INTRODUCTION TO ACCOUNTING, ITS USERS AND BRANCHES
Business becomes more complex because it continues to develop and
evolve. We need to have strategy to cope up with other businesses to make
our business successful.
 ACCOUNTING
- a service activity which provide quantitative information [Quantity
>> Numbers >> Money (Financial)]
- provide new concepts and techniques to have reliable and accurate
financial information
- analysis and interpretation of financial information, conduct of
audits and preparation of financial statements
 3 BASIC ACTIVITIES OF ACCOUNTING
 IDENTIFYING
- starting point of accounting process
- analyzing,
classifying,
interpreting,
and
measuring
business transactions/events/activities that have an
economic impact on a business
 RECORDING
- is done to provide history of its financial activities
- keeping a systematic and chronological diary (journals and
ledger)
of
events
measured
in
peso
(monetary
unit/amount/value)
- clarifies and summarizes economic events
>> Bookkeeping <<
- part of accounting process
- recording process of accounting (economic activities)
>> Double Entry <<
- type of accounting/bookkeeping system which is recorded
using debit and credit
- debits and credits should always be equal to each other
in order to balance the books
 COMMUNICATING
- the language of business in accounting
- presenting of financial statements to interested users
- used by decision makers to be able to make a reasonable
decision
 2 GROUP OF USERS OF ACCOUNTING INFORMATION
1. INTERNAL USERS - primary users of accounting, users of
information within the company
a. OWNERS - shareholders, stockholders
b. MANAGERS - decision makers
c. EMPLOYEES - financing department
2. EXTERNAL USERS - secondary users of accounting, users of
information outside the company
a. INVESTORS - potential investors
b. LENDORS - creditors
c. SUPPLIERS - offers goods and services on credit
d. CUSTOMERS - steady supply of goods and services
e. TAX AUTHORITIES - identify potential tax evaders
f. GOVERNMENT - to protect the interest of stakeholders
g. AUDITORS - to form audit opinion
h. PUBLIC - interest in economic developments

BRANCHES OF ACCOUNTING
1. FINANCIAL ACCOUNTING OR FINANCIAL REPORTING
- classifying business transactions, preparing and presenting
of financial statements (historical in nature) to be used by
external users
2. MANAGEMENT ACCOUNTING
- providing information for internal users
- financial analysis, budgeting and forecasting, cost
analysis, evaluation of business decisions and similar areas
to assist the management perform its functions
3. COST ACCOUNTING
- subset of management accounting which record, present, and
analyze the manufacturing costs
- determine future courses of action
- analyze actual costs and budgets or standards
4. AUDITING
- systematic process of objectively obtaining and evaluating
evidence (assertions economic actions and activities)
- ascertain the degree of correspondence between those
assertions (establish criteria and communicate the results to
interested users)
a. External Auditing - examination of financial
statements by an independent party
b. Internal Auditing - evaluating the adequacy of a
company’s internal control structure
5. GOVERNMENT ACCOUNTING
- public accounting in which accounting information is used
in the public sector that have different aims and objectives
of the state owned and privately owned institutions
- performance of public sector institutions are set in
budgetary context
6. TAX ACCOUNTING
- helps clients follow rules set by tax authorities (tax
planning and preparation of tax returns)
- determine income tax, tax advisory services, and other taxes
7. ACCOUNTING EDUCATION
- to develop future accountants
8. ACCOUTING RESEARCH
- search for new knowledge on the effects of economic events
- all aspects of the accounting profession
- standard- setting bodies to develop new standards (address
recent issues or trend in global business)
 ECONOMIC ENTITY - unit that exists independently such as
hospital, or government
 ECONOMIC EVENTS - business transactions that affect a business’
position and that should be recorded in the accounting records
 FINANCIAL STATEMENTS - accounting reports prepared periodically
the owner, creditors, and other interested users about the
condition and operating results of business
business,
financial
to inform
financial