**FABM 1 - Introduction to Accounting Part 2 | SIR NJ TV — Transcript & Summary | SozAI**
Source: https://sozai.app/transcript/fabm-introduction-accounting-part-2/

Introduction to Accounting Part 2 covers users of accounting, branches, profession regulation, and key terminologies for business decisions.

## Key Takeaways

- Accounting information serves different users with distinct needs: internal users manage operations, external users assess investment and compliance.
- Managers rely on accounting data to monitor business performance and make strategic decisions.
- Employees use financial information to evaluate job security and salary prospects.
- Owners use accounting reports to guide investment and expansion decisions.
- Understanding the classification of users helps clarify the purpose and presentation of accounting information.

## What the video covers

- The video is a continuation of an introduction to accounting, focusing on users of accounting information.
- It categorizes users into internal (managers, employees, owners) and external users (regulatory agencies, investors).
- Internal users use accounting data for decision-making, performance analysis, cash management, and pricing.
- Managers need information on income, cash availability, production costs, and dividends to improve company results.
- Employees seek accounting info for job security and salary considerations.
- Owners require data on profits, assets, liabilities to decide on investments and business expansion.
- External users are individuals or organizations outside the company interested in financial information for investment or regulatory purposes.
- The video includes a quiz question distinguishing internal from external users.
- It emphasizes accounting as the language of business and a communication process.
- The channel provides educational content with plans for standalone topic videos.

Answers

## Questions about this video

Who are considered internal users of accounting information?

Internal users are individuals inside the company such as managers, production supervisors, finance directors, company officers, and owners who use accounting data to manage and operate the business.

Why do employees need accounting information?

Employees need accounting information primarily to assess job security by understanding if the company is profitable and stable enough to continue paying salaries.

What is the importance of accounting information for business owners?

Owners use accounting information to evaluate profits, assets, and liabilities, which helps them decide on additional investments or business expansion.

## Full Transcript — Download SRT & Markdown

00:05

Speaker A

♪ Yeah, 'cause it's hateful, my soul ♪ Hello, guys. So, welcome to this video tutorial. So, for today, we will be discussing the introduction to accounting part 2. So, if you haven't watched the first part or part 1, I already included the link in the description box below, so you may check it out. Also, I will be posting standalone videos which will be shorter than this one for those who just want to study per topic. Please note that this channel is for educational purposes only and not as a substitute for a proper educational program. By the way, if you like this video, make sure to subscribe to this channel and, of course, hit the notification bell to get more updates from this vlog. So, prepare your coffee and notes. Let's begin! So, our topic for today includes the users of accounting, branches of accounting, the accountancy profession, and also comparison of terminologies. So, these are the questions we would like to address in this vlog. Who are the users of accounting information? What are the different branches of accounting? What is the law that regulates the accountancy profession? And also, what are the common accounting terminologies? So, if you want to know more about these topics, stay with me as we discuss this one by one. Now I'm shaking, drinking all this coffee. So, let's start with the users of accounting information. As mentioned in our previous video, accounting is understood as the language of business. So, because of what process? Again, communicating process. So, the question is, who are the users of accounting information? Or who uses the accounting data and information? So, in order for us to understand this, we have to categorize first how we will divide them. So, first, it can be by internal users and external users and also primary users and other users. So, let's start with internal users and external users. So, when we say internal users, these are the individuals inside the company who plan, organize, and run the business. So, meaning to say, these are the users who are directly involved in managing and operating the business. So, this includes managers, production supervisors, finance directors, company officers, and also, of course, the owners. So, the accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts, and also financial statements. So, this information will support whatever decision of the internal users. Let's find out who they are. So, let's answer this recitation first. Which of the following is not an internal user? A. Regulatory agencies B. Marketing managers C. Production supervisors D. Finance directors E. Company officers and owners So, the correct answer is letter A, okay? Regulatory agencies. Because regulatory agencies are external users. Letter B to E are the ones we mentioned earlier. So, later on, we will discuss who are part of regulatory agencies. So, let's start with the management or the managers. So, what is the information that they need? Why do they need accounting information? So, this is it, the income earnings for the period or the sales. Available cash, if our business still has money. And also yung production cost. Yan naman yung mga gastos or yung expenses. So, para saan? Bakit kailangan nila ng accounting information? Syempre, to analyze the organization's performance and position and take appropriate measures to improve the company results. So, primarily, ang concern talaga ng management or ng mga managers is ma-check if the operations are okay, if the day-to-day operations of our business are effective and efficient. Also, you need to know for the sufficiency of cash to pay dividends to stockholders. So, you saw the word dividends and stockholders. So, basically, what we're talking about here is corporation. Those dividends, we return to those who invest in the business. For example, you. As a student, buy stocks of Jollibee. If Jollibee is there, they declare dividends of 10% every year. That 10% will be returned to you every year. There should be sufficient cash to provide to investors. Management of knowledge about available cash is really needed. Also, the pricing decisions. Basically, if you are part of the management, you are the one who decides how to price, what is the cost, what is better for our company. You need knowledge about accounting information. Next, employees. In Tagalog, mga empleyado. What accounting information do they need? Profit for the period? Does it mean that our business is earning? The business that I entered? Salaries paid to employees. Of course, if you want to enter the company, you want to pay the salary. So, what is it for? Primarily, job security. So, they need financial information because they want to know if the company is still earning business, right? Because if it's already falling, of course, there's a possibility that you will be fired from your job. Because you are an employee, you will be working in a company that you know is long-term. The one that you know is secure in the job that you have entered. Because we don't want to be transferred by the company, so we will also check whether or not the company we entered is earning or not. Maybe next month or next year it's already bankrupt. Also, they have to consider if they will stay or if they will look for better employment opportunities. So, for example, let's consider the salaries paid to employees. If your income is minimum wage, but the same job you're doing is offered to another company but the income is higher, of course, it's better to move to another company. Maybe you'll have a better opportunity or you'll grow there. So, we need accounting information. So, next are the owners. Okay, so the most common internal users, right? Or in Tagalog, sila yung may-ari ng business. So, ano bang information yung kailangan nila? Of course, profit or income. Again, kung kumikita ba? Syempre, kung ikaw ay isang businessman or ikaw ay may-ari ng isang business, syempre kailangan mong malaman kung kumikita ba yung business ko or yung kumpanya ko. Resources or assets of the business. So, if you say assets or resources, that's your ownership. So, you will also check it. Maybe what I invested here is already gone or gone. Where did it go? Liabilities of the business. So, those are the liabilities of the business. So, why? Why do owners need accounting information? For what? So, to help them decide if they will make additional investment. Maybe our business is lacking. For example, you built a milk tea shop, you only have one machine, and you have a lot of customers. Maybe you need to invest in another machine. So, through accounting information, you will know that you need another investment. Next is expanding the business. Of course, you need accounting information if you are going to expand your business. For example, you have a business in Makati and you are earning and you have a big business. You think you need to branch out because you are wasting the excess money you got from the business. You might want to branch out. For example, you need to consider if you have enough cash to support the expansion of your business. You really need accounting information. If you don't have enough cash, do you need to borrow or do you need to make additional investment? Through accounting information, you can help you decide what else you need for the business. So, we're done with the internal users. So, let's proceed with external users. So, who are these external users? So, when we say external users, these are individuals and organizations outside the company who want financial information about the company. The company. So, in Tagalog, sila daw yung mga tao or organization na outside ng business natin pero kailangan nila ng information ng business natin. So, in short, concerned sila or they want to know more about our business. Baka kasi pwede silang mag-invest. Or they need someone for our business so these users are not directly involved in managing and operating the

