RIZAL TECHNOLOGICAL UNIVERSITY

JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANCY

2ND SEMESTER, 2020-2021
AC16 – ACCOUNTING FOR GOVERNMENT AND NON – PROFIT ORGANIZATION

REFLECTION ON THE GOVERNMENT ACCOUNTING MANUAL VOLUME I

CHAPTERS 7, 8 AND 9

Questions;

1. What needs to be remembered for each chapter and Why?

Chapter 7 – Financial Instruments:

As we know that the treatment for this is similar to IFRS (unless otherwise indicated).
We must first basically remember what does financial instruments are which is any contract that
gives rise to both a financial asset of one entity and financial liability instruments of another
entity. When we say financial asset it means any asset that is cash, equity instrument of another
entity, a contractual rights to receive cash or another financial asset from another entity, a
contractual right to exchange financial instruments with another entity under conditions that are
potentially favorable and a contract that will or may be settled in the entity’s own equity
instruments. While, in financial liability it is any liability that is a contractual obligation (to
deliver cash or to exchange financial asset or liabilities with another entity under conditions that
is potentially unfavorable to the entity) and contract that will or may be settled in the entity’s
own equity instruments.

We must also remember that the financial assets or financial liability

is measured  initially at fair value and subsequently measures depends on the category of the
financial instruments (some categories are measured at amortized cost and some are at fair
value).

Some examples of the government financial assets mainly include currency and deposits,
loans granted by government, securities other than shares, shares and other equity, insurance
technical reserves and other accounts receivable. While, examples of government financial
liability are transacted by many national government agencies which are accounts payable, bail
bonds payable, notes payable, interest payable, bonds payable – domestic, bonds payable –
foreign, and loans payable – domestic and loans payable – foreign representing domestic and
foreign deficit accounted at the BTr.

Chapter 8 – Inventories

There is five classifications of Inventories in government entities which are the

inventory held for sale (examples are the medicines for sales in government pharmacist),
inventory held for distribution (example is rice and other welfare goods held for distribution),
inventory held for manufacturing (example are raw materials and work in process), inventory
held for consumption (example is office supplies inventory) and semi-expendable property
(which consist of machinery, equipment, furniture and fixtures and similar items that are not
capitalized as PPE because their cost are below the P15,000 capitalization threshold for PPE).

NAME: SOPHIA GABUAT CBET-01-601P

 RIZAL TECHNOLOGICAL UNIVERSITY
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANCY
2ND SEMESTER, 2020-2021
AC16 – ACCOUNTING FOR GOVERNMENT AND NON – PROFIT ORGANIZATION

Inventories are initially measured at cost and subsequently measured at the lower of
cost and net realizable value (for goods held for sale) and lower of cost and current
replacement cost (goods held for distribution and consumption). And the measurement of cost
are comprises following which are the purchase cost (excluding trade discounts) and direct costs
incurred in bringing the asset to its intended location and condition. While in the measurement of
cost excludes the abnormal amounts of wasted materials, labor and production overhead, selling
cost and also administrative overheads.

The measurement of Net Realizable Value (NRV) is estimated selling price less
estimated cost of completion and estimated selling or disposal costs and in Current replacement
cost is the cost the entity would incur to acquire the asset on the reporting date.

In Philippine government, we only use two cost formulas which are the specific
identification which is used for items that are not ordinarily interchangeable and those that are
segregated for specific projects; and the weighted average cost which is used for large numbers
of items of inventory that are ordinarily interchangeable (this shall be applied under perpetual
inventory system).

We must also remember when the carrying amount of an inventory is recognized as

expense in the period specifically when sold, distributed, exchange, consumed or written down
to its NRV or current replacement cost (only the portion of carrying amount in excess of the
NRV or CPC is recognizable as expense)

We must all remember this because it is the basic idea in terms of inventories which we
also learned from our CFAS or even in Intermediate accounting which are almost as same in
government accounting except if it was indicated.

Chapter 9 – Investment Property

We must remember that an Investment property is property (land or a building – or part

of a building – or both) held to earn rentals or for capital appreciation or both, rather than for: (a)
Use in the production or supply of goods or services or for administrative purposes; or (b) Sale in
the ordinary course of operations.

We must also remember that Investment property shall be recognized as an asset when,
and only when: (a) It is probable that the future economic benefits or service potential that are
associated with the investment property will flow to the entity; and (b) The cost or fair value of
the investment property can be measured reliably.

In simple terms, the measurement at recognition of Investment property shall be

measured initially at its cost (transaction costs shall be included in this initial measurement).
While, when an investment property is acquired through a non-exchange transaction, its cost
shall be measured at its fair value as at the date of acquisition.

NAME: SOPHIA GABUAT CBET-01-601P

 RIZAL TECHNOLOGICAL UNIVERSITY
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANCY
2ND SEMESTER, 2020-2021
AC16 – ACCOUNTING FOR GOVERNMENT AND NON – PROFIT ORGANIZATION

After initial recognition, an entity shall choose as its accounting policy either the fair
value model or the cost model and shall apply that policy to all of its investment property.

These are important to note because we must remember what measurement we must use.

2. What is your take away from each of these chapters? Why?

My take away from each of these chapters are almost the same, they were almost
similar to IFRS or even in the lesson from CFAS or in Intermediate Accounting. Seeing what
measurement have been use from each of the chapters are almost the same as to the previous
lessons that we have (except this was meant for government transactions). As what I said in
my report that the government accounting are almost as same as in PFRS/IFRS or in the
previous lesson which will be helpful and take a little advantage because we have a prior
knowledge to the type of recognitions or other ideas and we just have to relate it with the
government transaction. However, we must also take note that there are a bit or certain
changes because this was meant for the public sector and not for private ones but it was great
that these chapters have relation to our previous discussion so we just need to review our prior
knowledge because basically we are not zero base in terms of these chapters. We just need to
mold our knowledge.

NAME: SOPHIA GABUAT CBET-01-601P

 RIZAL TECHNOLOGICAL UNIVERSITY
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANCY
2ND SEMESTER, 2020-2021
AC16 – ACCOUNTING FOR GOVERNMENT AND NON – PROFIT ORGANIZATION

REFERENCES:

 Dayag, A. (2021). Advanced Financial Accounting. 2021 Editions. Good Dreams

Publishing.
 Commission on Audit (2017). Government Accounting Manual for National Government
Agencies Volume 1 Accounting Policies, Guidelines and Procedures and Illustrative
Accounting Entries.
https://www.coa.gov.ph/phocadownload/userupload/Issuances/Circulars/Circ2015/GAM
_for_NGAs_Volume_I.pdf

NAME: SOPHIA GABUAT CBET-01-601P