Accounting Assignment

Accounting is the art of recording, classifying and summarizing, in a significant manner, and in terms of money, transactions and events which are in part at least of a financial character, and interpreting the results thereof. (American Institute of Certified Public Accountant)
Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions. (Accounting Standards Council)
Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. (American Accounting Association)

Basic Purpose of Accounting
The basic purpose of accounting is to supply financial information to users of the information to help them make informed judgments and better decisions.
For example, a company is considering obtaining a loan from the bank. Accounting provides the following information, among others, relevant to this decision:
• The resources of the business
• The obligations of the business
• Interest being paid on the obligations of the business.
• Cash inflows and outflows resulting from business operations

If management sees that the company has other resources (for example, investments in government Treasury Bills), it may decide instead to sell the investments and use the resulting cash to finance business operations.

Management also analyzes the obligations of the business to check if they could still handle additional obligations as a result of borrowing from the bank. Cash inflows and outflows are analyzed to see other possible sources of financing or to determine how the business would repay the bank loan, if it ever materializes.

Should the company decide to apply for a loan, the bank’s loan officer and lending personnel will require the company to submit several documents including financial information generated by the company’s accounting system. The bank analyzes the information to determine whether to approve or reject the loan application.


The Nature of Accounting

Accounting is the identification, measurement and communication of financial information about economic entities to interested persons (Kieso and Weygandt)
- Arose from the need to communicate financial information
- Not derived from first principles
- Financial Accounting Standards Board (FASB) is authoritative rule making body
Stewardship is taking care of the land and the resources for future generations.
No Filipino understands this concept! The only thing Filipinos understand is how much they can get before someone else gets it. Filipinos have destroyed their own lands and the oceans around them and the air they breath. They blame everyone but it is really the Filipinos that have killed all the wild animals, eaten all the birds, destroyed the coral reefs and the forests.



Functions:
Record Keeping Function:
The primary function of accounting is to keep a systematic record of financial transaction - journal, posting and preparation of final statements. The purpose of this function is to report regularly to the interested parties by means of financial statements.
Protect Business Property:
The second function of accounting is to protect the property of business from unjustified and unwanted use. The accountant thus has to design such a system of accounting which protects its assets from an unjustified and unwanted use.
Legal Requirement Function:
The third function of accounting is to devise such a system as will meet the legal requirements. Under the provision of law, a business man has to file various statements e.g., income tax returns, returns for sales tax purpose etc. Accounting system aims at fulfilling the requirements of law. Accounting is a base, with the help of which various returns, documents, statements etc., are prepared.
Communicating the Results:
Accounting is the language of business. Various transactions are communicated through accounting. There are many parties - owners, creditors, government, employees etc, who are interested in knowing the results of the firm. The fourth function of accounting is to communicate the results to interested parties. The accounting shows a real and true position of the firm of the business.
Scope of Accounting
•Scope is very wide
•Needed not only by business class but also by non-business class.
•Financial activities of professionals including doctors, engineers and lawyers.

Objectives of Accounting

• To keep systematic records: Accounting is done to keep a systematic record of financial transactions. In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear.
• To protect business properties: Accounting provides protection to business properties from unjustified and unwarranted us. This is possible on account of accounting supplying the information to the manager or the proprietor.
• To ascertain the operational profit or loss: Accounting helps is ascertaining the net profit earned or loss suffered on account of carrying the business. This is done by keeping a proper record of revenues and expenses of a particular period. The profit and loss account is prepared at the end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue, there is said to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.
• To ascertain the financial position of business: The profit and loss account gives the amount of profit or loss made by the business during a particular period. However, it is not enough. The businessman must know about his financial position i.e., where he stands; what he owes and what he own? This objective is served by the balance sheet or position statement.
• To facilitate rational decision making: Accounting these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision making.

