Government Accounting 2018 Questions Answers

Government Accounting - 2018 Edition
Punzalan and Cardona

Chapter 1 – Nature and Scope of NGAS
Questions & Answers:
1. Define government accounting.
Answer: Pursuant to Section 109 of PD 1445,

government accounting is the one which
“encompasses the process of analyzing,
recording, classifying, summarizing and
communicating all transactions involving the
receipt and disposition of government fund and
property and interpreting the result thereof.”
2. Enumerate the objectives of the government

accounting according to Section 110,
Presidential Decree 1445.
Answer: Section 110, Presidential Decree 1445

sets down the following objectives of
government accounting:
a. To produce information concerning past
operations and present conditions;
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b. To provide a basis for guidance for future

operations;
c. To provide for control of the acts of public

bodies and offices in the receipt,
disposition and utilization of funds and
property; and
d. To report on the financial position and the

results of operations of government
agencies for the information and guidance
of all persons concerned.
3. Explain briefly the purposes of creating the

Public Sector Accounting Standards Board
(PSASB).
Answer: Primarily, the Public Sector Accounting

Standards Board (PSASB) was created in 2008
under COA Resolution No. 2008-12 dated October
10, 2008, in order to formulate and implement
public sector accounting standards and establish
linkages with international bodies, professional
organizations and academe on accounting related
fields on financial management, Accordingly, the
PSASB shall assist the commission in formulating
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and implementing Philippine Public Sector
Accounting Standards (PPSAS).\
4. Explain the processes of developing the

Philippine Public Sector Accounting Standards
(PPSAS).
Answer: The following are the processes and

other considerations in developing the Philippine
Public Sector Accounting Standards (PPSAS):
a. Applicability of IPSAS.
Existing IPSAS were assessed to

determine the applicability of the
provisions in the Philippine setting as
bases in the development of PPSAS.
b. Exposure draft of PPSAS.
The PSASB issues exposure drafts of all

proposed PPSAS for comment by
interested parties including COA officials
and auditors, agency finance personnel,
oversight agencies, professional
organizations, academe and other
stakeholders. The PSASB sets a
reasonable time to allow interested
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parties to consider and comment on its

proposals. The PSASB evaluates all
comments received on exposure drafts
and makes such modifications, where
appropriate.
c. Fundamental issues.
Where an accounting principle or a

significant element of a disclosure
requirement contained in IPSAS is
considered to be in conflict with the
Philippine laws, rules and regulations, this
would be regarded as a fundamental issue
and the accounting principle or disclosure
requirement may be changed.
d. Statutory authority.
Where the international standard deviates

from the Philippine regulatory or
legislative environment, Philippine
application guidance shall be issued
accordingly.
e. Disclosure requirements.
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Disclosure requirements may be amended
when the amendments are regarded as
being significant for improving fair
presentation of the matter.
f. PPSAS numbering.
The PPSAS is assigned the same number

as the IPSAS to maintain the link. Where a
PPSAS is developed and there is no IPSAS
equivalent, the standard will be assigned a
number in a series of PPSAS starting with
101. When IPSASB subsequently issues
the equivalent standard as an IPSAS, the
100 series PPSAS will be withdrawn and
reissued as a PPSAS with the IPSAS
number. Standards of PPSAS have equal
authority regardless of the numbering
used.
g. Financial reporting issues not dealt with

by IPSAS.
Where issues related to financial reporting

emerged, researches were done and a
discussion document prepared based on
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other relevant accounting standards not in

conflict with Philippine laws.
h. Submission of draft to PSASB for

consideration of COA.
Where there are significant changes or

unresolved issues associated with an
exposure draft, the PSASB may decide to
re-expose a proposed PPSAS.
i. If considered appropriate, focus group

discussions will be held to obtain further
opinions on issues identified by the
exposure process.
5. What are the government offices primarily

charged with accounting responsibility?
Explain their respective responsibility.
Answer: The offices charged with the accounting

responsibility are the Commission on Audit (COA),
the Department of Budget and Management
(DBM), the Bureau of Treasury (BTr), and the
government Agencies.
Commission on Audit
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The Commission on Audit (COA) keeps the
general accounts of the government,
promulgates accounting rules and
regulations, and submits to the President
and Congress, within the time fixed by law
(not later than the last day of September
each year – Section 41, PD 1445), an annual
report of the government, its subdivisions,
agencies and instrumentalities, including
government-owned or controlled
corporations.
As mandated by Article IX-D, Section 2 par.

(2)of the 1987 Constitution of the
Philippines, to wit: “The Commission on
Audit shall have exclusive authority, subject
to the limitation in this Article, to define the
scope of its audit and examination,
establish the techniques and methods
required therefor, and promulgate
accounting and auditing rules and
regulations, including those for the
prevention and disallowance of Illegal,
irregular, unnecessary, excessive,
extravagant, or unconscionable
expenditures, or uses of government
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funds and properties,” the Commission on

Audit revised the previous government
accounting system.
Pursuant to the COA, DBM and DOF Joint
Circular No. 2013-1 dated August 6, 2013,
Unified Accounts Code Structures (UACS),
the consistency of account classification
and coding structures with the Revised
Chart of Accounts shall be the responsibility
of the COA.
As mandated by Article IX-D Section 2 par. (2) of
the 1987 Constitution of the Philippines, the
Commission on Audit shall have exclusive
authority, subject to the limitation in this Article,
to define the scope of its audit and examination,
establish the techniques and methods required
therefore, and promulgate accounting and
auditing rules and regulations, including those for
the prevention and disallowance of:
1. IRREGULAR EXPENDITURES signify that the
expenditure is incurred without adhering to
established rules and regulations, procedural
guidelines, policies, principles and practices that have
gained recognition in law; incurred without conforming
to or observing prescribed usages or rules of
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discipline, established pattern, course, mode of
action, behaviour or conduct.
Cases considered irregular uses of government funds

include the following:
a. Payment of salaries, allowances and other forms of
additional compensation such as:
1. Honoraria and other forms of allowances such as per
diems, representation allowance, Christmas bonus,
gift checks paid to Department Secretaries,
Undersecretaries, Assistant Secretaries or their
alternates as members of governing boards of
collegial bodies as these partake of the nature of
additional compensation/ remuneration proscribed
under the Phil. Constitution (GR #s147392, 156982,
138489);
2. Payment of allowances and per diems to BOD,
Secretariat and other officers of GOCC subsidiaries
that were acquired through Proclamation 50;
3. Payment of additional benefits to
officials/employees/BOD of GOCCs based on
issuances of the Department Secretary to which the
GOCC is attached;
4. Payment of EMEs (Emrgency Meeting Expenses) to
members of the BOD;
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5. Honoraria granted to special committees which are

performing functions inherent in the regular functions
of the agency;
6. Honoraria granted to private individuals sitting as
members of special committee/s of a government
agency without authority or approval from proper
authorities (DBM/OP);
7. Honoraria/RATA granted to members of committee/s
in regional/district offices in violation of Section 4,
Budget Circular No. 2003-5)
8. Honoraria paid to members of the BAC/TWG in excess
of the rates provided in DBM Circular 2004-5A and for
procurement activities pertaining to contracts not yet
awarded to winning bidder;
9. Grant of loyalty/service awards to employees not in
accord with the requirements of CSC MEMO Circ. No.
42 (GR142760);
10. Payment of CNA cash benefits/signing bonuses to
members of governing boards and non-organic
personnel and those occupying managerial positions
higher than a division chief and payment to rank and
file in excess of P5,000.00;
11. Grant of honoraria for performing functions inherent
in the regular function of the government
personnel/official;
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12. Grant of RATA and other benefits to OGCC lawyers
rendering legal assistance to GOCCs in the absence
of three concurring conditions required under EO 878
(COA Dec. 2006-030);
13. Payment of COLA and other allowances deemed
integrated in the salary (GR#153266);
14. Grant of food basket allowance/rice subsidy/health
care allowance/health care insurance in the absence
of a law authorizing the same;
15. Premiums paid for the personnel accident insurance
of officers and employees of GOCCs in the absence of
a prior authority from the OP and DBM;
16. Payment of CNA cash incentive/benefit to rank and
file employees where the conditions for determining
“savings” per PSLMC and DBM regulations are not
met;
17. Payment of salaries and wages wherein signatures
per logbook vary with those in the payroll/DTR; or
unauthorized payment to person/s other than the
payee;
18. Payment of personnel services out of financial
subsidy to LGUs;
19. Overtime pay for services/tasks that can be
undertaken during regular hours;
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b. Hiring of private lawyers: 1) by GOCCs/NGAs to handle

cases and legal matters without the prior written
authority from the OGCC/Solicitor General as the case
maybe and the prior written concurrence of COA; or 2) by
LGUs except in cases where the city/ municipality is the
party adverse to the provincial government or to another
component city or municipality;
c. Hiring of consultants and contractuals to perform
functions that will exercise control and supervision over
regular employees (CSC Memo Circ. # 26);
d. Attorney’s fees to lawyers holding plantilla positions;
e. Payment of rental contracts for service vehicles covering
a continuous period of more than 15 days in the absence
of a prior authority from the DBM, appropriation and CAF;
f. Payment for deliveries of goods without passing the
required quality test such as that of the Bu. of Plant
Industry, in case of seeds;
g. Acceptance of a (infrastructure) project not constructed
in accordance with plans and specs and with noted
deficiencies;
h. Release of funds to NGOs/Pos for money market
placement/time deposit/investments;
i. Use of funds (intended for specific purpose) for purposes
other than its original intent unless realignment thereof
is authorized/approved by proper authorities; release of
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funds in the form of assistance to unauthorized
beneficiaries
j. Media advertisements for anniversaries/publicity
propaganda (except when the nature of agency’s
mandate requires such and those required for the
issuance of agency guidelines/rules/regulations, conduct
of public bidding, dissemination of important public
announcements);
k. Grant of cash advance for no specific purpose;
l. Donations, contributions, grants and cash gifts, except
when such activity is undertaken in pursuit of the
mandate of the donor-agency (AO 103, dated 31 Aug.
2004)
2. ILLIGAL EXPENDITURES pertain to those incurred in

violation of the law and its IRR.
Illustrative cases include the following payments:
1. Contracts awarded under an alternative mode of

procurement for items that should have been subject of
public bidding;
2. Award of contracts to bidders who fail to meet the minimum
amounts required to be put up at the time the bids were
submitted;
3. Deliveries of equipment that do not conform to specs per
PO/contract and bid invitation;
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4. Communication equipment without the purchaser’s and

dealer’s permit from the National Telecommunications
Commission (RA 3846 on Radio Control Law)
5. Purchases from Jobbers/middlemen (government purchases
shall be with reputable manufacturers/ licensed
distributors)
6. Payment of claims awarded not strictly in accord RA 9184
and its IRR;
7. Payment for contracts which has no prior
approval/authorization of the local Sanggunian (RA9160);
8. Payment of compensation or benefits to government
personnel not in accord with provisions of existing laws
such as the following:
a) Additional retirement benefits beyond that allowed
under existing laws
b) Hazard pay to health workers/personnel not assigned
in establishment not specifically mentioned in Section
21, R.A.7305 and without proof of exposure to public
health hazards for at least 50% of working hours
c) Hazard allowance to employees not engaged in the
delivery of health or health related services such as the
social insurance group
9. Use of public funds for private purpose such as:
Widening/repair/improvement of roads (in private
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subdivisions) ownership for which had not been formally
turned over to the government
10. Entering into a contract, amount for which is over and
beyond existing approved appropriations/not covered by
an appropriation law;
11. Transportation allowance paid to officials with assigned or
using government vehicle
12. Entering into a contract without the covering certificate of
availability of funds signed/issued by the Chief Accountant,
even if the contract is signed by said Chief Accountant as
witness (GR151373-74, 17 Nov. 2005);
13. Grant of cash advance with no specific purpose
14. Expenses for foreign travel of officials/employees
(including uniformed/DILG/DND) who are due to retire
within one (1) year after the completion of said travel.
(GAA provision);
15. Grant of EME in excess of amounts authorized under
existing LRRs;
16. Overpricing of goods/services purchased.;
17. Grant of Xmas bonuses, cash gift and other benefits to
consultants, members of governing boards who are not
organic personnel of the government agency;
18. Grant of amelioration allowance /similar benefits to private
employees of service contractors (AO No. 365, GR
#157001)
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3. EXCESSIVE EXPENDITURES signify incurrence of

unreasonable expenses at immoderate quantity and/or
exorbitant price; expenses that exceed what is usual
or proper such as the following:
a) Grant of cash advance in excess of estimated
budget/requirement;
b) Supplies and materials including fuel inventory in
quantities exceeding the normal three-month
requirement, except for circumstances authorized by law;
c) Grant of cash advance for intelligence fund in excess of
one-month requirement except in emergency cases which
should not exceed the three-month requirement;
d) Release of funds to NGOs/Pos in excess of approved
project requirements;
e) Inclusion of unnecessary items/materials/equipment in an
infrastructure contract (i.e. motor vehicle, computers,
etc) resulting in increase project costs;
f) Procurement and distribution of seeds to farmers in
excess of requirements (as per study on requirements per
hectare);
g) Overpricing of purchases in excess of current/prevailing
market price by 10%;
h) Repair of equipment at a cost exceeding 30% of the
current market price of the same/similar item;
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i) Provision of more than one (1) unit mobile phone for each
entitled official which should not be lower than Division
Chief rank;
j) Provision of more than one (1) unit desktop/laptop/other
electronic gadget to officials entitled thereto;
k) Procurement of items in excess of the requirements
specially those with near/short expirations dates such as
vaccines, medicines, seeds, fertilizers, pesticides, etc.;
l) Installation of materials/items in excess of requirements
or in places where there is no need for the same/with
already existing installations that additional item/s result
to redundancy (such as installation of camera/s with
existing functional items);
m) Continuous extension of services of foreign
consultant/s for relatively simple supervisory work during
the final stages of the project, tasks which can be
undertaken by local consultant/s or the implementing
agency itself (GR101370);
4.Unnecessary expenditures pertain to those that cannot

pass the test of prudence or the diligence of a good
father of a family, thereby denoting non-responsiveness
to the exigencies of the service; they are not supportive
of the implementation of the objectives, goals and
mission/mandate of a government agency; incurrence of
expenditure not dictated by the demands of good
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governance; not essential to or can be dispensed with

without incurring loss or damage to property; such as:
a) Hiring of public relations companies;
b) Creation/continued operation of subsidiary/ies that
duplicate the functions of the parent government
agency;
c) Release of funds as financial assistance to civic
organizations/non- profit corporations/ foundations;
d) PR expenses of insurance corporations with its
members when its insurance services are
compulsorily required;
e) Hiring of consultants for functions included in the
plantilla positions such as those of the
procurement/financial/media consultants;
f) Hiring of consultants for services not aligned to the
mandate of the agency;
g) Repeated renewal of consultancy services over and
above agency requirements;
h) Purchase of high-end/expensive models/brands of
electronic gadgets (phones/ cell
phones/desktops/laptops, etc.);
i) Construction of structures/buildings/procurement of
equipment not really needed/not put to use/not
completed/could not be properly
maintained/operations not sustained;
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j) Construction of housing units not
distributed/awarded/disposed within considerable
period of time as evidenced by the deterioration of the
units;
k) Replacement of serviceable structure/equipment
l) Continuous repair of vehicles and equipment
considered beyond economic repair as evidenced by
frequent breakdowns/unseviceability after repair;
m) Construction of roads/bridges left uncompleted for
a number of years;
n) Construction of structures/buildings without any
intended purpose; using a structure/building/assets
other than the intended purpose may also be an
indication that the acquisition of the same is not
necessary;
5.Extravagant expenditures signify those incurred

without restraint, judiciousness and economy; they
exceed the bounds of propriety being immoderate,
prodigal, lavish, luxurious and injudicious such as the
following:
a) Rental of expensive halls/rooms in plush/luxury
hotels/restaurants for purposes of holding office
meetings/functions, except for government sponsored
international conventions, meetings and the like;
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b) Procurement of luxury vehicles except when allowed

by LRRs;
c) Grant of exorbitant bonuses/allowances/fringe
benefits;
d) Installation of highly sophisticated outdoor signs,
billboards and neon signs advertising a government
agency/office, except for banks, trading agencies,
hotels, buildings for culture and arts;
e) Installation of luxurious building furnishings except
those intended for showcase, trade and commerce,
promotion of arts and culture and for use of foreign
dignitaries;
f) Hiring of expensive transport service when there are
available public conveyances except in meritorious
cases and justified circumstances;
g) Purchase of wines, liquors, cigars, cigarettes except
when served in state functions and government
sponsored international conference/conventions;
h) Out of town meetings/conferences despite availability
of venue/s within office premises/locality;
i) Hiring of expensive vans, cars, aircrafts when there
are available ordinary public conveyances, except in
meritorious cases/justified by prevailing
circumstances;
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j) Installation of highly sophisticated outdoor signs,
billboards, neon signs, etc., advertising the entity,
except for banks, trading entities, hotels or venues for
culture and arts;
k) Lavish celebrations of Christmas, anniversaries, and
other special occasions.
6.Unconscionable expenditures pertain to expenditures

acquired in unreasonable and immoderate price or
quantities, and which no reasonable person/person in his
right mind would incur/make, nor would a fair and honest man
would accept as reasonable; those incurred without
considering ethical and moral standards. Illustrative cases
are the following payment of expenditures:
1. Live-in seminars in five-star hotels with significant number
of participants and unreasonable length of time;
2. Excessive and unreasonable retirement benefits, bonuses,
allowances and fringe benefits;
3. Release of significant amounts to NGOs/Pos without the
justification/evaluation on the necessity of the project,
needs of intended beneficiaries, reasonableness of project
requirements, etc.
4. Granting loans to unqualified borrowers and borrows
unlikely to payback the loans;
5. Hiring of personnel who previously opted to retire/be
separated from the service as a result of rationalization,
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within five (5) from such retirement/separation from

service (DBM Circ. No. 2010-3 & pertinent CSC
regulations);
6. Reimbursement of expenses for unauthorized attendance
in conferences/meetings/official functions
Or uses of government funds and properties.

