accounting embraces auditing. In a limited sense, accounting is
constructive in nature. Accounting involves the preparation and presentation of financial
statements using the generally accepted accounting principles as bases.
Auditing is analytical because it involves the examination of financial statements
to ascertain their conformity with the generally accepted accounting principles and the
expression of an opinion as to the fairness of the presentation of financial statements.
Auditors need financial statements generated by general accounting in their audit work.
Thus, the saying, “The work of an auditor starts when the work for an accountant
ends”.

Accounting VS Bookkeeping
Bookkeeping is the process of doing the accounting cycle, from gathering of data
up to the preparation of the financial statements. It is largely concerned with the
development and maintenance of accounting records. Thus, it only shows the procedural
aspect of accounting. On the other hand, accounting goes beyond its procedural aspects.
It includes the analysis of the financial statements prepared by the bookkeeper.
Although, both the accountant and the bookkeeper follow the same standards in the
preparation of the financial statements but the accountant goes beyond in following the
standards by analyzing and interpreting the financial position and financial performance
of the entity.
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Summative
Assessment

Multiple Choice. Read and analyze each item. Circle the letter of the best answer.

1. A field of accounting focuses on creating value for the business by providing

information used in the financial accounting and management account fields.
a. Accounting education c. Tax accounting
b. Cost accounting d. Auditing

2. One of the differences of financial accounting from management accounting is ____.

a. FA are beneficial to external users only
b. FA can be used by internal users only
c. FA produces reports known as Financial Statement
d. FA unlike management accounting, primarily aims managers in their decision-
making.

3. The definition of government accounting came from ______________.

a. Section 109 of PD 1446 c. Section 109 of PD 1445
b. Section 110 of PD 1445 d. Section 110 of PD 1446

4. Information produced by this field of accounting aims to educate students in the field
of accountancy.
a. Accounting education c. Financial accounting
b. Accounting Research d. Management accounting

5. Which of the following qualifications of an external auditor is considered the most

important?
a. Competence c. Objectivity
b. Independence d. Integrity

6. Financial accounting is concerned with ____________.

a. General purpose financial statements c. Tax returns
b. Special purpose financial statements d. Management reports

7. Financial accounting reports primarily to ___________.

a. Government agencies c. Top management of the company
b. Taxing authorities d. Creditors and investors

8. Which of the following is true about the board exam of accountancy students?
a. In order to pass, a student needs to achieve a general average of at least 75%.
b. All in all, there are a total of six subjects in the board exam.
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c. In order to pass, a student should not get a rating below 60% in any of the
subjects.
d. a and c only
9. These are costs that do not change in total amount within a relevant range of activity.
a. Variable costs c. Direct cost
b. Fixed Cost d. Indirect Costs

10. Which government agency is responsible for the keeping of the national funds of the
government?
a. Bureau of Treasury c. Commission on Audit
b. Department of Budget & Management d. Department of Education

11. Which of the following is NOT a role of a management accountant?

a. Assists in the preparation of general purpose financial statement
b. Monitors spending and financial control
c. Conducts internal business audits
d. Explains the impact of the competitive landscape

12. The frequency of reports generated by management accounting can be best described
as ______________.
a. Annually c. Semi-annually
b. Quarterly d. Whenever management demands

13. Which of the following agency is NOT charges with government accounting
responsibility?
a. Government Agencies c. Legislative Department
b. Bureau of Treasury d. Commission on Audit

14. The role of the Commission on Audit in the government accounting process includes
_____________.
a. Efficient and sound utilization of government funds
b. Keeping and updating the accounting books of the government
c. Management and distribution of government funds
d. Safekeeping of the national funds

15. Which of the following is a purpose of auditing?

a. To ensure that the financial statements are free from errors
b. To check the presentation of the financial statements
c. To enhance the credibility of the financial statements
d. None of the above

16. Which of the following can be considered as an internal user?

a. Board of directors c. Creditors
b. Investors d. Customers
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17. Section 110 of PD 1445 states that the objective of government accounting involves
the following, EXCEPT
I. To provide information concerning past operations and present conditions.
II. To provide basis for guidance for future operations.
III. To provide control of the acts of public bodies and offices in the receipt,
disposition, and utilization of funds and property.
IV. To report on the financial position and the results of operations of government
agencies for the information and guidance of all persons concern.

a. I only c. I, II and IV only

b. II only d. All of the above

18. These are the resources sacrificed to achieve an objective.

a. Expenses c. Costs
b. Benefits d. Revenues

19. Which of the following is an objective of financial reporting?

a. To help management in the company’s decision- making
b. To solve conflicts inside the company
c. To help interested users in their economic decisions
d. To adhere to government rules and regulations

20. Financial statements that undergo the process of auditing are called _____________.
a. Audited Financial Statements c. Qualified Financial Statements
b. Certified Financial Statements d. Financial Statement As Is

II. Instruction. Write F is the statement is false and T if the statement is true.

_____ 1. Bookkeeping is a procedural element of accounting.

_____ 2. Government accounting is a branch of accounting that deals with the analysis of
the costs of products and services.
_____ 3. Cost accounting refers to a branch of accounting that deals with tax
computations, filing of tax returns, and tax planning.
_____ 4. Financial accounting is a branch of accounting that deals with the preparation of
general-purpose financial statements.
_____ 5. The external users are the investors, lenders, suppliers, government, and
customers.
_____ 6. The external auditor is an employee of the company.
_____ 7. Management accountants should also possess strategic business and
management skills.
_____ 8. COA is responsible for the keeping of the government’s general accounts.
_____ 9. PD 1440, s. 109 lays down the objectives of government accounting.
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_____10.Indirect cost can economically be traced to a cost object (e.g., materials, labor,
etc.)