Branches of Accounting
Financial Accounting:
It is the original form of accounting. It is mainly confined to the preparation of financial statements for the use of outsiders like creditors, banks and financial institutions etc. The chief purpose of financial accounting is to calculate profit or loss made by the business during the year and exhibit financial position of the business as on a particular date.
Cost Accounting:
Function of cost accounting is to ascertain the cost of the product and to help the management in the control of cost.
Management Accounting or Managerial Accounting:
It is accounting for management. i.e., accounting which provides necessary information to the management for discharging its functions. It is the reproduction of financial accounts in such a way as will enable the management to take decisions and to control various business activities.
Accounting information (internal vs. external users)
In business, accountants play a very important role as far as keeping and maintaining financial records having to do with the company or by the individual who employs them.
Information accountants are responsible for keeping track of are the companies balance sheets, which is the company’s assets equal to liabilities plus owners equity, the company’s income statements, which is the company’s revenue minus expenses equaling the company’s net income. In addition, another record a business accountant is responsible for are the owners equity statement, which is the capital recorded for sole proprietors and partners or the common, preferred stock, and retained earnings of the corporation. Lastly, the statement of cash flow shows a record of cash coming in as well as out of the business. Accounting information such as balance sheets, income statements, owner’s equity statements, and cash flow statements are necessary records kept to ensure that the company recorded is keeping up to date records and are not falsifying documents.
The users of this accounting information are split up into two categories, which are external users and internal users. External users include shareholders, lenders, consumer groups, external auditors, customers, and government agencies; whereas the internal users are users within the company such as managers, internal auditors, sales staff, budget officers, controllers, officers, and directors. For each user or category mentioned, the business accountant is responsible for supplying information in relation to each of the groups accordingly.
The external users would receive limited financial information from the target company, such as general-purpose financial statements; these statements have just enough information to inform external users of the company’s economic position. General-purpose statements are in the area of financial accounting, which is the type of accounting aimed at supplying information to users not directly affiliated with the target company.
For the stockholders, which are individuals and or a group of investors who have interest in the company, the account must supply the above-mentioned statements so that the investors and or stockholders can assess the risk as well as potential gain of the company’s position in the stock exchange.
Lenders such as investors, banks and other financial institutions are interested in such statements for the fact if they were to lend the company money they would need to asses that the company would be able to afford to repay loaned money plus the interest that would be due.