Pursuant to the COA, DBM and DOF Joint Circular
No. 2013-1 dated August 6, 2013, Unified
Accounts Code Structures (UACS) (will be
discussed in detail in Chapter 3), the consistency
of account classification and coding structures
with the Revised Chart of Accounts (will be
discussed in detail in Chapter 4) shall be the
responsibility of COA.
PSASB shall assist COA in formulating and
implementing Philippine Public Sector
Accounting Standards (PPSAS). The PPSAS shall
apply to all apply to all National Government
Agencies (NGAs), Local Government Units (LGUs)
and Government-Owned and/or Controlled
Corporations (GOCCs) not considered as
Government Business Enterprises (GBEs), in
which case, the Philippine Financial Reporting
Standards (PFRS) and relevant standards issued
by the Financial Reporting Standards Council,
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Board of Accountancy, and Professional
Regulation Commission shall apply.
Accounting rules and regulations pertaining to
cash operations, collections, remittances and
disbursements, including public borrowings, are
issued by the Commission on Audit (COA), jointly
or with the concurrence of the DOF and DBM.
GOVERNMENT BUSINESS
ENTERPRISE (GBE)
CHARACTERISTICS:
1. An entity with the power to
contract in its own name;
2. Has been assigned the financial
and operational authority to carry
on a business;
3. Sells goods and services, in the
normal course of business, to other
entities at a profit or full cost
recovery;
4. Not reliant on continuing
government funding to be a going
concern (other than purchase of
outputs at arm’s length); and
5. Controlled by a public sector entity.
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Department of Budget and Management
Pursuant to Section 2, Chapter 1, Title XVII,

Book IV of the Administrative Code of the
Philippines (EO 292), “The Department of
Budget and Management shall be
responsible for the formulation and
implementation of the National Budget with
the goal of attaining our national socio-
economic plans and objectives. The
Department shall be responsible for the
efficient and sound utilization of
government funds and revenues to
effectively achieve the country’s
development objectives.”
And, as provided by the Joint Circular No.

2013-1 dated August 6, 2013, Unified
Accounts Code Structures (UACS), the
validation and assignment of new codes for
funding source organization, sub-object
codes for expenditure items shall be the
responsibility of the DBM. In addition, the
validation and assignment of new program,
activity, project codes shall be decided
jointly by the proponent agency and DBM.
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Bureau of Treasury
Under the Revised Administrative Code, the

Bureau of Treasury, as one of the operating
bureaus of the Department of Finance is
authorized to:
1. Receive and keep national funds, manage
and control the disbursements thereof;
and
2. Maintain accounts of financial
transactions of all national government
offices, agencies and instrumentalities.
Thus, the Bureau of Treasury shall control

and monitor the Notice of Cash Allocation
(NCA) released by the Department of Budget
and Management; as well as the bank
transfers it makes in replenishing its
Modified Disbursement System (MDS)
accounts.
According to the Joint Circular No. 2013-1

dated August 6, 2013, Unified Accounts
Code Structures (UACS), the consistency of
accounts classification and coding
standards with the Government Finance
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Statistics (GFS) shall be the responsibility of

Department of Finance - BTr.
National Government Agencies
Departments, bureaus, offices and other

instrumentalities of the National
Government, including the Congress, the
Judiciary, the Constitutional bodies, state
colleges and universities, and other self-
contained institutions and hospitals are
required by law to have accounting
units/divisions/departments, which are to be
of the same level with other
units/divisions/departments in the agency
and under the direct supervision of the Head
of the Agency. Accounting personnel shall
(1.) maintain and keep current the accounts
of the agency, (2.) provide advice on the
financial condition and status of the
appropriations and allotments of the agency
as its Head may require, and (3.) to develop
and conduct procedures designed to meet
the needs of management. They shall
perform the aforesaid duties in accordance
with existing laws, rules, regulations,
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procedures and comply with the reporting
requirements of the Commission on Audit,
the Department of Finance and the
Department of Budget and Management.
6. Enumerate the registries of the National

Government Agencies (NGAs) as provided by
the Government Accounting Manual (GAM).
Answer: Under the new accounting system, the

government agencies shall maintain the following
registries:
a. Registry of Revenue and Other Receipts –

Summary (RRORS).
This summary shall be kept by the Budget
Division/Unit for each fund cluster
maintained by the entity
b. Registry of Revenue and Other Receipts –
Regular Agency and Foreign Assisted
Projects Fund (RROR-RA&FAP).
This registry shall be maintained by the

Budget Division/Unit of the entity for the
following fund clusters: 1.) Regular
Agency Fund; and, 2.) Foreign Assisted
Project fund.
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c. Registry of Revenue and Other Receipts –

Special Account Locally
Funded/Domestic Grants Fund and
Special Account Foreign
Assisted/Foreign Grants Fund (RROR-
SADFGF).

following fund clusters: 1.) Special
Account - Locallly Funded/Domestic
Grants Fund; and, 2.) Special Account –
Foreign Assisted/Foreign Grants Fund.
d. Registry of Revenue and Other Receipts –
Internally Generated Funds (Off-
Budgetary Funds – Retained Income
Funds)/Business Related Funds (RROR-
IGF/BRF).

following fund clusters: 1.) Internally
Generated Funds (Off-Budgetary –
Retained Income Funds); and, 2.)
Business Related Funds.
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e. Registry of Revenue and Other Receipts –
Trust Receipts/Inter-agency Transferred
Funds (RROR-TR/IATF).

Trust Receipts/Inter-agency Transferred
Funds.
f. Registry of Appropriation and Allotments

(RAPAL).
This registry shall be maintained by fund

cluster by the Budget Division/Unit of
each entity to ensure that allotment
releases are within the authorized
appropriation. Separate registry shall be
maintained for prior year’s
appropriations.
g. Registry of Allotments, Obligations and

Disbursements – Personnel Services
(RAOD-PS).

Budget Division/Unit by Appropriation
Act, fund cluster, by Major Final Output
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(MFO) or Program/Activity/Project (PAP)

for personnel services.
h. Registry of Allotments, Obligations and

Disbursements – Maintenance and Other
Operating Expenses (RAOD-MOOE).

for maintenance and other operating
expenses.
i. Registry of Allotments, Obligations and

Disbursements – Financial Expenses
(RAOD-FE).

for financial expenses.
j. Registry of Allotments, Obligations and

Disbursements – Capital Outlays (RAOD-
CO).
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for capital outlays.
k. Registry of Budget, Utilization and

Disbursements – Personnel Services
(RBUD-PS).

Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program
Activity/Project (PAP) for personnel
services.
l. Registry of Budget, Utilization and

Disbursements – Maintenance and Other
Operating Expenses (RBUD-MOOE).

Activity/Project (PAP) for maintenance
and other operating expenses.
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m. Registry of Budget, Utilization and

Disbursements – Financial Expenses
(RBUD-FE).

Activity/Project (PAP) for financial
expenses.
n. Registry of Budget, Utilization and

Disbursements – Capital Outlays (RBUD-
CO).
Activity/Project (PAP) for capital outlays.
o. Registry of Allotments and Notice of

Cash Allocation (RANCA)

Accounting Division/Unit to determine
the amount of allotments not covered by
NCA and to monitor available NCA.
p. Registry of Allotments and Notice of

Transfer of Allocation (RANTA)
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Accounting Division/Unit to determine
the amount of allotments not covered by
NTA and to monitor available NTA.
7. What are the basic accounting and budget

reporting principles under GAM?
Answer: The following are the basic accounting

and budget reporting principles as provided by
GAM:
a. Generally accepted government accounting

principles in accordance with the PPSAS and
pertinent laws, rules and regulations.
COA Resolution No. 2014-003 dated January
24, 2014 prescribed the adoption of twenty
five (25) Philippine Public Sector Accounting
Standards (PPSASs) effective January 1,
2014. These PPSASs were based on
International Public Sector Accounting
Standards (IPSASs) which were published in
the 2012 Handbook of International Public
Sector Accounting Pronouncements of the
IPSASB.
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b. Accrual basis of accounting in accordance

with the PPSAS.
Accrual basis means a basis of accounting

under which transactions and other events
are recognized when they occur, and not
when cash or its equivalent is received or
paid. Thus, the transaction and events are
recognized in the accounting records and
recognized in the financial statements of the
periods to which they relate. The elements
recognized under accrual accounting are
assets, liabilities, net assets/equity,
revenue, and expenses.
c. Budget basis for presentation of budget
information in the financial statements in
accordance with PPSAS 24.
IPSAS 24, Presentation of Budget

Information in Financial Statements,
requires a comparison of budget amounts
and the actual amounts arising from
execution of the budget to be included in the
financial statements of entities that are
required to, or elect to, make publicly
available their approved budget/s, and for
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which they are, therefore, held publicly
accountable. It also requires disclosure of an
explanation of the reasons for material
differences between the budget and actual
amounts.
d. Revised Chart of Accounts prescribed by

Commission on Audit.
The Commission on Audit as member of the

International Organization of Supreme Audit
Institutions (INTOSAI) is encouraged to
adopt relevant International Accounting
Standards. The IPSASB of the International
Federation of Accountants which
promulgates the IPSASs, acknowledges the
right of governments and national standards-
setters to establish their respective
accounting standards and guidelines for
financial reporting in their jurisdictions. And
to provide new accounts for the adoption of
the PPSAS which were harmonized with the
IPSAS to enhance the accountability and
transparency of the financial reports, and
ensure compatibility of financial information,
the COA revokes COA Cir. No. 2004-008 and
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the COA Circular No. 2013-002 dated January

30, 2013, Adoption of the Revised Chart of
Accounts for National Government Agencies,
is adopted.
Furthermore, COA issued Circular No. 2014-

003, dated April 15, 2014, Implementing
Rules and Guidelines on the Conversion from
the Philippine Government Chart of Accounts
under the NGAS to the Revised Chart of
Accounts for National Government Agencies;
and Circular No 2015 – 007, dated October
22, 2015, Prescribing the Government
Accounting Manual for Use of All National
Government Agencies.
e. Double entry bookkeeping
It is a system of bookkeeping where every

journal entry to account requires a
corresponding and opposite entry to a
different account. In the double-entry
accounting system, two accounting entries
are required to record each accounting
transactions. Recording of a debit amount to
one or more accounts and an equal credit
amount to one or more accounts results in
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total debits being equal to total credits for all
accounts in the general ledger.
f. Financial statements based on accounting

and budgetary records.
The objectives of general purpose financial

reporting in the public sector should be to a)
provide information useful for decision
making, and b) to demonstrate the
accountability of the entity for the resources
entrusted to it, by:
a) Providing information about the
sources, allocation, and uses of
financial resources;
b) Providing information about how the
entity financed its activities and met its
cash requirements;
c) Providing information that is useful in
evaluating the entity’s ability to finance
its activities and to meet its liabilities
and commitments;
d) Providing information about the
financial condition of the entity and
changes in it, and;
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e) Providing aggregate information useful

in evaluating the entity’s performance in
terms of service costs, efficiency and
accomplishments;
8. Explain briefly the Fund Cluster Accounting.
Answer: Fund cluster refers to an accounting

procedure for recording expenditures and
revenues associated with a specific activity for
which accounting records are maintained and
periodic financial reports are prepared.
9. How would the general purpose financial

reporting in the public sector provide useful
information for decision making and
demonstrate the accountability of the
government agency?
Answer: COA Circular No. 2015-002 dated March

9, 2015, Supplementary guidelines on the
preparation of financial statements and other
reports, the transitional provisions on the
implementation of the PPSAS, and other coding
structures, provides that for the purpose of
preparing the Annual Financial Report and the
Annual Audit Reports, all National Government
38
Agencies (NGAs) shall submit to the COA Auditors
and the Government Accountancy Sector (GAS),
COA, the detailed financial statements and trial
balances consolidated by the fund cluster as
follows:
a) Regular Agency Fund
b) Foreign Assisted Projects Fund
c) Special Accounts – Locally
Funded/Domestic Grants Fund
d) Special Accounts – Foreign
Assisted/Foreign Grants Fund
e) Internally Generated Funds
f) Business Related Funds
g) Trust Receipt/Inter-agency Transferred
Funds (IATF)
The objectives of general purpose financial

reporting in the public sector should be to provide
information useful for decision making, and to
demonstrate the accountability of the entity for
the resources entrusted to it, by:
a. Providing information about the sources,
allocation, and uses of financial resources;
b. Providing information about how the entity
financed its activities and met its cash
requirements;
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c. Providing information that is useful in

evaluating the entity’s ability to finance its
activities and to meet its liabilities and
commitments;
d. Providing information about the financial
condition of the entity and changes in it;
e. Providing aggregate information useful in
evaluating the entity’s performance in
terms of service costs, efficiency and
accomplishments.
10. Enumerate and explain the concept of
responsibility accounting.
Answer: The following are the concepts of

responsibility accounting:
1. Responsibility accounting involves

accumulating and reporting data on
revenues and costs on the basis of the
manager’s action, who has authority to
make the day-to-day decisions about the
items;
2. Evaluation of a manager’s performance is

based on the matters directly under his
control;
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3. Responsibility accounting can be used at
every level of management in which the
following conditions exist:
a. Cost and revenues can be directly
associated with the specific level of
management responsibility;
b. Costs and revenues are controllable at
the level of responsibility with which
they are associated; and
c. Budget data can be developed for
evaluating the manager’s effectiveness
in controlling the costs and revenues.
4. The reporting of costs and revenues under
responsibility accounting differs from
budgeting in two aspects:
a. A distinction is made between

controllable and non-controllable costs.
1. A cost is considered controllable at a
given level of managerial
responsibility if that manager has the
power to incur it within a given period
of time. It follows that all costs are
controllable by top management
because of the broad range of its
activity, and fewer costs are
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controllable as one moves down to

lower level of management
responsibility because of the
manager’s decreasing authority.
2. Non-controllable costs are costs
incurred indirectly and allocated to a
responsibility level.
b. Performance reports either emphasize

or include only items controllable by
individual manager.
5. A responsibility reporting system involves

the preparation of a report for each level
of responsibility. Responsibility reports
usually compare actual costs with flexible
budget data. The reports show only
controllable costs and no distinction is
made between variable and fixed costs.
6. Evaluation of a manager’s performance for

cost centers is based on his ability to meet
budgeted goals for controllable costs.
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Answers to Multiple Choice (Chapter 1)
1. C
This is the definition of government accounting
pursuant to Section 109 of PD 1445.
2. D
The government offices charged with the
government accounting responsibility are:
a. Commission on Audit
b. Department of Budget and Management
c. Bureau of Treasury
d. National Government Agencies
3. A
Under the Revised Administrative Code, the
Bureau of Treasury, as one of the operating
bureaus of the Department of Finance is
authorized to:
1. Receive and keep national funds, manage
and control the disbursements thereof;
and
2. Maintain accounts of financial
transactions of all national government
offices, agencies and instrumentalities.
4. B
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The Commission on Audit based on the

authority granted under Section 2(2), Article IX-
D of the 1987 Constitution of the Republic of the
Philippines prescribed the New Government
Accounting System.
5. D
Per COA Cir. No. 2013-002 dated January 30,
2013 effective January 1, 2014, the account
code structure consists of eight (8) mandatory
digits, which is composed of the following:
Account Group: one digit; Major Account Group:
two digits; Sub-Major Account Group: two
digits; General Ledger Accounts: two digits;
and GL Contra Accounts: one digit.
6. A
The books of original entry or journals, shall be
used to record in time sequence, financial
transactions and information presented in duly
certified and approved accounting documents.
The basis for recording in the journals shall be
the Journal Entry Voucher (JEV).
7. C
The receipt of Notice of Cash Allocation is
recorded in the Regular Agency books
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representing the agency’s subsidy from the
national government.
8. A
The DBM, DOF-BTr, and COA are collectively
responsible for the UACS. Specifically,
validation and assignment of new codes for
funding sources, organization, sub-object
codes for expenditure items shall be the
responsibility of DBM; consistency of account
classification and coding structure with the
Revised Chart of Accounts shall be the
responsibility of COA; consistency of account
classification and coding standards with the
Government Finance Statistics shall be the
responsibility of DOF-BTr; and validation and
assignment of new Program, Activity, Project
Codes shall be decided jointly by the proponent
agency and DBM.
9. D
See explanation in No. 8.
10. B
See explanation in No. 8.
11. B
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The PPSAS shall be applied to National