00:28

Speaker A

may check it out. Also, I will be posting standalone videos which will be shorter than this one for those who just want to study per topic. Please note that this channel is for educational purposes only and not as a substitute for proper educational program. By the way,

00:51

Speaker A

if you like this video, make sure to subscribe to this channel and of course, hit the notification bell to get more updates from this vlog. So prepare your coffee and notes. Let's begin! So our topic for today includes the

01:14

Speaker A

users of accounting, branches of accounting, the accountancy profession, and also comparison of terminologies. So these are the questions we would like to address in this vlog. Who are the users of accounting information? What are the different branches of accounting? What is the law that regulates the accountancy profession? And

01:38

Speaker A

also, what are the common accounting terminologies? So if you want to know more about these topics, so stay with me as we discuss this one by one.

01:49

Speaker A

Now I'm shaking, drinking all this coffee. So let's start with the users of accounting information. As mentioned in our previous video, accounting is understood as the language of business. So because of what process? Again, communicating process. So the question is,

02:12

Speaker A

who are the users of accounting information? Or who uses the accounting data and information? So in order for us to understand this, we have to categorize first how we will divide them. So first, it can be by internal users and external users and also

02:36

Speaker A

primary users and other users. So let's start with internal users and external users. So when we say internal users, these are the individuals inside the company who plan, organize, and run the business. So meaning to say, these are the users who are

02:59

Speaker A

directly involved in managing and operating the business. So this includes managers, production supervisors, finance directors, company officers, and also, of course, the owners. So the accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts, and also financial statements. So this

03:27

Speaker A

information will support whatever decision of the internal users. Let's find out who they are. So let's answer this recitation first. Which of the following is not an internal users? A. Regulatory agencies B. Marketing managers C. Production supervisors D.

03:54

Speaker A

Finance directors E. Company officers and owners So the correct answer is letter A, okay? Regulatory agencies. Because regulatory agencies are external users. Letter B to E are the ones we mentioned earlier. So later on, we will discuss who are the part

04:18

Speaker A

of regulatory agencies. So let's start with the management or the managers. So what is the information that they need? Why do they need accounting information? So this is it, the income earnings for the period or the sales.

04:40

Speaker A

Available cash, if our business still has money. and also yung production cost. Yan naman yung mga gastos or yung expenses. So para saan? Bakit kailangan nila ng accounting information? Syempre, to analyze the organization's performance and position and take appropriate measures to improve the company

05:04

Speaker A

results. So primarily, ang concern talaga ng management or ng mga managers is ma-check if the operations are okay, if the day-to-day operations of our business are effective and efficient. Also, you need to know for the sufficiency of cash to pay dividends to stockholders. So, you saw the

05:27

Speaker A

word dividends and stockholders. So, basically, what we're talking about here is corporation. Those dividends, we return to those who invest in the business.

05:38

Speaker A

For example, you. As a student, buy stocks of Jollibee. If Jollibee is there, they declare dividends of 10% every year. That 10% will be returned to you every year.

05:56

Speaker A

There should be sufficient cash to provide to investors. Management of knowledge about available cash is really needed. Also, the pricing decisions. Basically, if you are part of the management, you are the one who decides how to price, what is

06:20

Speaker A

the cost, what is better for our company. You need knowledge about accounting information. Next, employees. In Tagalog, mga empleyado. What accounting information do they need? Profit for the period? Does it mean that our business is earning? The business that I entered? Salaries paid to employees.

06:43

Speaker A

Of course, if you want to enter the company, you want to pay the salary. So, what is it for? Primarily, job security. So, they need financial information because they want to know if the company is still earning. business, right?