Double-entry bookkeeping is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different accounts. It was first codified in the 15th century. In modern accounting this is done using debits and credits within the accounting equation: Capital = Assets - Liabilities. The accounting equation serves as a kind of error-detection system: if at any point the sum of debits does not equal the corresponding sum of credits, an error has occurred.
Since several different types of errors result in equal sums for debits and credits, double-entry accounting is not a guarantee that no errors have been made.
Accounting has three main forms of branches, viz, financial accounting, cost accounting, and management accounting. These forms of accounting have been developed to serve different types of objectives.
The double entry system of bookkeeping owes its origin to an Italian merchant named Lucas Pacioli who wrote the first book on double entry bookkeeping entitled "Decomputis et Scripturis". It was published in Venice in 1544. All modern methods of accounting are simply adaptation of the system invented by that ancient pioneer.
The double entry theory of bookkeeping can be defined as the system of recording transactions having two fundamental aspects - one involving the receiving of a benefit and the other to giving the benefit - in the same set of books.
In this theory, as the two fold aspects of each transaction are recorded, the name "double entry" has been given to this system.
Every transaction involves two fold aspects e.g., an aspect of receiving and an aspect of giving. One who receives is a debtor (Dr) and one who gives is a creditor (Cr). Under the double entry system, both the aspects of giving and receiving are recorded in terms of accounts. The account which receives the benefit is debited and the account which gives the benefit is credited. It is the ultimate result of this system that every debit must have corresponding credit and vice versa and on any particular day the total of the debit entries and the credit entries on the various accounts must be equal.
History of Accounting
In the 13th to 15th centuries, with the growth of trade and commerce, more systematic record-keeping methods were developed. Florentine, Venetian and Genoan merchants used these methods to keep track of their business. Double-entry records first appeared in Genoa in 1340 AD.
Accounting at any point in time and place can represent the level of civilization then and there. As civilization began around villages and developed into empires, scribes invented record keeping systems and kept running inventories of wealth, trade, and tribute payments. Accountants invented writing using abstract record keeping as temple (and later imperial) wealth and complexity expanded. Double entry bookkeeping played a crucial role of Italian merchants’ superior trading skills. Would the Renaissance have been possible without double entry?
Business history involves long-term processes that incorporated dozens of specific innovations. For example, the Industrial Revolution included many inventions from Watt’s steam engine to Hargreave’s spinning jenny. Equally important were the entrepreneurs who used the inventions successfully, often combining several innovations to create a successful business, and the changes to society associated with a new urban labor class. The concept of time took on a whole new meaning. This was a revolution not because it occurred quickly, but because it changed civilization in fundamental ways. The middle class (that’s most of us) is a direct result, as is the associated mind set—the work day, commuting, a standard of living well above subsistence, and so on. Accounting’s role was primarily one of business survival, which led to economic innovation.
Railroad history is tied directly both to the Industrial Revolution and the development of capital markets to finance large business enterprises. After all, the locomotive was a steam engine turned sideways to drive wheels. The business people organizing the first railroads were big thinkers, planning the use of technology that did not exist. Railway surveying, roadbeds, tracks, rail bridges, tunnels, locomotives, and freight and passenger cars did not exist (except for prototypes). Capital markets were expanded and new contractual arrangements invented to finance railroad construction and operations. The railroads also introduced new accounting problems, like how to deal with a vast infrastructure that wears out or becomes obsolete.
The inventors and the entrepreneurs of the Industrial Revolution were not cost accountants. But the entrepreneurs that survived the inevitable depressions were. Continued success (and avoiding bankruptcy) required accounting expertise. Beginning in the 19th century the rise of the accounting profession benefited business and investors, especially big business, banks, and other institutional investors. Accounting expertise added both knowledge and credibility to complex financial transactions.
The first mammoth monopoly was Standard Oil, organized as a holding company in 1870. The first billion-dollar corporation was U. S. Steel, formed in 1902. Henry Ford’s moving assembly line turned the automobile industry into a gigantic industry. Autos are useful to analyze the dominance of American big business in the first half of the 20th century and many of the problems in the second half. These include several accounting topics—both successes and stubborn problems.
British and American cost accountants and engineers developed calculations and reporting techniques that allowed the corporate moguls to control vast business empires from corporate headquarters. Part of the process was to buy out or destroy competitors, part of the business history. It is not clear that these practices were illegal or considered unethical. In any case, accountants were willing participants. The cost accounting (and to a lessor extent, auditing) techniques were essential to the dominance of American industry in the first half of the 20th century.
Monopoly practices, price fixing, speculation, and market manipulation are part of the Big Business story. So are the market collapse of 1929 and the Great Depression. This massive market failure led to bigger government and increasing regulation, including the securities markets and accounting. Accounting is highly regulated directly because of government response to perceived market and accounting abuses. The role of government is subject to continuing debate, but there is no doubt about the direction of government in the 20th century. The Reagan Revolution may have slowed down the process, but certainly didn’t reverse it.
The current world of business and accounting is based on the computer and the Information Revolution, which has been ongoing for nearly 50 years and is exploding into the 21st century. The computer proved to be a perfect fit to business. Computers efficiently crunch the repetitive transactions of accounts receivable and payable, inventories, and payrolls. IBM had the vision early and Big Blue dominated the history of business mainframes and became a billion dollar blue chip multinational. Technology exploded and new industries (and billionaires) created: personal computers, networks and the Internet, and "killer applications" software such as the electronic spreadsheet. The explosion continues as business and accountants struggle to keep pace with incredible technology progress.
Capital markets are complex, global, operate 24 hours a days, and rely on accounting information. The role of accounting expands as technology advances. Soon, virtually any information can be transmitted instantaneously across the globe. Who will be up to the challenge? The visionaries will most likely succeed, those with 20th century blinders likely to drop by the wayside.
To understand accounting today and predict tomorrow, one must know the history of accounting. That accounting history parallels the rise and development of civilization. Accounting has been surprisingly inter-connected with technology. The accounting-technology-civilization connection is the focus of this book.