Government Agencies, Local Government
Units, and Government-Owned and/or
Controlled Corporations not considered as
Government Business Enterprises, where the
Philippine Financial Reporting Standards
(PFRS) and relevant standards issued by FRSC,
BOA, and PRC shall apply.
12. C
The Public Sector Accounting Standards Board
was created in 2008 under COA Resolution No.
2008-12 dated October 10, 2008 to assist the
commission in formulating and implementing
public sector accounting standards and
establish linkages with international bodies.
13. B
This is the instruction provided by GAM for
Registry of Appropriations and Allotments
(RAPAL).
14. A
Registry of Allotments, Obligations and
Disbursements for Personnel Services (RAOD-
PS).
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15. A
Budget Utilization Request Status (BURS).
16. C
This is the definition of Fund Cluster
accounting.
Chapter 2 – Unified Accounts Code Structure

(UACS)
Questions & Answers
1. What are the key elements of the Unified

Accounts Code Structure (UACS)? Explain
each element briefly.
Answer: The key elements of UACS are as

follows:
1. Funding Source Codes

It is a six-digit code to reflect the
Financing Source, Authorization, and
Fund Category. However, per Joint
Circular No. 2014-1 dated November 7,
2014, the 6-digit Funding Source Code
was enhanced by adding another two
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digits code for the Fund Cluster for

purposes of accounting, banking, and
reporting; thus, it becomes eight digits.
2. Organization Codes
It is a twelve-digit code to reflect the
Department, Agency and Sub-Agency or
Operating Unit/Revenue Collecting Unit.
The first two digits (1st and 2nd) represent
the Department Code. The next three
digits (3rd to 5th) are for the Agency Code.
The next seven digits (6th to 12th) are for
Operating Unit Classification Code.
3. Location Codes
Location code is a nine-digit code
composed of Region, Province,
City/Municipality, and Barangay. Region
code is a two-digit code (1st and 2nd) that
identifies a specific region. Province
code is a two-digit code (3rd and 4th) that
identifies the province. Municipality code
is a two-digit code (5th and 6th) that
generally defines the relative
alphabetical sequence of municipalities
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within the province. Barangay code is a
three-digit code (7th to 9th).
4. Major Final Output (MFO)/Program,

Activity and Project (PAP) Codes
As provided by Joint Circular No. 2013-1
dated August 6, 2013, it is a nine-digit
code comprised of Program, MFO, 1st
Level Activity, and 2nd Level Activity. The
first digit is for Program. The next two
digits (2nd and 3rd) are for the MFO. The
next two digits (4th and 5th) are for 1st
Level Activity. And, the next four digits
(6th to 9th) are for the 2nd Level Activity.
However, this was enhanced by Joint

Circular No. 2014-1 dated November 7,
2014 by including a three-digit code for
Sector Outcomes and a two-digit code for
Horizontal Outcomes as prefix. Also
included is another digit for the last
category of MFO/PAP to ensure that there
is sufficient number of code values
bringing this to five digits (from 5-digit
code). In total, this key element is now
composed of 15 digits.
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5. Object Codes
It is a ten-digit code composed of the first
eight digits (1st to 8th) are for COA Chart
of Accounts Object, and the next two
digits (9th and 10th) are for Sub-Object. If
disaggregation is necessary, sub-object
codes shall be used to show the
breakdown of selected assets, income
and expenses. Otherwise, two zeros will
be used.
2. Explain the purpose of UACS.
Answer: The objective or purpose of UACS is to

establish the accounts and codes needed in
reporting the financial transactions of the
National Government Agencies. It provides a
framework for identifying, aggregating and
reporting financial transactions in budget
preparation, execution, accounting and auditing.
The key purpose of the UACS is to enable the
timely and accurate reporting of actual revenue
collections and expenditures against budgeted
programmed revenues and expenditures.
3. Enumerate the reporting requirements that will

be best served by UACS.
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Answer: Reporting requirements that will be best
served by the UACS include:
1. Financial reports as required by the DBM
and COA.
2. Financial statements as required by the
Public Sector Accounting Standards Board
of the Philippines.
3. Management reports as required by the
executive officials/heads of departments
and agencies; and
4. Economic statistics consistent with the
Government Finance Statistics (GFS)
Manual 2001.
4. What are the sources of account descriptions

and codes in the UACS object coding elements?
Answer: The sources of account descriptions and

codes in the UACS object coding elements
includes the following:
1. The codes from the COA Revised Chart of
Accounts prepared for accrual basis
financial reporting.
2. The addition of some sub-object codes; and
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3. Additional expenditure accounts designed

for cash basis budgeting, such as those of
capital outlays.
5. Enumerate descriptions and codes of Fund

Cluster as provided by Joint Circular No. 2014-
1 dated November 7, 2014.
Answer: The Fund Cluster Code Values, as

provided by Joint Circular No. 2014-1, were as
follows:
Fund
Cluster Fund Cluster Description
Code
01 Regular Agency Fund
02 Foreign Assisted Project
Fund
03 Special Accounts – Locally
Funded/Domestic Grants
Fund
04 Special Accounts – Foreign
Assisted/Foreign Grants
Fund
05 Internally Generated Funds
06 Business Related Funds
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07 Trust Receipts
6. Discuss the significance of the enhancement

of Sector and Horizontal Outcomes as provided
by Joint Circular No. 2014-1 dated November 7,
2014.
Answer: As provided by Joint Circular No. 2014-1,

dated November 7, 2014, MFO/PAP Codes is now
a 15-digit code due to enhancement. The
significance of this enhancement is to provide the
ability to track budgets to the sector outcomes,
thus, a 3-digit code for the Sector Outcomes was
added as a prefix of the MFO/PAP Codes. And to
provide the tagging of the horizontal outcomes,
another 2-digit code was added, for Horizontal
Outcomes, next to Sector Outcomes,
7. What is a municipality identifier?
Answer: The Municipality Identifier is a four-digit

number that defines the identity of the
municipality. It is the core of the national
standard geographic system, and is composed of
the Province Code, followed by Municipality Code;
therefore, the municipality identifier not only
identifies the municipality but also the province
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to which it belongs. An added feature of the

municipality identifier is its independence from
the Region Code. Regardless of the region, the
municipality identifier for a certain town remains
the same as long as it is part of that province.
8. Explain the transitory measure to allow
government agencies/operating units sufficient
time in the familiarization of the UACS codes.
Answer: According to the National Budget

Circular No. 554, “Conversion of Codes to
Conform to the UACS,” as a transition measure to
allow Government Agencies/Operating Units
sufficient time in the familiarization of the UACS
codes, the DBM shall still reflect the previous
codes alongside the UACS codes in the release
documents. However, all National Government
Agencies and Operating Units are authorized to
make the necessary conversion of the
appropriate codes, particularly on the funding
source and organization codes, to conform to the
prescribed UACS codes. In case of any
discrepancy noted in the indicated UACS codes
per SARO/NCA vis-à-vis the UACS Manual, the
codes per UACS Manual shall be adopted by the
agency concern.
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1. A
Funding Source Code is an eight-digit code to
reflect the Fund Cluster Source, Financing
Source, Authorization, and Fund Category. The
first two digits are for Fund Cluster which was
included as prefix due to enhancement by Joint
Circular No. 2014-1 dated November 7, 2014.
The next digit is for Financing Source. The next
two digits are for Authorization. And the last
three digits are for the Fund Category
2.D
Location code is a nine-digit code composed of
Region, Province, City/Municipality, and
Barangay.
3. D
Organization Codes is a twelve-digit code to
reflect the Department, Agency and Sub-
Agency or Operating Unit/Revenue Collecting
Unit.
4. D
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For purposes of UACS, Constitutional Offices,

the Judiciary and the Legislature are
categorized as department-level entities.
5. B
A program is an integrated group of activities
that contributes to an agency or department’s
continuing objective. Examples include:
General Administration and Support, Support to
Operations, and Operations.
6. C
For purposes of the UACS, an agency is an
entity under a department whose budget is
directly released to the latter, and may include
the summation of all budgets of sub-agencies
listed under it, if any.
7. B
In order to harmonize budgetary and
accounting code classification that will
facilitate the efficient and accurate financial
reporting of actual revenue collections and
expenditures compared with programmed
revenues and expenditures, the Joint Circular
No. 2013-1 dated August 6, 2013, the
Department of Budget and Management (DBM),
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Commission on Audit (COA), Department of
Finance (DOF), and Bureau of Treasury (BTr)
jointly developed the Unified Accounts Code
Structure (UACS).
8. B
Province is a political corporate unit of
government which consists of a cluster of
municipalities, or municipalities and
component cities. It serves as a dynamic
mechanism for developmental processes and
effective governance of local government units
within its territorial jurisdiction.
9. B
This is the definition of General Fund provided
by GAM.
10. D
This is the definition of New General
Appropriations provided by GAM.
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Chapter 3 – The Revised Chart of Accounts
Questions & Answers
1. Define and discuss the underlying reason why

a chart of accounts is prescribed in New
Accounting System.
Answer: The chart of accounts provides the

framework within which the accounting records
are constructed. It is defined as a list of general
ledger accounts consisting of real and nominal
accounts.
The chart of accounts is prescribed for use by

all national government agencies and local
government units. The description of all the
accounts and the instructions as to when these
are to be debited and credited are provided to
achieve uniformity in the recording of
government financial transactions.
2. Discuss why the Revised Chart of Accounts in

COA Circular No. 2013-002 dated January 30,
2013 was created.
Answer: The Commission on Audit as member of

the International Organization of Supreme Audit
58
Institutions (INTOSAI) is encouraged 1)to adopt
relevant International Accounting Standards. And
2)to provide new accounts for the adoption of the
Philippine Public Sector Accounting Standards
(PPSAS) which were harmonized with the IPSAS
to enhance the accountability and transparency
of the financial reports, and ensure compatibility
of financial information, the COA recognizes the
need to revise the existing NGAS Chart of
Accounts prescribed in COA Cir. No. 2004-008
dated September 20, 2004. 3)The Commission
also recognizes the need for uniform accounts to
be used in the national government accounting
and budget systems to facilitate the preparation
of harmonized financial and budget accountability
reports. Accordingly, the COA revokes COA Cir.
No. 2004-008 and the Revised Chart of Accounts
in Circular No. 2013-002 dated January 30, 2013
is adopted.
3. What are the five (5) classifications of

expenses in the Revised Chart of Accounts in
COA Circular No. 2013-002 dated January 30,
2013? Give the sub-major account group
classifications.
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Answer: Per COA Circular No. 2013-002 dated

January 30, 2013, Revised Chart of Accounts, the
expense accounts are classified into:
1. Personnel
Services:
a. Salaries and wages
b. Other Compensation
c. Personnel Benefit Contributions
d. Other Personnel Benefits
2. Maintenance and Other Operating

Expenses:
a. Traveling Expenses
b. Training and Scholarship
Expenses
c. Supplies and Materials Expenses
d. Utility Expenses
e. Communication Expenses
f. Awards/Rewards and Prizes
g. Survey, Research, Exploration and
Development Expenses
h. Demolition/Relocation and
Desilting/Dredging Expenses
i. Generation, Transmission and
Distribution Expenses
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j. Confidential, Intelligence,
Extraordinary Expenses
k. Professional Expenses
l. General Services
m. Repairs and Maintenance
n. Financial Assistance/Subsidy
o. Taxes, Insurance Premiums and
Other Fees
p. Labor and Wages
q. Other Maintenance and Operating
Expenses
3. Financial Expenses:
Financial Expenses
4. Direct Costs:
a. Cost of Goods Manufactured
b. Cost of Sales
5. Non-Cash Expenses:
a. Depreciation
b. Amortization
c. Impairment Loss
d. Losses
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4. Enumerate the five (5) account code structure

of the Revised Chart of Accounts consisting of
eight (8) mandatory digits. Explain briefly.
Answer: COA Circular No. 2013-002 provides that

the accounts code structure consists of eight (8)
mandatory digits, as follows:
1. Account Group – This represents the
accounts classification as to Assets,
Liabilities, Equity, Income and Expenses.
2. Major Account Group – This represents

classification within the account group;
e.g., for asset major accounts: Cash and
Cash Equivalent, Investment,
Receivables, etc.
3. Sub-Major Account Group – This

represents classification within the major
account group; e.g., for Cash and Cash
Equivalent: Cash on Hand, Cash in Bank –
Local Currency, Cash in Bank – Foreign
Currency, etc.
4. General Ledger Accounts – This

represents the accounts to be presented
in detailed financial statements; e.g.,
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Cash-Collecting Officer, Petty Cash, etc.
This is composed of two segments: the
first two digits from the left is the general
ledger code, and the last digit is reserved
for contra accounts, like: Allowance for
Impairment, Accumulated Depreciation,
etc.
5. General Ledger Contra-Accounts – Contra-

accounts are shown as reduction from the
related accounts, and this includes,
among others, Allowance for Impairment,
Accumulated Depreciation, etc. as shown
in the preceding item (General Ledger
Accounts).
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1. B
Codes are assigned to account groups to
facilitate location of accounts in the general
and subsidiary ledgers, to provide systematic
arrangement and classification of accounts
and facilitate preparation of financial reports.
2. A
Major account group represents classification
within the account group; e.g. for assets major
account: cash and cash equivalents,
investments, receivables, inventories,
investment property, etc.
3. A
Cash and cash equivalent is a major account
group. Asset is an account group. Petty cash is
a general ledger account.
4. A
Due from Non-government
Organization/People’s Organization is other
receivables. Due from Bureaus and Due from
Central Office are intra-agency receivables.
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5. A
Other receivables are other receivables. Due
from GOCC and Due from LGU are inter-agency
receivables.
6. A
Labor and wages account is used to record the
cost incurred for labor and wages, which
include labor payroll paid for projects
undertaken by administration, for agricultural
activities involving hired labor, student wages,
etc. This account is presented as Maintenance
and Other Operating Expenses in the Revised
Chart of Accounts.
7. A
Investment account is a major account group.
Cash in bank – local currency is a sub-major
account group. Treasury bills account is a
general ledger account.
8. B
Liabilities account is an account group. Loans
and receivables account is a sub-major
account group. Sinking fund is a general ledger
account.
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9. C
Financial assets held for trading is a general
ledger account. Allowance for impairment –
investment in treasury bonds account is a
general ledger contra account. Investment is a
major account group.
10. A
The basis for coding the object classification
in the COA Revised Chart of Accounts is
accrual accounting, which requires
transactions to be recorded in the period when
they occur (and not when cash or its equivalent
is received or paid). Thus, the transactions and
events are recorded in the accounting records
and recognized in the financial statements of
the periods to which they relate.
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Chapter 4 – Accounting for Budgetary Accounts
Questions & Answers
1. What is the General Accounting Plan of

government agencies/units? Enumerate and
explain the accounting systems in the NGAS-
National.
Answer: The General Accounting Plan (GAP)

shows the overall accounting system of a
government agency/unit. It includes a) the
source documents, b) the flow of transactions
and its accumulation in the books of accounts
and c) finally the conversion into financial
information/data presented in the financial
reports.
The following are the accounting system:
1. Budgetary Accounts System
The budgetary accounts system

encompasses the processes of preparing
the budget released document (formerly
known as Agency Budget Matrix, but was
replaced by 2014 General Appropriations
Act starting 2014), monitoring and
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recording of allotments received by the

agency from the Department of Budget and
Management, releasing of Sub-Allotment
Advices (SAAs) to Regional Offices (RO) by
the Central Office (CO), issuance of
SAAs/LAAs to Operating Units (OU) by the
Regional Office, and recording and
monitoring of obligations.
2. Receipts/Income and Depository System
This system covers the processes of

acknowledging and reporting
income/collections, deposits of
collections with Authorized Government
Depository Bank (AGDB) or through the
AGDB for the account of Treasurer of the
Philippines, and recording of collections
and deposits in the books of accounts of
the agency. All collecting officers shall
deposit intact all their collections, as well
as collections turned over to them by sub-
collectors/tellers, with their AGDB daily or
not later than the next banking day. They
shall record all deposits made in the Cash
Receipts Record. At the end of each
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business day, the collecting officers shall
accomplish the Report of Collections and
Deposits (RCD).
3. Disbursement System
Disbursements constitute all cash paid out

during a given period either in currency
(cash) or by check. It may also mean the
settlement of government
payables/obligations by cash or by check.
It shall be covered by Disbursement
Voucher (DV)/Petty Cash Voucher (PCV) or
Payroll. The Disbursement System
involves the preparation and processing of
disbursement voucher, preparation and
issuance of check; payment by cash;
granting, utilization, and
liquidation/replenishment of cash
advances.
4. Financial Reporting System
Generally, there are eight steps in the

accounting cycle: analyzing the
transactions, journalizing the
transactions, posting the journal entries,
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70
preparation of trial balance, adjusting the

accounts, closing the accounts,
preparation of the financial statements,
and reversing the accounts. Under the
New Government Accounting System,
financial reporting includes the
preparation and submission of trial
balances, financial statements and other
reports needed by fiscal and regulatory
agencies. The sub-systems are as follows:
(1.) preparation and submission of trial
balances and other reports; and (2.)
preparation and submission of financial
statements.
2.Explain the National Budget.
Answer: The National (Government) Budget is a

plan for financing the government activities for
a fiscal year prepared and submitted by
responsible executive to a representative body
whose approval and authorization are
necessary before the plan can be executed. It
is a definite proposal of estimate or statement
of receipts and expenditures that may be
approved or rejected. As such, it should
70
present a detailed demonstration of the
revenues and expenditures of the government
for the past and ensuing years, and should
furnish not only definite information regarding
the general character, purpose and amount of
government expenditures, but also detailed
data regarding the cost entailed in maintaining
particular units of organization and in
performing particular units of organization and
in performing particular activities. In other
words, it is the financial blueprint of a
country’s development plan.
To strengthen the link between planning and

budgeting and to simplify the presentation of
the budget, the DBM introduced, in the
preparation of the proposed National Budget
for FY 2014, a new approach to budgeting.
Through National Budget Memorandum (NBM)
No. 117, the DBM introduced Performance-
Informed Budgeting (PIB), which will ensure
that public resources are managed more
efficiently and with the greatest degree of
discipline by re-directing funds to programs
that would be responsive to the needs of the
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people especially those in regions beset by

poverty.
3. Enumerate and explain the different kinds of

budget.
Answer: Under the new accounting system, the

different kinds of budget are:
1. As to Nature
a. Annual Budget – a budget which covers a

period of one year. It is the basis of an
annual appropriation.
b. Supplemental Budget – a budget which

supplement or adjust a previous budget
which is deemed inadequate for the
purpose it is intended. It is the basis for a
supplemental appropriation.
c. Special Budget – a budget of special

nature and generally submitted in special
forms on account that itemizations are not
adequately provided in the Appropriation
Act or that the amounts are not at all
included in the Appropriation Act.
2. As to Basis
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a. Performance Budget – a budget
emphasizing the program or services
conducted and based on functions,
activities, and projects, which focus
attention upon the general character and
nature of work to be done, or upon the
services to be rendered.
b. Line-Item Budget – a budget the basis of

which are the objects of expenditures
such as: salaries and wages, traveling
expenses, freight, supplies and materials,
equipment, etc.
3. As to Approach and Technique
a. Zero-Based Budgeting – a process which

requires systematic consideration of all
programs, projects and activities with the
use of define ranking procedures. In this
approach, activities are analyzed and
presented in “decision packages” or key
budgetary inclusions.
b. Incremental Approach – a budget where

only additional requirements need
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justifications. It focuses analysis of

incremental changes in the budget and
maybe done within the context of
performance and program budgeting.
4. Discuss briefly the budget process/cycle.
Answer: The Budget Process/Cycle:
1. Budget Preparation
This covers estimation of government

revenues, the determination of budgetary
priorities and activities within the
constraints imposed by available revenues
and by borrowing limits, and the translation
of approved priorities and activities into
expenditure levels. Estimates are prepared
by the various government agencies,
reviewed and finalized by the President of
the Philippines, and then submitted to the
Legislative Department as basis for the
preparation of the annual Appropriation Act.
The budget preparation begins with the

issuance of a “budget call” by the
Department of Budget and Management. To
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ensure that the National Budget is enacted
on time, the DBM, under the Aquino
Administration, has established a new
tradition of beginning the Budget Preparation
phase earlier. Under the new Budget
Preparation Calendar, the Budget Call is
issued in December, unlike in the past where
it was issued in April; and the submission of
the President’s budget a day after the State
of the Nation Address, in contrast to earlier
practice where it is submitted to Congress
within 30 days from the opening of every
regular session.
2. Legislative Authorization
It is the second phase of the budget process

relative to the enactment of the General
Appropriation Bills based on the budget of
receipts and expenditures submitted by the
President of the Philippines. This phase
starts upon the receipt of the President’s
Budget by the House Speaker and ends with
the President’s enactment of the General
Appropriation Act.
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The House of Representatives, in plenary,

assigns the President’s Budget to the House
Appropriations Committee, which conduct
hearing and scrutinize their respective
programs and projects. It then crafts the
General Appropriation Bill (GAB). In plenary
session, the GAB is sponsored, presented
and defended by the Appropriations
Committee and Sub-Committee Chairmen.
Normally, after receiving the GAB from the

House of Representatives, the Senate
conducts its own committee hearings and
plenary deliberations on the GAB. Once both
Houses of Congress have finished their
deliberations, they will each constitute a
panel to the Bicameral Conference
Committee. This committee will then discuss
and harmonize the conflicting provisions of
the House and Senate Versions of the GAB.
The Harmonized or “Bicam” Version is then

submitted to both Houses, which will then
vote to ratify the final GAB for submission to
the President. Once submitted to the
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President for his approval, the GAB is
considered enrolled. The President and DBM
then review the GAB and prepare a Veto
Message, where budget items subjected to
direct veto or conditional implementation are
identified, and where general observations
are made. Under the Constitution, the GAB is
the only legislative measure where the
President can impose a line-veto (in all other
cases, a law is either approved or vetoed in
full).
Appropriations are approved by the

legislative body in form of
(1) a General Appropriation Law which
covers most of the expenditures of
government;
(2) Continuing Appropriations for
various public works projects;
(3) Supplemental Appropriations laws
that are passed from time to time, to
augment or correct an already existing
appropriation; and
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(4) Certain automatic appropriations

intended for fixed and specific
purposes.
3. Budget Execution and Operation
The third phase of the budget process covers

the various operational aspects of budgeting.
This phase of budget cycle begins with
DBM’s issuance of guidelines on the release
and utilization of funds. Agencies are
required to submit their Budget Execution
Documents (BEDs) at the start of budget
execution. These documents outline agency
plans and performance targets. The DBM set
a limit for allotments issued to an agency and
on the aggregate by preparing an Allotment
Release Program (ARP). A Cash Release
Program (CRP) is also formulated alongside
to set a guide for disbursement levels for the
year and for every month and quarter.
In implementing programs, activities and

projects, agencies incur liabilities on behalf
of the government. Obligations are liabilities
legally incurred, which the government will
pay for. To authorize an agency to pay the
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obligations it incurs, DBM issues a
disbursement authority. Most of the time, it
takes the form of a Notice of Cash Allocation
(NCA); and in special cases, the Non-Cash
Availment Authority (NCAA) and Cash
Disbursement Ceiling (CDC).
4. Budget Accountability
The last phase of budget process consists of

the following: (1) periodic reporting by the
government agencies of performances under
their approved budget; (2) top management
review of government activities and the
fiscal policy implementations thereof; and (3)
the actions of Commission on Audit in
assuring the fidelity of officials and
employees by carrying out the intent of the
National Assembly regarding the handling of
receipts and expenditures.
This phase happens alongside the Budget

Execution phase. Through Budget
Accountability, the DBM monitors the
efficiency of fund utilization, assesses
agency performance and provides a vital
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basis for reforms and new policies. Agencies

are held accountable not only for how these
use public funds ethically, but also on how
these attain performance targets and
outcomes using available resources.
Submitted by agencies on a monthly and
quarterly basis, 1) Budget Accountability
Reports (BARs) are required reports that
show how agencies used their funds and
identify their corresponding physical
accomplishments. 2) An annual Budget
Performance Assessment Review (BPAR) is
conducted to determine each agency’s
accomplishments and performance by the
year-end. The DBM regularly reports results
to the President.
Auditing is not within the DBM’s jurisdiction,

and is instead lodged under the Commission
on Audit (COA). Nonetheless, auditing is
critical in ensuring agency accountability in
the use of public funds. The DBM uses COA’s
audit reports in confirming agency
performance, determining budgetary levels
for agencies and addressing issues in fund
usage.
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5. Enumerate and explain the Budgetary accounts.
Answer: Budgetary accounts consist of the

following:
1. Appropriation – an authorization made by

law or other legislative enactment,
directing payment of goods and services
out of government funds under specific
conditions or for special purpose.
2. Allotment – an authorization issued by the

Department of Budget and Management to
the government agency, which allows it to
incur obligations, for specified amounts,
within the legislative appropriation.
3. Obligation – a commitment by a
government agency arising from an act of
duly authorized official which binds the
government to the immediate or eventual
payment of a sum of money.
6. Explain the Performance-Informed Budgeting.
Answer: Performance-Informed Budgeting is a

budgeting approach that uses performance
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information to assist in deciding where the funds

will go. Performance information, both financial
and non-financial information, is presented in the
appropriations document, which provides the
context for the programs, activities and projects
pursued by the different agencies of government.
Performance information typically includes the
following:
1. The purpose for the funds required.
2. The outputs that would be produced or the
services that would be rendered.
3. The outcomes that would be achieved by
the outputs and/or services.
4. The cost of the programs and activities
proposed to achieve the objectives.
Performance-informed budgeting differs from

the traditional line item-based budgeting in a
way that it focuses more on outputs and
outcomes and places less emphasis on the
inputs. It links funding to results, and provides
a framework for more informed resource
allocation and management. This new face of
the National Budget will no longer contain an
excessively detailed line item document, but a
budget that presents performance information
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aligned to planned resources that promises to
be understandable and accessible to the
people because of its simplicity.
7. Enumerate and explain the obligational

authorities prescribed by the Government
Accounting Manual (GAM)
Answer: Obligational Authority or Allotment – the

following are the documents which authorize the
entity to incur obligations:
a) General Appropriation Act Release
Document (GAARD)
This serves as the obligational authority

for the comprehensive release of
budgetary items appropriated in the
General Appropriation Act (GAA),
categorized as For Comprehensive
Release (FCR). This will abolish the
lengthy process of releasing allotments
to departments and agencies; thereby,
enhancing the operational efficiency of
all agencies across the bureaucracy,
allowing the DBM to speed up
government disbursements and fast-
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track the implementation of programs

and projects set for the year.
b) Special Allotment Release Order (SARO)
This covers budgetary items under For

Later Release (FLR) (negative list) in the
entity submitted Budget Execution
Documents (BEDs), subject to
compliance of required
documentats/clearances. Releases of
allotments for Special Purpose Funds
(SPFs) (e.g., Calamity Fund, Contingent
Fund, E-Government Fund, Feasibility
Studies Fund, International
Commitments Fund, Miscelaneous
Personnel Benefits Fund, and Pension
and Gratuity Fund) are also covered by
SAROs.
c) General Allotment Release Order

(GARO)
This is a comprehensive authority

issued to all national government
agencies, in general, to incur
obligations not exceeding an authorized
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amount during a specified period for the
purpose indicated therein. It covers
automatically appropriated
expenditures common to most, if not all,
agencies without need of special
clearance or approval from competent
authority.
8. Enumerate and explain the disbursement

authorities prescribed by GAM.
Answer: Disbursement Authority – the following

documents authorize the entity to pay
obligations and payables:
a. Notice of Cash Allocation (NCA)
This is the authority issued by the DBM

to central, regional, and provincial
offices and operating units to pay
operating expenses, purchases of
supplies and materials, acquisition of
PPE, accounts payable, and other
authorized disbursements through the
issue of Modified Disbursements System
(MDS) checks, Authority to Debit
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Account (ADA) or other modes of

disbursements.
b. Non-Cash Availment Authority (NCAA)

to agencies to cover the liquidation of
their actual obligations incurred against
available allotments for availment of
proceeds from loans/grants through
supplier’s credit/constructive cash.
c. Cash Disbursements Ceiling (CDC)

to the Department of Foreign Affairs
(DFA) and Department of Labor and
Employment (DOLE) to utilize their
income collected/retained by their
Foreign Service Posts (FSPs) to cover
their operating requirements, but not to
exceed the released allotment to the
said post.
d. Notice of Transfer of Allocation (NTA)
This is the authority issued by the

Central Office to its regional and
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operating units to pay their operating
expenses, purchases of supplies and
materials, acquisition of PPE, accounts
payable, and other authorized
disbursements through the issue of MDS
checks, ADA or other modes of
disbursements.
9. Explain briefly the tax remittance advice (TRA)
Answer: Pursuant to the Tax Remittance Advice

(TRA) System, as provided for in Joint Circular
No. 1-2000 dated January 3, 2000, as amended
by JC No. 1-2MOA dated July 31, 2001 of the
Department of Finance, the Department of
Budget and Management and the Commission
on Audit, the Notice of Cash Allocation (NCA)
released to the government agency is reduced
by the amount of the estimated taxes expected
to be remitted by the agency through the Tax
Remittance Advice. Estimated taxes are
computed based on the following percentages:
Personnel Services – 8%; Maintenance and
Other Operating Expenses – 5%; and Capital
Outlay – 5%. The Notice of Cash Allocation
received by the government agency from the
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Department of Budget and Management is net

of the applicable percentage of Tax Remittance
Advice based on the Notice of Cash Allocations
received.
10.What are the documents/reports, which are

required by the DBM to be submitted on a
regular basis? Explain briefly.
Answer: National Budget Circular No. 507

provides that the Department of Budget and
Management required agencies to submit, on a
regular basis, a) Budget Execution Documents
(BEDs) and b) Budget Accountability Reports
(BARs). Budget Execution Documents are
annual documents required on the onset of the
budget execution phase that contain the
agencies’ targets and plans for the current
year; while Budget Accountability Reports are
reports which contain information on the
agencies’ actual
accomplishments/performance for a given
period.
1. B
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This is the definition of budgetary accounting.
2. D
The national budgetary system consists of
methods and practices of the government for
planning, programming and budgeting. Its
primary concern is the availability and use of
money to provide the necessary services
expected of the government.
3. C
The national government budget is a statement
of estimated receipts based on existing and
proposed revenue measures, and of estimated
expenses, which serves as the basis for a
general appropriation bill.
4. A
Pursuant to Sec. 22, Article VII of the Philippine
Constitution, the President of the Philippines
shall submit to Congress within 30 days from
the opening of every regular session, as the
basis of the general appropriation bill, a budget
of expenditures and sources of financing,
including receipts from existing and proposed
revenue measure.
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5. B
This phase of budget process/cycle involves
the review and approval of the budget by the
legislative and the formulation of an
appropriation bill.
6. C
the implementation of the budget by different
government agencies.
7. B
the comparison of performance with
predetermined plans. The expenditures and
performance are evaluated.
8. D
This is pursuant to Sec. 29(1), Article VI of the
1987 Constitution.
9. A
Pursuant to Sec. 2(1), Bk VI, 1987 Adm. Code,
appropriations refers to an authorization made
by law or other legislative enactment, directing
the payment of goods and services out of
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government funds under specified conditions or
for special purposes.
10. C
This is the definition of allotment.
11. A
This is the definition of obligation.
12. A
This is the definition of program.
13. A
Under the new accounting system, government
agencies/units shall now journalize the receipt
of Notice of Cash Allocation using this journal
entry. Likewise, the accountant of government
agency shall credit “Cash – National Treasury,
MDS” each time payment is made charged
against the Notice of Cash Allocation.
14. C
In government accounting, budgetary
accounts consist of the following:
1. Appropriation – an authorization made by

law or other legislative enactment,
directing payment of goods and services
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out of government funds under specific

conditions or for special purpose.
2. Allotment – an authorization issued by the

Department of Budget and Management to
the government agency, which allows it to
incur obligations, for specified amounts,
within the legislative appropriation.
3. Obligation – a commitment by a
government agency arising from an act of
duly authorized official which binds the
government to the immediate or eventual
payment of a sum of money.
15. A
The Allotment Release Order is a formal
document issued by the Department of Budget
and Management to the head of the agency
containing the authorization, conditions and
amount of an agency allocation. The document
may be the 2014 General Appropriations Act
(GAA), a budget release document that
replaced the Agency Budget Matrix (ABM), or
the Special Allotment Release Order (SARO).
16. D
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The accounts personnel services include basic
pay, all authorized allowances, bonus, cash
gifts, incentives and other personnel benefits
of official and employees of the government.
Telephone charge, Rent, and Meal allowance

for overtime work are incorrect because these
are maintenance and other operating
expenses.
17. C
Purchase and/or construction of fixed assets
such as building and structures, land, land
improvements, equipment, etc. are charged
against the capital outlay.
Salaries and wages account is incorrect

because this is Personnel service. Repairs and
maintenance is incorrect because this is
maintenance and other operating expense.
Merchandise inventory is incorrect because
this is current asset.
18. C
Budget Execution Documents is the annual
documents required by the DBM at the onset of
the budget execution phase, which contain the
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following: 1.) Physical and Financial Plan, 2.)

Monthly Disbursements Program, 3.) Estimate
of Monthly Income, and 4.) List of Not Yet Due
and Demandable Obligations.
19. A
Physical and Financial Plan is a budget
execution document that serves as overall plan
of the government agencies encompassing the
physical and financial aspects, consistent with
their approved budget level for the year, broken
down by quarter.
20. D
Statement of Allotment, Obligations and
Balances is a budget accountability report
which serve as the agencies’ summary report
of allotments received and corresponding
obligations incurred during the month from all
sources by object of expenditure, and shall be
reported on monthly basis. Monthly
Disbursements Program, list not yet due and
demandable obligations, and estimate of
monthly income are budget execution
documents.
21. B
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Notice of Cash Allocation (NCA) is a
disbursement authority use for payment of
personnel services, maintenance and other
operating expenses, capital outlay, financial
expenses, foreign assisted projects, and prior
years/current years’ accounts payable.
22. C
NBC No. 550 set the deadline for agency
submission of the BEDs to DBM on November
30. This deadline was reiterated in NBC No. 551
dated January 2, 2014.
23. C
Balanced budget is a budget where the
proposed expenditures are equal to or less
than the estimated revenues. Currently, the
government is operating with a budget
deficiency. As such, it is serving government
priorities to achieve a balanced budget by
increasing revenues and cutting on
expenditures.
24. A
Performance-Informed Budgeting is a
budgeting approach that uses performance
information to assist in deciding where the
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funds will go. Performance information, both

financial and non-financial information, is
presented in the appropriations document,
which provides the context for the programs,
activities and projects pursued by the different
agencies of government.
25. B
It is the second phase of the budget process
relative to the enactment of the General
Appropriation Bill based on the budget of
receipts and expenditures, generally,
submitted by the President of the Philippines
within 30 days from the opening of its regular
session, as the basis of the general
appropriation bill. However, in contrast, the
submission of the President’s budget under the
Aquino Administration is a day after the State
of the Nation Address. This is to ensure that
the National Budget is enacted on time. This
phase starts upon the receipt of the
President’s Budget by the House Speaker and
ends with the President’s enactment of the
General Appropriation Act.
26. C
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Line item budget is a budget the basis of which
is the object of expenditures such as: salaries
and wages, travelling expenses, freight,
supplies and materials, equipment, etc.
27. B
Special budget is a budget of special nature
and generally submitted in special forms on
account that itemization are not adequately
provided in the Appropriation Act or that the
amounts are not at all included in the
Appropriation Act.
28. C
The budget preparation begins with the
issuance of a “Budget Call” by the DBM. This
document outlines the priority areas of
government activity applicable to the budget
year, which begins a year and one month
hence.
29. B
Janitorial services account is a professional
service under Maintenance and Other
Operating Expenses.
30. A
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To facilitate the swift and efficient

implementation of the government
administration’s expenditure program, the
Department of Budget and Management (DBM)
phased-out the Agency Budget Matrix (ABM)
from the budget process starting 2014. The
General Appropriations Act Release Document
(GAARD), as a budget release document, shall
serve as obligational authority and will replace
the ABM, in order to eliminate the need to
prepare ABM; thereby, abolishing the lengthy
and elaborate process of releasing allotments
to departments and agencies.
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Suggested Answers to Problems: (Chapter 4)
1.
Released Released Unfunded
Allotments NCA Allotments
150,000 120,000 30,000
120,000 90,000 30,000
230,000 200,000 30,000
14,000 12,000 2,000
Special Purpose
Fund
150,000 125,000 25,000
Total 547,000 117,000

664,000
2.
Obligations Unobligated
Released Incurred Allotments
Allotments
150,000 100,000 50,000
120,000 80,000 40,000
230,000 180,000 50,000
14,000 10,000 4,000
Special Purpose
Fund
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100
150,000 120,000 30,000
Total 490,000 174,000

664,000
3.
Cash – MDS, Regular 547,000
Subsidy income from 547,000
national government
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Chapter 5 – Accounting for Disbursements and
Related Transactions
Questions & Answers
1. Enumerate the fundamental principles for the

disbursement of public funds.
Answer: All financial transactions and operations

of any government entity shall be governed by the
following fundamental principles provided in
Section 4 of P.D. No. 1445, the Government
Auditing Code of the Philippines: a) No money
shall be paid out of any public treasury or
depository except in pursuance of an
appropriation law or other specific statutory
authority; b) Government funds or property shall
be spent or used solely for public purposes; c)
Trust funds shall be available and may be spent
only for the specific purpose for which the trust
was created or the funds received; d) Fiscal
responsibility shall, to the greatest extent, be
shared by all those exercising authority over the
financial affairs, transactions, and operations of
the government agency; e) Disbursement or
disposition of government funds or property shall
invariably bear the approval of the proper
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officials; f) Claims against government funds shall

be supported with complete documentation; g) All
laws and regulations applicable to financial
transactions shall be faithfully adhered to; and h)
Generally accepted principles and practices of
accounting as well as of sound management and
fiscal administration shall be observed, provided
that they do not contravene existing laws and
regulations.
2. Identify the basic requirements and

certifications for disbursement of public funds.
Answer: The following are the basic requirements

and certifications for disbursements of
government: a) Availability of allotment/budget
for obligation/utilization certified by the Budget
Officer/Head of Budget Unit; b)
Obligations/Utilizations properly charged against
available allotment/budget by the Chief
Accountant/Head of Accounting Unit; c)
Availability of funds certified by the Chief
Accountant; d) Availability of cash certified by the
Chief Accountant; e) Legality of the transactions
and conformity with existing rules and
regulations; f) Submission of proper evidence to
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establish validity of the claim; and g) Approval of
the disbursement by the Head of Agency or by his
duly authorized representative.
3. Explain the use of Notice of Cash Allocation.
Answer: The NCA shall be the authority of an

agency to pay operating expenses, purchases of
supplies and materials, acquisition of PPE,
accounts payable, and other authorized
disbursements through the issue of a MDS
checks, b) ADA (AUTHORITY TO DEBIT
ACCOUNT) or c) other modes of disbursements.
The NCA specifies the maximum amount of
withdrawal that an entity can make from a
government bank for the period indicated.
4. Explain the use of Notice of Transfer of

Allocation.
Answer: The NTA shall be the authority of the

regional and operating units to pay their operating
expenses, purchases of supplies and materials,
acquisition of PPE, accounts payable, and other
authorized disbursements through the issue of a)
MDS checks, b) ADA or c) other modes of
disbursements.
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5. Enumerate and discuss the two types of checks

being issued by government agencies.
Answer: There are two types of checks being

issued by government agencies as follows: a)
Modified Disbursement System Checks – are
checks issued by government agencies
chargeable against the account of the Treasurer
of the Philippines, which are maintained with
different MDS-GSBs; and b) Commercial Checks –
are checks issued by NGAs chargeable against
the Agency Checking Account with GSBs. These
shall be covered by income/receipts authorized to
be deposited with AGDBs.
6. List down the COA rules and regulations (and

other issuances) governing the grant and
liquidation of cash advances.
Answer: The COA rules and regulations (and other

issuances) governing the grant and liquidation of
cash advances are as follows: a)No cash advance
shall be given unless for a legally authorized
specific purpose; b) A cash advance shall be
reported on and liquidated as soon as the purpose
for which it was given has been served; c) No
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additional cash advance shall be allowed to any
official or employee unless the previous cash
advance given to him/her is first settled/liquidated
or a proper accounting thereof is made; d) Except
for cash advance for official travel, no officer or
employee shall be granted cash advance unless
he/she is properly bonded in accordance with
existing laws or regulations. The amount of cash
advance which may be granted shall not exceed
the maximum cash accountability covered by
his/her bond; e) Only permanently appointed
officials shall be designated as disbursing
officers; f) Only duly appointed or designated
disbursing officer may perform disbursing
functions. Officers and employees who are given
cash advances for official travel need not be
designated as Disbursing Officers; g) Transfer of
cash advance from one accountable officer to
another shall not be allowed; and h) The cash
advance shall be used solely for specific legal
purpose for which it was granted. Under no
circumstance shall it be used for encashment of
checks or for liquidation of a previous cash
advance.
7. Discuss what a Tax Remittance Advice is.

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Answer: The Tax Remittance Advice (TRA) refers

to a serially-numbered document prescribed by
the DBM that should be used by the NGAs in the
remittance of withheld taxes on funds coming
from DBM. With the inclusion of all NGAs among
the taxpayers who are mandated to use the
Electronic Filing and Payment System (eFPS)
under the Bureau of Internal Revenue Regulations
No. 1-2013 dated January 23, 2013, the TRA is
accomplished on-line which is called the
Electronic TRA (eTRA). The eTRA is certified
correct by the Chief Accountant/Head of
Accounting Division/Unit and approved by the
Head of Agency/Authorized Official, and used to
record the remittance of taxes withheld to the
BIR. The same document shall be the basis for
the BIR and the BTr to draw a JEV to record the
tax collection and deposit in their respective
books of accounts. The JEV shall be recorded in
the GJ. The eTRA shall be supported with the
Summary of Taxes Withheld (STW) certified by the
Chief Accountant. The STW is the document
which summarizes the type and amount of taxes
withheld. The Accounting Division/Unit shall
maintain SL to monitor remittances of taxes
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withheld from individual employees, suppliers and
contractors.
8. Define and discuss what a Cash Disbursement

Ceiling is.
Answer: CDC is an authorization issued by the

DBM to DFA and other agencies with foreign posts
to utilize their collections retained by their
Foreign Service Posts to cover operating
requirements, but not to exceed the released
allotment to the said post. The following are the
accounting policies regarding disbursements by
Foreign-based Government Agencies: a) Based on
the proposed budget of FSP/Foreign Attaché, a
Working Fund shall be established to cover
payment of PS and MOOE. The Finance Officer
shall be required to maintain CBReg and CDReg to
monitor and control the Working Fund; and b) All
disbursements from the Working Fund shall be
covered by duly approved DV/Payroll with the
required SDs. At the end of the month, the
Finance Officer of FSPs/Foreign Attachés shall
prepare and submit RCDisb together with the SDs
to the Central
107
108
Office concerned for preparation of JEV to

record the liquidation made by the accountable
officer. The JEV shall be recorded in the CkDJ
and CDJ based on the CBReg and CDReg,
respectively.
Answer to Multiple Choices (Chapter 5)
1. B
2. B
3. B
4. D
5. C
6. A
7. B
8. B
9. B
10. A
11. C
12. A
13. C
14. C
15. D
16. B
17. A
18. C
108
19. A
20. B
Answers to Problems (Chapter 5)
1-A
Cost per unit P4,950,000/6 units P825,000
If the promotional item received is the same

as the PPE purchased, the total purchase
price shall be allocated to the total quantity
purchased plus the promotional item.
B-
(Constructive receipt of NCA for withholding
tax.)
1010 297,
Cash - TRA
4070 000
Subsidy from
4030
National 297,000
1010
Government
(Payment of accounts payable.)

2010 4,950
Accounts payable
1010 ,000
Cash – MDS, 1010
4,653,000
Regular 4040
109
110
2020
Due to BIR 297,000
1010
(Remittance of withholding tax through TRA.)

2020
Due to BIR 297,000
1010
1010 297,00
Cash - TRA
4070 0
2-A
Cost per 12,000 – 1,200)/6 P1,800
unit units
If the promotional item received is different

from the PPE purchased, the fair value of the
promotional item shall be the cost of the
promotional item and deducted from the total
price paid. The balance shall be allocated to
the total quantity purchased.
B-
(Purchase of furniture and fixtures.)
1060
Furniture and fixtures 10,800
7010
2010
Accounts payable 10,800
1010
110
(Receipt of promotional item.)
1060
Office equipment 1,200
5020
2010
1010
(Payment of accounts payable.)

2010
1010
1010 11,28
Cash – MDS, Regular
4040 0
2020
Due to BIR 720
1010
Note: Tax rates: VAT is 5% and EWT for

goods is 1%.
(Remittance of withholding tax to BIR.)

2020
Due to BIR 720
1010
Subsidy from 4030
720
national government 1010
Based on requirement “b”, the NCA received

is net of TRA. In other words, the subsidy from
national government recorded by the agency
111
112
upon receipt of NCA does not include the

portion for TRA; thus, the above journal entry.
112
Chapter 6 – Accounting for Income, Collections
and Related Transactions
Questions & Answers
1. Differentiate revenue from revenue funds.
Answer: Revenue pertains to the gross inflow of

economic benefits or service potential during the
reporting period when those inflows result in an
increase in net assets/equity, other than
increases relating to contributions from owners.
Revenue funds on the other hand comprise all

funds derived from the income of any agency of
the government and available for appropriation or
expenditure in accordance with law.
2. Enumerate the fundamental principles

governing revenues accruing to the NGAs.
Answer: Revenues accruing to the NGAs are

governed by the following fundamental principles:
a) Unless otherwise specifically provided by law,
all revenues accruing to an entity by virtue of the
provisions of existing law, orders and regulations
shall be deposited/remitted in the National
Treasury (NT) or in any duly authorized
113
114
government depository, and shall accrue to the

General Fund (GF) of the NG; b) Except as may
otherwise be specifically provided by law or
competent authority, all moneys and property
officially received by a public officer in any
capacity or upon any occasion must be accounted
for as government funds and government
property; c) Amounts received in trust and from
business-type activities of government may be
separately recorded and disbursed in accordance
with such rules and regulations as may be
determined by a Permanent Committee composed
of the Secretary of Finance as Chairman, and the
Secretary of Budget and Management and the
Chairman, COA, as members;
d) Receipts shall be recorded as revenue of

Special, Fiduciary or Trust Funds or Funds other
than the GF, only when authorized by law as
implemented by rules and regulations issued by
the Permanent Committee; e) No payment of any
nature shall be received by a collecting officer
without immediately issuing an official in
acknowledgement thereof. The receipt may be in
the form of postage, internal revenue or
documentary stamps and the like, officially
114
numbered receipts, subject to proper custody,
accountability, and audit; f) Where mechanical
devices (e.g. electronic official receipt) are used
to acknowledge cash receipts, the COA may
approve, upon request, exemption from the use of
accountable forms; g) At no instance shall
temporary receipts be issued to acknowledge the
receipt of public funds; h) Pre-numbered ORs shall
be issued in strict numerical sequence. All copies
of each receipt shall be exact copies or carbon
reproduction in all respects of the original; i) An
officer charged with the collection of revenue or
the receiving of moneys payable to the
government shall accept payment for taxes, dues
or other indebtedness to the government in the
form of checks issued in payment of government
obligations, upon proper endorsement and
identification of the payee or endorsee. Checks
drawn in favor of the government in payment of
any such indebtedness shall likewise be
accepted by the officer concerned. At no
instance should money in the hands of the CO be
utilized for the purpose of cashing private checks;
and j) Under such rules and regulations as the
COA and the Department of Finance (DOF) may
115
116
prescribe, the Treasurer of the Philippines and all

AGDB shall acknowledge receipt of all funds
received by them, the acknowledgement bearing
the date of actual remittance or deposit and
indicating from whom and on what account it was
received.
3. Discuss when revenues are accrued to the

General fund or Special, Fiduciary or Trust
Funds.
Answer: All revenues (income) accruing to the

departments, offices and agencies by virtue of the
provisions of existing laws, orders and
regulations shall be deposited in the NT or in the
duly authorized depository of the Government and
shall accrue to the General Fund of the
Government, unless otherwise specifically
provided by law.
Receipts shall be recorded as revenue of Special,

Fiduciary or Trust Funds (TF) or Funds other than
the GF, only when authorized by law and following
such rules and regulations as may be issued by
the Permanent Committee consisting of the
Secretary of Finance as Chairman, and the
116
Secretary of the Budget and the Chairman,
Commission on Audit, as members.
4. Identify and differentiate the sources of

revenue of NGAs.
Answer: The sources of revenues of NGAs are a)

exchange and b) non-exchange transactions.
Exchange transactions are transactions in which

one entity receives assets or services, or has
liabilities extinguished, and directly gives
approximately equal value (primarily in the form
of cash, goods, services, or use of assets) to
another entity in exchange.
Non-exchange transactions are transactions in

which an entity either receives value from
another entity without directly giving
approximately equal value in exchange, or gives
value to another entity without directly receiving
approximately equal value in exchange.
5. How are exchange and non-exchange

transactions recognized and measured?
117
118
Answer: Revenue from exchange transaction

shall be measured at fair value of the
consideration received or receivable and it shall
be recognized when it is probable that future
economic benefits or service potential will flow to
the entity and these benefits can be measured
reliably.
On the other hand, the cash basis of accounting

shall be applied by all government agencies in the
recognition of revenue from non-exchange
transaction until a reliable model of measurement
of this revenue is developed. Revenue from non-
exchange transactions shall be measured at the
amount of the increase in net assets recognized
by the entity, unless it is also required to
recognize a liability. Where a liability is
recognized and subsequently reduced, because
the taxable event occurs, or a condition is
satisfied, the amount of the reduction in the
liability will be recognized as revenue.
6. Identify the sources of revenue of NGAs under

exchange and non-exchange transactions.
118
Answer: Revenues received by the NGAs from
exchange transactions are derived from the a)
sale of goods or provisions of services to third
parties or to other NGAs and b) use by other
entity of assets yielding interest, royalties and
dividends or similar distributions while revenue
of the NGAs from non-exchange transactions are
derived mostly from taxes, gifts and donations,
goods in kind and fines and penalties.
7. Discuss what a Dishonored Check is.
Answer: A check is dishonored either by non-

payment or non-acceptance.
Dishonor by non-payment occurs when (a) the

check is duly presented for payment and
payment is refused or cannot be obtained; or (b)
presentment is excused and the check is
overdue and unpaid.
Dishonor by non-acceptance happens when (a)

the check is duly presented for acceptance,
and such an acceptance as is prescribed by law
is refused or cannot be obtained; or (b)
presentment for acceptance is excused and
the check is not accepted.
119
120
A dishonored check may also be defined as a

check paid to the agency that was dishonored
by the AGDB due to “Drawn Against Insufficient
Fund (DAIF)” or “Drawn Against Uncleared
Deposits (DAUD).”
8. How is Cash Shortage/Overage of Disbursing

Officer accounted for by NGAs?
Answer: Cash overage discovered by the Auditor

that cannot be satisfactorily explained by the
Disbursing Officer shall be forfeited in favor of the
government and an official receipt shall be issued
by the Collecting Officer/Cashier. The cash
overage shall be taken up as Miscellaneous
Income. Cash shortage which is not restituted by
the Disbursing Officer despite demand in writing
by the Auditor shall be taken up as receivable
from the Disbursing Officer.
9. Define and provide the accounting treatment

for Cancelled Checks.
Answer: Checks may be cancelled when they

become a) stale, b) voided or c) spoiled. The
depository bank considers a check stale, if it has
been outstanding for over six months from date of
120
issue or as prescribed. A stale, voided or spoiled
check shall be marked cancelled on its face and
reported as follows: a) Voided, spoiled or
unclaimed stale checks with the Cashier shall be
reported as cancelled in the List of Unreleased
Checks that will be attached to the RCI (report or
registry of checks issued) and b) New checks may
be issued for the replacement of stale/spoiled
checks in the hands of the payees or holders in
due course, upon submission of the stale/spoiled
checks to the Accounting Division/Unit. A
certified copy of the previously paid DVs shall be
attached to the request for replacement. A JEV
shall be prepared to take up the cancellation. The
replacement check shall be reported in the RCI.

1. C
2. D
3. C
4. A
5. B
6. D
7. B
8. D
9. B
121
122
10. C
11. C
12. C
13. B
14. C
15. C
16. B
17. A
18. A
19. D
20. B
Chapter 7 – Trial Balance, Financial Reports and

Statements
Questions & Answers

1. Discuss the purpose of Financial Statements.
122
Answer: The purpose of general purpose
Financial statements is to provide information
about the financial position, financial
performance, and cash flows of an entity that is
useful to a wide range of users in making and
evaluating decisions about the allocation of
resources.
Specifically, the objectives of general purpose

financial reporting in the public sector are a)
to provide information useful for decision
making, and b) to demonstrate the
accountability of the entity for the resources
entrusted to it.
General purpose financial statements can also

have a predictive or prospective role, providing
information useful in predicting the level of
resources required for continued operations, the
resources that may be generated by continued
operations, and the associated risks and
uncertainties.
2. Who is/are responsible for the preparation of

Financial Statements?
123
124
Answer: The responsibility for the preparation of

the FSs rests with the head of the
entity/department central office (COf) or regional
office (RO) or operating unit (OU) or his/her
authorized representative jointly with the head of
the finance/accounting division/unit for individual
entity/department FSs; and for department/entity
FSs as a single entity, the responsibility for the
preparation of the FSs rests with the head of the
entity/department COf jointly with the head of the
finance unit.
3. Define what a Statement of Management

Responsibility is.
Answer: A The Statement of Management

Responsibility for Financial Statements shall
serve as the covering letter in transmitting the
entity financial statements to the COA, and other
regulatory agencies and other entities. It shows
the entity’s responsibility for the preparation and
presentation of the financial statements.
4. Enumerate and explain briefly the Components

of General Purpose Financial Statements
124
Answer: A complete set of financial statements
(condensed and by fund cluster) to be submitted
by an entity shall include the following:
a) Statement of Financial Position - is a

formal statement which shows the
financial condition of the entity as at a
certain date. It includes information on
the three elements of financial position,
namely, assets, liabilities and equity. The
Statement of Financial Position shall be
presented in comparative, detailed and
condensed format.
b) Statement of Financial Performance -

shows the results of
operation/performance of the entity at the
end of a particular period. All items of
revenue and expense recognized in a
period shall be included in surplus or
deficit unless a PPSAS requires otherwise.
c) Statement of Changes in Net Assets/Equity

- The Statement of Changes in Net
Assets/Equity shows the changes in equity
between two accounting periods
125
126
reflecting the increase or decrease in the

entity’s net assets during the year.
d) Statement of Cash Flows - summarizes the

cash flows from operating, investing and
financing activities of an entity during a
given period. It identifies the sources of
cash inflows, the items on which cash was
expended during the reporting period, and
the cash balance as at the reporting date.
Cash flow information provides users of
financial statements with a basis to
assess (a) the ability of the entity to
generate cash and cash equivalents, and
(b) the needs of the entity to utilize those
cash flows.
e) Statement of Comparison of Budget and

Actual Amounts – A separate additional
financial statement for comparison of
budget and actual amounts shall be
prepared since the financial statements
and budget of NGAs are not on the same
accounting basis.
126
f) Notes to the Financial Statements -
comprising a summary of significant
accounting policies and other explanatory
notes. Notes to financial statements are
integral parts of the financial statements.
Notes provide additional information and
help clarify the items presented in the
financial statements. It provides narrative
description or disaggregation of items in
the financial statements and information
about them that do not qualify for
recognition.
5. Identify and discuss briefly the qualitative

characteristics of Financial Statements.
Answer: An entity shall present information

including accounting policies in a manner that
meets the following qualitative characteristics
enumerated in PPSAS 1:
a. Understandability – information is
understandable when users might
reasonably be expected to comprehend its
meaning. For this purpose, users are
assumed to have a reasonable knowledge of
127
128
the entity’s activities and the environment in

which it operates, and to be willing to study
the information. Information about complex
matters should not be excluded from the
financial statements merely on the grounds
that it may be too difficult for certain users
to understand.
b. Relevance – information is relevant to users

if it can be used to assist in evaluating past,
present or future events or in confirming, or
correcting, past evaluations. In order to be
relevant, information must also be timely.
c. Materiality – the relevance of information is

affected by its nature and materiality.
Information is material if its omission or
misstatement could influence the decisions
of users or assessments made on the basis
of the financial statements. Materiality
depends on the nature or size of the item or
error, judged in the particular circumstances
of its omission or misstatement.
d. Timeliness – the usefulness of financial

statements is impaired if they are not made
128
available to users within a reasonable period
after the reporting date. Ongoing factors
such as the complexity of an entity’s
operations are not sufficient reason for
failing to report on a timely basis. More
specific deadlines are dealt with by
legislation and regulations in many
jurisdictions.
If there is an undue delay in the reporting of

information, it may lose its relevance. To
provide information on a timely basis, it may
often be necessary to report before all
aspects of a transaction are known, thus
impairing reliability. Conversely, if reporting
is delayed until all aspects are known, the
information may be highly reliable but of
little use to users who have had to make
decisions in the interim. In achieving a
balance between relevance and reliability,
the overriding consideration is how best to
satisfy the decision-making needs of users.
(PPSAS 1)
e. Reliability – reliable information is free from

material error and bias, and can be depended
129
130
on by users to represent faithfully that which

it purports to represent or could reasonably
be expected to represent.
f. Faithful representation – information to

represent faithfully transactions and other
events, it should be presented in accordance
with the substance of the transactions and
other events, and not merely their legal form.
g. Substance over form – if information is to

represent faithfully the transactions and
other events that it purports to represent, it
is necessary that they be accounted for and
presented in accordance with their
substance and economic reality, and not
merely their legal form. The substance of
transactions or other events is not always
consistent with their legal form.
h. Neutrality – information is neutral if it is free

from bias. Financial statements are not
neutral if the information they contain has
been selected or presented in a manner
designed to influence the making of a
decision or judgment in order to achieve a
predetermined result or outcome.
130
i. Prudence – is the inclusion of a degree of
caution in the exercise of the judgments
needed in making the estimates required
under conditions of uncertainty, such that
assets or revenue are not overstated and
liabilities or expenses are not understated.
However, the exercise of prudence does not
allow, for example, the creation of hidden
reserves or excessive provisions, the
deliberate understatement of assets or
revenue, or the deliberate overstatement of
liabilities or expenses, because the financial
statements would not be neutral and,
therefore, not have the quality of reliability.
j. Completeness – the information in financial

statements should be complete within the
bounds of materiality and cost.
k. Comparability – information in financial

statements is comparable when users are
able to identify similarities and differences
between that information and information in
other reports. Comparability applies to the
comparison of financial statements of
different entities and comparison of the
131
132
financial statements of the same entity over

periods of time. An important implication of
the characteristic of comparability is that
users need to be informed of the policies
employed in the preparation of financial
statements, changes to those policies, and
the effects of those changes. Because users
wish to compare the performance of an
entity over time, it is important that financial
statements show corresponding information
for preceding periods.
6. What are information that needs to be

disclosed in the Notes to Financial
Statements?
Answer: The Notes to Financial Statements

should contain the following:
a. a statement of compliance with PPSASs;
b. summary of significant accounting policies

adopted and followed by the reporting entity
shall include:
i. the measurement basis (or bases) used in

preparing the financial statements;
132
ii. the extent to which the entity has applied
any transitional provisions in any PPSAS;
and
iii. the other accounting policies used that

are relevant to an understanding of the
financial statements;
c. supporting information for items presented

on the face of the Statement of Financial
Position, Statement of Financial
Performance, Statement of Changes in Net
Assets/Equity or Statement of Cash Flows, in
the order in which each statement and each
line item is presented; and
d. additional information required by PPSAS

that is not shown on the face of the financial
statements but is relevant to an
understanding of any of them which includes
the following:
i. disclosure that the budgeted amounts

have not been exceeded. If any budgeted
amounts or appropriations have been
exceeded or expenses incurred without
133
134
appropriation/allotment, then details shall

be disclosed; (Par. 24 (b) PPSAS 1)
ii. nature and extent of prior period errors;

(PPSAS 3)
iii. events after the reporting date that have a

material effect on the financial
statements; (PPSAS 14)
iv. contingent liabilities (PPSAS 19), and

unrecognized contractual commitments;
v. related party disclosure (PPSAS 20); and
vi. non-financial disclosures, e.g., the entity’s

financial risk management objectives and
policies. (PPSAS 15)
7. What are the Events After the Reporting Date?
Answer: Events after the reporting date are those

events, both favorable and unfavorable, that
occur between the reporting date and the date
when the financial statements are authorized for
issue.
Two types of events can be identified:
134
a. Adjusting events after the reporting date –
those that provide evidence of conditions
that existed at the reporting date; and
b. Non-adjusting events after the reporting date

– those that are indicative of conditions that
arose after the reporting date. (Par. 5, PPSAS
14)
The reporting date is set every end of the

calendar year while the date on which the
financial statements are authorized for issue is
the date when the Statement of Management’s
Responsibility is approved by the Chief
Executive or his authorized representative and
the Head of Finance Department.
8. Is change of Accounting Policy allowed for

government agencies?
Answer: Change is not allowed in PPSAS unless

the change is a) required by PPSAS or b) results
in the financial statements that providing reliable
and more relevant information about the effects
of transactions, other events and conditions on
the entity’s financial position, financial
performance, or cash flows.
135
136
9. Differentiate current period errors from prior

period errors and provide the accounting
treatment for each item.
Answer: Current period errors – are errors

committed and discovered within the same
period. It shall be corrected by an adjusting entry,
within the same year before the financial
statements are authorized for issue.
Prior period errors – are omissions from, and

misstatements in, the entities’ financial
statements for one or more prior periods arising
from failure to use, or misuse of reliable
information that was available when financial
statements for those periods were authorized for
issue and could reasonably be expected to have
been obtained and taken into account in the
preparation and presentation of those financial
statements. An entity shall correct material prior
period errors retrospectively in the first set of
financial statements authorized for issue after
their discovery by restating the comparative
amounts for prior period(s) presented in which the
error occurred or if the error occurred before the
earliest prior period presented, restating the
136
opening balances of assets, liabilities and net
assets/equity for the earliest prior period
presented. (Par. 47, PPSAS 3). The correction of a
prior period error is excluded from the
computation of income and expense for the
period in which the error is discovered.
10. What are the limitations for the retrospective

restatement of prior period errors?
Answer: The limitations of retrospective

restatement of prior period errors are as follows:
a. A prior period error shall be corrected by

retrospective restatement, except to the
extent that it is impracticable to determine
either the period specific effects or the
cumulative effect of the error. (Par. 48,
PPSAS 3)
b. When it is impracticable to determine the

period-specific effects of an error on
comparative information for one or more
prior periods presented, the entity shall
restate the opening balances of assets,
liabilities, and net assets/equity for the
earliest period for which retrospective
137
138
restatement is practicable (which may be

the current period). (Par. 49, PPSAS 3)
c. When it is impracticable to determine the

cumulative effect, at the beginning of the
current period, of an error on all prior
periods, the entity shall restate the
comparative information to correct the error
prospectively from the earliest date
practicable. (Par. 50, PPSAS 3)
11. What are Interim Financial Statements?
Answer: Interim Financial Statements are

Financial Statements that are required to be
prepared at any given period or at a financial
reporting period without closing the books of
accounts. The interim financial statements shall
be prepared employing the same accounting
principles used for annual reports. Adjusting and
closing journal entries shall be prepared.
However, only the adjusting journal entries are
recognized in the books of accounts. To facilitate
the preparation of the interim financial
statements, the use of the worksheet is
recommended.
138
12. Differentiate Trial Balance from Pre-closing
Trial Balance and Post-closing Trial Balance.
Answer: Trial Balance (TB) is a list of all the GL

accounts and their balances at a given time. The
Pre-Closing Trial Balance shall be prepared after
posting the AJE in the GJ and the same to the GL.
It shows the adjusted balances of all accounts as
at a given period. This is also described/termed as
the Adjusted Trial Balance. The Post-Closing Trial
Balance shall be prepared at the end of the year
after preparing and posting the closing journal
entries in the GJ and posting to the GL. Since
revenue and expense accounts have been closed
out, the only accounts with balances are balance
sheet or real accounts.
1. C 9. C 17. C
2. C 10. D 18. B
3. B 11. A 19. A
4. C 12. C 20. B
5. D 13. D
6. B 14. A
7. C 15. D
8. B 16. D
139
Suggested Answers to Problems (Chapter 7)
1.
Capital 14,250,00
outlay 0
MOOE 11,400,00
0
Total NCA 15,650,00
received 0
Less
payments:
Left wing 6,500,00
constructio 0
n
Right 2,000,00
wing 0
repainting
Total 8,500,00
0
Less: 595,000 7,905,00
W/tax (5% + 0
2%)
Purchase
of furniture 3,000,00
and 0
1
fixtures and
equipment
Purchase 2,500,00
of office 0
supplies
Total 5,500,00
0
Less: 330,000 5,170,00 13,075,00
W/tax (5% + 0 0
1%)
Cash 2,575,000
balance
2.
Subsidy from national 520,000
government
Less: Unutilized NCA 100,000
Refund of excess 5,000 105,000
cash advance
Balance 415,000
Less Expenses:
Salaries and wages 150,000
PERA 50,000
Retirement and life 18,000
insurance premiums
2
Pag-IBIG premiums 2,500
Philhealth premiums 4,500
Travelling expenses - 13,000
local
Electricity expenses 12,000
Telephone expenses 10,000
Rent/lease expenses 25,000
Office supplies 20,000
expenses
Depreciation - 15,000 320,000
Machinery
Excess of income over 95,000
expenses
3.
Current assets 500,000
Property, plant and 800,000
equipment
Total assets 1,300,000
Less: Current liabilities 200,000
Accumulated 1,100,000
surplus/Deficit
4.
Excess of income over 500,000
expenses
3
Depreciation - Machinery 5,000
Increase in accounts 30,000
payable
Increase in due to BIR 5,000
Increase in due from NGA (55,000)
Increase in office supplies (25,000)
inventory
Cash provided by 460,000
operating activities
4
Chapter 8 – Bank Reconciliation
Questions & Answers
1. Define bank reconciliation.
Bank reconciliation is the settlement of

differences contained in the bank statement
and the cash account in the agency’s/entity’s
books. It compares the bank balance with the
entity balance and explains any differences.
2. According to the GAM, what are the objectives

of the Bank Reconciliation Statement (BRS)?
Answer: According to GAM, the Bank

Reconciliation Statement (BRS) shall be prepared
in order to:
a. Check correctness of both the bank’s
and agency’s/entity’s records,
b. Serve as a determent to fraud, and
c. Enable the agency/entity or bank to
take up charges or credits recognized
by the bank or agency/entity but not yet
known to the agency/entity or bank.
5
3. Explain briefly the importance of using a bank
as a depository and clearing house for checks
issued and received by an entity.
Answer: When an agency/entity uses a bank as

a depository and clearing house for checks
issued and checks/cash received, the use of a
bank, among others, facilitates the control of
cash, because it creates a double record of all
bank transactions – one by the agency/entity
and one by the bank.
4. What are the two accounts in Revised Chart of

Accounts of National Government Agencies
covered by this chapter for purposes of bank
reconciliation? Enumerate the components of
each account.
Answer: The bank reconciliation statement is

prepared for a) AGDB accounts and b) Treasury
account for Modified Disbursement System (MDS)
accounts.
AGDB accounts comprised of Cash in Bank –

Current Accounts; while the Treasury account
for MDS accounts comprised of: a) Cash – MDS,
6
Regular; b) Cash – MDS, Special Accounts; and
c) Cash – MDS, Trust.
5. Explain briefly the reconciliation procedure as

provided by the GAM.
Answer: The Chief Accountant/Designated Staff

shall reconcile the monthly bank statement
together with the paid checks, debit
memorandum, like bank service charge, and
credit memorandum, like interest earned, from
Government Servicing Banks. In other words, in
reconciling the bank account, it is customary to
reconcile the balance per books and balance per
bank to their adjusted cash balances.
The monthly BRS shall be prepared by the Chief

Accountant/Designated Staff for each of the bank
accounts maintained by the agency/entity using
the Adjusted Balance Method. Under this method,
the book balance and the bank balance are
brought to an adjusted cash balance that must
appear in the Statement of Financial Position.
6. Enumerate the reconciling items for Cash – MDS

accounts.
Cash – Modified Disbursement System Accounts
7
Bank
 Notice of Cash Allocation (NCA)
received by the entity but not yet
recognized by the bank
 Lapsed/unused NCA
 Outstanding checks
 Outstanding Authority to Debit
Accounts (ADA)
 Errors committed by the bank
Agency/Entity
 NCA received by the bank but not yet
recognized by the agency/entity
 Cancelled checks
 Lapsed NCAs not yet adjusted by the
agency/entity
 Bank charges
 Errors committed by the
agency/entity
7. Enumerate the reconciling items for Authorized

Government Depository Bank accounts.
Answer: Authorized Government Depository Bank

Accounts
Bank
8
 Unrecorded deposit/deposit in transit
 Outstanding checks
 Errors committed by the bank
Agency/Entity
 Deposit per bank statement but not
yet recorded in the books.
 Cancelled checks
 Returned check deposit
 Bank charges
 Errors committed by the
agency/entity
8. Differentiate the credit memorandum from debit

memorandum.
Answer: Credit memorandum is a document

issued by the bank informing an increase in the
depositor’s (agency’s/entity’s) account, such as
previous bank debit errors and collections
directly deposited to the agency’s/entity’s bank
account. While, debit memorandum is a document
issued by the bank informing a decrease in the
account, such as previous bank credit errors or
service charges and fees.
9
1. C – Outstanding checks
2. C – Notice of Cash Allocation
3. B – Bank statement
4. B – Cancelled checks
5. D – Credit memorandum
6. A – Debit memorandum
7. D – All of the above
8. E – A, B, and C
9. E – Chief Accountant or Designated Staff
10. B – Chief Accountant
Chapter 9 – Accounting for Local Government

Units
Questions & Answers
1. Enumerate and explain the three separate

books that shall be maintained by local
government units as required under sections
308 to 310 of the local Government Code.
Answer: The three separate books that shall be

maintained by local government units under
Section 308 – 310 of the local government code
are:
a. General Fund
10
This consists of monies and resources not
accruing to any other fund and shall be
available for payment of expenditures,
obligations or purposes not specifically
declared by law as chargeable to or
payable from, any other fund, though
transfers of monies or resources therefrom
to other funds of local government may be
made by proper appropriation.
b. Special Education Fund
This consists of the respective shares of

provinces, cities and municipalities in the
proceeds of the additional one percent
(1%) tax on the assessed value of real
property for education purposes under the
Real Property Tax Code. This amount
accruing to special education fund shall be
automatically released to the local
schools.
c. Trust Fund
This consists of private and public monies

received, by local government or of a local
11
government official as trustee, agent or
administrator, as a guaranty for the
fulfillment of some obligations. A trust
fund shall only be used for the specific
purpose for which it was intended.
2. Enumerate the special accounts in the general

fund of local government unit that shall be
supported by subsidiary ledgers.
Answer: Special accounts maintained in the

General Fund that shall be supported by
subsidiary ledgers are the following:
a. Public utilities and other economic

enterprises;
b. Loans, interests, bonds issued, and other
contributions for specific purposes;
c. Development projects funded from the
Share in the Internal Revenue Collections;
and
d. Other special accounts, which may be
created by law or ordinance.
3. Identify and discuss the two different kinds of
books of accounts to be used by the local
government unit.
12
Answer: The accounting unit of the Local
Government Units shall maintain the following
books of accounts:
Journals
1. Cash Receipt Journal (CRJ)
2. Cash Disbursements Journal (CDJ)
3. Check Disbursements Journal (CkDJ)
4. General Journal (GJ)
Ledgers
1. General Ledger (GL)
2. Subsidiary Ledgers:
a. Cash
b. Receivables
c. Inventories
d. Investments
e. Property, Plant and Equipment
f. Liabilities
g. Income
h. Expenses
In addition to the preceding records, the

treasurers and disbursing officers, however,
shall maintain their respective cash records,
such as:
13
1. Cash book – Cash in Treasury
2. Cash book – Cash in Bank
3. Cash book – Cash Advances
4. What are the two parts of the local government

budget?
Answer: The local government budget primarily

consists of two parts, namely:
1. The estimates of income certified

collectible by the treasurer; and
2. The total appropriations covering the

current operating expenditures and the
capital outlays.
5. Enumerate the three main sources of income of

local government units.
Answer: The main sources of income of local

government units are as follows:
1. Tax revenues, fees and charges.

2. Share from Internal Revenue Collections.
3. Share from National Wealth.
14
The sources of income are further classified
into general income accounts and specific
income accounts.
6. Enumerate and explain the methods of

accounting for income.
Answer: The following accounting methods shall

be adopted in recording income:
1. Accrual Method – Accrual method of

accounting shall be used to record Share
from Internal Revenue Collections in the
books of accounts. Upon receipt of the
Notice of Funding Check Issued from the
Department of Budget and Management,
Share from Internal Revenue Collections
shall be taken up as Due from National
Government Agencies and credited to
Share from Internal Revenue Collections.
However, Cash in Bank account shall be
debited upon receipt of Bank Credit
Advice as to receipt of the Share from
Internal Revenue Collections regardless
of whether or not the Notice of Funding
Check Issued has been received from the
Department of Budget and Management.
15
2. Modified Accrual Method – Modified
accrual method of accounting shall be
used for real property taxes; that is, Real
Property Tax Receivable and Special
Education Tax Receivable shall be
established at the beginning of the year.
This in view of the need to record in the
books the actual receivables from said
taxes and not mere income estimates
from real property taxes.
3. Cash Basis – Cash basis of accounting

shall be used for all other taxes, fees,
charges and other revenues.
7. Give at least four examples of other receipts

that may be recognized by the local
government units. Explain briefly.
Answer: Other receipts of the local government

units shall be comprised of, but not limited to,
the following:
1. Borrowings – Borrowings are proceeds of

repayable obligations, generally with
interest from the bank, national agency,
16
another local government unit, and
private sector. All borrowings incurred
shall be recorded directly to the
appropriate liability accounts.
2. Sale of Property, Plant and Equipment –

Sale of property, plant and equipment
refers to the proceeds from the sale of
fixed assets, such as: land, buildings,
equipment, furniture and fixtures, etc.
Similar to commercial accounting, the
applicable asset accounts shall be
cancelled from the books upon disposal.
3. Refund of Cash Advances – Cash

advances for official travel shall be
recorded as a receivable from the
concerned official or employee. Refunds
made shall be credited to the receivable
account previously recorded. Cash
advances for salaries and wages shall be
recorded as debits to the account Cash
Disbursing Officers, and any refund shall
be credited to the same account.
4. Receipt of Performance/Bidders’ Bonds –

Similar to national government
17
accounting, performance bond posted by
contractor or supplier to guaranty full and
faithful performance of their work may be
in form of cash, certified check or surety.
Performance bond in cash or certified
check shall be acknowledged through the
issuance of official receipt and recorded
in the books by the accountant using a
Journal Entry Voucher. In case of surety
bond, this is recognized by an
acknowledgment receipt to be issued by
the authorized official.
8. Enumerate the reasons behind the adoption of

special accounts of local government units.
Answer: Accounting procedures for the

operations of the special accounts are adopted
for the following purposes:
1. To determine whether the income

generated by the public utilities or
economic enterprises are sufficient to
meet their respective operating costs.
18
2. To provide adequate information as to the
assets, liabilities and equity of each
special account.
9. What are the sub-codes for the special

accounts?
Answer: The following shall be the sub-codes for

the special accounts:
SPECIAL ACCOUNTS SUB-

CODE
General Fund Proper 01
Market Operation 02
Slaughterhouse Operation 03
Waterworks System 04
Electricity, Light and Power 05
System
Telephone System 06
Toll Roads, Bridges and Ferries 07
Transportation System 08
Hospital 09
School 10
Sport Center 11
Recreational Center 12
Housing Projects 13
19
Convention/Conference Center 14
Parking Space 15
Ice Plant 16
Cemetery 17
20% Development Fund 18
80% Share from Energy Sources 19
Share from Development of 20
National Wealth
Loans 21
Interests 22
Bond Issues 23
10.Enumerate and explain the classification of

supplies or property.
Answer: Supplies or property shall have the

following classification:
a. Expendable Supplies or Property
These are articles, which are normally

consumed in use within one year or
converted in the process of manufacture
or construction, or those having a life
expectancy of more than one year but
which shall have decreased substantially
20
in value after being put to use for only one
year. Examples are stationery, fuel, spare
parts, etc. Expendable supplies are part of
the maintenance and operating expenses
of the Local Government Unit.
b. Non-expendable Supplies or Property
These are articles, which are not

consumed in use and ordinarily retain their
original identity during the period of use,
whose serviceable life is more than one
year and which add to the assets of the
government. Examples are furniture,
fixtures, transport equipment, etc. Non-
expendable supplies or property are
capital outlays of LGU.
c. Non-Personnel Services
These articles include, but not limited to

repairing, cleaning, redecorating, and
furnishing of necessary repair parts or
other supplies as part of the services
performed. Examples are contractual
services like trucking, hauling, janitorial,
security and related services. Non-
21
Personnel services are charged to
maintenance and operating expenses of
LGU.
22
1. D
One of the basic features of the Local
Government Unit is the one-fund concept.
However, separate fund accounting shall be
done when specifically required by law or by a
donor agency or when otherwise necessitated
by circumstances subject to prior approval of
the Commission. As required under Section
308, 309 and 310 of the Local Government
Code, separate books shall be maintained for
the General Fund, Special Education Fund and
Trust Fund, respectively.
2. C
Journal Entry Voucher (JEV) shall be used for
all the transactions of the government, whether
cash receipts, cash/check disbursements, or
non-cash transactions. It shall be prepared by
the Accounting Unit based on transaction
documents presented and shall be the basis of
recording the transactions in the appropriate
journals.
3. B
23
Cash receipt journal shall be used to record all
collections and deposits reported during the
month for the Regular Agency books. The
sources of entries are the journal entry
vouchers, which shall be prepared based on the
Reports of Collections and Deposits.
4. A
The accounting unit of local government units
shall maintain the books of accounts, such as,
journal and ledgers.
5. B
The treasurers and disbursing officers shall
maintain their respective cash records, such
as, Cash book – Cash in Treasury, Cash book –
Cash in Bank, and Cash book – Cash Advances.
6. C
Check disbursements journal shall be used to
record check payments made by the cashier or
disbursing officers. Recording to this journal
shall be based on the JEVs supported with paid
disbursement vouchers and duplicate copies of
checks listed in the Report of Checks Issued
submitted by the Cashier/Disbursing Officers.
24
7. A
In order to monitor allotments received,
obligations incurred, NCAs received and
utilized, public infrastructures, dormant
accounts, accounts written off, loans and
grants, among other, registries shall be
maintained by the concerned government
agencies.
8. A
Section 61 of the NGAS manual provides that
liquidation report shall be prepared by the
concerned employees/officers to liquidate cash
advances for travel or for other purposes
except those cash advances granted to
Regular/Special Disbursing Officers.
9. B
Section 53 of the NGAS manual provides that
Requisition and Issue Slip shall be used to
request for supplies and materials that are
carried on stock.
10. C
Grants and donations coming from foreign
funding institutions, other levels of government
and private institutions/individuals for specific
25
projects/purpose shall accrue to the Trust
Fund. The equity of the local government unit
on projects under a trust agreement shall also
accrue to the Trust Fund.
11. A
Under the NGAS (2002), Prior Period
Adjustments account is used to record the
adjustment of prior years’ transaction affecting
revenue and expenses and other adjustments
which increase or decrease the Retained
Operating Surplus of the government. The year-
end debit or credit balance of this account is
closed to Retained Operating Surplus account.
However, the Revised Chart of Accounts of COA
Circular 2013-002 dated 30 January 2013 no
longer recognizes the Prior Period Adjustment
account. Instead, the prior period adjustment is
directly credited to the Government Equity
account.
NOTE: The COA Circular 2013-002 dated

January 30, 2013, Adoption of the Revised
Chart of Accounts for National Government
Agencies, provides the revised chart of
accounts for National Government Agencies
26
only. Likewise, the COA Circular No. 2014-003
dated April 15, 2014 also provides that the
Chart of Accounts of GOCCs and Local
Government Units (LGUs) and its conversion to
the New Chart of Accounts shall be covered by
separate guidelines; thus, pending the new
circulars for Local Government Units, current
circulars for accounting for LGU shall be used.
12. C
Upon receipt of the Notice of Funding Check
Issued from the Department of Budget and
Management, Share from Internal Revenue
Collections shall be taken up as Due from
National Government Agencies and credited to
Share from Internal Revenue Collections.
However, Cash in Bank account shall be
debited upon receipt of Bank Credit Advice as
to receipt of the Share from Internal Revenue
Collections regardless of whether or not the
Notice of Funding Check Issued has been
received from the Department of Budget and
Management.
13. D
27
Approval of disbursements by the Local Chief
Executive himself shall be required whenever
local funds are disbursed, except for regularly
recurring administrative expenses such as:
payrolls for regular or permanent employees,
expenses for light, water, telephone and
telegraph services, remittances to government
creditor agencies and others, where the
authority to approve may be delegated.
14. A
The periodic physical count of inventory of
supplies or property every semester shall be
reported in the Report of the Physical Count of
Inventory (RCPI) and shall be submitted to the
auditor not later than July 31 and January 31 of
each year for the first and second semesters,
respectively. While the physical count of
property, plant and equipment by type shall be
made annually and reported on the Report on
the Physical Count of Property, Plant and
equipment (RPCPPE) and shall be submitted to
the auditor not later than January 31 of each
year.
15. D
28
The transfer or issuance of the equipment to
the Office of the Municipal Engineer is
recognized only by using the Acknowledgment
Receipt for the equipment.
Chapter 10 – The New Barangay Accounting

System
Questions & Answers
1. What are the basic features and policies of the

new barangay accounting system?
Answer: The basic features and policies of the

new barangay accounting system are:
a. Accounting Method
The IPSASB’s Conceptual Framework deals

with concepts that apply to general purpose
financial reporting under the accrual basis of
accounting. Under this method, transactions
and other events are recognized in financial
statements when they occur and not only
when cash or its equivalent is received or
paid. Therefore, the transactions and events
are recorded in the accounting records and
29
periods to which they relate.
The IPSASB has also issued a comprehensive

cash basis IPSASs that includes mandatory
and encouraged disclosures sections. The
cash basis IPSASs encourages an entity to
voluntary disclose accrual based
information, although its core financial
statements will nonetheless be prepared
under the cash basis of accounting.
b. Recognition of Liability
Liabilities shall be taken up only for goods

actually delivered and accepted or services
rendered or upon receipt of bills from
suppliers/creditors. Cash received to
guaranty faithful performance of an activity
shall be recorded as a liability. Surety bonds
shall not be recorded in the books.
c. Purchase of Supplies and Materials and

Small Items
Purchase of supplies and materials and small

items with serviceable life of more than one
30
year, like stapler, puncher, ruler, mechanical
tools, etc., shall be directly charged to
expense account. Cost of transporting
supplies and materials to barangay shall be
charged to “Delivery Expense” account.
d. Cash Advances
Cash advance for payment of personnel

services shall be accounted for as
“Advances for Payroll”; while cash advance
granted for travel and other special time –
bound undertaking shall be accounted for as
“Advances to Officers and Employees”.
e. Audit Disallowances
Audit disallowances shall be recorded only

when they become final and executory.
f. Barangay Accounts
Barangay accounts shall be kept within the
framework of the New Government
Accounting System (NGAS) chart of
accounts.
g. Processing of Transaction and Recording in

the Books
31
Processing of transactions shall be done at
the barangay level; while recording in the
books through Journal Entry Voucher shall
be done by the City/Municipal accountant.
The financial records (General Journal,

General Ledger, Subsidiary Ledger) of the
barangays shall be kept in the office of the
City/Municipal Accountant. Recording in the
barangay books shall be based on the reports
submitted by the Barangay
Treasurer/Barangay Record Keeper
Reports and documents supporting entries in

the reports shall remain with the Barangay
Treasurer/Barangay Record Keeper in the
Barangay and shall be made available to the
Commission on Audit anytime for
examination.
h. Certified Registers
In accordance with the New Barangay

Accounting System, the following certified
registers shall be used:
1. Cash Receipt Registers
32
2. Cash on Hand and in Bank Registers
3. Cash Disbursement Registers
4. Check Disbursement Registers
5. Petty Cash fund Registers
i. Status if Appropriations, Commitments and

Balances
The Status of Appropriations, Commitments

and Balances of each barangay under the
city/municipality shall be consolidated by the
city/municipal Budget Officer.
j. Trial Balance
The two-money column trial balance shall be

used.
k. Financial Statements
The New Barangay Accounting System
requires the preparation of the following
financial statements:
1. Balance Sheet (Detailed and
Condensed)
2. Statement of Income and Expenses
(Detailed and Condensed)
3. Statement of Cash Flows (Direct
Method)
33
4. Statement of Changes in Government
Equity
The City/Municipal accountant shall furnish

the Sangguniang Barangay and the
Auditor/Audit Team Leader with financial
statements within thirty (30) days after the
close of each month.
L. Schedules Supporting the Financial

Statements
The following schedules supporting the

financial statements prepared by Barangays
shall be used
1. Schedule of Public Infrastructures and
Reforestation Projects
2. Schedule of Accounts Payable
3. Schedule of Accounts Receivables
m. E-NGAS
Whenever possible, the use of the Electronic

New Government Accounting System at the
City/Municipality level is encourage to
facilitate the recording of barangay
transactions and to hasten the consolidation
34
of all barangay financial statements and
reports.
2. Describe the barangay accounting system plan.
Answer: The Barangay Accounting System Plan

shows the accounting flow of barangay
transactions in the books maintained by the
City/Municipal accountant. It starts with the
receipt of the certified registers/reports from
the Barangay Record Keeper on or before the
5th day of the following month, the recording of
the barangay financial transactions in the
books of the original and final entry and the
ultimate conversion into financial information
as presented in the financial statements.
Presented in the Accounting System Plan are
the following:
1. Receipts and Deposits
2. Disbursements (Cash or Checks)
3. Public Infrastructures and Reforestation
Projects
4. Registries of Public Infrastructures and
Reforestation Projects
3. What are the major financial transactions of

barangays? Explain briefly.
35
Answer: The new Government Accounting System
for Barangays prescribes the following major
categories of financial transactions:
a) Appropriations and Commitments
Appropriations are amounts in the annual

or supplemental budget that are
authorized by the Sanggunian to be
obligated for the undertaking of a
particular function, program, activity or
project. The approved appropriations of
barangays are covered by General
Appropriation Ordinance (GAO).
Commitments are amounts earmarked by

the barangay arising from an act of a duly
authorized official, which binds the
barangay to the immediate or eventual
payment of money.
b) Receipts and Deposits
Receipts represent all collections in form

of cash and checks received by the
Barangay for a given period such as: share
36
in national taxes and revenues, Barangay
taxes, other revenues and other sources.
Deposits represent money or its equivalent

received by the bank for safekeeping and
for credit to a checking, savings or time
deposit account of an agency.
The Barangay Treasurer shall be

responsible in handling collections of
income and other receipts of the Barangay
and the deposit of the same with
Authorized Government Depository Bank
(AGDB), such as: Development Bank of the
Philippines, Land Bank of the Philippines,
and Veterans Bank of the Philippines.
However, agencies may seek authority
from Monetary Board of the Banko Sentral
ng Pilipinas to designate other depository
banks.
c) Disbursements
Disbursements refer to all cash/check paid

out during a given period for settlement of
government expenditures/payables. It also
represents the movement of cash from an
37
AGDB or from the Barangay
Treasurer/authorized disbursing officer to
the final recipient. Existing rules ands
regulations require that all disbursements
of public funds be supported by documents
necessary to prove their validity,
propriety, and legality.
d) Supplies and Materials, Property, plant and

Equi8pment, Public
Infrastructures/Reforestation Project
Requisition, procurement, issuance,

physical inventory and loss of supplies and
materials are governed by existing
government rules and regulation. Except
in emergency cases, all procurement shall
be covered by Approved Procurement
Program as required in RA 9184.
Procurement of supplies shall be charged
directly to Maintenance and Other
Operating Expenses and shall be recorded
using the appropriate expense accounts.
Supplies, inspected by Inspection
Committee, shall be accepted by Barangay
Treasurer, who will act as the Property
38
Officer of the barangay. The cost of
supplies and materials acquired through
purchase shall be based on the invoice
cost.
Similar with supplies and materials, all

procurement of property, plant and
equipment shall be in accordance with the
requirements of RA 9184, and shall be
insured with GSIS. All deliveries shall be
inspected by the Inspection Committee
headed by Barangay Treasurer with
designated kagawad as member, and shall
be accepted by the Barangay Treasurer,
who shall act as the property officer of the
barangay. Procurement of property, plant
and equipment and construction of public
infrastructures shall be charged against
appropriation of capital outlay and shall be
recorded in Property, Plant and Equipment
Registry for control and monitoring
purposes. The cost of property, plant and
equipment acquired through purchase
shall include the purchase cost and
expenses incurred in bringing the asset to
its intended location and make it
39
operational. The property, plant and
equipment shall be subject to depreciation
using the straight line method. A residual
value of ten percent (10%) of the cost shall
be provided. The estimated useful life of
the PPE as prescribed by COA shall be
used in computing the rate of
depreciation. Recipient of PPE shall be
covered by Property Acknowledgement
Receipt. Any unserviceable PPE shall be
returned to the Barangay Treasurer for the
cancellation of the Property
Acknowledgement Receipt and shall be
reported in the Inventory and Inspection
Report of Unserviceable Property.
Infrastructures and reforestation projects

which are for public use and not for the
exclusive use of the barangay are
considered public
infrastructure/reforestation projects. The
cost of the projects and the cumulative
cost of repairs and maintenance shall be
monitored using the appropriate registries
such as, but not limited to:
40
1. Registry of Public Infrastructure –
Roads, highways and bridges
2. Registry of Public Infrastructure – Parks,
plazas and monuments
3. Registry of Reforestation Projects
4. What are the five funds to be recorded in the

Registry of Appropriations and Commitments of
barangays?
Answer: The five funds to be maintained in the

Registry of Appropriations and Commitments of
barangays are:
1. General Fund
2. 20% Development Fund
3. Calamity Fund
4. Sangguniang Kabataan Fund
5. Gender and Development Fund
5.Explain briefly the appropriations and

commitments transaction of barangays.
Answer: Section 29, par 1 of the Constitution

provides that: No money shall be paid out of the
treasury except in pursuance of an
appropriation made by law. Laws, rules and
regulations of the government provide that all
41
disbursements of public funds, except those
received for specific purposes, shall be
covered by an approved General Appropriation
Ordinance (GAO) authorizing appropriation for
the annual budget, the expenditures items of
which shall be in accordance with the
Philippine Government Chart of Accounts under
NGAS. Unless authorized by the DBM and
covered by subsequent Sangguniang Barangay
Resolution approving the appropriation, in no
case shall commitments exceed the approved
appropriation.
Charges (deductions) against the appropriated

funds shall be based on the commitments made
by the Barangay as shown in the Disbursement
Vouchers, Payroll for personnel services,
Contracts or Purchase Orders, and Purchase
Requests. Expenses for personnel services,
maintenance and other operating expenses,
and financial expenses shall be charged
against respective appropriation; while
investments, purchase of property, plant and
equipment, and construction of public
infrastructures and reforestation projects shall
42
be charged against appropriation for capital
outlay.
6.Explain briefly the receipt and deposit

transaction of barangays.
Answer:The Barangay Treasurer shall be

responsible in handling collections of income
and other receipts of the Barangay and the
deposit of the same with Authorized
Government Depository Bank (AGDB), such as:
Development Bank of the Philippines, Land
Bank of the Philippines, and Veterans Bank of
the Philippines. However, agencies may seek
authority from Monetary Board of the Banko
Sentral ng Pilipinas to designate other
depository banks.
All collections shall be acknowledged by the

issuance of a pre-numbered Official Receipt or
its equivalent like Real Property Tax Receipt
and Community Tax Certificate subject to
proper custody, accountability and audit, which
shall be secured from the City/Municipal
Treasurer. All collections by the Barangay
Treasurer for the Barangay shall be reported in
the Summary of Collections and Deposits, and
43
shall be deposited with AGDB daily or not later
than the following banking day.
7. Enumerate the basic requirements applicable

to all classes of barangay disbursement.
Answer: Basic requirements applicable to all

classes of barangay disbursements are:
a) Existence of appropriation sufficient to cover
the expenses.
b) Legality of the expenses and in conformity
with rules and regulations.
c) Approval of the expenses by the Punong
Barangay.
d) Submission of documentary evidence to
establish the validity of the expenses.
8. What are the registries that shall be maintained

for barangay disbursements?
Answer: The following registries shall be

maintained for barangay disbursements:
1. Check Disbursements Register
2. Petty Cash Fund Register
3. Cash Disbursements Register
4. Cash on Hand and in Bank Register
44
9. What are the two modes of disbursement
applicable to barangays? Explain briefly.
Answer: Modes of disbursements may be

classified into two, namely:
1.) By check - Commercial checks for
disbursements is covered by deposit with
AGDB. The check shall be signed by the
Barangay Treasurer and countersigned
Punong Barangay.
2.) By cash (through Barangay

Treasurer/Accountable Officer)
Cash advance was given to Barangay

Treasurer/Accountable Officer and shall
be used solely for payment of salaries,
honoraria, and other allowance due the
barangay officials and employees.
Disbursements made by petty cash

custodian out of his petty cash fund. The
petty cash fund shall be maintained using
the imprest system.
10.Explain briefly the accounting for supplies and

materials.
45
Answer: Requisition, procurement, issuance,
physical inventory and loss of supplies and
materials are governed by existing government
rules and regulation. Except in emergency
cases, all procurement shall be covered by
Approved Procurement Program as required in
RA 9184. Procurement of supplies shall be
charged directly to Maintenance and Other
Operating Expenses and shall be recorded
using the appropriate expense accounts.
Supplies, inspected by Inspection Committee,
shall be accepted by Barangay Treasurer, who
will act as the Property Officer of the barangay.
The cost of supplies and materials acquired
through purchase shall be based on the invoice
cost.
Issuance of supplies and materials shall be

covered by an approved Requisition and Issue
Slip. The recipient of small items with more
than one year life shall be responsible for its
upkeep during the estimated life of the item
and shall be issued an Inventory Custodian Slip.
11. Enumerate the reports that shall be prepared

for property, plant and equipment of barangays.
46
Answer: The following reports shall be prepared
for Property, Plant and Equipment (PPE) of
barangays:
1. Inventory and Inspection Report of
Unserviceable Property
2. Report on the Physical Count of Property
3. Inspection and Acceptance Report
12. What are the two types of trial balance?
Answer: The two types of Trial Balance are:

1. Pre-Closing Trial Balance
It is prepared after all the adjusting entries
have been recorded in the General Journal
and the accounts are posted to the General
Ledger and respective Subsidiary Ledger.
2. Post-Closing Trial Balance

It is prepared at year-end after all the closing
journal entries have been recorded in the
General Journal and the accounts are posted
to the General Ledger.
13. Enumerate the financial statements and

supporting schedules for barangays.
47
Answer: The financial statements and supporting
schedules for barangays are:
1. Balance sheet
2. Statement of income and expenses
3. Statement of cash flows
4. Statement of net assets/equity
5. Notes to financial statements
6. Schedule of public infrastructures
7. Schedule of reforestation projects
8. Schedule of accounts receivable
9. Schedule of accounts payable
14.Enumerate the duties and responsibilities of

the city/municipal accountant.
Answer: The following are the duties and

responsibilities of the city/municipal
accountant:
a) Maintain the General Journal, General

Ledger, Subsidiary Ledgers, and Registries of
Public Infrastructures/Reforestation Projects
for each of the barangays under the
city/municipality.
b) Prepare Journal Entry Voucher to record the

financial transactions of barangays based on
48
the certified registers and supporting
documents submitted by the Barangay
Record Keeper.
c) Record the Journal Entry Vouchers in the

General Journal and post journal entries to
the General Ledgers and Subsidiary Ledgers.
d) Prepare the required monthly and year-end

Trial Balances, Financial Statements and
reports/schedules for each of the barangays.
e) Prepare and submit the Bank Reconciliation

Statement to COA auditor/audit team leader
concerned.
f) Consolidate the year-end trial balances and

financial statements and reports/schedules
of the barangays.
g) Submit monthly and year-end barangay

individual financial reports to the
Sangguniang Barangay, and the printed and
digital copies of the consolidated year-end
trial balances, financial statements and
reports/schedules of the barangaya together
with those of the city/municipality to
49
GAFMIS-COA and to the auditor/audit team
leader concerned.
50
1. A
Purchase of supplies and materials and small
items with serviceable life of more than one
year, like stapler, puncher, ruler, mechanical
tools, etc., shall be directly charged to expense
account. Cost of transporting supplies and
materials to barangay shall be charged to
“Delivery Expense” account.
2. B
The IPSASB’s Conceptual Framework deals
with concepts that apply to general purpose
financial reporting under the accrual basis of
accounting. Under this method, transactions
and other events are recognized in financial
statements when they occur and not only when
cash or its equivalent is received or paid.
Therefore, the transactions and events are
recorded in the accounting records and
periods to which they relate.
The IPSASB has also issued a comprehensive

cash basis IPSASs that includes mandatory
and encouraged disclosures sections. The
51
cash basis IPSASs encourages an entity to
voluntary disclose accrual based information,
although its core financial statements will
nonetheless be prepared under the cash basis
of accounting.
Therefore Accrual and Cash basis of

accounting.
3. C
Cash advance for payment of personnel
services shall be accounted for as “Advances
for Payroll”; while cash advance granted for
travel and other special time – bound
undertaking shall be accounted for as
“Advances to Officers and Employees”.
4. C
Processing of transactions shall be done at the
barangay level; while recording in the books
through Journal Entry Voucher shall be done by
the City/Municipal accountant.
5. C
Section 29, par 1 of the Constitution provides
that: No money shall be paid out of the treasury
except in pursuance of an appropriation made
52
by law. Laws, rules and regulations of the
government provide that all disbursements of
public funds, except those received for specific
purposes, shall be covered by an approved
General Appropriation Ordinance (GAO)
authorizing appropriation for the annual
budget, the expenditures items of which shall
be in accordance with the Philippine
Government Chart of Accounts under NGAS.
6. A
The General Fund of barangays is composed of
personnel services, maintenance and other
operating expenses, capital outlay, and
financial expenses, which are recorded in the
respective Registry of Appropriations and
Commitments.
7. D
Expenses for personnel services, maintenance
and other operating expenses, and financial
expenses shall be charged against respective
appropriation; while investments, purchase of
property, plant and equipment, and
construction of public infrastructures and
reforestation projects shall be charged against
53
appropriation for capital outlay. The balance of
appropriations for Capital Outlay, 20%
Development Fund, and Sangguniang Kabataan
Fund shall be valid until fully spent or until the
planned activity is completed. Balances at
year-end of other appropriations shall revert to
unappropriated status.
8. A
The Barangay Treasurer shall be responsible in
handling collections of income and other
receipts of the Barangay and the deposit of the
same with Authorized Government Depository
Bank (AGDB), such as: Development Bank of
the Philippines, Land Bank of the Philippines,
and Veterans Bank of the Philippines. However,
agencies may seek authority from Monetary
Board of the Banko Sentral ng Pilipinas to
designate other depository banks.
9. A
Credit memo received from the bank for direct
remittance made by Local Government Units
(LGU) or the Department of Budget and
Management for the Barangay share in real
property tax or the internal revenue allotment,
54
respectively, shall be recorded direct to the
Cash on Hand and in Bank Register and in the
Cash Receipts and Deposits Register. The LGU
or the DBM making the direct remittance shall
furnish the Barangay a copy of he advice for
information and counterchecking with the
credit memo received from the bank.
10. D
The petty cash fund shall be maintained using
the imprest system. The amount of the petty
cash fund shall be determined by the
Sangguniang Barangay but not to exceed 20%
of the funds available and to the credit of the
Barangay Treasurer (Sec. 334 (b) RA 7160).
11. C
Except in emergency cases, all procurement
shall be covered by Approved Procurement
Program as required in RA 9184. Procurement
of supplies shall be charged directly to
Maintenance and Other Operating Expenses
and shall be recorded using the appropriate
expense accounts. Supplies, inspected by
Inspection Committee, shall be accepted by
55
Barangay Treasurer, who will act as the
Property Officer of the barangay.
12. D
The budget officer shall consolidate the
Statement of Appropriations, Commitments and
Balances of each barangay for the five funds,
such as: General Fund, 20% Development Fund,
Calamity Fund, Sangguniang Fund, and Gender
and Development Fund. The budget officer,
likewise, submit the Consolidated Statement of
Appropriations, Commitments and Balances of all
barangays under the city/municipality to GAFMIS-
COA through the auditor/audit tea
56

Government Accounting 2018 Questions Answers

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Government Accounting 2018 Questions Answers

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Government Accounting - 2018 Edition

Punzalan and Cardona

Questions & Answers:

1. Define government accounting.

Answer: Pursuant to Section 109 of PD 1445,

2. Enumerate the objectives of the government

Answer: Section 110, Presidential Decree 1445

b. To provide a basis for guidance for future

c. To provide for control of the acts of public

d. To report on the financial position and the

3. Explain briefly the purposes of creating the

Answer: Primarily, the Public Sector Accounting

4. Explain the processes of developing the

Answer: The following are the processes and

Existing IPSAS were assessed to

b. Exposure draft of PPSAS.

The PSASB issues exposure drafts of all

parties to consider and comment on its

Where an accounting principle or a

Where the international standard deviates

The PPSAS is assigned the same number

g. Financial reporting issues not dealt with

Where issues related to financial reporting

other relevant accounting standards not in

h. Submission of draft to PSASB for

Where there are significant changes or

i. If considered appropriate, focus group

5. What are the government offices primarily

Answer: The offices charged with the accounting

As mandated by Article IX-D, Section 2 par.

funds and properties,” the Commission on

Cases considered irregular uses of government funds

5. Honoraria granted to special committees which are

b. Hiring of private lawyers: 1) by GOCCs/NGAs to handle

2. ILLIGAL EXPENDITURES pertain to those incurred in

Illustrative cases include the following payments:

1. Contracts awarded under an alternative mode of

4. Communication equipment without the purchaser’s and

3. EXCESSIVE EXPENDITURES signify incurrence of

4.Unnecessary expenditures pertain to those that cannot

governance; not essential to or can be dispensed with

5.Extravagant expenditures signify those incurred

b) Procurement of luxury vehicles except when allowed

6.Unconscionable expenditures pertain to expenditures

within five (5) from such retirement/separation from

Or uses of government funds and properties.

Department of Budget and Management

Pursuant to Section 2, Chapter 1, Title XVII,

And, as provided by the Joint Circular No.

Under the Revised Administrative Code, the

Thus, the Bureau of Treasury shall control

According to the Joint Circular No. 2013-1

Statistics (GFS) shall be the responsibility of

National Government Agencies

Departments, bureaus, offices and other

6. Enumerate the registries of the National

Answer: Under the new accounting system, the

a. Registry of Revenue and Other Receipts –

This registry shall be maintained by the

c. Registry of Revenue and Other Receipts –

This registry shall be maintained by the

This registry shall be maintained by the