07:01

Speaker A

Because if it's already falling, of course, there's a possibility that you will be fired from your job. Because you are an employee, you will be working in a company that you know is long-term. The one that you know is secure in the job

07:17

Speaker A

that you have entered. because we don't want to be transferred by the company so we will also check whether or not the company we entered is earning or not maybe next month or next year it's already bankrupt also they have to consider if

07:34

Speaker A

they will stay or if they will look for better employment opportunities so for example let's consider the salaries paid to employees If your income is minimum wage, but the same job you're doing is offered to another company but the income is higher, of course, it's better to move to

07:57

Speaker A

another company. Maybe you'll have a better opportunity or you'll grow there. So, we need accounting information. So next are the owners. Okay, so the most common internal users, right? or in Tagalog, sila yung may-ari ng business. So, ano bang information yung kailangan nila? Of course, profit

08:21

Speaker A

or income. Again, kung kumikita ba? Syempre, kung ikaw ay isang businessman or ikaw ay may-ari ng isang business, syempre kailangan mong malaman kung kumikita ba yung business ko or yung kumpanya ko. Resources or assets of the business.

08:39

Speaker A

So, if you say assets or resources, that's your ownership. So, you will also check it. Maybe what I invested here is already gone or gone. Where did it go? Liabilities of the business. So, those are the liabilities of the business. So, why? Why do owners need

09:03

Speaker A

accounting information? For what? So, to help them decide, if they will make additional investment. Maybe our business is lacking. For example, you built a milk tea shop, you only have one machine, and you have a lot of customers. Maybe you need to invest in another machine. So, through

09:26

Speaker A

accounting information, you will know that you need another investment. Next is expanding the business. Of course, you need accounting information if you are going to expand your business. For example, you have a business in Makati and you are earning

09:43

Speaker A

and you have a big business. You think you need to branch out because you are wasting the excess money you got from the business. You might want to branch out. For example, you need to consider if you have

10:01

Speaker A

enough cash to support the expansion of your business. You really need accounting information. If you don't have enough cash, do you need to borrow or do you need to make additional investment? Through accounting information, you can help you decide what else you need for the business.

10:24

Speaker A

So we're done with the internal users. So let's proceed with external users. So who are these external users? So when we say external users, these are individuals and organizations outside the company who want financial information about the company. The company. So in Tagalog, sila daw yung mga tao

10:48

Speaker A

or organization na outside ng business natin pero kailangan nila ng information ng business natin. So in short, concerned sila or they want to know more about our business. Baka kasi pwede silang mag-invest. or they need someone for our

11:05

Speaker A

business so these users are not directly involved in managing and operating the business so if we compare it to internal users internal users directly involved external users not directly involved so the two most common type of external users are who are they?

11:28

Speaker A

so I'll give you time to think so the correct answer are potential investors and creditors. So, let's discuss them. So, potential investors They use accounting information to make decisions to buy shares of a company or to buy ownership.

11:52

Speaker A

When we say potential investors, it means they have a chance to invest in a business. Of course, they need accounting information whether or not they will buy shares or ownership of our business. So, through accounting information, they can help you decide. Because if your business is falling, do you think that an

12:15

Speaker A

individual will invest in you? Of course, that might be a double-minded decision. But if your business is earning and you're making a lot of money, it means your business is developing and growing. So it means that more potential investors can invest in your business. So creditors. So

12:39

Speaker A

creditors are the suppliers and bankers. Suppliers, for example, you are a businessman who sells in Lazada. So the clothes that you sell there, of course, you get something from it. For example, you get it from TaiTai, UkayUkay. So they are your suppliers. Bankers, most likely from

13:02

Speaker A

the word itself, the banks. So these creditors, they use accounting information to evaluate the risks of granting credit or lending money. So these creditors, their concern is whether or not the risk that they will lend you are they worth

13:19

Speaker A

it? because will you be able to pay for them or not? so for the suppliers of course because if you get from them your inventory or what you sell it's possible that you just borrowed it, you can't pay cash. They can be creditors

13:36

Speaker A

because you will have accounts payable to them. So bankers, it's the same. Or lending institutions, you will be borrowed. For example, you need money for expansion. So you can get them close. So they are concerned, will you be able to pay us? So

13:52

Speaker A

in the accounting information, they will know, is this business a lot of liability? Does he pay? Does he settle his debts or obligations? Because if not, I might not be able to supply them or I might not be able to lend them money. So again, they use accounting information

14:15

Speaker A

to evaluate the risk of lending or lending money. There are also other external users. Who are they? We have tax authorities.

14:27

Speaker A

They use accounting information in determining the credibility of the tax returns filed on behalf of a company. Meaning to say, who are the tax authorities specifically? In the Philippines, we have what we call Bureau of Internal Revenue or BIR. They are the ones concerned with

14:50

Speaker A

the collection of taxes. They are concerned with the business whether or not you file the right taxes because if not, Of course, there might be tax evasion because you know that our government is able to survive because of taxes. The majority of sources of income of

15:13

Speaker A

our government are from taxes. If this business is not paying its due, of course, the tax authorities must know. So again, BAR uses accounting information to check whether or not a business pays the right amount of money. Next are the customers

15:36

Speaker A

or in Tagalog, the "mamimili" They are concerned with the accounting information in assessing the company's ability in continuously supplying the goods they need at the right price and the right quality. Meaning to say, they are concerned that as customers, will I be able to

15:59

Speaker A

supply this business? For example, let's make it easier. For example, you as a student, you are studying, you will buy milk tea. So the milk tea you are buying will still be running for 30 minutes because there is no

16:15

Speaker A

one near you. So you are the customer. So if you know that the business or the milk tea shop you are buying will close, do you think you will still go there? Of course not. So it's the same here for accounting purposes. The

16:30

Speaker A

customers need to know through accounting information, will I still be able to supply this?

16:35

Speaker A

So for example, as customer, So you are a customer of Company A. Meaning, for example, what we are talking about here is camera. You are a vlogger, for example.