The Chart of Accounts
A chart of accounts is a list of all the accounts of the business and their respective account numbers. Using a chart of accounts would reduce confusion as to the choice of account titles and permits uniformity in recording routine transactions. The accounts are arranged in the following order: Assets, Liabilities, Equity, Income, and Expenses. Ordinarily, the chart of accounts is prepared by the accountant who set up the accounting system of the business. An example of a chart of accounts is provided in the comprehensive illustration at the latter of this chapter.
Accounting for TFP differences across countries
We know that a large part (half or more) of the difference in incomes per head between rich and poor countries is due to differences in total factor productivity (TFP)--i.e., the efficiency with which capital, skills, labor, and other inputs are transformed into final output--with the rest being due to differences in physical or human capital levels. But what accounts for these TFP differences? A new paper by Chang-Tai Hsieh and Peter Klenow takes us some way into understanding the issues:
We use plant-level data from the Chinese Industrial Microdata (1998-2005), the Indian Annual Survey of Industries (1987-1994) and the U.S. Census of Manufacturing (1977, 1987, 1997) to measure dispersion in the marginal products of capital and labor within individual 4-digit manufacturing sectors in each country. We then measure how much aggregate manufacturing output in China and India would increase if capital and labor were to be reallocated to equalize marginal products across plants within each 4-digit sector to the extent observed in the U.S. The U.S. is a critical benchmark for us, as there may be measurement error and factors omitted from the model (such as adjustment costs and markup variation) that generate gaps in marginal products even in a comparatively undistorted country such as the U.S. We find that moving to “U.S. efficiency” would increase TFP by 30-45% in China and 40-50% in India. The output gains would be roughly twice as large if capital accumulated in response to aggregate TFP gains.
In other words, dispersion in TFP across plants within industries is an important source of the productivity gap across countries. This is a hopeful message insofar as it suggests that poor countries are able to sustain economic activities that are much higher-productivity than what their income levels would suggest and that a lot of economic catchup involves catching up with the productivity frontier within their economies.
But the interpretation of these large TFP differences across plants within the same 4-digit industries is still up for grabs. Is it that credit constraints or political connections prevent more productive plants from expanding, and therefore block economy-wide convergence? Or is what we are observing an inherent sign of economic progress, with resources dynamically being reallocated from low- to high-productivity activities, and in which case these gaps are necessary to sustain growth in transition? UPDATE: Link to paper is now fixed.


The basic professional values and ethics
Reputation- is the opinion (more technically, a social evaluation) of the group of entities toward a person, a group of people, or an organization on a certain criterion. It is an important factor in many fields, such as education, business, online communities or social status.
Competence- the quality of being competent.
Objectivity- the state of being impartial; the ste or quality of being objective.
Client relations and confidentiality- Confidentiality is an ethical principle associated with several professions (e.g., medicine, law, religion, professional psychology, and journalism). In ethics, and (in some places) in law and alternative forms of legal dispute resolution such as mediation, some types of communication between a person and one of these professionals are "privileged" and may not be discussed or divulged to third parties. In those jurisdictions in which the law makes provision for such confidentiality, there are usually penalties for its violation.
Integrity- being straightforward, honest and truthful in all professional and business relationships. You should not be associated with any information that you believe contains a materially false or misleading statement, or which is misleading by omission.
Conduct- is important for everyone associated with the education and training divisions of the Department of Education and Training (DET) and its activities. Public service employees hold a special position of trust.
Reporting breaches of the code
Supervisors and managers have an obligation to address breaches of the Code as soon after observation or the reporting of the incident as practicable. All the facts and the circumstances of each case are to be obtained and appropriate action taken. This includes, where necessary, reporting serious matters or repeated minor matters where an employee has failed to heed managerial guidance/correction for consideration by the appropriate delegate.
It is important that supervisors and managers carefully distinguish between conduct and behaviour related issues which are covered by the Code, as opposed to performance matters which should be addressed using performance management policies and procedures.
All employees are obliged to report either suspected or actual breaches of this Code to either the department or another appropriate public sector entity.The Public Sector Ethics Act 1994 Whistleblowers Protection Act 1994 and the department's Student Protection Policyprovide further guidance on reporting requirements. Employees may also raise concerns if they believe that, in the reporting process someone may not have acted in good faith in their allegations against another employee.
In the case of suspected or actual official misconduct or maladministration, procedural fairness does not mean that the person under investigation is to be presented with all the details of the allegations prior to an investigation. The relevant investigating authority will determine the appropriate timeframes for advising the person of the allegations and for their opportunity to respond. Official misconduct is to be dealt with in accordance with the department's obligations under the Crime and Misconduct Act 2001
Unlawful activities- in relation to an individual or association, means any action taken by such individual or association (whether by committing an act or by words, either spoken or written, or by signs or by visible representation or otherwise)
Fees and Remuneration - This Determination repeals and replaces the Bankruptcy (Fees and Remuneration) Determination 2008 and establishes the fees and remuneration charged by the Insolvency and Trustee Service Australia (ITSA).
Advertising and publicity- are two very different communication tools, even though both employ the mass media as a vehicle for reaching large audiences.
• Traditionally, most marketers placed heavy reliance on advertising and only occasionally used publicity.
• On the other hand, public relations practitioners have primarily relied on publicity--or, as they sometimes prefer to call it, media relations--and only rarely used advertising.
This does not mean that advertising should be seen only as a marketing tool and that publicity should be seen only as a public relations tool. Thoughtfully used, both tools are valuable for both functions.
Disciplinary procedures, in parliamentary procedure, are used to enforce a deliberative assembly's rules. RONR notes, "Punishments that a society can impose generally fall under the headings of reprimand, fine (if authorized in the bylaws), suspension, or expulsion." If an offense occurs in a meeting, the assembly, having witnessed it themselves, can vote on a punishment without the need for a trial. The chair has no authority to impose a penalty or to order the offending member to be removed from the hall, but the assembly has that power. It is also possible to make a motion to censure. Mason's Legislative Manual provides.
Accounting Framework
The framework for the Preparation and Presentation of Financial Statements (hereinafter called the “Framework”) sets out the concepts that underlie the preparation and presentation of financial statements for external users.
Forms of Business Organization
According to nature of operations, a business enterprise may be classified as: a service business, a merchandising business, or a manufacturing business.

