Thursday, August 30, 2012

How Does Public Differ From Private and Government Accounting

In Philippines there is limitation of the practice of public accountancy. Single practitioners and partnerships for the practice of public accountancy shall be registered certified public accountants. A certificate of accreditation shall be issued to certified public accountants in public practice only upon showing in accordance with rules and regulations promulgated by the Board of Accountancy and approved by the Professional Regulation Commission that such registrant has acquired a minimum of three years of meaningful experience in any of the areas of public practice including taxation.

File:WeirdTalesv36n1pg005 Accountancy.png
Image via Wikimedia Commons uploaded by original: Weird Tales, Inc., derivative work: AdamBMorgan

Certified Public Accountants (CPA), firms and partnership of certified public accountants, including partners and staff members are required to register with the Board of Accountancy (BA) and Professional Regulation Commission (PRC) for the practice of public accountancy. Upon favorable recommendation of the BA, PRC shall issue the Certificate of Registration to practice public accountancy which shall be valid for three years and renewable every three years upon payment of required fees. Republic Act No. 9298 is the law regulating the practice of accountancy in the Philippines. This law is known as the Philippine Accountancy Act of 2004. 

Certified Public Accountants generally practice their profession in three main areas namely:

  • Public accounting
  • Private Accounting
  • and Government Accounting
Public accounting is the practice of the accountancy profession. Individual practitioners, small accounting firms and large multinational organizations render independent and experts financial services to the public and there are three kinds of services rendered by a public accountant such as:

  • Auditing
  • Taxation Service
  • and Management advisory service

Auditing is about the examination of financial statements by independent certified public accountant for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.

Taxation service is about the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors. However, The Certified Public Accountant not regularly represents the client in tax investigations.

The term management advisory service has no precise coverage but is used generally to refer to services to clients on matters of accounting, finance, business policies, organization procedures, product costs, distribution and many other phases of business conduct and operations. But the mainstay of public accountants are audit and tax services.

Private accounting means that the CPAs are employed in business entities in various capacity as accounting staff, chief accountant, internal auditor and controller. The highest accounting officer in a business entity is the controller. Private accountant assists management in planning and controlling the entity’s operations that includes maintaining the records, producing the financial reports, preparing the budgets, controlling and allocating the costs of the business. Also determines the various taxes the business is obliged to pay.

Government accounting handles the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds, property and interpreting the results thereof. CPAs are employed in many branches of the government like BIR (Bureau of Internal Revenue), CA (Commission on Audit), DBM (Department of Budget and Management), SEC (Securities and Exchange Commission) and NBI (National Bureau of Investigation).

Sources of facts and other information: Book Review: Theory of Accounts–many Ways to Learn The Language of Business by Conrado T. Valix and Christian Aris M. Valix

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