16:46

Speaker A

So as a vlogger, you are buying a camera. Since you have a lot of followers, you are selling your other camera to your subscribers. So for example, you are You promised to subscriber A, B, and C that you will give them a camera,

17:02

Speaker A

that you will sell them a camera next month. But the one you are buying is already bankrupt or closed. Of course, your name will be ruined. You will not be able to supply them with the goods or products you promised. So, as customers,

17:18

Speaker A

we should know if we are getting what we are getting. Will we be able to supply it? So, what else? We also have suppliers. I just put it again to give emphasis. They need to assess the creditworthiness of

17:35

Speaker A

their customers before offering goods and services on credit. Of course, if you are a supplier, you need to know if the supplier is paying for the service. For example, you are a supplier of vlogging cam, then I contacted TV, Ivana Alawi, Alex Gonzaga, They will buy a vlog income from you,

17:59

Speaker A

so do you think you will give them a chance to buy from you on credit? Meaning, they will borrow money from you. So of course, through accounting information, you will know if these people are paying when they buy or if they are paying

18:15

Speaker A

on time. Also, we have regulatory agencies. Aside from BIR, we also have other regulatory authorities or agencies that are concerned with accounting information. So, what is accounting information for? Why do they need it?

18:33

Speaker A

to ensure that the company's disclosure of accounting information is in accordance with the rules and regulations set in order to protect the interests of the stockholders who rely on such information in forming their decisions. So again, the regulatory agencies are

18:50

Speaker A

concerned whether or not the business complies with the accounting information. Whether or not the business complies with the rules and regulations set by the government. or that the law has passed. Because if not, it might be a violation. Or

19:07

Speaker A

maybe later, the stakeholders are using it wrong because the business was presented wrong. So let's give an example, for example, the Department of Labor and Employment or what we call DOLE, their concern is the benefits of employees.

19:25

Speaker A

They are concerned with the accounting information because you might not be paying the right salary to your employees. Our law has a minimum wage. Maybe you as a businessman, your salary is below minimum wage.

19:42

Speaker A

It means you are not complying with the rules and regulations of our law. So proceed to the recitation, so identification. So let's apply whether or not you learned or can you identify who are these internal users and external users. So first question, they set goals for

20:05

Speaker A

the company, they use financial data as a guide for future management action. Who are they? So I'll give you time to think. So the correct answer is Managers. What made you decide that they are managers? Because it is already included in the clue. Future

20:28

Speaker A

management actions. They are the ones who decide for day-to-day operations of a business. The correct answer is managers. Next. They offer goods or merchandise on cash basis or on credit terms. Who are they?

20:46

Speaker A

They offer goods or merchandise on cash, meaning through cash payment or on credit terms or through debt. So the correct answer is suppliers. Because it says they offer.

21:03

Speaker A

So it means they are supplying. Not bankers because bankers lend money but they don't supply goods or merchandise. They just lend money on credit terms. So the supplier offers goods or merchandise so it depends on your agreement if the payment is on cash payment or

21:27

Speaker A

on credit. So if it's on credit, the supplier is concerned if you will be able to pay me if I borrow from you and I supplied you with these goods. So next, They are interested in financial information of the business

21:44

Speaker A

to determine if they have a future in the company. Who are they? So, they are concerned if they have a future in the business, not in the lab life. So, the correct answer is employees. So, again, employees are concerned whether

22:02

Speaker A

or not there is job security in my company. So, next, let's go to the essay. So the question is, what is BIR? Why are they interested with financial information of a company? So think about it, we discussed this earlier. BIR is Bureau

22:26

Speaker A

of Internal Revenue. They are a government agency that has a mandate to collect and assess taxes. They are concerned with financial information whether you are complying or paying the right amount of taxes. Again, our government is one of the major sources

22:49

Speaker A

of income is taxes. So you really need to comply because if you don't comply, you might get tax evasion or the fraudulent scheme that you use that doesn't comply or doesn't declare the right income or doesn't pay the right income. So next, aside from BIR, what are other government

23:12

Speaker A

agencies are interested with financial information of a business and why? Like earlier, there are also regulatory agencies or authorities that are concerned with accounting information. Let's take Dole as an example. They are concerned about the rights or benefits of employees because maybe later your business

23:35

Speaker A

will not declare a proper salary. Aside from Dole, we also have what we call Department of Trade and Industry. DTI or Department of Trade and Industry, you will register with them if you are a sole proprietorship business. What does it mean by sole proprietorship? Meaning

23:58

Speaker A

to say, You created a business and you're the sole proprietor. To operate, you need to register with DPI. If you're a partnership or corporation, you need to register with Securities and Exchange Commission. Again, they're concerned with accounting information because they

24:22

Speaker A

need to know if you're compliant with the rules and regulations that they've set. for that kind of business. So what else aside from that? We also have SSS, GSIS, PhilHealth, Pag-ibig. The agencies that require mandatory contributions. So for example, you are a business. The

24:45

Speaker A

deductions you declare to your employees, you should also remit. You should pay for it. Okay? Because if not, you might be fooling your employee later. Because you are reducing his salary You will be falling into SSS, GSIS, Philhealth or Pag-ibig and you are not remitting. So

25:09

Speaker A

we should also be compliant. So we're done with the internal and external users. So I hope that we understand the internal and external users. So let's proceed with primary users and other users. So let's go to the primary first. When we say primary users, From the word itself,

25:32

Speaker A

primary or pangonahin. They are the parties whom general purpose financial reports are primarily directed. So the accounting information we do is directly for them. So these primary users are the existing and potential investors and lenders and other creditors.

25:56

Speaker A

So let's just emphasize the word "existing" and "potential investors" is that just one? The answer is no. Because when we say "existing" it means it already exists. So what it refers to is the owners. The potential investors are the

26:14

Speaker A

ones who have a chance to invest in your business or have a chance to be owners as well. So for now, if it's just potential, they are not yet owners. So we also have lenders or they are the ones who borrow or borrow

26:31

Speaker A

and other creditors. So let's list them one by one. So, existing and potential investors are concerned with the risk inherent in and return provided by their investments.

