Cover Page

PA 131

Government Accounting

ii

Table of Contents
PA 131 Public Accounting and Budgeting 3

Chapter 1
Government Organization and Government Accounting: An Overview

Objectives:
1. To know the organizational chart of the Philippine government 2. To understand
peculiarities of government organization and objectives of government accounting
 3. To differentiate
government and
commercial accounting

Topics:
▪

Organizational Chart of the Philippine Government

▪ Peculiarities of the Government Organization
▪ Objectives of Government Accounting
▪ Comparison of Government and Commercial Accounting

GOVERNMENT ORGANIZATION
The government is the largest financial organization in terms of assets, liabilities, capital and
sources of income and items of expenditures. It is also the largest entityinterms of number of
personnel, facilities, instrumentalities which are used to servethesocial, political and economic
needs of the nation.
The government like
 The government has as many departments,
any other entity, operates to
serve the interest of the
commissions or offices to carry out its functions, like owner. Citizens becomepart
promotion of social welfare, development of national
owners of government
wealth, defense of the state from internal and
resources though their
external aggression, promotion of justice, promotion contributions in theformof
of trade and industry, general government and
taxes and fees paid. Withthe
protection of private rights of the people. The process
growth of populationand
of government is carried out through the three
expanding demands for
branches and a fourth branch composed of
public services andbenefits,
constitutional bodies. Figure 1 illustrates the
the Philippine government
organizational chart of the Philippine Government.
functions and responsibilities
are constantly increasing.
PA 131 Public Accounting and Budgeting 4

Organizational Chart of the Philippine Government

 Executive Branch

Takes charge of the implementation of laws, policies and decisions. This branchisheaded by
the President who is the chief executive of the Republic. As chief executive, he is vested with the
power to formulate national policies, implement thelaws andadminister the day-to-day affairs of
the government.

● National Government
● Local Government
● Government - owned
Units - composed of the
Agencies - consisting different local political organized by lawor
of departments or chartered cities,
and/or controlled commissions, boards
corporations - agencies pursuant to law, vested

ministers,bureaus, offices, tribunals,

units like the provinces, municipalities and
with functions relating

councils, centers, barangays. Local to public needs

governments are
institutions, state whether governmental
granted autonomy to
colleges and establishments. Each
ensure their reliant
universities and department is headed
development as self or proprietary innature, and ownedby thegovernment
directlyof through its
communities.Governm
by a secretary. instrumentalities either
ental powers are
wholly or, to theextent
exercised through a set of
of at least fifty one
elective and appointive
percent of its capital
officials under the general
stocks.
supervision of the national
government.
PA 131 Public Accounting and Budgeting 5

Legislative Branch

Is responsible for the enactment of laws. The congress of thePhilippines, composed of the
Senate (Upper House) and the House of Representatives (Lower House) constitute the Legislative
The legislative
Branch. It
convenes once
every year on
the fourth
Monday of
power is
vestedin
July for its
regular session,
unless a
different date is
fixed by law,
a body consisting
and continues
to be in session
for such
number of days
as it
of
 elective
may determine until 30 days before the opening of the next
representatives
session. A special session may be called by the President any
fromtheprovinces
time. The Senate headed by the Senate President is
with their
composed of 24 Senators elected at large by the country’s
component cities,
voters. The first 12 with the highest number of votes serve for six
urbanizedcities
years while the lower 12 serve serve for 3 years. The Lower
anddistricts.
House of Congress, headed by the Speaker of the House, is composed of 212
elected districts and party-list representatives.

Judicial Branch

Is concerned with the interpretation and application of laws. Judicial powers arein the
Supreme Court and such inferior courts as may be created by law. Theinferior courts include the
Court of Appeals, Court of Tax Appeals and Sandiganbayan.

Constitutional Bodies

Are created under the Constitution and are independent in the performanceof their
respective duties. It is headed by a Chairman with a set of Commissioners- appointed by the
President for a fixed term of office. The Commissions performcritical functions in government and for
this reason they are expressly createdbytheConstitution in order to ensure their continued existence.
Other offices createdunder the Constitution are the Office of the Ombudsman, Commission on
Human Rights andthe Autonomous Region in Muslim Mindanao.

PECULIARITIES OF THE GOVERNMENT ORGANIZATION The government accounting system

differs in certain fundamental aspects fromthat used in private concerns because the
government has certain characteristics which distinguish it from private business.
PA 131 Public Accounting and Budgeting 6
1. Purpose realize profit fromit.
government, no one may disposeof his share and
The primary purpose of the
government business is to render service
Accounts which express ownership
to the public at the lower-cost possible as
interests such as owner’s capital,
distinguished from the usual profit motive
partner’s capital, capital stock or shares
of the private business. Although there
of stocks are not required in the
are few cases
wherein the
government

government accounts (except for some

operates a utility or engages in special
government owned and controlled
 enterprises with the expectation of
corporations). The accounts expressing
making profits, such profits realized are
proprietorship of a government body
retained for public use and not available
simply consist of various surplus accounts
for the use of specific individuals.
of their equivalents.

Government accounting
emphasizes accounting for revenues and
3. Management
expenditures instead of profit and loss
accounting procedure. The main
Officers and managers of private
objective is to determine how much of
businesses have relatively fewinternal
the expected revenue has been realized
limitations unlike the officers and
and made available for use; what
administrators of the government entities
obligations have been incurred out of the
who are governed by specificlaws and
appropriations for the period and how
regulations. Since the power of the
much obligations have been liquidated.
officials emanate fromthe public, they
It is also important to know whether
have to render their functions, duties and
actual revenues are in excess of actual
responsibilities in accordance with
expenditures or there is a deficiency
established laws, rules and regulations
resulting from the excess of actual
which serve as a yardstick of their
expenditures over actual revenues.
performance. Legislative bodies place
limitations on executives, administrative
officers and ministry heads through
2. Ownership restrictions on ministry
revenue and appropriation acts. Executives place
 In government, there are no
heads and other subordinate operating
defined ownership interests that can be
officials through administrativeorders,
acquired, sold, transferred or redeemed
in the commercial sense. Individual work programs and collections
budgetary allotments, cash disbursement ceiling,
ownership does not exist in the
and expenditure procedures. Chief
government. Although every citizen is
executives have veto powers on
said to have a share in the assets of the
acts of the legislative body. The
reviewing bodies whose decisions may
judiciary constitutes the independent
PA 131 Public Accounting and Budgeting 7

result in further restrictions on the actions

of other branches of the government.
To provide evidence of
compliance or lack of compliance with
controls over financial operations,
government accounting requires
budgetary accounts to indicate the
progress and status of the budget.
Budgetary accounts constitute the formal
record of the financial plan.
4. Income
Private business derives its income
from charges made for services rendered
or commodities sold. The government
derives most of its income fromthe
collection of taxes and fees. Tax revenue
provides the major portion of resources
available to finance government
operations.
Taxes or charges are authorizedto
 Accounts for
estimated
revenues
be levied and
collected for identified
and realized revenues
as well as
purposes. Borrowings
are likewise
appropriation
accounts dealing with
authorized to
provide funds for
definite
authorizations to incur
obligations are
purposes. Gifts and trusts
are received
included in the
government
accounts.
with restrictions on
howthey shouldbe

used.

BASIC PRINCIPLES

Accounting is a tool of management by which officials may control, coordinate, and plan
the activities of the government in such a way that services requiredor demanded by the citizens
are provided at the lowest possible cost.

The Government Auditing Code of the Philippines prescribes the following: the chart of

accounts for government agencies shall be prescribedby

Chart of Accounts
the Commission on Audit and shall be so designed as to heads to review their activities according to selected areas
permit agency of
 responsibility; permit a more simplified preparation of trial balances anda simpler and
more orderly process of national consolidation; etc.

to permit effective budgetary control and to establish uniformityin financial

reports, accounts shall be classified in balancedfund
Account
Classification
groups. The group for each fund shall include all accounts necessary to
set forth its operations and condition.
PA 131 Public Accounting and Budgeting 8

the general accounting in the government shall include

budgetary control accounts for revenues, expenditures andBudgetary
Control and
debt. Budgetary accounts reflect budget operations
Accounts
conditions such as estimated revenues, appropriations and
encumbrances.
 all lawful expenditures and obligations
incurred during the year shall be taken
upin
Accounting
the accounts that year. However, a
complete accrual basis of accounting is
not
for obligations
necessary. The modified accrual basis
or modified cash basis is adopted
because
and
not all expenditures could be
taken up when incurred due to
some legal
expenditures
requirements. For example, interest
expense cannot be accrued unless
providedfor
in the current
appropriation. Income
taxes are taken up when
collected.

The Commission on Audit shall

issue pertinent
accountingrules
and regulations
whenever the
reporting
requirements tobe
Accounting
prescribed by the
Department of Budget and Management
reports
pursuant to the budget law affect accounting functions of the
various agencies of the government.

PARTIES INTERESTED IN GOVERNMENT ACCOUNTS

Government accounting information is used by a variety of groups andfor diverse purposes.

The information should be presented in a form and expressedintermsthat a user comprehends.
Among others, the parties interested in the government accounts are as follows:
 they use the accounts to check theactivities of
subordinate officers and agencies, tocontrol current
expenditures and to plan the future.
Officials and administrators of government
agencies

they use the accounts to check theprogressofthe

financial programs and the stewardshipof responsible
officials, for guidance in the formulationof newactsor

Legislative body determinecompliancewith limitations set up in the

bill relating to finance and to budget andappropriationsact.
PA 131 Public Accounting and Budgeting 9

they refer to the accounts in order tocompare

expenditures incurred by comparableunits for broad
governmental responsibilities such as publichighways,
public safety, health, hospital and education.

Political analysts
 they use the
information in

analyzingfuturetrends,
general economic effects and for modification
purposes.
Student of public finance

they find the financial statements as asourceof

information on how the money they contributed, inthe
form of taxes and fees, had been used. Accounting
information helps them in evaluatinghowwell elected
representatives and other publicofficialshave
discharged their fiduciary responsibilities as agentsand
stewards of the people. They also determinefromthese
government accounts whether adequateprocedures,
 in all matters relative to accounting, aresetupin
accordance with sound principles andthat theyare
Lenders, suppliers and employees
areconcernedabout the government’s ability to
General public
generatecashflowsfor timely payment of its
consistently followed. obligations withthem. Donorsand grantors need
information that will helpthem
Resource providers: include (a) those
assess how well the objectives of adonationor grant
directly compensated for providing
have been complied with, and whether further
resources - lenders, suppliers, employees;
donations and grants are warranted. Taxpayersmay
and (b) those who are not directly and
want to know the services providedby government
proportionately compensated - tax
payers, donors, grantors andfeesthey will be required to pay.
which are likely to affect the amount of taxes

NEED FOR THE STUDY OF GOVERNMENT ACCOUNTING The following are some reasons for

the study of government accounting:

1. Government operations are managed by people who are either electedbythecitizens or

appointed by the Chief Executive. Fiscal and accounting controls areset up to prevent abuses
of power. Accountability denotes the responsibility toothers
PA 131 Public Accounting and Budgeting 10

tha one or more persons have for their actions and behavior. All public officials andemployees
are ultimately accountable for their actions to the people. Thus, theneed for government
accounting to assure continuous flow of operations andinsafeguarding the interest of the
citizens.
2. With the knowledge of government accounting, citizens will

understandpublishedgovernment financial statements so they can judge how well the

administrationhad managed the government operations.

3. Need for knowledge of government accounting is not confined only to thoseemployed in the
accounting offices of the government. Those employedinother branches of government,
specially those in record keeping and computer programming will be of better service if they
have sufficient knowledge of government accounting principles and procedures.

4. Examinations given by the Civil Service Commission and Board Examinations mayinclude
questions on government accounting.
GOVERNMENT ACCOUNTING

As defined in Section 109, Chapter 1,Title III of the Government AuditingCodeof the
Philippines, Presidential Decree 1445, government accounting encompasses theprocesses of
analyzing, recording, classifying, summarizing, communicatingall transactions involving the receipts
and the disposition of government funds andproperty and interpreting the results thereof.

OBJECTIVES OF GOVERNMENT ACCOUNTING

Section 110 of Presidential Decree 1445 enumerates the fourfold objectives of government
accounting. These are:

1. To produce information concerning past operations and present conditions; 2. To

provide basis for guidance for future operations

3. To provide control of the acts of public bodies and officials in the receipts, disposition,
authorization of funds and property;

4. To report on the financial position and results of operations of government agenciesfor

the information and guidance of all persons concerned.
PA 131 Public Accounting and Budgeting 11

Comparison of Government Accounting and Commercial Accounting Both have similarities and

differences:

Similarities:

1) Both maintain books of original entry

 2) Both use a
chart of
accounts

3) Both use
general ledger
and subsidiary
ledgers

4) Both adopt
the double
entry
bookkeeping
system

5) Both establish and observe internal check and control systemas

effectivedevicefor controlling and safeguarding assets

6) Both use adjusting entries and closing entries

Differences

Government Accounting Commercial Accounting

Accounting principles and practices are

Procedures is more flexiblebecause
derived from laws, rules and regulations making accounting principles andpractices
 the procedure fixed Principles (GAAP)
are based on Generally AcceptedAccounting

All national agencies shall maintain two sets of

Only one set of accountingbooks is
books: maintained except when theyarebranch offices
A) Regular Agency (RA) Books - these shall be used to record the
receipt and utilization of Notice of Cash Allocation (NCA) an other
income/receipts which the agencies are authorized to use and to
deposit with Authorized Depository Bank (AGDB) and the National
Treasury

B) National Government (NG) Books - these shall be used to record

income which the agencies are not authorized to use and are
required to be remitted to the National Treasury.
PA 131 Public Accounting and Budgeting 12

Modified accrual basis of accounting is used.

Either cash or accrual basis is used
All expenses shall be recognized when
but not a combination of both
incurred, income shall be on accrual basis
except for transactions where accrual basis is
impractical or when other methods may be
required by law.
 Budgetary
accounts of
appropriations
and
Budgetary
accounts are not
allotments are
entered in the
Registry
necessarily
maintained
maintained by
the DBM;
allotments and
obligations
entered in the
Registry of the
Agency

Makes use of
uniform
account codes
in
Account codes
may vary
among
private businesses.

recording transactions.

Emphasis of accounts is on correctness, so the

Emphasis of accounts is on fair
reports are “Certified Correct” “opinion”
valuation, so the reports arestatedasan
PA 131 Public Accounting and Budgeting 13

Chapter 1 Evaluation

A. Demonstrate/ Observe and v.v.

1. I will be assigning a partner (will be posted in our LMS) for you to do this task: Thetwo of you will
decide who will demonstrate first and who will act as the audience/observer, then exchange
 roles:

a) Who does
the
demonstration:

i.

Demonstrate to your partner the organizational chart of the PhilippineGovernment

Organization. You may do this via chat (messenger), videocall, sms or cp call (mobile
numbers). - though remember to keep asampleevidence.

b) Who observes

i. The partner will write down her/his observations if the demonstrator is ableto explain
well, if it is complete, and clear.

c) Provide a sample evidence (screen shot or any feasible evidence) of

thedemonstration together with the written/encoded observations (twoobservations
since you exchanged roles) of each of the partners
B. Choose one letter from the word PECULIAR and explain in two sentences any peculiarities of
government organization.

C. Why is government accounting means of control to the acts of public bodies?D. Government

accounting is more rigid than commercial accounting because______.

PA 131 Public Accounting and Budgeting 14References

 1. COMMISSION ON AUDIT (COA). 2016. Government Accounting Manual. 2. DEL BARRIO-
JORGE, J. 1980. National Government Accounting, RevisedEdition. Ring Industrial Sales and
Services Corporation.
3. LAYA,
JAIME C.
1980.
Philippine

Government Budgeting: Policy and Practiceinthe New Society. Ministry of the Budget Manila,
1980.
PA 131 Public Accounting and Budgeting 15

CHAPTER 2
GENERAL PATTERN OF GOVERNMENT ACCOUNTING

Objectives:
1) To determine internal controls adopted in the government;
 2) To
3) To

Topics:
▪ Internal
Control
▪

INTERNAL CONTROL

Government
Accounting is a tool of
management by which
officials maycontrol,
coordinate, and plan the
activities of the
government so that
services requiredor
demanded by citizens
may be provided at the
lowest possible cost. For
this purpose, accounting
makes an important
consideration for the
provision of internal
control tosafeguard the
money and property of the citizens.

Internal control is the plan of organization and all the coordinate methods and and measures
adopted within the organization or agency to safeguardits assets, check the accuracy and reliability
of its accounting data, and adherencetoprescribed policies.

Under this plan, employee’s duties are arranged and records and procedures are designed
to make it possible to exercise effective accounting control over assets, liabilities, revenues and
expenditures. The employee’s work is subdivided so that nooneemployee performs a complete
cycle of operations.
Purposes of internal control are as follows:

1. To discourage dishonesty through the implementation of a systemthat wouldmakeconcealment

of irregularities possible only through collusion of two or more persons. Thisis founded on the theory
that the more number of persons who knowabout theirregularity, the greater possibility of disclosure.

2. To promote accuracy by providing an automatic check of accounting entries bysubjecting them

to review by at least one person other the one who recordedit.
PA 131 Public Accounting and Budgeting 16

Examples of internal control:

1. Segregation of incompatible duties - this includes the duties of: a.

Authorization
b. Execution, and
c. Custody
 2.
Imprest system
- this requires
that all cash
receipts should
be

depositedintact within a reasonable period of time from date of collection and all cash
disbursements should be made through checks and not from cash collections;

3. Bank reconciliation - it should be prepared regularly to reconcile thedifference between the

cash balance per books and the cash balance per bank statement. Any differences should be
accounted for.

4. Cash counts - this is to provide reasonable assurance that actual cashtallywith

the balance per records. Reconciliation

5. Lock box

6. Bvbhgf
 7. Dnd

Effectiveness of internal control system depends on the (1) organizational structure with
proper distribution of responsibilities among the personnel; (2) largepersonnel staff to permit
distribution of duties and operations for purposes of cross checking; and (3) proper
implementation of the system.
PA 131 Public Accounting and Budgeting 17Orga