Service business or service concern
This simplest form of business. These enterprises provide services to clients or costumers in exchange for fees, rent, interest or royalties.

Merchandising business or trading concern
These enterprises purchase goods from suppliers and, without altering the state of the goods bought, sell the same at a higher price than cost.

Manufacturing business or manufacturing concern
Compared to service and merchandising enterprises, a manufacturing business involves the most complex activities.

Accounting Concepts and principles
1. Business entity principle. This concept states that the business is considered distinct and separate from the owner(s) of the business. Personal transactions of the owner(s) is/are not included in the records of the business. The business is considered a separate accounting empty.

2. Dual-effect of business transactions. Whenever a business transaction takes place (for example, the rendering of services, delivery of goods, purchase of equipment, payment of salaries to employees, etc.) accounting assumes that the value received is equal to the value given up (for every value received, there is an equal value given up).

3. Matching Principle. Under the matching principle, net income or net loss can only be measured if there is a proper matching of the income earned and the expenses incurred within one accounting period. This means that income that is recorded and reported in one accounting period should be matched by recognition of the expenses that directly or indirectly contributed to the generation of the income.

4. Accrual Basis. There are two common bases in accounting for business transactions. These are the cash basis and accrual basis. Under the cash basis, income is recognized when cash is received and expenses are recognized when cash is paid. Under the accrual basis, income is recognized when it is earned, regardless of when cash is received. Expenses are recognized when incurred, regardless of when cash is paid.

5. Stable monetary unit. Accounting provides information which is primarily financial in nature, it is concerned with information which can be quantified and expressed in terms of money. For a business transaction to be included in the accounting records and financial statements of the enterprise, it must be expressed in terms of a uniform means of measurement.

6. Periodicity (Time Period Concept). If economic decisions are to be effective, timely financial information must be available to decision-makers. The periodicity concept assumes that the operating life of an enterprise may be divided into time periods of equal length (one year), called accounting periods.

7. Going Concern (Continuity Assumption). The financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations.

Financial Statements

Financial statements are the means by which the information accumulated in and processed by financial accounting is communicated to users on a periodic basis. Financial statements are the end-product of the financial accounting process. A complete set of financial statements includes the following:
1. Statement of financial position or balance sheet
2. Statement of comprehensive income
3. Statement of changes in equity
4. Statements of cash flows
5. Notes to the financial statements

Relationships among the financial statements
Users:

1. Investors. The “providers of risk capital”. Investors and their advisers are concerned with the risk inherent in and return provided by, their investments.

2. Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers.

3. Lenders. These users are interested in information that enables them to determine whether their loans and the interest attaching to them, will be paid when due.

4. Suppliers and other trade creditors. These users are interested in information that enables them to determine whether amounts owing to them will be paid when due.