26:42

Speaker A

So, of course, if you are going to invest in a business, your concern is whether the money you risked will return to you, will it earn profit?

26:54

Speaker A

Does that mean that your money will be returned? So, again, through accounting information, You will know if a business is growing or developing. If it's already falling, you may have to think twice if you will invest in that business. Next. Lenders and other creditors. They are

27:17

Speaker A

interested in information which enables them to determine whether their loans, interest thereon, and other amounts owing to them will be paid when due.

27:28

Speaker A

They are concerned whether or not their loans will be paid to them. Aside from that, their concern is not only the debt they owe you. Even the interest that is included in the debt they owe you, they should be able to pay. It says, "Loans, interest thereon, and other amounts owing

27:51

Speaker A

to them will be paid when due." So, can this business pay this debt with interest? If there is? So, those are their concerns. Next is the other users. Who are they referring to? They are the parties that may

28:08

Speaker A

find general purpose financial reports useful but the reports are not directed to them primarily. So, it's the opposite of primary users. If the primary users are directly for them, the other users are not directly. but they need accounting information or financial reports because it is useful to them. So

28:32

Speaker A

who are they? Again, the employees are there. The customers are also there. Government and their agencies. And also the public. So it means that these four, they need accounting information because it is useful to them. So let's discuss them one by one. So let's start with Employees. So again,

28:55

Speaker A

employees are interested in information about stability and profitability of the entity or the business. So again, their primary concern is job security. Because this business that I entered, is it stable? Is it profitable? Does it mean that I will stay here for

29:18

Speaker A

long? So there. Also, customers. Right? Customers, their concern is the continuance of the entity especially when they have a long-term involvement with or dependent on the entity. So again, the focus of the customers is the continuance of a business. Because they might have a

29:42

Speaker A

long-term involvement in that company and then the business will close. So you might need to find someone to supply you. Okay? So next, is the government and their agencies. So again, this is also like the one before, the tax authorities and regulatory authorities. So they are interested in

30:06

Speaker A

the allocation of resources and therefore the activities of the entity. So our keyword here is allocation of resources because There should be a portion for taxes that should be paid. That's their concern.

30:23

Speaker A

Also, the public. Financial statements may assist the public by providing information about the trend and the range of its activities. Meaning to say, the general public. For example, you want to start a business and check the financial statements or financial information in

30:46

Speaker A

the food industry and you see that the chicken is booming so maybe it can help me if I start a business with chicken so again they need accounting information but not primarily directed to them. So let's go back

31:04

Speaker A

for example, you graduated now, you went to Jollibee Corporation and applied. You will not go there Then you will immediately tell HR that you are being interviewed. Ask them to look at your financial statement to see if your

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Speaker A

business is stable or profitable. Again, don't do that because you are not a primary user, you are just an other user. Meaning, the accounting information is useful to you but not directly for you. So don't just go to a company and ask for

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Speaker A

financial statements. For example, you are the customer, right? So you buy milk tea in the shop near you. You will not go there and say, "One Okinawa milk tea." "Please look at your financial statements if I can still buy here tomorrow." So it's not like that, right? They are

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Speaker A

just other users. Remember, primary users are directly for them. Other users are not directly for them. Again, recap, for internal and external users, you should know if the involved is within the entity or within and outside the entity. For primary and other users, you should know

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Speaker A

who is directly and who is not directly. So we're done with the discussion of the users of accounting. So we know the internal and external users and also the primary and other users. So now let's proceed to the branches of accounting. So what are the branches of accounting? So we have

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Speaker A

financial accounting. management or managerial accounting, government accounting, auditing, tax accounting, cost accounting, accounting education, and also accounting research.

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Speaker A

So let's discuss them one by one. So let's start with financial accounting. So financial accounting is the broadest branch and is focused on the needs of external users.

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Speaker A

So, when we say financial accounting, they focus on the needs of external users. So, again, you should know what external users means. Also, financial accounting is primarily concerned with the recognition, measurement, and communication of economic activities. So this information is communicated in

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Speaker A

a complete set of financial statements. So as we said in our previous discussion, that our output in accounting is financial statements.

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Speaker A

So we are talking about financial accounting there. So it is assumed that under this branch, users have one common information need. In financial accounting, it confirms with accounting standards developed by standard setting bodies. When we say financial accounting, we have standards that we

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Speaker A

follow. We should be in compliance with the standards that we use in the Philippines or the framework that we use here.

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Speaker A

Again, financial statements, let's review it again. It contains a set of financial statements. Because it contains a balance sheet or statement of financial position. What accounts do you see there? Asset, liabilities, and equity. In income statement, there is

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Speaker A

profit or loss. or what we call in the income statement is the statement of profit or loss. So that's what it's called. We also have the statement of changes in equity. So that's where we can see the changes, the increase, the decrease in our

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Speaker A

equity or capital account. Which is what changes? The additional investments, drawing, income, and expense. Okay. So, what else? The statement of cash flows. So, there you can see the inflow and outflow of our cash or cash of our business. So take note guys, although financial accounting generally

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Speaker A

meets the needs of external users, the internal users also use this information for decision making needs. So it's not just limited to external users, for internal and external users as well. That's why its focus is on external users. So next. We have managerial accounting

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Speaker A

or management accounting. What is that, sir? Managerial accounting emphasizes the preparation and analysis of accounting information within the organization.

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Speaker A

This is the opposite of financial accounting. If your focus is on external users, your focus is on the users within the organization. So the objective of managerial accounting is to provide timely and relevant information for those internal users of

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Speaker A

accounting information. So that is the objective of managerial accounting to provide timely and relevant information that will be used by internal users or within the organization. So what are the examples of that? For example, the pricing, right? So in managerial accounting, that will

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Speaker A

be included. The setting of the price of a business. What else? The plans to open branches. or it can also be our product line whether or not we need to continue or discontinue a product line so for example your company is Proctor and Gamble so Proctor and

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Speaker A

Gamble has a lot of product lines so it has soaps, it has shampoos and all so different through managerial accounting we can categorize or list down Is this product A earning? Is this product B earning?

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Speaker A

Or is this product C earning? Or maybe we need to discontinue this product B because we are already losing. Or for example, we need to strengthen product A because it has a lot of sales and we might need to produce

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Speaker A

a lot. So those are the decisions that will help if we use managerial accounting. In managerial accounting, it involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas. You can use financial analysis for example,

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Speaker A

in expenses. You have list down your expenses, you have utilities expense, you have rent expense, maintenance expense, miscellaneous expense, if you can see the percentage, you can see it here, for example, 50% of your expenses are from rent expense. So you might have something to

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Speaker A

do because your expenses are huge in rent. Maybe you have an excess space that you can rent out. Or maybe because your rent expense is huge, you might not be able to maximize all of that. Maybe you can move if

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Speaker A

it's just a warehouse or office. So that budgeting is normally from your cost allocation. For forecasting, through accounting, we can forecast. For example, in forecasting, our rent expense this year increased by 10%. By the next year, it increased by 10%. So we can assume, safe

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Speaker A

to assume, for for the next next year, it might increase by 10% again. So in cost analysis, we check the costing. Did we set the standard cost? Did it increase in the actual cost that we incurred? So, the evaluation of business

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Speaker A

decisions is the same. For operations, for example, in higher accounting, you study the make or buy. For example, you sell food, right? So, the food you offer, for example, is pizza. In make or buy, is it better to make dough? or is it better to buy dough? Where

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Speaker A

is it cheaper or where is it more beneficial to your business? So you will study that in Hire Accounting. So let's proceed. So next we have Government Accounting. So it says, Government Accounting is the process of recording, analyzing, classifying, summarizing, communicating, and interpreting financial information about

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Speaker A

the government, In aggregate and in detail, reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities. So when we say government accounting, what really concerns us is the transactions or the recording of the inflow

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Speaker A

and outflow of the funds of the government. That's why it's called government accounting. So we account for the spending or the income that comes out or enters the government. So next is auditing. So when we say auditing, there are two types of auditing which

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Speaker A

is external and internal auditing. So external auditing, it refers to the examination of financial statements by an independent CPA with the purpose of expressing an opinion as to the fairness of presentation and compliance with the generally accepted accounting principles. Our focus

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Speaker A

in external auditing is expressing opinion. Whether or not this company complies with the standards that we use.

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Speaker A

That is the focus of external auditing. Additional information in external auditing, Sometimes, we don't cover the whole accounting record. Sometimes, we just use a sampling. That's what represents the totality of an account or whatever we are auditing. Next is internal auditing. What does

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Speaker A

it have? Internal auditing deals with determining the operational efficiency of the company regarding the protection of the company's assets, accuracy and reliability of the accounting data, and adherence to certain management policies. So internal auditing, our focus is operational

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Speaker A

efficiency of the company. Whether or not if what we do is right or if we adhere to the policies that are set in our business. Also, internal auditing focuses on the evaluation of the company's internal control structure. So here, we test the

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Speaker A

segregation of duties, If you say segregation of duties, is there an overlap or is there a collusion between employees or among employees? So, that's what we're checking. Also, the policies and procedures. Also, the degrees of authorization. For example, in

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Speaker A

expenses, if we have an expense worth 10,000, is it okay for the manager to decide or do we need to So, that's what we're checking here. And other controls implemented by the management. So, next is tax accounting. So, tax accounting helps clients follow rules

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Speaker A

set by tax authorities. So, our focus in tax accounting is compliance with tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes that a business is liable to. Also, tax advisory services such as how we can

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Speaker A

minimize our taxes legally. So again, it should be legally. So we can reduce our taxes legally. So it should be in compliance with our law because we have what we call Tax Avoidance and Tax Evasion. Tax avoidance is legal. It means we are doing our best

44:32

Speaker A

to reduce the taxes of a business or company. So if you say tax evasion, it's fraudulent. So meaning you are not declaring or you are declaring but you are declaring wrong. For example, you earned 100,000. It's either you didn't declare your 100,000 as income,

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Speaker A

that's why you don't have tax, or you declared your 100,000 as 20,000. So that's tax evasion. So again, tax avoidance is legal. Tax evasion is illegal. So again, it involves determination of income tax and other taxes, tax advisory

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Speaker A

services, minimization of taxes legally, evaluation of the consequences of decisions and other tax-related matters. Next, we have cost accounting. This cost accounting is sometimes considered as a subset of management accounting. This refers to the recording, presentation, and analysis of manufacturing costs. In

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Speaker A

cost accounting, we account the costs of our products or the products we use in our business. Our cost accountants analyze actual and standard costs to help managers determine future courses of action regarding the company's operation. Through cost accounting, we can help them

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Speaker A

to set the right prices. how we will price our product. So for example, you are selling clothes and you are making something new or you are adding design or aesthetic. So what is your cost there? Of course, the materials that you used. What else? Your labor is also possible. it

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Speaker A

will also be directly costed. So, is that your cost already? So, for example, you bought that shirt for 50, then you sell it for 100. So your labor in account for example 20 pesos per cloth. So 70 is your cost already? So

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Speaker A

not yet because you may not be able to account your indirect cost. Like for example you used electricity because you used the sewing machine. So you should also account that. So our costing should be correct so that we can set the right prices.

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Speaker A

So next is accounting education. So this branch of accounting deals with developing future accountants by creating relevant accounting curriculum. So kayo as future accountants, tinutulungan ko kayo na magkaroon ng knowledge about this profession. So accounting educators contribute to the development of the

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Speaker A

profession through their effective teaching skills. publications of their research and influencing students to pursue careers in accounting. So that is the focus of accounting education to help students or interested persons to have knowledge in the profession that we have which is accounting. Lastly, we

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Speaker A

have accounting research. Accounting research focuses on the search for new knowledge on the effects of economic events on the process of summarizing, analyzing, verifying, and reporting standardized financial information and on effects of reported information on economic events. From the word itself, research, it means we

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Speaker A

are doing research or we are improving what we already have. Again, of course, we said accounting is a science but it is not an exact science. We have principles and standards that we use but these standards, it changes over time.

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Speaker A

Because the standards before are not applicable now or maybe we need to improve. For example, the the computer, we have an accounting system so we should also have an accounting research how we can apply our profession through the use of these technologies so the accounting research helps standard

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Speaker A

setting bodies around the world to develop new standards that will address recent issues or trend in global business so that is our example new digital age or the improvement of our technology so our profession should also cope up so now let's proceed with the accountancy profession

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Speaker A

so now let's talk about the accountancy profession or the profession that you will enter in case you will enter an accountancy so at present We have Republic Act No. 9298 which is the law that regulates the practice of accountancy in the Philippines. So

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Speaker A

don't forget that. You should know the law. What governs the accountancy profession which is the 9298. This is also known as the Philippine Accountancy Act of 2004. again, this is the law that regulates the practice of accountancy in the Philippines so here

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Speaker A

in the Philippines, in order to qualify to practice the accountancy profession a person must finish what degree? so you must have graduated a bachelor of science in accountancy and also you must have passed Examination given by the BOA or what we call CPA

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Speaker A

Board Exam. So, let's claim that. If you will pursue accountancy, let's claim that you will pass this board exam. So again, who will be giving the exam? The BOA or Board of Accountancy. So who is the Board of Accountancy?

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Speaker A

So this is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines. So they are the ones who are in charge or they are the ones who were granted the grant of the law

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Speaker A

to promulgate the rules and regulations regarding this profession. So the Board of Accountancy is responsible for preparing and grading the CPA Examination. So you should know when is the Board Exam. So first question, how many times is the Board Exam offered in a year? The answer is 2.

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Speaker A

So CPA Licensure Examination is offered twice a year. The next question is when? So it is offered in May and October. in authorized testing centers around the country. Remember, May and October.

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Speaker A

This is not absolutely true. Like now, because of this pandemic, they stopped giving CPA examinations. CPAs generally practice their profession in these three main areas. What are the areas of accountancy or accounting? Let's discuss these three areas of practicing our profession. Public accounting.

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Speaker A

The field of public accounting is composed of individual practitioners, small accounting firms, and large multinational organizations that render independent and expert financial services to the public. That's why it's called public accounting.

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Speaker A

Of course, we give financial information to the public. Public accountants usually offer three kinds of services. namely, Auditing, Taxation, and Management Advisory Services. For example, in Public Accounting, we have what we call as Big Four. After you graduate and pass the Board Exam,

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Speaker A

you can practice your profession in Public Accounting. In the Philippines, we have what we call as Big Four Auditing Firm. So, number one is SGV and Company. They are more known as Ernst and Young in other countries. But in the Philippines, it's SGV. Number two

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Speaker A

is Navarro Amper and Company. So, that's the partner of Deloitte. Third is East Lalipana and Company. Which is its partner is PWC. And of course, RG Manabat and Company or KPMG. So, if you're after you graduate, after you pass the board exam, you can get experience in this

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Speaker A

big 4 auditing firm because for sure, you will learn a lot and you will really grow in the profession of accountancy. Like in my case, I worked in Sisip Gores Velayo and Company or SGV. So I encourage you

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Speaker A

to enter in public accounting because you will learn a lot here. So next is taxation. So in taxation, we know that the services that it provides is the preparation of income tax return and determining the tax consequences of certain proposed business and divorce. So our focus

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Speaker A

here is tax. So of course, to provide this service effectively and efficiently, you should be highly familiar with the tax laws and regulations and you should also be updated on the changes in tax law and court cases concerning the interpretation of taxation law. So like

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Speaker A

now, we updated the tax laws. So, there are amendments or changes in our law regarding tax. So, what is the name of that law? Anyone?

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Speaker A

So, have you heard of the Train Law? Train law is the Tax Reform for Acceleration and Inclusion or otherwise known as RA 10963. This train law will have amendments or changes in the tax schedules because the rates that we have now are not

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Speaker A

up to date. For example, there were fines before that were very small compared to now. If you have a new bag, the fine is just like this.

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Speaker A

So it's not updated. So now we need to update. The rates are also the same. Aside from that, we also have new taxes. For example, the sweetened beverages, right?

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Speaker A

The price of soft drinks has increased because our tax has increased now. Even the non-essential services. we also have additional taxes. So the goal of the train law is to simplify and update the tax we already have before. So next is

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Speaker A

the management advisory service. So from the word itself, right? advisory so meaning nagbibigay tayo ng advice sa management para makatulong sa operations nila para maging effective and efficient yung operations nila so dito wala siyang precise coverage so maraming pumapasok na services dito like advice

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Speaker A

sa computer system sa quality control sa mga installation and modification ng accounting system budgeting design or advices on mergers or consolidations. Anything that can improve or can help in business operations. So, that will be included here. So now let's discuss Private Accounting. It says, "Many certified public accountants

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Speaker A

are employed in business entities in various capacity as accounting staff, chief accountant, internal auditor, and controller." Usually, when we say private accounting, meaning a CPA, they are working in a private company.

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Speaker A

We are giving them an accounting service For example, you can be an accounting staff, internal auditor, or controller. In private accounting, it includes maintaining the records, producing the financial reports, and preparing budgets and controlling and allocation of the entity's resources. So additional

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Speaker A

info lang, the highest accounting officer in an entity is known as the controller. So the major objective of a private accountant is to assist the management in planning and controlling the entity's operation. Again, pag sinabi mo kasing, so again pag sinabi mong private accountant, tumutulong siya

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Speaker A

para mag-improve our operations. So, private accounting includes maintaining the records, producing the financial reports, preparing the budgets, and controlling and allocating the resources that an entity or business has. Lastly, we have government accounting. From the word itself, government. So, our concern here is government. So it

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Speaker A

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. So it's like the definition of accounting but this one is specific. It says here, receipt and disposition of

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Speaker A

government funds and property. So, it's not limited to funds only because the government also has properties. So, we account for all of that. So, the focus of government accounting is the custody and administration of public funds. So, meaning in Tagalog,

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Speaker A

we account for, we know how it entered and where the money of the government went. So the CPAs employed in government accounting usually they are in the BIR or Bureau of Internal Revenue, Commission on Audit or COA Department of Budget and Management or DBM,

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Speaker A

Securities and Exchange Commission, Banko Sentral ng Pilipinas. So, those are the examples. Again, as we said, if you are a CPA, you can get a lot of benefits. So, you can get benefits in public, like auditing firms, private companies,

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Speaker A

companies because those private companies require CPA or accountant. Of course, all businesses need to account for their finances. So, CPA is really needed. So, so you won't get confused, government accounting is related to government, private is related to

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Speaker A

private entities, public is providing services for public. So now let's discuss the comparison of the terminologies that we use in accounting.

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Speaker A

So that you at least have an idea of the difference between these two words. Or are they the same? So first question, accounting and auditing are just the same. So recitation, true or false? Absolutely true or false? The answer is false. Let's make a

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Speaker A

comparison. In broad sense, accounting embraces auditing. As we said earlier, auditing is one of the areas of accounting specialization. But in a limited sense, accounting ceases when the financial statements are already prepared. Accounting is constructive in nature. On the other hand, the auditing is

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Speaker A

analytical. The work of the auditor begins when the work of the accountant ends. What is the comparison in Tagalog? It means that the accounting is completed when the financial statements are done.

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Speaker A

The auditor audits when the accountant has completed the financial statements. In other words, in simple terms, accounting is like taking an exam. So accounting, you're doing your answer. So after you do your answer, the auditor will check your answer. If you did the right thing. So it's the

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Speaker A

same here, the analogy is the same. It says that the accounting is finished when you're done with the exam. The auditor or checker The work just started when you finished the exam. So again, you can't check if you haven't answered the exam. So if the question is

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Speaker A

which comes first, your answer should be accounting. Because you won't be checking if you haven't done the exam, if you haven't answered. So it's the same here, just use logic. Next question, accounting and bookkeeping are just the same. True or false?

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Speaker A

Is it absolutely true or false? The correct answer is false. Why is it false? Let's do a comparison again. Bookkeeping is procedural. While accounting is conceptual. When we say bookkeeping, it is largely concerned with development and maintenance of accounting records. It's limited.

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Speaker A

Compared to accounting, it's broader. So, it means that bookkeeping is repeated. It's procedural, so you do it repeatedly.

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Speaker A

Accounting is conceptual, meaning you think and analyze how to do it. Bookkeeping is concerned with how. How did you do it? Accounting is concerned with why you did it. Do you see the difference? Recitation again. Accounting and accountancy are just the same. Is it absolutely true

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Speaker A

or false? So the correct answer is false. Okay? So broadly speaking, when we say accounting and accountancy, they both refer to the entire field of accounting theory and practice. So they are the same.

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Speaker A

In other words, they are synonymous. Those two terms. But technically speaking, when we say accountancy, it refers to the profession of accounting practice. While when we say accounting, it is used in reference only to a particular field of accountancy.

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Speaker A

Like what we learned earlier, the areas like public accounting, private accounting, and government accounting. So kung ang profesyon ang pinag-uusapan, accountancy dapat yung term na ginagamit. Kapag naman particular field, gamitin mo accounting. So last question. Financial accounting and managerial accounting

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Speaker A

are just the same. Is it absolutely true or false? The correct answer is false. So, what is the difference again, sir? Let's make a comparison. When you say financial accounting, it focuses on general purpose reports known as financial statements that is intended for

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Speaker A

internal and external users. Financial accounting focuses on external users but it is not limited to external users because even internal users use financial accounting. When you say managerial accounting, this is the accumulation and preparation of financial reports for internal users only. That's the

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Speaker A

difference between the two. Financial accounting is for internal and external users but the focus is on external. Managerial accounting is for internal users only. How will the efficiency and effectiveness of the operations improve? In other words, managerial accounting is the area of

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Speaker A

accounting that emphasizes developing accounting information for use within an entity. So that's it for today. So that's the end of my presentation which is the part 2 of Introduction to Accounting. So if you haven't watched the part 1 or

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Speaker A

the first part, again, it's linked in the description box below. Go back because the definition of accounting is also important there. So I hope that you learned for this lesson and I hope that you can apply this to your class. So if you

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Speaker A

like this video, make sure to like this tutorial. And also, you can share it with your friends. So I will also post more accounting tutorials so stay tuned to my YouTube channel. So if you have video suggestions or you want to spread positive

66:55

Speaker A

vibes, feel free to comment down below. Also, these are my social media accounts. This is my YouTube, SirNJTV. I also have a Facebook page, SirNJTV. Twitter account, SirNJTV.

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Speaker A

And of course, my Instagram account, SirNJTV. So again, my discussion today is a bit long. I hope you followed because I discussed it in detail. So I will also make separate videos for each topic, the shorter ones. So

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Speaker A

if that's all you want to learn, it's easier for you to come back. So again, that's it for today. Let's go, let's have coffee.

Topics: accounting introduction users of accounting internal users external users accounting branches accountancy profession financial information business decisions accounting terminology educational video


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