Chapter 1 - Nature and Scope of NGAS Questions & Answers:: 2018 Edition

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;
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.
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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 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 parties to consider and comment on its
proposals. The PSASB evaluates all comments received
on exposure drafts and makes such modifications, where
appropriate.
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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.
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.
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Where issues related to financial reporting emerged,

researches were done and a discussion document
prepared based on 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
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.
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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 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
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
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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;
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;
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;
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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;
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 funds in the form of assistance to
unauthorized beneficiaries
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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;
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
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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 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)
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;
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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;
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
governance; not essential to or can be dispensed with without incurring loss
or damage to property; such as:
a) Hiring of public relations companies;
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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;
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:
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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;
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;
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;
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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, 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, 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;
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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.
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.
Bureau of Treasury
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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 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
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of management. They shall perform the aforesaid duties in

accordance with existing laws, rules, regulations,
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.
c. Registry of Revenue and Other Receipts – Special

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

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

1.) Internally Generated Funds (Off-Budgetary – Retained
Income Funds); and, 2.) Business Related Funds.
e. Registry of Revenue and Other Receipts – Trust

Receipts/Inter-agency Transferred Funds (RROR-
TR/IATF).

Division/Unit of the entity for the 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).

Division/Unit by Appropriation Act, fund cluster, by Major
Final Output (MFO) or Program/Activity/Project (PAP) for
personnel services.
h. Registry of Allotments, Obligations and Disbursements –

Maintenance and Other Operating Expenses (RAOD-
MOOE).
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maintenance and other operating expenses.
i. Registry of Allotments, Obligations and Disbursements –

Financial Expenses (RAOD-FE).

financial expenses.
j. Registry of Allotments, Obligations and Disbursements –

Capital Outlays (RAOD-CO).

capital outlays.
k. Registry of Budget, Utilization and Disbursements –

Personnel Services (RBUD-PS).

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).

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

Financial Expenses (RBUD-FE).

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

Capital Outlays (RBUD-CO).
or Program Activity/Project (PAP) for capital outlays.
o. Registry of Allotments and Notice of Cash Allocation

(RANCA)
This registry shall be maintained by the 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)
This registry shall be maintained by the 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:
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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.
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 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.
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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 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 total debits being equal to total credits for all
accounts in the general ledger.
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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;
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
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Audit Reports, all National Government 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;
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
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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;
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 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.
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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
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.
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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 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
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
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(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
This is the instruction provided by GAM for Registry of
Allotments, Obligations and Disbursements for Personnel
Services (RAOD-PS).
15. A
This is the instruction provided by GAM for 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
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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 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 (3 rd to 5th) are
for the Agency Code. The next seven digits (6 th 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 (3 rd 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 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 (4 th and 5th) are for 1st Level
Activity. And, the next four digits (6th to 9th) are for the
2nd Level Activity.
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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.
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.
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.
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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
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
07 Trust Receipts
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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 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
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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.
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
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
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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),
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 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.
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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.
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
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
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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
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.,
Cash-Collecting Officer, Petty Cash, etc. This is composed
of two segments: the first two digits from the left is the
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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.
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
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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.
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 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
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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 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, 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.
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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 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 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
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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
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.
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b. Incremental Approach – a budget where only additional
requirements need 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
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
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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.
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 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
46
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
(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 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
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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 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 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.
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50
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 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-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
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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 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 Account (ADA) or other modes of
disbursements.
b. Non-Cash Availment Authority (NCAA)
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This is the authority issued by the DBM 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)
This is the authority issued by the DBM 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 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%;
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and Capital Outlay – 5%. The Notice of Cash Allocation received
by the government agency from the 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
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
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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.
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
This phase of budget process/cycle involves the implementation
of the budget by different government agencies.
7. B
This phase of budget process/cycle involves 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
government funds under specified conditions or for special
purposes.
10. C
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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 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
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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
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 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
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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
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
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Performance-Informed Budgeting is a budgeting approach that

uses performance 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.
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
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
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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
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 Allotments Released Unfunded
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 Allotments Incurred 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
150,000 120,000 30,000
Total 490,000 174,000

664,000
3.
Cash – MDS, Regular 547,000
Subsidy income from national 547,000
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 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
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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 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.
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
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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 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.
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)
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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 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
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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
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.
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B-
(Constructive receipt of NCA for withholding tax.)
101040 297,00
Cash - TRA
70 0
Subsidy from National 403010
297,000
Government 10
(Payment of accounts payable.)

201010 4,950,0
Accounts payable
10 00
101040
Cash – MDS, Regular 4,653,000
40
202010
Due to BIR 297,000
10
(Remittance of withholding tax through TRA.)

202010
Due to BIR 297,000
10
101040
Cash - TRA 297,000
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2-A
Cost per unit 12,000 – 1,200)/6 units P1,800
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.)
106070
Furniture and fixtures 10,800
10
Accounts payable 201010 10,800
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10
(Receipt of promotional item.)

106050
Office equipment 1,200
20
201010
Accounts payable 1,200
10
(Payment of accounts payable.)

201010
Accounts payable 12,000
10
101040
Cash – MDS, Regular 11,280
40
202010
Due to BIR 720
10
Note: Tax rates: VAT is 5% and EWT for goods is 1%.
(Remittance of withholding tax to BIR.)

202010
Due to BIR 720
10
Subsidy from national 403010
720
government 10
Based on requirement “b”, the NCA received is net of TRA. In

other words, the subsidy from national government recorded by
the agency upon receipt of NCA does not include the portion for
TRA; thus, the above journal entry.
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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 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;
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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 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 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
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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 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?
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.
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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.
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.
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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.
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 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
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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
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.
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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?
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.
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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
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
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
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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.
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 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
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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 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)
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e. Reliability – reliable information is free from material error

and bias, and can be depended 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.
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.
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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
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;
ii. the extent to which the entity has applied any transitional
provisions in any PPSAS; and
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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
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?
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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:
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.
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.
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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 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 restatement is
practicable (which may be the current period). (Par. 49,
PPSAS 3)
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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.
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 3. B 5. D 7. C
2. C 4. C 6. B 8. B
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9. C
10. D
11. A
12. C
13. D
14. A
15. D
16. D
17. C
18. B
19. A
20. B
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Suggested Answers to Problems (Chapter 7)
1.
Capital outlay 14,250,000
MOOE 11,400,000
Total NCA received 15,650,000
Less payments:
Left wing construction 6,500,000
Right wing repainting 2,000,000
Total 8,500,000
Less: W/tax (5% + 2%) 595,000 7,905,000
Purchase of furniture and

fixtures and 3,000,000
equipment
Purchase of office 2,500,000
supplies
Total 5,500,000
Less: W/tax (5% + 1%) 330,000 5,170,000 13,075,000
Cash balance 2,575,000
2.
Subsidy from national government 520,000
Less: Unutilized NCA 100,000
Refund of excess cash advance 5,000 105,000
Balance 415,000
Less Expenses:
Salaries and wages 150,000
PERA 50,000
Retirement and life insurance 18,000
premiums
Pag-IBIG premiums 2,500
Philhealth premiums 4,500
Travelling expenses - local 13,000
Electricity expenses 12,000
Telephone expenses 10,000
Rent/lease expenses 25,000
Office supplies expenses 20,000
Depreciation - Machinery 15,000 320,000
Excess of income over expenses 95,000
3.
Current assets 500,000
Property, plant and equipment 800,000
Total assets 1,300,000
Less: Current liabilities 200,000
Accumulated surplus/Deficit 1,100,000
4.
Excess of income over expenses 500,000
Depreciation - Machinery 5,000
Increase in accounts payable 30,000
Increase in due to BIR 5,000
Increase in due from NGA (55,000)
Increase in office supplies inventory (25,000)
Cash provided by operating activities 460,000
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.
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, 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
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
 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.
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
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 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.
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:
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.
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.
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, 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 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.
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 System 05
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
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 National Wealth 20
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 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-Personnel
services are charged to maintenance and operating
expenses of LGU.
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
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.
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 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 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
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
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 recognized in the
financial statements of the 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 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
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
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)
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 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 5 th 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.
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 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 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 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
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:
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 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 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 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
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.
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.
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.
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 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 GAFMIS-COA
and to the auditor/audit team leader concerned.
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 recognized in the financial statements
of the 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.
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 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 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, 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
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

Chapter 1 - Nature and Scope of NGAS Questions & Answers:: 2018 Edition

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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

2. Enumerate the objectives of the government accounting

Answer: Section 110, Presidential Decree 1445 sets down the

b. To provide a basis for guidance for future operations;

c. To provide for control of the acts of public bodies and

d. To report on the financial position and the results of

3. Explain briefly the purposes of creating the Public Sector

Answer: Primarily, the Public Sector Accounting Standards Board

4. Explain the processes of developing the Philippine Public Sector

Answer: The following are the processes and other considerations in

Existing IPSAS were assessed to determine the

b. Exposure draft of PPSAS.

The PSASB issues exposure drafts of all proposed PPSAS

Where an accounting principle or a significant element of a

Where the international standard deviates from the

Disclosure requirements may be amended when the

The PPSAS is assigned the same number as the IPSAS to

g. Financial reporting issues not dealt with by IPSAS.

Where issues related to financial reporting emerged,

h. Submission of draft to PSASB for consideration of COA.

Where there are significant changes or unresolved issues

i. If considered appropriate, focus group discussions will be

5. What are the government offices primarily charged with

Answer: The offices charged with the accounting responsibility are

The Commission on Audit (COA) keeps the general accounts

Cases considered irregular uses of government funds include the following :

Department Secretaries, Undersecretaries, Assistant Secretaries or their

j. Media advertisements for anniversaries/publicity propaganda (except

2. ILLIGAL EXPENDITURES pertain to those incurred in violation of the law

Illustrative cases include the following payments:

1. Contracts awarded under an alternative mode of procurement for

3. EXCESSIVE EXPENDITURES signify incurrence of unreasonable expenses at

d) Release of funds to NGOs/Pos in excess of approved project

4.Unnecessary expenditures pertain to those that cannot pass the test of

5.Extravagant expenditures signify those incurred without restraint,

a) Rental of expensive halls/rooms in plush/luxury hotels/restaurants for

6.Unconscionable expenditures pertain to expenditures acquired in unreasonable

Or uses of government funds and properties.

2. Has been assigned the financial and operational

Department of Budget and Management

Pursuant to Section 2, Chapter 1, Title XVII, Book IV of the

And, as provided by the Joint Circular No. 2013-1 dated

Thus, the Bureau of Treasury shall control and monitor the

According to the Joint Circular No. 2013-1 dated August 6,

National Government Agencies

Departments, bureaus, offices and other instrumentalities of

of management. They shall perform the aforesaid duties in

6. Enumerate the registries of the National Government Agencies

Answer: Under the new accounting system, the government

a. Registry of Revenue and Other Receipts – Summary

This registry shall be maintained by the Budget

c. Registry of Revenue and Other Receipts – Special

This registry shall be maintained by the Budget

This registry shall be maintained by the Budget

e. Registry of Revenue and Other Receipts – Trust

This registry shall be maintained by the Budget

f. Registry of Appropriation and Allotments (RAPAL).