5. Customers. These users have an interest in information about the continuance of an enterprise especially when they have a long-term involvement with or are dependent on, the enterprise.

6. Government and their agencies. These users are interested in the allocation of resources and, therefore, the activities of enterprises.

7. The public. Enterprises affect members of the public in a variety of ways.

Assets

An asset is a resource owned and/or controlled by the enterprise. An asset is expected to provide future economic benefits to the enterprise (that is, it is expected to continue to be useful to the enterprise).


Examples of Assets:
Cash- money on hand, or in banks, and other items considered as medium of exchange in business transactions.
Accounts receivable- valid claims from costumers or clients arising from the provision of services or delivery of goods in the ordinary course of business, where the price for these services or goods has not yet been paid (on account or on credit).

Supplies on hand- refers to supplies purchased by an enterprise (for example, bond paper, envelopes, printer, cartridges, pencils, paper clips, etc.) which are unused as of the date of the balance sheet.

Merchandise inventory– goods which have been bought from suppliers for resale to customers at a price higher than cost.

Property, plant and equipment– long-lived assets which have been acquired for use in operations. Land, building, furniture, fixtures, equipment, transportation or delivery vehicles are example or property, plant and equipment.

Liabilities

A liability is a present obligation of the enterprise arising from the past events, which are to be settled in the future. In layman’s terms liabilities refer to the debts of the business. Liabilities are settled thru paying cash, the delivery of goods, the provision of services, or settled in some other form.

Example of Liabilities
Accounts payable– amounts due, or payable too suppliers for goods purchased on account or for services received on account.

Salaries payable– salaries due to employees which are unpaid as of balance sheet date.

Utilities payable– amounts due, or payable to, utility companies for electricity, heat, light and water charges.

Advances from customers– amounts received from customers, in advance, for the delivery of goods or provision of services.

Loans payable– obligations of an enterprise to lenders (such as banks and finance companies) to be paid on demand or at a specified future date agreed between the enterprise and the lender.

Equity

Equity means a claim. Technically creditors and owners both have claims on the assets of the enterprise. The claim of creditors is known as creditors’ equity or simply, liabilities. The claim of owners is known as owner’s equity or simply, equity (sometimes it is also known as capital). In accounting parlance, when the word equity is used, it refers to owner’s equity.

Income
Income refers to increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in equity, other than those a relating to contributions from equity participants. The definition of income encompasses both revenue and gains.

Expenses

Expenses refer to decrease in economic benefits during the accounting period in the form of outflows or depletions of assets or incidences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

Examples of expenses:
• Salaries and other employee benefits paid to employees
• Rent expense
• Expenses for electricity water and other utilities
• Cost of used supplies
• Taxes, business permits and licenses paid
• Professional fees paid to the company’s lawyer and accountant
• Commissions paid to company salespersons
• Advertising and promotion expenses
• Depreciation expense on machinery and equipment

Opportunities for Accountants

Numerous career opportunities are available for students majoring in accounting. Currently, the demand for accountants exceeds the number of new graduates entering the job market. This is partly due to the increased regulation of business caused by the accounting and business frauds. Also, more and more businesses have come to recognize the importance and value of accounting information.

As we indicated earlier, accountants employed by a business are said to be employed in private accounting. Private accountants have a variety of possible career options within a company. Accountants who provide audit services, called auditors, verify the accuracy of financial records, accounts and systems.

Accountants and their staff who provide services on a fee basis are said to be employed in public accounting. In public accounting, an accountant may practice as an individual or as a member of a public accounting firm. Public accountants who have met a state’s education, experience, and examination requirements may become Certified Public Accountants (CPAs). CPAs generally perform general accounting, audit, or tax services. Career statistics indicate, however, that these salary differences tend to disappear over time.

Because all functions within a business use accounting information, experience in private or public accounting provides a solid foundation for a career. Many positions in industry and in government agencies are held by individuals with accounting backgrounds.

Fields of Accounting

Financial accounting- focuses on the preparation and presentation of general-purpose financial statements with the aim of meeting most of the needs of external users.

Management Accounting- is concerned primarily with financial reporting for internal users, such as management.

Cost Accounting- measures a business’s costs to help management in controlling expenses.

Tax Accounting- has two aims: compliance with the tax laws and minimizing the company’s tax bill through legal means.

Government Accounting- encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof.