•

THE ~~FECTS OF CHANG ES IN FOREIGN EXCHANGE RA

Initial Measurement TES .... .... ......... .. . -------
Subsequent Measu r~~~~;.-.-_"_"_"_" . _"_"_"_"_"_" _"_" ·· ·· ····· ·· ···· ·····... ..... ....... .·.·.·.·.·.·.·.·.·.·.·.·.·.·.· ::;
Exchange Differences ··· ····· · ···· ····· ·· ·.. ......... .. .. ..
Overview of Government Accounting

Chapter 1
. ····· ··· ········ ............ 388
Translation of Financial Statem~~·~~····················· ............. ... ............... 38
8 overview of Government Accounting
CHAPTER 15 SUMMARY; .......... •... ... .. . ....... .-.-.-.-.-.-.·.-.-.·.-.·.·.·.-.·.·.·.-.·.·.·.·.·.·.·.·.·.·.-.·.·.-.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·::~
CHAPTER 16
Learning 06jectives
NON-PROFIT ORGANIZATIONS- 1. Differentiate government accounting from the accounting for
•.•.•.•...••.......•..••..••.........•.....•.•....•.... 400
CURRENT TREND IN PRACTICE ... . . .. . business entities.
CHARACTERISTICS OF A NON-PROFI;·~~·~~~;;~;;~~· ········ ···· --·· ·· ···· ·· ······· ··· ··· ······ 401 2. State the government entities charged with accounting
PFRS PRINCIPLES APPLICABLE TO NPOs ········· :································ 4 03 responsibility.
. . .. .... ..... .. ... , 40
ACCOUNTING FOR NON-PROFIT ORGANIZATIONS ...... ..... ... ..... .. ... .. ..... .. .... ... 3 3. Describe briefly the GAM for NGAs.
Fu nd theory VS. Fund accounting ·· ·· ··· ····· ··· ··· ··:····· ········ ····· ··· ····· 405 4. State the basic principles used in government accounting.
Contributions .... .. .. ... .._. .... .... ..... ..... :·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.·.··············· ········ :g; 5. State the recognition criteria for assets. ·
Recognition and measurement. .............. · . ········· ····· ··· ·····
···· ····· ······· ··········· ·· ········· ····· 407
Cash and other Non-cash assets .. ....... ...... ...... ...... ........ ...... ...... .. .. . 407

~;~~~~~~1n;::~~:~s~~ ....;...-......_._._..._._._._._._. ................................................:...................-...·.-.-.·.·_-_-_-_-_-_-

Services ............ .. .... .. .... ......... ... ............... ... .... ...... ....... .. .............. ... 410
:i: Introduction
"Government accounting encompasse~ the processes of
analyzing, recording, classifying, su.rnrnanzmg and .
Works of art and similar items ................... ... ................................. 411 ,
Deferral method of recognizing contributions ............... ..... ........... 418 communicating all ~ransactions involving the receipt and
FINANCIAL STATEMENTS ............................ : .. .......... ...................................... 420 disposition of government funds and property, and interpreting
Statement of financial position .......... .. .. .......... :... .............................. 420 the results thereof." (State Audit Code of the Philippines, P.O. No. 1445, Sec. 109)
Statement of activities ............ ........... ................................................ 420
Statement of cash ·flows .......... .............. ............ ........... .. .... ... ............. 422 The objectives ofgovernment accounting are:
ACCOUNTING PROCEDURES PECULIAR TO SPECIFIC TYPES OF NPOS ....................... 423
a) To produce information concerning past operations and
Health Care Organizations ......... ............................... .... ....... .............. 423
Private, non-profit, Colleges and UniversitieL ..... ...... ......... ............. . 429
present conditions;
Voluntary Health and Welfare Organizations .................................... 430 b) To provide a basis for guidance for future operations;
Other non-profit organizations ................................. ... .. ... ..... .... .. ... ... 431 · c) To provide for control of the acts of public bodies and officers
ACCOUNTING FOR OTHER ASSETS HELD BY NPOS ..... ...... ...... ..... ...... ........... ........ 431 in the receipt, disposition and utilization of funds and
CHAPTER 16 SUMMARY: ·· ··· ··· ·· · .. ··········· .• ... ...... ··· ········· ···· ·· ······ ···· ..... ·.. ... .. ... 432 property; and
d) To report on the financial position and the results of
CHAPTER 17 operations of government agencies for the information of all
ILLUSTRATIVE _FINANCIAL STATEMENTS QF NPOS .................................. 457 persons concerned.
(P.O. No. 1445, Sec. 110)
ILLUSTRATIYE FINANCIAL STATEMENTS - BASED ON U.S. GAAP .. ......... ... ..... .. .. .... 457
ILLUSTRATIVE FINANCIAL STATEMENTS -BASED ON IFRSS ... ........ ....... .... .. ....... .... 462
ILLUSTRATIVE FINANCIAL STATEMENTS- BASED ON IFRSS, SOME U.S. GAAP PRINCIPLES
ARE INCORPORATED ... ............................ ;.... ....... .. ...... .. .... ... ... ·... ..... ...... .... .. .. 473
 Ch
~ overview of Government Accounting
Like the accounting for busm · ..
ess entities go
accounting is also a process of. produc· . ,r, _ . ' vernll"lent
. . mg zn1 0, matzon that 15·
m making economic decisions. Governme t . usefo1
n accounting, h 0
places greater emphasis on the following: wever,
a. Sources and utilization of government funds; and
b. Responsibility, accountability and liability of . t·t·
. en 1 1es entrust
with government funds. and properties. . ect
> The sources of government funds include receipts from taxes
and other fees,_ borrowings, and grants from other
governments and international bodies.
> The utilization of government funds includes expenditures on
programs, projects, unanticipated losses from calamities and
the like.
Responsibility. Accountability and Liability over Government
. Funds and Property
ResponsibilihJ over Government Funds and Pro'perty
1. Government resources shall be utilized efficiently and
effectively in accordance with the law. The head of a government
agency is directly responsible in implementing this policy and
is primarily responsible for government resources entrusted to
his agency. Those who are entrusted with the possession of
government resources are directly responsible to the head of
the agency.
2. All those who are exercising authority over a government
agency shall share fiscal responsibility.
(State Audit Code of tile Philippines, P.D. No. 1445)
Accountability over Government Funds and Property
1. A government officer entrusted with the possession. of
government resources is responsible for the safekeeping
3
ountable officer
therefor in accordance with the law. Every ace
shall be properly bonded. (PD. No. 1445and E.0. No. 292)
fr e officer to another
The transfer of government funds om on onl after the
z. shall except as· allowed by law, be made Y rly
auth~rization of the COA. The transfer shall be prope
documented in an invoice and receipt. (P.O. No. 1445 )
Liability over Government Funds and Property 1 be the
The unlawful use of government resources shal .
1. personal liability of the employee found to be directly
responsible therefor.
Every accountable officer shall be liable for all losses res_ulting
Z. from the unlawful use or negligence in the safekeeping of
government resources.
3 No accountable officer shall be relieved from liability merely
· because he has acted under the direction of a superior officer
in unlawfully utilizing ,the government resources e~truste~ to
him, unless before that act, he has notified the supenor officer,
in writing, that the utilization is illegal. The superior officer
shall be primarily liable while the accountable officer who fails
to serve the required notice shall be secondarily liable.
4. An accountable officer shall immediately notify the COA for
any loss of government funds from unforeseen events (force
majeure) within 30 days. Failur.e to do _so will not relieve the
officer of liability.
(PD. No. 1445)
\ Main concept:
Government resources must be utilized efficiently and effectively in
accordance with the law. Government officials are responsible in
implementing this policy, are accountable for the government
resources in their custody, and are liable for any loss.
 _ _ _ _ _ _ _ _ __ _ _ _ _
C_hapter 1
4
Overview of Govern ment Accounting 5

Tfie 11nsung J(eroes

b. Keeps the general accounts of the government, supporting
. • · ·nos going abroad to seek employment i vouchers, and other documents.
Th e number o f FI 1ip1 .
In 2012 it was estimated that about 10.4 million
s
· easing every year. ' I c. Submits finan cial reports to the President and Congress.
'~~r. k d broad.1 Almost all Filipinos know at east one other
F1hpmos wor e a f . d h .
.. . f. -1 member. a relative. or a nen , w o 1s working Department of Budget and Management (DBM)
F11tpmo - a am1 y h H
abroad. We refer to our overseas workers as unsung eroes. ow so? The Department of Budget and Management (DBM) is responsible
This is mainly because overseas workers remittance~ greatly , for the formulation and implementation of the national budget with the
increase the spending in our country. and the r:nore money 1s spent, goal of attaining the nation's socio-economic objectives.
the more taxes the government collects. A portion of the money we
spend on almost everything (food. clothing, bills, entertainme~t, Bureau of Treasury (BTr)
medicine, rentals. etc.) represents payment for tax. Taxes are the main The Bureau of Treasury (BTr) functions under the Department of
source of government funds used in developing our country. Finance and is the cash custodian of the government. The BTr is
Working abroad entails great sacrifices, not only for the authorized to:
overseas worker but also for family members left at home. We need a. Receive and .keep national funds and manage and control the
efficient and effective utilization of our government resources so that disbursements thereof; and
someday our countrymen can have better options of finding a b. Maintain accounts of financial transactions of all national
livelihood in our country. ·
government offices, agencies and instrumentalities.
Accounting, as a tool for planning and control, contributes to
the achievement of this goal by providing information that is useful in £overnme'nt Agencies
planning the sources and uses. of government funds and comparing Government agency refers to any department, bureau or office of
adua/ results with expeded results tb promote the efficient and ,
effedive utilization ofgovernment funds.
the national government, or any of its branches and
I CNN instrumentalities, or any political subdivision, as well as any
government owned or controlled corporation (GOCC), including
its subsidiaries, or othe'r self-governing board or commission of
Ac~ounting responsibility
the government. (P.O. No. 1445)
The fo~o~ing offices are charged with government accounting The government agencies are responsible in dir~ctly
responSib11i ty:
implementing the projects of, and performing the functions
a. Commission on Audit (COA) .
delegated by, the government. .
b. Department of Bu.dget and Management (DBM)
Each agency (entity) shall maintain accounting books and
c. Bureau of Treasury (BTr)
d. Government agencies
budget registries which are reconciled with the cash records of the
BTr and the budget records of the COA and DBM. .
Commission on ·Audit (COA) Government agencies are required by law to have accounting
The Commission on Audit (COA): units/divisions/departments.
a. Ha~ .the exclusive authority
audztmg rules and regulations. to promulgate accounting and ..... h llest administrative division in the Philippines) is required
Q Even a barangay (t e sma . "b kk per "
to have. an accounting unit, ·e.g., the barangay's 00 ee ·
- 6

.
---
_ _ _ _ _ _ _ _ _ _ _-'--Chapter 1

tern of the National Government

~
- overview of Government Accounting 7

Financial Reporting 5ys . fhe GAM for NGAs

An "old" government accountin g system had been used for about
Bureau ofTreasury (BTr) five decades before it was replaced by the New Government
Accounting System (NGAS) in 2002. However, on January I, 2016,
the NGAS was replaced by the Government Accounting Manual
_ f.ach entity reco11ciles J.g_r National Government Agencies (GAM for NGAs) .
aa:ounti11g books with
aish records of BTr. - Each mtity's The CAM for NGAs was promulgated p rimarily to
I accou11li11g books are
subject loaudit by
harmonize the government accounting standards with
Govemmtnl Agtneits international accounting standards, particularly the International
(Entities) • . COA. Commission on Audit Public Sector Accounting Standards (IPSAS) . The IPSASs are
Eadt entity maintains - - . Each entity reco11ciles -+ (COA)

I
acrounting books and budge/ registries with based on the International Financial Reporting S tandards (IFR S).
budget registries. budget records of COA.
- Each enlity submits The Philippine Government has adopted. the IPSAS
I ft11ancial reports lo
J I through the Philippine Public Sector Accounting Standards
- Each entity rtCOnCiles COAfor co11solidation.
- Consolidatesfinancial (PPSAS). The provisions of the PPSAS are incorporated in the

I
budget rtgistries witir
budget records of DBM
reports ofgovernment CAM.for NGAs.
agencies and submits it to

•
Department of Budget
md
the Presideut q11d
Congress. i

I
Since the PPSAS are based on the IPSAS, which are in tum
based on the IFRSs/PFRSs, most of the concepts that we will be
learning in this book would be very familiar to you ~©.
Mmagement (DBM}

},:, .Entity - refers to a goverrune t .

I Legal basis
The GAM for NGAs ·is promulgated by the Commission o udit
. (COA) based on the authority conferred to it by th Philippine
operating/field unit. n agency, department or
Co~
},:, Financial Reporting - . th .
d is e process of prep ti . Relevant provision of iaw:
an submission of general u . ara on, presentation
~- "The Commission (QJ1 Audit) shall have exclusive authority,
other reports The ob· t· p rpose fmancial statements d
· fi · 1ec 1ve of finan ·a1 an subject to the limitations in this Article, to define the scope of its
in orrnation about the entity th CI . reporting is to provide
accountability
purposes and decisio
at IS useful t
k. o users for
I audit and examination, establish the techniques and methods
required therefor. and promulgate accounting and auditing rules
n-ma mg.
I and regulations. including · those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant.
or unconscionable expenditures. or uses of government funds
l
I
and properties." (Art. IX-D. Sec. 2(2). Philippi ~e Comtitution)

-----
I
 8
9

fl h n n ·a1 .1t m nf· b d n ou.:,,w,tir,X med budg tary records;

a

/'11 I
Th fa c un ar m· int· in d by fund cluster
(i. ., a rding th of fund;:; in counted for ) as
f II w ~

in accountin

C
0

05
06
07

For example, ccounting b O aoumals and

Ledgers) and budg t re all b - maintai n d for Regular
J. Agency Fund. Anoth r r te counting b k and budget
lnndard (PPSAS) and regis tries hall b r Forei n A i ted Project Funds,
and so on.

Qualitative Characteristics of Financial Reporting

tions ar
Information r p rted h ll meet th qualita tive characteristics.
wh "11 C,l h i
Q1mlitntiut' characteri ti ~ are the ttribute that make information
n ogniz d in the
u e/11/ t u er .
3,
budg f inform tion in th .
. Understandability - in ormati n is under tand ble when
u r can rea on bly be expected to comprehend its meaning.
4· &r, · d Cho Ac ordingly, u e rs re sumed to h ve
rt of Account pr
cribed by DA; i. re, onable kn wledge of the entity' activitjes; and
ii. willingness to tudy the information.
 ~10~- -----------~ 11
ln m,ati n a out mpl maUcr n t c dud
·t
1 m ,. b t difficult for c rtain tJ r . ~ ub tan e over form - Th ub tance of transactions or other
impf~· ·' to f'·
und d. ' •nt . n _t a/wa c n i tent with their legal form. lf
inf rm tron I t r pr nt faithfully the transactions and

nnati I vant if it an a sist u r . oth r •v nt th t it purp rt to repr ent, it is necessary that

t,_ , II)
, nts r in nf,rming th ' b ' unt 'd for and pre ented in acco rdance with their
Or ·ub tan ' nd econ mic reality, and not merely their legal
rd r b P l van,.
fo rm .

h. Neutrality - fnformation i neutral if it is free from bias.

C. rele, ance of information. Information shall not be elected or presented in a manner
n or misstatement could that is designed to influence the user's decision in order to
. Materiality depends on the achieve a predetermined outcome.
r error, judged in the particular
r mj t.atement i. Prudence - is the exercise of a degree of c.aution when making
estimates under conditions of uncertainty, such that assets or
d. its relevance if there is undue revenue are not overstated and liabilities or expenses are not
. The complexity of an entity's operations understated. However, prudence does not allow the creation
for fajling to report on a timely basis. of hid-den reserves or excessive provisions, the deliberate
understatement of assets or revenue, or the deliberate
e. Rtluib_ili-ty - r . information is free from material error overstatement of liabilities or expenses, because the financial
~~fubli ' and can be depen . ded on by users to represent statements would not be neutral and, therefore, not reliable.
31u l y that hich ·
rea . it purports to represent or could
1• be expected to represent
j. Completeness - Information should be complete within the
bounds of materiality and cost.
Trade-o . bet~ &levance and Reliability
To proV1de tl:mely information ·t
befor all aspects of a tr .~ J may be necessary to report k. Comparability - Information is comparable when users are
reliability. Converse] .f ansacti~n ~re known, thus impairing able to identify similarities and dilierences between that
are known the info~, it i_ reporting is delayed until all aspects information and information in other reports. Comparability
' a on may be hjghJ li bl applies to the comparison of financial statements of different
use_to users who need to mak .. -y ~e a e but of little
achieve a balance betw e deoswn m the interim. To entities and comparison of the financial statements of the same
ov ·d· een relevance d entity over different periods. Comparability requires that users
em tng consideration h
JS
. an reliability the.
ow user f d ,
. s nee s are best satisfied must be informed of the entity's policies, changes to those
f. Faithful · policies, and the effects of those changes and that financial
representation
faithfuJJy transacti - For information t statements show corresponding information for preceding
· ons and othe O represent
in accordance with th r events, it should b periods.
events and e substance of th e presented
, not m 1 e transa ti (PPSAS 1/GAM for NGAs, Chapter 19, Sec. 6)
ere Ytheir legal fo c ons and other
~ rm.
 12 ~ . overview of Government Accounting 13

of General Purpose Financial Statements

Compon ents . Possession or ownership normalJy evidences control.
Purpose Financial Statements are those intended to Ihe
Genera l et th However, this is not always true. For example, under a finance
d of users who are not in a position to demand re e
nee s . . . . Ports lea se, the lessor retains legal ownership over the leased asset
tailored to meet their particular mfQrmation needs. (PPSAS 1,3)
but control is transferred to the lessee.
The complete set of general purpose financial statern ents
consists of: ~ Benefit means the ability to use, exchange, lease, sell, or use the
a. Statement of Financial Position; asset to settle liabilities, or distribute it to owners.
b. Statement of Financial Performance;
c. Statement of Changes in Net Assets/Equity; Indicators of future economic benefits:
d. Statement of Cash Flows; a. distinguishable from the source of the benefit i.e. the
e. Statement of Comparison of Budget and Actual Amounts; and particular physical resource or legal right;
f. Notes to the Financial Statements, comprising a summary of
1
b. does not imply that assets necessarily generate cash flows, the
significant accounting ·policies and other explanatory notes. benefits can also be in the form of 'service potential';
c. in determining whether a resource or right needs . to be
accounted for as an asset, the potential to contribute to the
Notice that the financial statements listed above are
objectives of the entity should be the prime consideration;
similar to those of a business entity. However, the financial !1
d. capacity to contribute to activities/objectives/programs; and
statement unique to a government entity is the "Statement of
e fact that an asset cannot be sold does not preclude it from
Comparison of Budget and Actual Amounts" (letter 'e')-. We will e. th
providing future economic benefits.
elaborate on this later. I.
I

)" Past event - A transaction or event giving rise to control of

Elements of the financial statements future economic benefits must have occurred. A mere intention
to acquire assets in the future does not result to the
ASSETS recognition of assets in the present.
Assets - are _resources ~ontrolled by an entity as a result of past ;·
events~ and from which future economic benefits or service Recognition of an Asset
potential are expected to flow to the entity. . f An asset is recognized when: .
a. it is probable that the future economic benefits will flow to the
The key features of an asset are: entity; and · · . . · al ) that can be
a. The bene~ts must be controlled by the entity; b. the asset has . a cost . or value (e.g., farr v ue
b. The benefits must have ari~en from a past event· and measured reliably.
c. Future economic· benefits or service potential must
' be t d
to f1 ow to the entity. _ expec e f futu ec~nomic benefits:
Probable inflow o re . . . likely rather than less
a. The chance of benefits ansmg is more
> Control means the ability to benefit fr . likely (e.g. greater than 50%).th basis of available evidence or
others from benefittin f om an asset or prevent
g rom that asset. b. Benefits can be expected on e
logic.

~ ====::.::::.. :::::=~ - - - -...... -111111111111111_ _ _ _ _

 Ot
1_4_ ___

l' bl easuremen t:
Re ra em .
a Valuabon me
thod is free from material error or b ias.
.
~~~
I

-- overview of Gauernment Accounting

EXPENSES
15

.
Expenses - are decreases in economic benefits or service potential
• · LL £. .! resentation of the asset's benefits. · ng the reporting period in the form of outflows or
b. f a.IUUl.li rep . . . · dun .
. bl information will wi thout bias or undue surnption of assets or incurrence of liabilities that result m
c Relia e ' con · t
. faithfully represent those transactions and events. decreases in net assets/equity, other than those re1atmg o
distributions to owners.
LIABILITIES
Liabilities _ are present obligations of the entity arising from Past ~ Distributions to owners - are future economic benefits
events, the settlement of which is expected to result in an outflow · distributed by the entity to its owners, either as a return on
from the entity of resources embodying economic benefits or investment or as a return of investment.
service potential.

EQUITY
Net assets/equity - is the residual interest in the assets of the entity
after deducting all its liabilities.

REVENUE
Revenue - is 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.

~ Contributions from owners - are future economic benefits that

have been contributed to the entity by external parties which
do not result to liabilities of the entity and for which the
c~ntnbutor _o~tains interest in the net assets of the entity (i.e.,
~gh~ t~ diVIdends and right to net assets in cases of
liqUida tion).
I
Revenue funds- comprise all funds derived from th . '
agency f th e mcome of any
. o e government and available f "
expenditure in accordance with l .. or appropriation or
_ aw. (Section 3, P.£?. No. 1445 )
Chapter 1 Summary: I
I

Aside from p~o_viding information that is .useful in making

•
economic deos1ons, gove_~ment accou~hng also aims to \
demonstrate the accountabzlzty of the entity for the resources
entrusted to it. l
The fpllowing are charged with government a~counting
•
responsibility: COA, DBM, . BTr and other goyernrnent ,
agencies . .
• The GAM for NGAs provides the principles and procedures to
be applied in the financial reporting of government entities. it ~
was promulgated by the COA primarily to harmonize the
government accounting standards with international
stap.dards. 1

• Basic principles: Compliance with PPS~S and other relevant ·-~

laws, Accrual basis, Budget basis, Revised chart of accounts, ,
'
Double entry, Financial statements
,
.based on accounting and 1
I
budgetary records, and Fund cluster accounting. \
• Qualitative · characteristics: Understandability, Relevance,
Materiality, Timeliness, Reliability, · Faithful representation,
Substance over form, Neutrality, Prudence, Completeness,
and C::omparability. ·
• An item is recogni~ed._ as asset. if all of the following criteria
are met:
1. the item.meets the definition of an a;set;
2. probab~e inflow of future economic benefits; and ·
3. reliable measurement of cost or other value (e .g ., f air
.
v al ue.
)
 "~- - - -- - - - - - - - - - - - - - - -~
~4 Chapte
Tlte Budge/ Pracess 25

Chapter 2
f3L1dget Preparation . ,,
The Budget Process The budge t prepara ti on in the Philippines uses a l'bottom-u!'
approach: Under "bottom-up" budgeting, several parties
participate in the budget preparation, starting from the_lowest to the
h · hesf levels of the government. Government agencies are also
[earning 06jectives
t;; ked to increase the participation of citizen-stakeholders in the
1. Enumerate the steps in the budget process.
budget preparation. The opposite of "bottom-up" bu~geting is
2. Describe briefly the principles of responsibility accounting.
"top-down" budgeting - wherein the budget preparation starts
from the agency heads.
The National Budget In 2011, the Philippine Government attempted to a start a
Government accounting is primarily budgetary accounting. new tradition by shifting from the old "incremental" system of
Government accounting does not only aim to provide information budgeting to the uzero-based budgeting/I approach. (The Philippine
Public Transparency Reporting Project, January 11, 2011)
on past events and transactions but also budget information in
accordance wi PPSAS 2 .
Incremental budgeting vs. Zero-based budgeting
The Philip Constitution and other laws require };> The current year's budget is );;,, The current year's budget is
government funds to be utilized in accordance with a national
formulated based on the formulated without regard
budget that is duly approved by legislatio~. Government
previous year's b~dget, to the previous year's
accounting, therefore, is concerned with providing information ,
which is just adjusted for budget. Government
useful in· assessing the conformance of utilizations of government
funds with the approved budget. any variances experienced agencies are required to
in the pas·t. Presumably,_the justify their current year's
. The national budget (government b~dget) is the government's
proposed programs and proposed programs and
~stimate of the sources and uses of government funds within a
expenditures in the expenditures, irrespective
fiscal year. This forms the basis for expenditures and is the
previous year are of whether these are new or
gbo~e~ent's key instrument for promoting its socio-economic
o Jectives. automatically approved in carried over from the
The formulation and eventual utilization of th . ' the current year. previous year.
budget are summarized in th b d e national ) Uses a "roll-over" approach. ~ Uses a "back-to-zero" or
e u get cycle.
) Prone to abuse. "clean slate" approach.
) Promotes efficient and
The Budget Cycle
The budget cycle has fourph effective utilization of
1
· Budget Preparation ases, namely·· funds.
2· Budget Legislation
3. BudgetExecution 1. Budget call - The budget preparation starts when the
4. Budget Accountability Department of Budget and Management (DBM) issues a

- - Budget Call to all government agencies. The budget call

 h, pter 2
26
. th n t 1 al y ar' targ t~, th
and oth r guid Ji, .. in th
fa n ~· bud i f ropos, ,~.
v mm nt ea rns
revenues, the
f one year and forms the
riati n.
- p for items not adequately
uded in he general appropriations act.
• t - on pecific expenditures such
travel expenses, freight, supplies,
• estimates of expected sources of financing .
the wor be d on or services to be rendered.
• Obligations uudget - focuses on expenditures incurred in
the current ear which a.re to be paid either in the same
year or in the foUowing year.
Relevant provision of law:
)>
2. Budget hearings - Budget hearings are conducted after the
agencies submit their budget proposals. Each agency defends
its budget propo aJ before the DBM. The DBM deliberates on
the budget proposals, makes recommendations and
consoli~ates the deliberated proposaJs into the National
Expemizture Program (NEP) and Budget of Expenditures and
Sources of Financing (BESF). The DBM then s b .t . th
proposed budget to the President. u mt s e
n fl ud rl p
{I( •,; 27
Pre en tation to the Office of th e President - The President
and abin t memb r review the proposed budget. After the
Pre. id nt approv the proposed budget, the DBM finalizes
th budg t documents to b ubmitted to the Congress. At this
point, the proposed budget is referred to as the "President's
Budget."
The "Pre ident' Budget" contains the following
d ocuments which are intended to assist the Congress in their
review and deliberati on of the proposed nat:ionaJ budget:
a. President's Budget Message - thi contains the President's
explanation of the country: s fiscaJ policy and budget
priori ties.
b. National Expenditure Program (NEP) - this contains the
details of aU the government entities' proposed
expenditures in the corrring year .
c. Budget of Expenditures and Sources of Financing (BESF) - this
contains the estimated expenditures accompanied by
d. Other documents aimed to provide further explanation of
selected items in the NEP (e.g., details of key programs
and projects and staffing summary).
The President shall submit the proposed budget to the
Congress within 30 days from the opening of every regular
session. (Art . VII. Sec. 22 . Philippine Constitution)
 29

shall nJy b pent in pursuance of an

la w. Therefore, due process must be
pr p d budget.

4. llou Delib ratiotrs - Upon receipt of the Pre ident's Budget,

t Hou . of R pn s ntative conducts hearings to scrutinize
th va riou genci ' r pective pr po ed programs and
2017
nditur Th re ft r, the Hou~ of Representatives
repa th · Bill (GA B).

s. Serrate Delibe-ration - The ate conducts its own

deliber tio on the GAB . Th se normaUy tart after the
nate receiv s the GAB from the Hou of Representatives.
H i\<\lever, f r expediency, hearin in the Senate art even as
Representative delib ration a:re ongoing.
nt of the
Reoresentat.ives. the
(FY) 2017. 6. Bicameral Deliberations - After deliberations in both houses
/ ,,.· ,,,. are finished, a committee called the Bicameral Conference
Committee is formed to harmonize any conflicts between the
&
/
Representatives and Senate e-rsion of the GAB.
PlSCBJ Year 2017
The harmonized GAB ('Bicam' version) is submitted
back to both Houses for ratification. After ratification, the final
GAB is submitted to the President for enactment.

to implement real 7. Presidenrs enactment - The President enacts the budget,

proposed Budget for
which i now known as the General Appropriations Act (GAA).
Before enactment though, the President may exercise his veto
a Budget thal gtves pow r a c nf rr d to him uruiel' the Philippine Constitution.
lCh I won as Pres dent to
ce. - was designed to reaJ ze change in the Relevant provision of law:
here and now.
, When the proposed budget is not enacted before the fiscaJ
y"ar start , the last year's GAA is automat-ically reenacted.
This Budget is for the people and by the peopie.
The l year's GAA shall be used in the current year until a
new general appropriati ns bill is passed by the Congress.
In the last one and a hatf months sJnce we assumed office, we
(M . Vt. Sec. 25(7). Philippine Constitution)
, designed this Budget around the following principles:
// // /// / / //,/
/ /
 10
31

4 ' '' 11tt 111 1 - r th , uth r i1A1tin programmed

, nr iall < (, r m h r rind pr, rib d by I. w which do
n< r,, pm f ti< J1 .1 ti by (<mg ~.
I tttl t,;,

rrnn, (d I II J ppmpriation au horized

, )J '
Y,J' in th which m y b availed only
OI r,
in
02
03
b. not
05
06 are
07 re
aso'.eeirnems for foreign

rd ding (M>U
m mmcnt.
whi h a authoriz.e d by
nm d -- b a I gj lative b dy enc con em d for their
i j(j ~d by th I gi lative or
2016/ L ARY .pdf}

7. Revolving Funds - ri c ip · d rived from business-type

I. l(tf1 - 1'i nnu I auth rizations for
activit.ies of d partmen /a enci which re authorized by
·fi d budg t y ar, as Ji t d •
law t be c n tituted a uch and deposited in an authorized
g.ovemm nt dep it ry bank The funds all be seH-
liq uidating and aH oblig ti and xpenditure incurred by
2. rm tum - r ~ th· au th ,riz ti n to upport virtu f ·, id bu in type activity 11 be charged against
·fr 'f i purpo , r prr j t, su a~ multi-y ar ,ld hmd .
c tru n pr j L which r ·quir th, in urr n of (hip:// ww.dbm g v.ph/wp- ontrnt/uploads/8 · FIB · F2016/GLOSSARY.pdf)
obligation ev"'n beyond th budg •t y •a r.
8. Tru t Receipt - r •ceipts by any government agency acting as
3. Supplemental Appropriati ns - r addition, I approp ri ation tru t !O, agent or dmi.nistrator for the fulfilment of ome
authorized by law to u ment the original ppropri, tlon bHg, tions r conditions.
which prov d to b . insuffl ient fc r th "ir intended purpo • due (Ad p1 •d from the d.enrut 011 of "Tru t Fund" in http://www.dbm.gov.ph/wp-
nt ,nt,uplo ds/8 F/8 F20lb/ L ARY.pdf)
to ec nomic, p liti al or so ial ondHlon s upported by a
Certification of Availability of Funds from th 13Tr.
 33

,U~J - indud (a) autonomous

hr nd · ti ind pendent from a
citi which are part of a
nd (d ) b ran ays.

' r i md C , tml&d Corp rations (GOCC ) -

of that r wn d r contr lJed, directly or
( t~ ind1r ti , by th ~ nm nt and ve d with functions
, l r lating to public n d
of
members of the Congress (Sena OF> :nd Congressmen) nd the Judiciary
ir Br n<h are also reci pien s of a port ro.n of rhe budget.
1. The portion received ~ , members of he Congress is referred to as the
m ir Priority Developm nr Aulsta ca Fund OAF) a.lea ... Pork Barrel. - This is
25(5). Phllippint! Intended 10 fund priority devetop t pro s of the government.
2. The portion received by bers of !he Judiciary is refer ed to as the
Judldary Development Fund (JDF) . Ar le st 80% of the fund is intended
for the cost of llvlng allow nas of memb r1 d personnel of the
Judiciary. the remainder. not exceeding 20%. is for the acquisition and
maintenance of office equipment d fodlitle.s. (PD NO. 1949)

In 2014. the Aquino Adminis rat ion introduced the Disbursement

Ac.celeration Program (OAP) whkh aims to speed-up pubflc spending. The
OAP is not a rund but a mechanism of releasing funds. particularly from
ue gu ide lir:te . on sovfng5 and unprogrammed funds.
funds while the a ri ou agencies ;,. 54vlnp are available portions or balances of items under the General
£urn · Docu numt ( BED J. A BED Appropriations Aa (GAA} which result fro m: a) the comp letion or final
d is.continuance or abandonment of a program. acttvity. or project: b)
I year plans and performance unpaid compen.s<'!ltion for vac.snt or unfilled positions and leaves of
absence without pay; or c) the implementat ion of efficiency measures that
s at fewer cost Such savings may then be
enable agencies to deliver iervlce_
b. used to augment funds for programs. activities. or projects which are
Included In the GAA (i.e. nonexis-tent budget items cannot be funded).
C. tima
> Unprogrammed funds (see previous definition).
d. Li t of
nd dem ndabl ~.
Both th PDAF and the OAP rece ived various criticisms from the public in
2013 and 2014. following the Janet Lim-Napoles alleged pork scam. The PDAF
The foUowing ar th major r ci pi nt s of th ;> budg t. and DAP was later on thought to have been abolished by the Supreme Court.
1. National Govern A · ( G . ·
.. . m nI gen I A J - m lud · all g ncic However. "The 2015 budget is rti ll filled with pork barrel funds despite the
within the xecuti I .I . Supreme Court decision declaring the Disbursement Acceleration Program
v , gJS ative and judi ial bran hes of (OAP) and the Priority Development Assist ance Fund (PDAF) as
government e g · .
' · ·, comm I.S ion , d partment and Ban.I< unconstitutional. according to a budget watchdog." (Source : The Philippine Star.
of the PhiJi · So ·
pprnes, oa l Securi ty Sy tern, etc.
' 0 cember 21. 2014)
 35

~ nd, Miscellaneou
nd ity Fund)

rd ·r (GARO) - i a
u d II national
, in g r I, t incur blig tions not
ing an auth ri.l d amount dunn a p ified period
for th purp indicate th r m. It cov automatically
appropriat d e p d itur c mmon to most, if not all,
ag n ci w itlrout ne d of pedal clearance or approval
fro m compet nt auth rity, i.e. Retir ment and Life
Insu rance Premium.

10. Incurre11ce of Obligations - government agencie incur

obligation which will be paid by the government, e.g.,
entering into contra cts, hiring of personnel, purchase of
supplies, etc.

11. Disbursement Authority - the DB sues disbursement

authority to the governmen t agencie . This is the point where
government agencies obtain acces to the government funds.

used in releasing The following are the documents used in releasing

disbursement authority to ovemmen t agen cie :

. Gm Documen t (GAARD) - 1. Notice of Casli All ation(L CA) - authority issued by" the

authority fo r th comprehensive DBM to central, region al and provincial offices and

it m appropria d in the GAA, perating unit to ove r their cash requirements.
FOT Comprehen si e Re Lease. Th NC pecifie the max.imum amount of cash
that n be withdrawn from a government servicing bank
2. -~ · l Allotment Re Order (SARO) - cover budgetary in a certa in period. The NCA is based on the age.ncy' s
items _u nder For Lattt R.ek11 (negative li t) in the ntitys ubmitt d Monthly Ca h Program.
ubmi~d Budg t Execution Document (BEDs), subj ct to
comphance of required dOOJD.1en ts/clearances. Releases of
~ lo~ent for Special Purpose Fund s (e.g., Calamity Fund,'
ontingent Fund, E--Govemm nt Fund, Fea ibility Studies
 Chapter 2
r11e Budget Process 37
36
. ,r Allocation - authority issu ed by an
· O Tra11sfrr 01 . · , Budget Accountability
2. ohce Office to its regmnal and operating units
encv's Central . This phase occurs concurrently with the Budget Execution phase.
ag · . tter' cash requirements.
to cover the 1a As the budget is being executed, it is regularly monitored to
determine the conformance of actual results with planned targets.
Aziai/mrnt Authority - authority issued by the
3. on-Cash · "d a ti' on o f th err
ies to cover the 11qU1 · ac tu a_I
DBM to agen C 12. Budget Accountability Reports - government agencies are
. . incurred against available allotments for
obligations · required to submit the following accountability reports:
availment of proceeds from loans/grants through
supplier's credit/constructive cash. a. Monthly Report of Disbursements - shows the disbursements
of the entity during the month, classified according to the
4. Cash Disbursement Ceiling - authority issued by the DBM to type of disbursement authority. This report is submitted to
agencies ¥.ith foreign operations (e.g., Department of the COA and DBM within 30 days after the end of each
Foreign Affairs 'DFA') allowing them to use ·the income month.
collected by their Foreign Service Posts to cover their
operating requirements. b. Quarterly Physical Report of Operation - shows the agency's
physical accomplishments in a given quarter vis-a-vis its
Disbursements are most commonly made through physical targets.
checks that are chargeable against the account of the Treasurer
of the Philippines (i.e., Treasury Single Account). Checks issued c. Statement of Appropriations, Allotments, Obligations,
under this scheme are called "Modified Disbursement System Disbursements and Balances - shows the agency's
(MDS) Checks." . authorized appropriations, allotments received,
Other modes of disb~rsements include payments obligations incurred, disbursements made and the
through cash, commercial check, bank transfer/bank debit, or balances of unreleased appropriations, unobligated
credit card. We will elaborate on these later in Chapter 5. allotments, and unpaid obligations.

mRemember the ollowin : d. Summary of Appropriations, Allotments, Obligations,

1., Appropriation authorization by a legislative body to Disbursements and Balances by Object of Expenditures -
allocate funds for s cified oses. similar to 'c' above but provides details of expenditures
2. Allotment authorization to agencies to incur · (e.g., salaries and w_ages, traveling expenses, etc.).
obligations (i.e., obligational
authori ). e. List of Allotments.and Sub-Allotments - shows the allotments
3. Obligation received by the agency from the DBM and th: sub-
amount contracted by an authorized
officer for which the government is allotments issued by the agency's Central Office or
held liable. Regional Office to lower operating units.
4- Disbursement
actual amount paid ·out of the
bud eted amount.
 Chapter 2
Approved Budget, Utilizations, Disbursements
f Statement oif . . . •!• The bud get reports t th
· es_ this report 1s prepared by agenoes that have
and Ba 1anc
·ty to use their revenue. It shows the budgeted
au thon . Comparison of Budget and Actual Amounts, which is one of
the utilizations and disbursements thereof, and
rev~ue, . the components of a complete set of fin ano·a1 s ta tements of a
the unutilized amount.
g. Sz:immary of Approved Budget, Utilizations, Disbursements and
Balances by Object of Expenditures - similar to 'f' above but
provides details of expenditures.
h. Quarterly Report of Revenue and Other Receipts - shows the
actual revenues and other receipts remitted to the BTr and
deposited in authorized government depository b~s in a
given quarter.
•!• Reports 1'' to 'h' above are prepared on a quarterly basis and
are submitted to the COA and DBM within 30 days after the
end of each quarter.
. (Presentation to the Office of the PresidentJ
i. Aging of Due and Demandable Obligations - shows the
names of creditors, the amounts owec:J. to them, and the
number of days these obligations are outstanding. This
report is submitted to the COA and DBM within 30 days
after the end of the year.
•!• A Consolidated Statement of Allotments, Obligations, and Balances
per Summary of Appropriations (based on reports 'c' and 'd'
above) shall be submitted on or before February 14 of the
following year.
13· Pe~ormance reviews - The DBM and COA perform periodic
reviews of the agencies' performance and budget
accountability and report to the President.
14. Audit- the COA.audits the agencies.
The Budget Process
39
.
. . ' oge er with other budget records,
provide information · .
. m preparing the Statement of
government entity. We will discuss this statement later.
Story: The Budget Cycle
I. Budget Preparation
Papa ~nd ~arna are leaving for a 1-month trip ·so they asked you and
your little mter to make an .estimate of the money you wi,11 need while
they are gone (Budget Call). You started your estimate by asking first
Little Sister of her needs ('bottom-up· budgeting'). Same time last year.
Papa and Mama also went for a 1-month trip and they had you made
a similar estimate. However, instead of giving them that old estimate.
you decided to make a new one in order to better reflect current
circumstances ( 'zero-based' budgeting').
You defended your estimate with Mama (Budget hearings).
Marna submitted the estimate to Papa for approval
II. Budget Legislation
Papa consulted Lolo (a retired Lawyer) to review your estimate
(House Deliberations).
After reviewing the estimate, Lolo gave the estimate to Lola (a
retired CPA) for further study (Senate Deliberations).
Lolo and Lola had some disagreements, so they asked
Umpong, your dog, to harmonize the conflicts (Bicameral
Deliberations). After harmonizing the conflicts. Umpong submitted the
"Bicarn" version of the estimate back to both Lolo and Lola for
ratification.
Lolo and Lola submitted the ratified, estimate to Papa for
enactment (President's enadment). Your approved budget for the
month is ,100 (Appropriation).
111. Budget Execution ·
Papa left the money to Uncle. Uncle gave you guidelines on how the
money will be released to you. based on your estimates of the timing
of disbursements (Release guidelines and BEDs).
 _ _ _ _ _ _ _ _ _ _ _ _ _Chapteri
The Budget Process 41

that you can now incur obligations up to

Uncle told you a
. f ,so (Allotment). . .
maximum O h went to Aling Masing s Store to purchase grocer!
y u t en
0 th worth,so. on credit (/ncurrence of Obligations' es · 'BUDGET PREP
ood for I mon . '/,
g Uncle gave you P25 cash to cover your cash disbursernen 4 . House
De liberat ions
needs for th• I' week (Difbur>ement Authority - Notice of Ca,~ J. ~1fet 2 . Budget 3 . f resen tatlon to the

~ Hjgi
Offi ce of the President
Allocation). You gave Little Sister her share of PS (Notice of Transfer
of Allocation). •
11
•!• Your disbursements in the 1 week were as follows: 0,
. You: ~5 installment payment to Aling Masing and f!l/2 on persona/
o:i ii;:~~~ns C

~
needs
. Uttle Sister: fl5 on personal needs
Total disbursements in !st week f!l22
~
N. Budget Accountability ~ r4
Your budget accountability reports after the l s' week will sho ,...~ tl1

°'
th
,...~ Gi,...
following information (Budget Accountability Reports): . w e THE
Appropriation: ft/00
= BUDGET
6. Bicameral CJ>

~ii
13. Performance
Allotment received: ft80 Reviews
=
P20 CYCLE
Unreleased appropria~ion: (PlOO _ PB0)
Obligations incurred: (PSO to Aling Masing + P12 on
z
~
perso~al needs+ PS on Little Sister's personal needs) = P67 your
u -~
U~obligated allotment: (P80 allotment - t>67) = P/3
0
Disbursements: ft22 u
u_npaid Obligations: (P67 obligations
~1sbursements) = ft45 (payable to Aling Masing)
incurred P22 < 12. Budget
Accountability
Reports
7. President's
Enactment
~

I
nused NCA = (P25 NCA - P22 disbursements) = P3 ~
0
Uncle periodically updates Pa a d 0
budget execution through call and t t ~Pi ~n Mama regarding your ;)
Papa and Mama will audit ;:u w~e~~;:;~:t~~:i~idit). =
- The End- 11. Disbursement 10. lncurrence of 9. Allot:ment 8. Release
Guidelines & BEDs

incurren
Notice that appropriation allotme
authorities are systems of b d , nts and disbursement
t~e allocated funds of ,100ut getary controls. Instead of releasing
piecemeal basis, based on O you ~u at once, it is released on a
(Budget Execution D your estimate of the timing of
ocuments 'BEDs'). Thi .
_ce of · overdraft ·
· appropnated funds).
. s is to prevent the
(1.e., obhgations exceeding the
d
nee s
E,t BUDGET EXECUTION
 Chapter<
The Budget Process
42 43

Responslbil Ity
Accounting budget accounta b'l'
1 1ty o
f
an entity, Responsibility Cent er Code S tru cture
Exam pl e : Comm issi on on Aud it
aJuate t1,e f
To better ev
government accounting
accounting. . ..
informat10n
. adheres to the concept o responsibility

ounting is a system of providing cost and

Responstbzltty ace . . .
. ov er which a manager has direct control of.
revenue h luation of a manager's performance based
This enables t e eva . Th
that are directly under his control. erefore,
only on matters h
budget dev1a · tions can be readily attributed to t e managers
accountable therefor. · . .. .
· Responsibility accounting requires , the 1denhficat10n of
responsibility centers and the distinction between' controllable and
non-controllable costs.
)- Responsibility center - is a part, segme~t, unit or function of a
government agencyj headed by a manager, who is accountable
for a specified set of activities.
J> Controllable costs - a cost is considered· controllable at a given
level of managerial responsibility if the manager has the ·
power to incur it within a given period of time.
J> Non-controllable costs - are costs incurred indirectly and
allocated to a responsibility level.
Except for some which derive most of their income from
collection of taxes and fees, government agencies are basically cost
centers whose primary purpose is to render service to the public at
the lowest possible cost. ·
Each of the managers of an agency that is a cost center is
evaluated based on his ability to meet budgeted goals for
controllable costs. ·All costs are controllable by top management
because of ~he high extent of its authority. , Fewer costs are
controll bl · 1 · •
a e m ower management levels because of the decreased .
scope of authority.
Each government
center·code as follows: agency is assigned a responsibility
~
_ TJJ
c!IM fo,- -Jar otlktl,S.pll1atal
M a ~ _ _ _ _ _ _ _ __J
=-~T
Chapter 2 Summary:
• The Budget Cycle: (1) Budget Preparation, (2) Budget
Legislation, (3) Budget Execution, (4) Budget Accountability
Under "bottom-up " budgeting, several parties parti cipate in the
•
budget preparation, starting from the lowest to the highes t levels
of the government..
• Under "zero-based" budgeting, the current year's budget is
formulated without regard to the previous year's budget.
Gqvemment agencies are required to justify their current
year's proposed programs and expenditures, irrespective of
whether these are new or carried over from the previous year.
• Appropriation - is the authorization made by a legislative body
to alloc~te funds for purposes specified by the legislative or
similar au·thority.
Allotment _ is an authorization issued by the DBM to
•
government agencies to incur obligatio_ns_ fo~ specified
amounts contained in a legislative appropnation m the form
of budget release documents. It is also referred to as
Obligational Authority. . .
Obligation - is an act of a d\.1-ly authorized official which binds
the government to the immediate or eventual payment of a
sum of money. .
• Under responsibility accounting, a manager's perfonnance is
evalua te d o nl l·n terms of the costs that he controls.
 - - - - - - - -------..:23_
!_Th~e~Govem~~m~e:n::_:t~A~c~co::'.u.'.!:nt~in~g:_:P~roce~s:._s
- The Government Accoun ting Process 53

Chapter 3 3. Registries
a. Registries of Revenue and Other Recei pts (RROR)
The Government Accounting Process b . Registry of Appropriations and AJlotments (RAPAL)
c. Regi5tries of Allotments, Obligations and Disbursements
(RAOD)
Learning 06jectives d . Registries of Budget, Utilization and Dis bursements
1. Record the basic transactions of a government entity. (RBUO)
2. Prepare a worksheet
Technically, only the JoumaJs ~d Ledgers are considered
accounting records. These are similar to the accounting records of a
· Introduction business entity. The Registries are budget records. These are used to
The government accounting process comprises the activities of I monitor the budget. You may think of the registries like
analyzing, recording, classifying, summarizing and I "iogbooks" or something, rather than accounting books with debit
· commqnicating transactions involving the receipt and disposition and credit columns. The accounting unit of the agency maintains
of government funds and property, and interpreting the results the Journals and Ledgers while the budget division of the agency
thereof. This process is similar to that of a business entity, except maintains the Registries.
that it incorporates budgetary controls, such as recording in the Recall that separate accounting records and budget
budget registries and preparing periodic budget accountability registries are maintained for each fund cluster (i.e., Regular Agency
reports. Fund, Foreign Assisted Projects Fund; etc. - see Chapter 1).

, Books of Accounts and Registries Budget Registries

The books of accounts and registries of government entities l. Registries of Revenue and Other Receipts (RROR) - used to
consist of: monitor the , budgeted amounts, actual collections and
remittances of revenue and other receipts.
1. Journals
a. General Journal 2. Registry of Appropriations and Allotments (RAPAL) - used to
b. Cash Receipts Journal monitor appropriations and allotments. This is to ensure that
c. Cash Disbursements Journal allotments will not exceed appropriations.
d. Check Disbursements Journal
3. Registries of Allotments, Obligation s and Disbursements (RAOD) -
2. Ledgers used to monitor the allotments received, obligations incurred
a. General Ledgers against the corresponding allotment, and the actual
b . Subsidiary Ledgers disbursements made. This is to ensure that obligations
incurred will not exceed allotments while actuaJ
disbursements will not exceed the obligations incurred.

b
 54
Cha pter 3
- T1i<' Government A ccounting Process 55

Separate RAOD shall be maintained fo r each object of Keeping of the General Accounts
The COA sh all keep the general accounts of the Government and
expenditure. preserve the vouchers and other su pporting d ocuments.

ob·ect of Ex enditures _ _ ___ ----- ___

r
Basic Recordings
e classifications of expenditures by object a re as fo llows:
Appropriation
Personnel Service~ (PS) - perta. in to all types ?f employee Entity A (a government agency) rece-ives its GAA consisting of the
benefits, e.g., salaries, bonuses, allowances, cash gifts, etc. following:
I .
I
I Personnel Services (PS) 100,000
I b. Maintenance and Other Operating Expenses (MOOE) -
60,000
Maintenance and Other Operating Expenses (MOOE)
pertain to various operating expenses other than employee
Financial Expenses.(FE)
benefits and financial expenses, e.g., travel, utilities, supplles,
Capital Outlays (CO) 200,000
etc. Total appropriation for the current year 20x1 360,000

c. Financial Expenses (FE) - pertain to finance costs, e.g., interest

expense, bank charges, etc. Financial expenses also include The receipt of the appropriation is posted (recordes:l ) in the
losses on foreign exchange transactions. Registry of Appropriations and Allotments (RAPAL) as follo w s: •

RlGISTRY OF APPROPRIATIONS AND ALLOTM!NTS

Id. Capital Outlays (CO) - pertain to capitalizable expenditures,

l e.g., expenditures on the construction of public

infrastructures, acquisition costs of
_ _ _ _ _ __ . ! __ _ _ _
equjprnent, etc.
.:....._:_:c,~.:..:.:..:.::.....::..:.=---- - --
EllllyNa:~
FalClllllr.!!l!!!-fal

Dalt w u.-.ii- ... U.......!--w..

Accordingly, the following separate RAODs shall be PS MOOE FE co TIIII PS hm: FE I co TIIII PS I 10E l FE I CO I TIIII
maintained: (a) RAOD-PS; (b) RAOD-MOOE; (c) RAOD-FE; /I/Ix/ OM 100 OOl 6000) 200.00) 36100) I I I
T
I
I I
and (d) RAOD-CO. I I I I r I
\

4. Registries of Budget, Utilization and Disbursements (RBUD) _ Allotment

used to r.ecord the approved special budget and the Entity A receives its allotment from the DBM consis ting of the
corr~spondmg utilizations and disbursements charged to following:
retamed
. incom e. separate•RB UDs are also maintained for each
obJect of expenditure, i.e., (a) RBUD-PS; (b) RBUD-MOOE· ( ) Personnel Services (PS) 90,000
RBVD-FE; and (d) RBUD-CO. , c
Maintenance and Other Operating Expenses (MOOE) 40,000
Financial Expenses (FE) ,
Capital Outlays (CO) 170,000
Total allotment 300,000

---
56 Chapter 3
The Govern men t A ccou nting Process
57
The receipt · of the allotment is posted (recorded) in the
Registry of Appropriations and Allotments (RAPAL) and Registries of REGISTRY OF ALLOTMRNTS OBLI
CAPiTAL o~~~y~s AND DISBURSEMENTS
Allotments, Obligations and Disbursements (RAOD) as follows: For the year 20x1
Eallty Name: h1lll:.A
RAPAL faad Claster ; l!altt 61an [ll!I

u............ u._.n ......._

Date Ref. Allomeats Obllplloas
REGISTRY OF APPROPRIATIONS AND ALLOTMENTS ~ ~ Due and Not Yet
Due and
Demudablc
112/xl 170 000 Demmdable
EllilyNa:Y!!I,!
F_.Clllller: !mt BF•

1111t l w A-wlam Alaats Umleastd !aa...rialielS

lncurrence of Obligation
I PS IMOOE I FE I co Tolll PS I MOOE FE i co I Tolll PS I MOOE FE I co I Tolll
lllh:l I GM 100.im I 60.im I - I200.im .360.00, I I I .. I I I . Obligation Request and Status (ORS) ,
ll2/xliGWD I i I 90,00, j 4000, • 1t101ml300,oo, 101ml 20.00, . !JO 00, I60.00,
I I I I T T I I
I I I Obligations shall be incurred through the issuance of Obligation
Request ar:d Status· (ORS). The Requesting Office shall prepare this
document, supported by valid claim documents like disbursement
RAODs vouchers, payrolls, purchase/job orders, itinerary of travel, etc.
The Head of the Requesting Office shall certify the
REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS necessity and legality ·of the obligation and the validity of the
PERSONNEL SERVICES
For the yeu 20xl supporting documents. The Head of the Budget Division shall
certify the availability of the allotment.
bdlyN-:bdll:.A
,._, CIMter: lmkttVDSY fyd

u. aid ot, lloas Entity A enters into the following contracts:

Uaollllc•ttd a. Personnel Services - Employment contracts Gob Order)
Allotmeats ·
amounting to P70,000.
//2/Jd 90000
b . Maintenance and Other Operating Services - Purchase
contract for office supplies worth P25,000:
c. Capital Outlays - Purchase contract for office equipment
REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS
MAINTENANCE AND OTHER OPERATING EXPENSES worth P160,000.
For the year 20xl

Eadry"-ibUtt,A The ORS is prepared as follows:

,.... a...r' · - [ . _ fH!I
I u-..wot.-
UaeltllpHd DIA..,_ts Not Yet
Date Rd .O.C-11 Ollllcadou Alloomeats
Due and
Ducand
Dcmmdable
Demandable
J/2btJ .0000
 Chapter 3
58 The Go vcmment A cco1111li11g Process
59
Dale : 1/3/X l --..
OBLIGATION REQUEST AND STATIJS Fund ausaer :Rqular Aga,cy FUlld
EadtvA REGISTRY OF ALLOTMENTS OBLIGATION
I ' S AND DISBURSIM:INTS

-,.,---...
JI.I AINTENANCE AND OTHRR OPIRATING IXPINSIS
For lbe year 20xl
UACS
MF01'AP Code
Amount E•tltyN••"Wtt.4
fud Cl••••r : Bmll[ &1s1a (11i
XXX
Jell 0rw ~ I <Mtnffl)
ruu-enw 1er.mc. •ppliol XXX 25,...
U-<l--
hl'CUN ............ ~. . . . ., XXX 1......
Data R.d. Allotmears Ol•lls•tion u........... Dl,h,._ts Not Yet
~ O...md
Toal
. ClrtUlocl: Allotmellt available md oblip,,d
forlbepurpo,o'adjmlmml nccasay11
J/]/x} 40000
Dmwidablo
Daemd
o.m-tablc

J/J/'z} 2HOO 15 000 0 0 25 000

Sigaalln :
il dic3l7f;::i..t,
edabo~4 t, ·>A ,,
Prialed Name: GidT.Pid REGISTRY OF -ALLOTMENTS, OBLIGATIONS AND DISBURSU,IENTS
Positioa · Head. Blldgd Divisioa
DIiie Jlllr.J CAPITAL OUTLAYS
-
STAnJS O.F OIILICAllON
- For the year 20:xl
C.
..,._,, ~I Eatlty N_e, l!.!i!I..A
Balmce
I Obligatioll hyable hymtm Not Yet Dllemd
.Fud O•ster : RSI!!!![ gns:r .Faad
QRS/JEV/Qedi
Da Par1iculars AIW1RA No. Due Dtmaadablo u-~- - - ~

(a) (b) (c) (a-b' 11.J.,

D•~ ltd. AJlocmmts Ollllsadoas u....11sa1ec1 ~ Ducmd
Not Yet
Allocaoats Dacmd
I/ltd
1/llxJ
~Ortlor
0-.....,.. "·'°'
25,...
0
0
0
0
70,000
25,000
0
0
Dcmmdablc
Damndablc
1/llxJ 0-.......-1 1--.... 0 0 160,000 0 J/]Jx} 170 000
//3/xl 160,000 10.000 0 0 160.000

To simplify the illustration, only one ORS is ·presented for

the three contracts. Separate ORSs should be prepared for each of
them. Notice of Obligation Request and Status Adjustment (NORSA)
_ Th~ "obligations0 are recorded in the Registries of,'
If the obligations recorded in the RAOD and ORS above need to
Allotments, Obligations and Disbursements (RAOD) as follows: be adjusted, the ·subsequent adjustment shall be made through the
use of the Notice of Obligation Request and Status Adjustment
llGISTRY OJ' ALLOTMll:NTS, OBLIGATIONS AND DISBURSEMENTS
(NORSA) . The adjustment shall be effected through a positive
PERSONNRLSERVICES entry (addition) or a negative entry (reduction), as appropriate.
J'or the year 20xl

!111i171'1_,Yi11LA
,_.a..• lmllt_._ bH
.,... w ~
I
OWlpCleu
u......,.
.u.-a ~ ..
u...wo
' Ducand
DaiwMlablc
~-....
Not Yd
Due and
Dmw,dal,le
Up to this point, nothing is recorded yet in the accounting books.
The recordings above are made on the budget registries. Journal
entries shall be made only after:
112/x]
113/xJ
90000
,._... 20.000 0 0 70000
a. the employees have rendered services;
b. the office supplies are delivered and received; and
c. the office equipment is delivered and received.

- -
 Chapter 3 Tire Govern ment Accounting Process
60 61

Onl
after these events occur that the entity's financial The registries used to moni tor the NCA are the following:
Y a. Registn; of Allotments and Notice of Cash Allocatio n (RAN CA ) -
statement elements . thus, an accountable event
are a ff ected' and
has occurred that needs to be recogrnzed. . used to determine the amount of aUotments not covered by
. t1·me, the "obligations" recorded m the NCA and to monitor the available balance of NCA.
In t he mean
. . (b u t no t yet in the accounting books) are referred to as _b. Registry of Allotment and Notice of Transfer of Allocation
reg1stnes
(RANTA) - used to determine the amount of allotments not
"Not Yet Due and Demandable." . ..
covered by Notice of Transfer of Allocation (NT A) and to monitor
N o ti.ce that government entities and business entities
bl" .
use
the available balance of NTA.
the term " o bliga ti"on" or the phrase "incurrence of o 1gation"
differently.-
The NCA is posted (recorded) in the RANCA as follows:

Government enti hi Business entitl/

REGISTRY OF ALLOTMENTS AND NOTICE OF CASH ALLOCATION
;.,. Obligati(Jn - is an act of a duly };,, Obligation is another term for For tM puW lMRa lhl
authorized official which liability.
EadrJ Naa: lldttA , ... 01a1w:_. . . . . ,...,,...
binds the government to the
immediate or eventual
I SIIOll~:l

AMJ{JNT
payment of a sum of money.
Nodce.tC.Allocadla Bllace
Obligation maybe referred to
Dot•
..,_ AllOlmelll
Jteoei\'ed Received Uti1iml tlaalilmd Udadld
as a commitment that NCA Au.-
encompasses possible future (1) (I>) ( C) (I>- c) (1 • b)
liabilities based on current
contractual agreement.
JI.fix} 300000

-- 200.000 100000

I. JOURNALS
Disbursement Authority - Notice of Cash Allocation (NCA)
Entity A receives Notice of Cash Allocation (NCA) from the DBM a. General Journal - used to record transactions not recorded in
amounting to ~200,000, net of tax.
the Special Joumals.
This time a journal entry shall be made in the accounting
books because the financial statement elements of the entity are Special Journals:
now affected, i.e., increase in cash and increase in revenue. The , b. Cash Receipts Journal - used to record the Report _of Col~ection
entry is as follows: and Deposit and Cash Receipts Register of collecting officers.
Date ~

Cash-Modified Disbursement System Report of Collection and Deposit (RCD) - prepared by_a
(MDS), Regular 200,000 collecting officer to report }:tis/her collections and deposits
..Subsidy from National Government 200,000 to an Authorized Government Deposito~ Bank (AGDB) .
To recoinize receipt of NCA from DBM
62
Chapter 3
p
The Go1Jcr11111ant Accounting Process 63
,
~ Cas11 Receipts Register (CRReg) - used by fie ld offices The journal entry for the_ NCA is posted
ledger as follows: to the general
without a complete set of books to record theb- cash
GENDlALIZDClll
collections and deposits in the books of their rnother unit
,_.a..:n-tr:arlw
(central/regional/division office). iac1CYN-:&11i1LA
.uc-u• T111ti ~. .-Mtj- Dllh.-i lm•BIDS\.••• CACSOl,feclC..wtml

c. Cash Disbursements Journal - used to record the cash .,.. Panicun 1W.
Dlllit I
-'-
a.Ill I Iii.-
J[VNo. l 200000 I I 200000
J/,f/1.1 • - ofNCA fr4a dae DBM
disbursements of the Disbursing Officer. I I

d. Check Disbursements ]011rnal - used to record the <:heck GENERAL LEDGEll

disbursements of the Disbursing Officer. F_.Ollla' :J:ntcMWYfW
r.cll1 N-. ~ UAQCJl,jasC.-:a&BI
~1Tlt1t:~m1:!l!IIIIIC..1a- •

Del• fame.Ian .... Ddlil

-'-
I a-a \ llllala
ll. LEDGERS JEVNo. I I 2m000 I 200000
114/t/ • - ofNCAfrladaeDBM I
I

a. General Ledger - summarizes all transactions recorded in the

journals. Accounts in the general ledger are arranged
according to their sequence in the Revised Chart of Accounts. Disbursements
Employees have rendered services and are now entitled to
b. Subsidiary Ledgers - show details of each control account in the · compensation.
general ledger. Journal entries shall be made because the financial
statement elements of the entity are affected, i.e., increase in
"The NCA specifies the maximum amount of withdrawal expenses and increase in liability/decrease in cash. The recordings
~a~ an entity can make from a government bank for the period are as follows:
md.icated. The C~llecting Officer shall not issue an official receipt
(OR) for_ the receipt of NCA." (CAM for NGAs, Chapter 5, Sec. 38) Since a. Set up of payable to officers and employees upon approval of
the receipt of the NCA does not constitute a collection that is payroll.
recordable in the Cash Receipts Journal, it is recorded in the 35,000
General Journal as follows: Salaries and Wages 5,000
Personal Economic Relief Allowance (PERA)
40,000
GENERALJOURNAL Gross Compensation (10,000)
' Mo• ll•o: 1!11I · Withholding Tax (2,000}
Ea1117Nae:f.l!III.A GSIS
.-..a...,--[Aaan(llf SIINCNo. :l (2,000)
.,.. JE\'
"--
,........ UACS
OltltaCt41
, Debit
-'-at
Credit
Pag-IBIG (1,000}
1Hlu I Ollll-Modifted~S·--"'-' - 10104040 200000
PhilHealth· (15,000)
~ ......... tcaNlliau!Gov.-
n, _ _.. _ .0301010 200 000 Total Deductions 25,000
tlwDIJI
Net
64

35,000
Chapter 3 - Tlie Govern111e11t Accounting Process 65

Date Salaries and Wages, Regular c. Grant of Cash Advance for payroll.
5,000
Personal Economic Relief Allowance (PERA)
Due to BIR 10,000 Date Advances for Payroll 25,000
Due to GSIS 2,000 Cash-Modified Disbursement 25,000
Due to Pag-IBIG 2,000 System (MOS), Regular
Due to PhilHealth 1,000 To recognize grant of cash advance
Due to Officers and Employees 25,00Q for payroll
-
To recognize payable to officers and
lo ees u on a roval of ayro/1 The entries above are posted to the appropriate ledgers.

d. Posting of disbursement to the payment column of Section of C

b. Posting of payable to the Section ·C of ORS of the ORS and disbursements column of the RAOD

OBLIGATION REQUEST AND STATIJS ~ The Section C of the ORS will show the following
EadtvA
information:
s-.reSLLillltTon

MFO'PAP
UACS
Code
- OBLIGATION REQUEST AND STATIJS
Ea~A

-
Job Onl,r ~ .-.:IS) XU XU 70,000
hrdlaRordorftwofflc:eqplia XU 25,000

.....
XU
STATIJS Of 081.11.AlJD.'l
...._ on1or r« oll'ioe eqaipmml XU XU 140,000
C.
....._
Toal
. 255 000

·c111111od: -IVlillble mc1 oblipled

Cot dlepurpoo&'.i;--, as
DIie Paniculan
ORS!JEV/Cllectl
ADIJIKANo.
Oblipia ,.,_ ,.,.. MalYs
°""
O.ad
Deaadllllll
(a) (b) (c) /Ml ~\
1/3/xl JobOnler JEVNo. 2A 3 70,000 25,a J0,000

=_:~ifiJ:'4
40,000 15,a
1/3/xl Otliceq,plia 25,000 0 0 25,000 0
1/3/xl omce ...,_ 140,000 0 0 140,000 0

PooitioD Had.a,..Divilim
DIie : J/JlzJ

C. I
........ STATtJS Of OIUGATJON

"-'
Bllmce
~ The recording in the RAOD-PS is as follows:
REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS
DIii hniaolan ORSIJEVICktt _Obliplioo hyablc ~ NotYe1 i.ad PERSONNEL SERVICES
AI>AmtANo. Due Demadal,lc For tbe year 20xl
1131&1
1/3111
1/3/al
JOIIOnlor
Olllc,e..,i;.
OClloe .......
JEVNo. 2
(a)
70,000
25,000
.....(b)

0
(C)
0
0
<•bl
30,000
2S,000
.....
n,.d

0
EadtyN-:bdtt.A
full Clater I 1111111£ A - , , (JIM
140,000 0 0 140,000 0
11-wo....._
Date

]/2h]
//Jiu
llaf. .u..-rs

90,000
OWlptlNs

70000
u......_
.........

20000
··- ,~
Due ....
Dama.lablc

,..__
Not YCI
0ue....i
Daaaadable

30.000

-
 66
hnpte r 3
- The Covcrnme11/ Accounting Process 67

d' b e'nt columns in ,he remittance of the tax withheld is record ed as follows :
At this point, the payment and 1s ursem h P25 000
the ORS and RAOD-PS, respectivley, show only_ t e . ' th
a ment. This amount will be updated after the entity remits . e 'flgoks of Entitt1 A
p ) 'thh l :i to the other government agencies
other P15 000 amount w1 e L . .
C BIR, ' GSIS Pag-IBIG, and PhilHealth). In the meantime, ~e 0/IIC Cash-Tax Remittance Advice 10,000
~~~-000 ,..ri.thheld are treated as "Due and Demandable." We will Subsidy from Na tional Government 10,000
To recognize the constructive receipt of
dis~ss the remittances momentarily. . NCA for TRA
~

D/IIC Due to BIR 10,000

e. Liquidation of Pavro HFun d 25,000 Cash-Tax Remittance Advice 10,000
Dal~ Due to Officers and Employees To recognize the constructive remittance
25,000
Advances for Payroll of taxes withheld to the BIR throu~h TRA
To recog11ize liq11idatio11 of Payroll Fund

N~tice that there is actually no physical transfer of cash to

the BIR (i.e., debit and credit to 'Cash-TRA '), thus the term
Remittance of Amounts Withheld
Entitv A remits the PlS,000 withheld to the other government "constructive." The TRA is another form of d isbursement
agencies. The breakdown is re-provided below: authority, thus it is recorded similarly to the receipt of the regular
Withholding Tax 10,000 NCA (i.e., credit to 'Subsidy from National Government_'). This
GSIS 2,000 means that Entity A has the authority to use the amount withheld
Pag-IBIG 2,000 in its operations. Amounts used from the TRA will be reported in
Ph.i!Health 1,000 Entity A's Monthly Report of Disbursements.
Total Deductions 15,000
_ The TRA is recorded by the other government agencies as
Remittance of Withholding Tax follows:
Books of BIR Books ofBTr
1Tax Remittance Advice (fRA) . Cash-TRA ............ 10,000 Subsidy to NGAs ....10,000
' The Tax Remittance Advice (TRA) is used to recognize: Income Tax ..... .... .... .. 10,000 Cash-TRA ... .. ... .......... 10,000
, a. In the books of government agencies, the constructive remittance To recognize constructive To recognize constructive
of taxes withheld to the Bureau of Internal Revenue (BIR) or receipt of taxes remitted by National receipt of remittance of taxes by NGAs
customs duties withheld to the Bureau of Customs (BOC), and Government Agencies (NCAs) through through TRA
I the constructive receipt of NCA for those troces and customs
TRA
/ · duties;
' b. In the books of the BIR and BOC, the constructive receipt of tax The use of the account "Cash-Tax Remittance Advice" is as if
revenue and customs duties; and Entity A remits the cash to the BIR and BTr, which the latter then
; c. In the books of the BTr, the constructive receipt of the taxes and remits back to Entity A, without the cash being physically
customs du ties remitted. transferred. The use of TRA is necessary in order for the BIR to

-
 haptcr 3 The Govenr mc11t A cco1111t i11g Process 69
68
. · and for the BTr to record the The bi ll ing of revenue is reco rd ed in the Gener al Jo11mal
record the taxes as t ts income .
. 's d isbursement au thority as subs idy. w hil e the collection and re mitta nce are reco rded in the Cash
wi thholding agency
Receipts Journal as fo ll ows:
Remittance to GSIS, Pag-lBIG & Phi/Health
CASH RECEIPTS JOURNAL
Moai~ J•111a lOJI
2,000 ~ H- •&dr.A
- _ ..._ ,1
Dau Due to GSIS ,.._a-,r ,
--~
.... -··-- ;:i,i-
Due to Pag-IBIG 2,000 C
N - .t ~ ·~ DUCT
It.Cl)/
1,000 rr.v Collocrias ~y ~ SU)q)IIY
Due to Phi!Health °"" Cit.It.ea
)lo.
No. Offlcu oarr
(1 -lOlf)
T - , 1-
o..-. ....... = lrl-
OmDIT

Cash-Mod ified Disbursement , ·--

f;I IIMtl-.,

5,000 0001 f 10 M,. JtoliL«lw I I I I .,-.-

System (MOS), Regular "''" I I I I

To rerogn ize remittance to GSIS,

Pa -/BIG and PltilHealth
Reversion of Unused Notice of Cash Allocation (NCA)
The Obligation Request and Statu s (ORS) and the RAOD-PS Government entities are required to revert any unused NCA at the
are updated for the payments above. end of the accounting period .
The unused NCA is computed as follows:

Billings, Collections & Remittances .

Cash-Modified Disbursement System (MDS), Regular
a. Entity A bills revenue of PI00,000 for rent income.
Receipt of NCA 200,000
Date Accounts receivable ·100,000 25,000 Ad vances for pa yroll
Rent/Lease income . 100,000 Rentittances to GSIS,
5,000
To recognize billing of income Pag-IBIG, & PhilHealth
170,000 end
b . Entity A collects Pl00,000 from the billed revenue and remits
the collection to the BTr. ·
Date Subsidy from National Government 170,000
Date Cash - Collecting Officers 100,000
Cash-Modified Disbursement 170,000
Accounts Receivable 100,000
System (MDS), Regular
To recognize collection of billed income
To reco nize reversion o unused NCA
Date Cash-Treasury/Agency Deposit, Regular 100,000
Cash - Collecting Officers 100;000
Notice that the entry above is the exact opposite of the
To recognize remittance of income to BTr
entry to record the receipt of the NCA.

P.O. No. 1445 requires that all collections must be remitted

to the National Treasury, unless another law specifically allows
otherwise . .
 Chapter 3
70 The Government Accoun ting Process 71

II} Summarv of Basic Record'zn>!s: The Revised Chart of Accounts

RecordinK in:
Transaction Registries & Journal & Ledger -- A chart of accoun ts is <! list of all the accounts used by an entity.
Government en tities shall use the account ti tles and account codes
Other R ecords ~
in the Revised Chart of Accounts (RCA) issued by the COA.
- None
a. Appropriation
b. Allotment
- RAPAL
- RAPALand - None - The RCA in clud es numerous accoun ts. Only a few of these
accounts are shown below as presenting the complete list wou ld
appropriate more than double the number of pages in th.is book. @
RAODs Each account in the RCA is assigned an 8-digit cod e as
- follow s:
C. Incurrence of - ORS and - None
Obligations appropriate
RAODs
Cash-MDS, Regular xx Account Group---------__J
d. NCA - RANCA
Subsidy from NG xx Major Account Group _ _ _ _ _ _ _ _ __J

e. Disbursements - updating of Expense/ Asset xx Sub-Major Account Group - - - - - - - - - - '

ORS and Payable xx
General ledger Accounts
appropriate Payable xx
RAODs General ledger ~ontra-Accounts
Cash-MDS, Regular xx

f. Tax Remittance - updating of Cash-TRA xx Code Account Groups

Advice ORS and Subsidy from NG xx
1 Assets.
(TRA is used for appropriate Due to BIR xx
2 Liabilities
remittance of taxes
RAODs Cash-TRA xx 3 Equity
withheld)
4 Income
g. Billings, - RROR, Accounts receivable xx
Cash-CO xx 5 Expenses
Collections, & RCD/CRReg
Remittances (not illustrated)
Cash-CO xx Example:
Accounts receivable xx Accouat Grovp: A.et
M,rjor Accovat Gm,p: Cub uul Cub EquiYalenta
Cash-Treasury/Agency Sub-Major Accovat Grovp: Cub on Hand
Deposit, Regular xx
I Gffler41 IMl,-r Atanlnt: Cub-Collectin1 Officers

Cash-CO
I r Gamrl IMl,-r Conan-Accounts: Not a a,ntra-aa:uunt
xx Cash-COilecting Officers 1 01 01 01 0
<Account title) (RCA Co,M
h. Reversion of - RANCA Subsidy from NG xx
Unused NCA Cash-MOS, Regula_r xx

-
 pt

Chapter 3
72 The Government Accounting Process 73

UST OF ACCOUNTS

RCA
-
UAcs : -
Office Supplies Inventory 10404010 1040401000

Account Title rropertv, Plant and Equipment

Code Object II - Infrastructure Assets
-
ASSETS
Code
-
---- I
- Road Networks
Accumulated Depreciation-Road
Networks
10603010
10603011
1060301000
1060301100

Cash and Cash Equivalents

Cash on Hand
-1 ~

Accumulated Impairment Losses-Road 10603012 1060301200

10101010 1010101000 Networks
Cash-Collecting Officers
Pettv Cash 10101020 1010102000- I
Other Assets
Cash in Bank-Local Currency
10102020 1010202005- Advances
Cash in Bank-Local Currency, Current
Advances for Payroll 19901020 1990102000
Account-Banco de Oro (BDO)
Prepa11ments
Treasurv!A~ency Cash Accounts
Prepaid Rent 19902020 1990202000
Cash-Treasury/Agency Deposit, 10104010 1010401000
Regular
10104040 1010404000 LIABILITIES
Cash-Modified Disbursement System
(MDS), Regular Financial Liabilities
I
Cash-Tax Remittance Advice 10104070 1010407000 Pa11ables
Accounts Payable 20101010 2010101000
Cash Equivalents
Treasury Bills 10105010 1010501000
Inter-A~enCl/ Payables ,
Due to BIR 20201010 2020101000
Investments
Financial Assets at Fair Value
Throu£h Surplus or Deficit NET ASSETS/EQUITY
Financial Assets Held for Trading 10201010 1020101000
Government Equit11
Accumulated Surplus/(Deficit) 30101010 3010101000
Receivables
Loans and Receivable Accounts REVENUE
Accounts Receivable Tax Revenue
10301010 1030101000
Allowance for Impc,irment-Accounts Income Tax 40101010 4010101000
10301011 1030101100
Receivable Income Tax-Individual 40101010 4010101001
Immigration Tax 40101040 4010104000
Inventories
'
lnventoru Held (pr Sale Service and Business Income
Merchandise Inventory Service Income
10401010 1040101000
lnventorv Held for Consumvtion

-
 --..:::: .'I .._.--
>
Chapter 3 75
111£ Government Accounting Process
74
40201010 402010100() The Government Accounting Cycle
Permit Fees 40201020 4020102~ In this section, we will have an overview of the accounting cycle
Registration Fees 40201990 4020199099' of a government entity. Here is a Hs t of the things that we will be
Other Service Income
------
.--.. learning:
1. Appropriation
Business Income 40202010 4020201001 2. Allotment
Tuition Fees 40202100 4020210Qoo 3. Incurrence of Obligation
Power Supply System Fees
Landing and Parking Fees
40202120 4020212000
-- 4. Disbursement Authority- NCA
5. Disbursements
6. Billings, Collections & Remittances
Assistance and Subsidy
40301010 403010100() 7. Unadjusted trial balance
Subsidy from NationaJ _Government - 8. Adjusting entries
9. Closing entries
Gains
Gain on Sale of Property, Plant and 40501040 4050104000 10. Preparation of financial statements.
Equipment
The trial balance of Entity A (a government entity) at the
Other Non-Operating Income beginning of the period is shown below:
Reversal of Impairment Loss
Reversal of Impairment Loss 40602010 4060201000 Accounts Debit Credit
Cash - Collecting Officers 5,000
EXPENSES Accounts Receivable 45,000
Personnel Services Buildings 500,000
Salaries and Wa~es Accumulated Depreciation - Buildings 150,000
Salaries and Wages-Regular 50101010 5010101000 Office Equipment 150,000
Accumulated Depreciation - Equipment 60,000
Other Compensation Accounts Payable 20,000
Personal Economic Relief Allowance 50102010 5010201000 Accumulated Surplus (Deficit) 470,000
(PERA) Totals 700,000 700,000

Direct Costs Notes:

Cost of Sales 50402010 5040201000 The ~0,000 accounts payable pertains to office supplies purchased
in the prior year that were already delivered but not yet paid.
Non-Cash Expenses An additional purchase of office supplies worth P,5,000 is not yet
Depreciation recorded in the accounting books because they are not yet delivered.
Depreciation-Buildings and Other This prior year "obligation" is described in the registries as "Not yet
50501040 5050104.0()()
Structures due and demandable obligation."
~

-
 ....
76 Chapter 3 ~ C ----~---=---~--_____
Ac Proc•
vernmtm l 01.wting
_:,_7!7__
9

c sh~Mod ified Di bu rs m nt 5,~:::-

y ' t >m
T""- - - , - - - - -
2 0 0
1. Appropriation (MOS), Regular , 0·
Entity A receives its GAA amounting to P1 ,000,000. h 25,000
Sub id y from Na ti onal Gov, mmen t
To recognize receipt 0~r N A ,i rom tlte
)l' The appropriation is po ted (record d) in th Registry of DBM
Apprapriations and Allotmen ts (RAPAL).
;i, The NCA
. is posted (record ed) in the /',Jef{ tS. try of Allotment
2. Allotment and NoHce of Cash Allocation (RA NCA).
Entity A receives its allotment amounting to P960,000 from the
DBM.

5. Disbursements
>- The allotment is posted (recorded) in the Registry of
Apprapriations and Allotments (RAPAL) and Registries of I. Personnel Services (PS)
Allotments, Obligations and Disbursements (RAOD) . .
a. Set up of payable to officers and employees upon approval
3. lncurrence of Obligation
,,
of payroll.
Entity A incurs obligations amoW1ting to P700,000.
Salaries and Wages 200,000
)l' The obligations are recorded in the Obligation Request and
Personal Economic Relief Allowance (PERA) 50,000
Status (ORS) documents and Registries of Allotments, Gross Compensation ---2-50.. .,-00_0_
:.
Obligations and Disbursements (RAOD).
I:, Withholding Tax (20,000)
GSIS (9,000)
4. Disbursement Authority - NCA
Pag-IBIG (2,000)
Entity A receives the following Notice of Cash Allocations
PhilHealth (1,000)
(NCA), net of tax:
Total Deductions (32,000)
Net 21 8,000
a. For current year's appropriation 600,000
b. For prior year's accounts payable and not yet due
Date 200,000
and demandable obligations 25,000 . Salaries and Wages, Regular
(5.J,a)
Personal Ec~nomic Relief Allowance (PERA) 50,000
Due to BIR 20,000
)> The journal entries are as follows:
Due to GSIS 9,000
Due to Pag-IBIG 2,000
Date Cash-Modified Disbursement System 600,000 1,000
(4 .a)
(MDS), Regular 600,000 Due to PhilHealth
Due to Officers and Employees 218,000
Subsidy from National Government to officers and
To recognize receipt of NCA from the
DBM
 7}

[
:;;,
<>ffi<t''

I
,_1r plit
1\ c ot1nf<1, l'.1
r,. ,,.
fm -n
,il I
11,y
?'•1 ,, , .. ,11 .,.,., ,
' "-' oo l l
m,, HI l

rtw p.- t ,• I,• i r nrdt>tf in th JR ~

/>ff!J'"'-·"I "/a · 0 11111 flfl\f blr

En tity A pay · th following coount clbl :

d . Th disbu "m nt i rded in th1;• ORS and RAOD.
c. From prior Y a-rs counts pay· le f,ee tnai baJ11nc a:bcnrt:J:
e. Liqujdati n f Pa · II Fund
Accounts p yabl
218,000 u : Withholding ta .es..
Net
Pa_vrol/ Fund

• For implification, tht.' wi thholding ta:xe L t l 1Jl1.1.5a:amm do ttO-t

necessa ril y refl ct the provi ion of relev n tax 1 ~
n. Maintenance and Other Operating Expen.ses (MOOE)
Datt Accounts Payable 20,
(5./1.c)
Purchaseo upplies: Due to BIR
Cash - Modified Di bu.rsemen
a. Receipt of d elivery of purchased office supplies from prior System (MOS), Regul ar
year's obligation ( ee note above on 'Not yet du e and To recognize payment o
demandable obligation') able

Dau Office Supplie I.nventory 5,000

d. From prior years obligation ( e note above an ·. ot ye-t due
{SJJ and demandable obligation ' and previous en try to reco-rd the
Accounts Payable 5,000
To recognize delivery of office 11pplies related accounts payable):

, The payable is .r ecorded in the ORS . Accounts payable 5,000

Less: Withholding taxes (1,000)
b . Receipt of delivery of purchased office supplies worth Net 4.000
~70,000 from current year's obligation.
 Cha pter 3 The Government Accounting Process
80 81

Date Accounts Payable 5,000 --- Janitorial

Security 10,000
(5.ll.d) 1,000 12,000
Due to BIR Tota l
Cash - Modified Disbursement 30,000
4,000
Less: Withholding taxes
System (MOS), Regular (2,000)
Net
To recognize payment of accounts 28,000
pa11able - oate Water Expenses
1,000
(5. Il,f) Electricity Expenses 5,000
Common Fund System Telephone Expenses 2,000
To maximize the available NCAs of the agency, the Common Fund System Janitorial Expenses 10,000
policy s hall be adopted whereby cash allocation balances of agencies under Security Expens.es 12,000
the Regular MDS Account may be used to cover payment of current year's Due to BIR 2,000
accounts payable, i.e., goods and services which have been delivered and Cash - Modified Disbursement
accepted during the year charged against appropriations of prior year/s, after
satisfying their regular operating requirements as reflected in their Monthly
System (MOS), Regular 28,000 i
To recognize issuance of MOS checks as I
Cash Program. (GAM for NGAs, Chapter 6, Sec. 3) a ment or ex enses

Cash advances for travel:

e. From current year's accounts payable. g. Entity A grants a cash advance of P2,000 for the traveling
expenses of an officer:. ·
Accounts payable 60,000
Less: Withholding taxes · (3,000)
Date Advances to Officers and Employees 2,000
Net 57,000 (5. ll.g) Cash- Modified Disbursement
System (MOS), Regular 2,000
Date Accounts Payable 60,000 To recognize grant of cash advance for
.(5. 11.e) 3,000 travel
Due to BIR
Cash - Modified Disbursement
System (MDS), Regular 57,000 >1' All the disbursements above (payments of accounts
To recognize payment of accounts payable, operating expenses, and cash advance) are
a able recorded in the ORS and RAOD.

h. Liquidation of cash advance:

Operating expenses:
1,800
f. Entity A pays for the following expenses: Date Traveling Expenses - Foreign
(5. ll.h)
1,800
Advances to Officers and Employees
1,000 To recognize liquidation of cash advance
Water
5,000 or travel
Electricity
Telephone 2,000
 R_ C'h a ptN 1

i. R&.--eipt and depo it of refund of ('~c •ss c,,. h ,1dvancc: b. P,1 menl of a coun rM
F" able.
An:ounts p,1 abt,
Duh· Ca.h - o llecting Oflil · rs ~00 L '-: Wi thho ldin~ t
(5.11.,. J I
dvanet'-s to fficcrs and Employ( ,

-
N t'l
T,> nY\Wni.:e rd imd >f rx ~ ni., h
adroncr ft r trm-.cl -oun
--
L
-
t · Payabl-
Datt C\Sh - T~asury/. ~'1Ky cpo:a it,
(5./1.,2)
Regular Due to BIR
200
a ·h - Modifi ,d Di bur 20. 0
Cash - C ollt: ting Offt1..'\.'rs 200 rn n t
T, r~-ogniu remithlttCt' vf the refmul Sys te m (MOS). R gular
o CXC't''$~- aislt adWJrcr t , ¥1 To recognize pay-m,mt 01 280.C
.co11,1ts
aya/Jle

};> An adjustment for the excess cash advance is made on the

ORS and RAOD.
IV. Remittances of amounts withheld
L »1 nee of office supplies to end users
j. Entity Ai sues office upplies worth tt63,000 to end users. a. Entity A remit the taxe wi thheld through TRA

Datt Date Cash-Tax Re mittance Advice

Office Supplies Expense 63,000 (5./V.n. 1) .000
(- Iii)
Office Supplies Im entory . 63,000 Subsidy fr; m National Government 48,000
To reaml the issuance o office s11pplies To recognize the constructive re dpt o
to end users NCA or TRA
Date Due to BIR <•>
(5.IV.a1J
48,000
Cash-Tax Remittance Advice 48,000
!JI. Capital Outlays (CO) To recognize the constructi1.,.-e remit tan e
o taxes withheld to the BIR tlirou h TRA

Purchase of office eq uipme11t

<•> Due to BlR
a. Receipt of delivery of purchased office equipment worth
20,000 (SJ .a)
P300,000 from current year's obligation.
2,000 (5.II.c)
Date 1,000 (5. Il.d)
Office Equipment 300,000
(5.lll.a} 3,000 (5.Il.e)
Accounts Payable 300,000
2,000 (5.U.t)
To recognize delivery of office
20,000 (5.Illb)
equipment
48,000

b. Entity A remits the following to the GSlS, Pag-rBIG and

PhilHealth.
 Chapt er 3 Tire Government Accounting Proce 8
84 85

9,000 Cash-Treasury/Agency Deposit, Regular

GSIS 90,000
2,000 Cash - Collecting Officers
Pag-rBlG 90,000
1,000 To recognize remitta11ce of income to th/!
Phil Health BTr
Total 12,000

, 9,000 •Asa genera l rul e, nil revenues of an enti ty mu t be remitted to the BTr (Sec.
Datt' Due to GSIS 65(1), P.O. No. 1445 )· Howeve r, lherc are cases wher other law p rmit an
(5.IV.I,) Due to Pag-lBIG 2,000
I, entity to retai n some of Its revenues fo r pedfic uses - thus, the u.n remitted
Due to PhilHealth 1,000
collection of ~10,000 above (100K collection less 90K remittance).
Cash-Modified Disbursement
System (MDS), Regular 12,000
c. Entity A collects P45,000 accounts receivable from prior
To recognize remittance to GS IS,
year's billing and remits total collection.
Pa~-lBIG and Phi/Health
Date Cash - Collecting Officers 45,000
c. The disbursements above are recorded in the ORS and ,,, (6.c.1)
Accounts receivable 45,000
RAOD. 11
To recognize concction of priar year's
billed income
Date Cash-Treasury/Agency Deposit, Regular 45,000
6. Billings, Collections & Remittances (6.c.2)
Cash - Collecting Officers 45,000
a. Entity A bills the following revenue/income: To recognize remittance of income to the
BTr
Power supply system fees 100,000
Landing and parking tees 80,000
Total 180,000 d . Entity A collects unbilled service income of ~370,000 and
remits ~340,000 of the total collection:
Date Accounts receivable ' 180,000
(6.a)
Power Supply System Fees 100,000 Permit fees 200,000
Landing and Parking Fees 80,000 Registration fees 160,000
To recognize billing of income • Other service income 10,000
Total collection 370,000
b. Entity A collects ,100,000 accounts receivable from the
billing above and remits '90,000* of the collection. Date 370,000
(6.d.1)
Cash - Collecting Officers
Permit fees 200,000
Date Cash- Collecting Officers 100,000 Registration fees 160,000
(6 .b.1)
Accounts receivable 100,000 Other service income 10,000
To recognize collection of current year's
To recognize collection of unbilled
b.illed income
- service income
 Cha pt r 3 The Government Accounting Process
86
87

Date Cash-Treasury/ Agency Deposit, Regular 340,000

GENERAL LEDGER
(6.d.2)
Cash - Collecting Officers 340,00Q
To recognize remi ttance of income to ASSETS
the BTr
C.·
bot, S,L'OO
Oflian C...T . ....,
" Unbilled revenue/income" refers to fees from reguJa tory functions and (W-1) 200 200 OJI.U) l'JI.U) 200
(4.1,J 25.00, 2ll«W) 15.14
collections of revenue with no direct e~change of services or goods. 100,fXXl
(6.b.l) 90,L'OO (6.b.2) (6.b.2) 90.!Q)
4.5,L'OO (W ) l&!Dl ~
('LI) 4.5,rol (6.c.l) 4.5.!Q)
~ 111.4)
run 370.COO 340,ro) (6.d.2) (6.d.2) J«l.!Q)
')7.!Q) tU,)
45,DOO - (MJ 100.ax,
28,ln) tu-0
e. Entity A collects unbilled tax re venue through direct 575,2# - l.!Ollllt)
deposit in Authorized Agent Banks: 2llCQ) (lllb)

---j.....:12£0):::..:.:... t5.J'ibl
'-9"'-
Immigration Tax 100,000
~-Tu Rarnttn u ~ 'Oiu Acaint• R«.i!Mhu
Total 100,000
(5.IV... l ) ~ . 0 0 0 bes- 45.(XX) {5.JI..,) 5.(XX)
48.000 (5.lV.u) (6.A) 180.(XX) 100.(XX) (6.b.lJ (5.JU,J 70,000 63.COO (5JLj)
Date Cash-Treasury/Agency Deposit, Regular 100,000 - -'- --~-45_.(XX)_ 12,000 - .
(6.e)
Immigration Tax 100,000
To recognize collection and remittance of
'
income to BTr through Authorized Government
Depository Bmks (AGDB)I Government Servicing
Bmks (GSB )

The collection is automatically remitted to the National

Treasury because it is made through the latter's bank account.
- ~-~
~
-. 60,000 ·
60,000 bes- (5.I.c)
A'-.:a o,P,
218,000
218,000
_·::~,-::
7. Unadjusted trial balance
- 200 ~
- -- )

An uJ111djusted tri.al balance is a list of the accounts in the

General Ledger together with their balances. Its purpose is to
test the equality of total debits and total credits in the
accounts.
Before we can prepare the unadjusted trial balance,
we need to post first the journals entries above in the General
Ledger.
~-- - - - - - - - - - - - - -
UAB IUT l E
Cha_p--:2._
-- fh-t Cqr;r rnmen t

;\.Ct:OU'1 t
A ffatm l lrt,(,( f'roulf

- - - ~ - -_ _ _ _ _89_

~ . Collecllng O ffic rs Dtbit

45,{X)O
sh-Treo u ry/A~ nry D p., Reg. 101 04010
~
!l.Sh-MDS, lkg uf.ar 575,200
1010400,
~
Ca h-To x Re mittana, Ad vi 6,000
Cl>ILol 10104070

-
~ ~=:..+-- - A count R.ec •i v.:ibl ,
Off ice Su pplie Invento ry
Bu ild ings
10301010
104-04IJ10
10604010
80,000
12,000
500,.000
Accum . D prec ia lion - Buildings 10604011 150,000
Office Equipment 106050:ZO 450,000
Accum. Dep reciation - Equi pL 10605021 60,000
Advances for PayroU 19901020
EQUITY Advances to Officers & Employees 19901040
Accounts Payable 201 01010 10,000
Due to Officers an d Employees 20101010
Due to BlR 2020101 0
Due t.oGSlS 20201020
Due t.o Pag-lBIG 20201030
fNCOME
Due to Phl!Hea Ith 20201040
Accumulated Surplus (Deficit) 30101010 470,000
~ 200,000 (6.d.l) 160,000 (6.4.lJ
immigration Tax 40101040 100,000
-- 200,000 --- Permit Fees 40201010 200,000

oc..s.noa.-.
~
1-S.rys,n-rn, I.all 'j" rlda,r- NG
Registration Pees
Other Service Income
40201020
402.01990
160,000
10,000
"""-1)
aL 1.... -'. .
IQ,000 (6.4.I J
J00,000
100.000 l6.AJ
.., . 000
<•_.> <,00,000 (UI
25.000 (O,J
48.000 C,JY.a.l)
Power Supply Sys tem Pees 40202100 100,000
- -673-,000--1"--
Landing and Parking Pees 40202120 80,000
Subsidy from NG 40301010 673,000
EXPENSES Salaries and Wages, Regular 50101010 200,000
PERA . 50102010 50,000
· s.J..tam~I.,.
200,000
{5.u) Traveling Expenses - Foreign 50201020 1,800
200,000 -.. 50203010 63,000
Office Supplies Expense
Water Expenses 50204010 1,000
(5.ll.f) Electricity Expenses 50204020 5,000
Telephone Expenses 50205020 2,000
Janitorial Expenses 50212020 10,000
,u
Security Expenses 50212030 12,000
(!l.n.f) 12,000
Totals 2,013,000 2,01J,OOO
 Chapter 3
90

The accounts are arranged according to their sequence in

the Revised Chart of Accounts (RCA) . (GAM for NG As, C hoplc r 19, Sec. 48)

8. Adjusting entries
1. Reversion of unused Notice of Cash Allocation (NCA).
2.
Depredation expenses:
i. Buildings - PS0,000
ii . Equipment - P30,000
3. Allowance for impairment on accounts receivable of
P2,000.

The adjusting entries are as follows:

6,000
Dale Subsidy from National Government
(8.a) Cash-Modified Disbursement
System (MOS), Regular
6,000
~ ;:;Pl"~~;~~~ ~ i;~~~~ .. l
I
§ U§§~§
To reco~nize reversion of unused NCA
Depreciation-Buildings & Other Structures 50,000 i §§§§§§§§§ l
Date
Accumulated Depredation - Bldgs.
50,000
~
.. ... ... .....
~
~
(8 .l1.1)
~~$p$, $pp$
§§UUUU §
if
Dale
To recoRnize depreciation of buildinRS
Depreciation-Machinery and Equipment 30,000 i
(8.b.2) Accumulated Depreciation - O.E.
To recognize depreciation of office
30,000
.i U§ !-'~~ ·°'§ I
\

equipment
~ ~ i
~°'
2,000 ~
Impairment Loss - Loans and Receivables ;"' § §
Date
(8.c) Allowance for Impairment - AIR
2,000 u \!;J
.....
To recognize loss allowance on accounts

,~i -ti i
I iii iliii;ill l ~
receivable

The adjusted trial balance is shown below:

l
ti ~
h UHtmu §

-
 ""'I CqtJt"rnment Accau,itino p
Tlie Gv,·1·nrmo1/ 1k co1111t111g /'roe,·,~ ;::.,---- - ---...:.'. "~ ror
93
· Dcpredatfon-M
9. Closing entries ac. & Eq
Impairment L uipt
The follO\ving ..1re the 1H:.' n's~,1ry dosin!~ cntrit·s: - lJR 30,000
Revenue
. and Erno,.,,,. Summ 2,()()()
a . C losing of the " ( a~h- T rm~11 ry l :-\i.:1·11 c_1,1 [)cpo~it , l< c:,.; 11 /0 1· 1 o recognize c/osin . ry U.3.200
account tt) the " A r o1m11lalcd S11rpl1i:.. /( [)cficit) " ,1cL·punl. nse account i< of inconw 1t1td
b . Closing of tlw '' S11b~ uiy _f,0111 i\'nt iow1l Gm•cm1111·11t " t1ccoun1 1:,.,tr Revenue and Expen S
(9.e.l)
A 'l.Jmmary ).200
to the " l,cunr uc a11d J:xp1·11 ~c S111111111ir_1t'· ,lCcou nt. ccu mulat d Surplu /(Defici t
c Closing of incnnw and l ,pcnsc acn ninl s to the " U.cuc1111e To recogntu closm of r ) 200
nse summa I? 1'111-nwt lll'td
and Expc11sc S11mnwr_1( ' ,1 ccount and closin8 of the net
balan e of " Rn•c1111c and fxpor~c S11111111ary " acco unt to the
" Accumulated Sury1/u~l(D1 / frit )'' i1Ccount.
The completed worksheet is shown below:
Only closing entries (a) and (b) are unique to a
government enti ty.

Date Accumulated Surplus/(Deficit) 575,200 I

575,200 I
(9.a) Cash-Treasury/ Agency Deposit,
I
Regular
To recognize closing of cash deposit
account
Datt Subsidy from National Government 667,000
(9.b) 667,000
Revenue and Expense Summary
o subsid accou11t
100,000
Date Immigration Tax
(9.c.1) 200,000
Permit Fees
160,000
Registration Fees
10,000
Other Service Income
100,000
Power Supply System Fees
Landing and Parking Fees 80,000
200,000
Salaries and Wages, Regular
50,000
.PERA
1,800
Traveling Expenses - Foreign
63,000
Office Supplies Expense
1,000
Water Expenses
Electricity Expenses
s,ooo
2,000
Telephone Expenses
10,000
Janitorial Expenses
12,000 ·
Security Expenses
De reciation-Bld s. so,ooo '
 11t Accounting. Process
f/re cor;erlllllt:
.

95
preparation of financial statements
10. The Statement of Financial Position anct St . .
, atemen
Performance are shown below. We will prepare the othert of Fmm1anl
On ents of a complete set of f' ·a1 .
ocornp
1 apter 14.
111 anci statements later m

ENTITY A
ST ATEMENT OF FINANCIAL POSITION
(REGULAR AGENCY FUND)
AS AT DECEMBER 31, 2ox1

ASSETS
Notes
current Assets
Cas.h a nd Cash Equivalents
45,0U0
Receivables
78,000
Inventories
12,000
Total Current Assets
135,000

Noncurrent Assets
Property, Plant and Equipment 1 660,000
Total Noncurrent Assets 660,000

TOTAL ASSETS 795,000 _

Current Liabilities
I I~! Financial Liabilities 10,000
Total Current Liabilities
tu I 10,()00:

I BliBH TOTAL LIABILITIES 10,000

TOTAL ASSETS less TOTAL LIABILITIES 785,000_

I ill ilUihll I
NET ASSETS/EQUITY
i Accumulated Surplus/(Deficit) 785,00()_
, TOTAL NET ASSETS/EQUITT 785,000_
I,
I

_J
 7
%
ENTrry .
ENTITY A NOTES TO Fl A CIA
DEC l STATB{ ;-rs
STATEMENT OF FINANCIAL PE RF O RM AN CE EMBER 31, 20 l
.(REGL'LA R AGENC Y FUND)
FOR THE YE:\ R ENDED DECEM BER 31, 20X1 Note 1: Property, ~lant and Equi pment
n,rs account consi sts of the folio....,; .
Notes
2 100,00{)
Tax re\·enue ~~0.000 Buildings
3
Senice and Busmes · ln ·om1: Office Equipment
650,00()
TOTAL REYENUE Total Cost
less: C\SRRE1'.'f OPERATIN G EXPEN S ES Accumulated Depredation - Build.in
4 250,000
Personnel Ser-ices 94,800 Accumulated Depreciation - Equipment
Maintenai,ce and Other Operating Expenses 5
6 82,000 Total Accumulated Depreciation
:--: on-cash Expenses
TOT Al CURRENT OPERA TING
426 ,800 Property, Plant and Equipmeni, net
EXPEN SES

SURPl.l1S/ (D EFICm FROM Note 2: Tax Revenue

223,200 This account consists of the following:
CTR.RE!\"T OPERATIONS

667,000
~ et Financial Assistance/Subsidy Immigration Tax
Tax Revenue
SURPLUS/ (OEFKm FOR Tm PERIOD 890,200

Note 3: Service and Business Income

This account consists of the following:

Permit Fees
Registration Fee~ 10,00)
Other Service Income
Power Supply System Fees
Landing and Parking Fees
smice
. and Business lncome
98 cover.n~-
_!!:;---
rn_en_t_A_c_ t i r...;.
co_u_n_ ,:?:....l_'r_oc.,;,;
_______
e!l:.::.f! _ _ _ _
_::.::._
99

Note 4: Personnel Services chapter 3 Summary:

Th is account consists of the following:
A gove rn m en t e n lity' s books of ace
oun ts and regislrieB consist
Salaries and Wages, Regular 200,000 of
PERA 50,000 a. Jo urn als,
Personnel Services 250,000 t,. Led ge rs, an d
c. Regis tri es .
, The classifica ti ons of expenditu re5 by obj-ect are:
a. Personn el Services (PS),
Note 5: Maintenance and Other Operating Expenses
This account consists of the following: b. Maintenance and Other Operating Expenses (MOOE),
c. Financial Expen ses (FE), and
Traveling Expenses - Foreign 1,800 d. Capital Outlays (CO).
Office Supplies Expense 63,000 , Appropriations, allotments, and incurrence of obligations are
Water Expenses 1,000 recorded only in the registries. Record ing in the books of
El ectricity Expenses 5,000 accounts starts from 'the receipt of disbursement authority.
Telephone Expenses 2,000 , Appropriations are record ed in the Registry of Appropriations
Jani tori al Expenses 10,000 and Allotments (RAPAL).
Security Expenses 12,000 - , Allotments are re corded in the RAPAL and Registries of
Maintenance and Other Operating Expenses 94,800 Allotments, Obligations and Disbursements <RAOD).
, Obligations incurred are recorded in the RAOD and Obligation
Request and Status (OR S) .
Note 6: Non-cash Expenses • Disbursement authority (e.g., Notice of Cash Allocation ) is
This account consists of the following: recorded in the books of accoun ts.

Depreciation-Buildings & Other Structures 50,000

Depreciation-Machinery and Equipment 30,000
Impairment Loss - Loans and Receivables 2,000
Non-cash Expenses 82,000
 .....
Chapter 4 R£Uenues and Other Receipts
117
11 6

d. Receipts shall be recorded as

Chapter 4
Revenues and Other Receipts
.learning 06jechves
1. State the sources of revenue of a government entity.
2. State the recognition and measu rement of revenue.
Introduction
Revenue - is the gross inflow of economic benefits or servke
potential during the reporting period when those inflows result in
an increase in equity, other than increases relating to contributions
from owners.
Revenue includes onl y those that are recei ved or
receivable by the entity in its own account. Receipts refer to actual
cash coliections from all sources durin g a period .
("'Fundamental Principles for Revenue
a. All revenues of an enti ty shall be remitted to the National
Treasury and incl uded in the General Fund of the National
Governmen t, unless another law specifically allows otherwise.
b. All moneys and property received by a public officer, acting in
any capacity or upon any occasion, shall be accounted for as
government funds and government property, unless another
law specifically states otherwise.
c. Amounts received in trust and from business-type activities of
the government may be separately recorded and disbursed in
accordance with relevant rules.
Trust Funds or Funds th
,
revenue of Special, Fiduciary or
o er than th Ge
authorized by law. e neral Fund only when
e. · A collecting officer shall imm di · . .
(OR) upon collectin a e ately issue an official receipt
g payment of any nature .
f. . offmal
Where mechanical devices (e.g. e1ectromc . . receipt) are
used to acknowledge cash receipts, th e COA may approve,
upon request, the exemption from th e use o f accountable
forms.
g. Temporary -receipts shall never be used to acknowledge the
receipt of public funds.
h. Pre-numbered official receipts (ORs) shall be issued in strict
numerical sequence. Duplicate copies shall be the exact copies
of the original.
i. A collecting officer shall accept payments to the government
in the form checks, upon proper endorsement and
identification of the payee or endorsee. The collecting officer
shall not use government funds to encash private checks.
i- Receipts of government funds shall be acknowledged in
accordance with the law - indicating the date of receipt, from
whom and on what account the fund was received.
rP.D. No. 1445 & Chapter 2, Sec. 4 of CAM for NGAs )
'
Types of funds
General fund - a fund which is available for any purpose other
than those which other funds have been designated to.
• Special fund - a fund designated for special purposes.
• Trust fund (Fiduciary fund) - fund held by a government
agency or public officer acting as trustee, agent, or
administrator for the fulfillment of a condjtion.
11 8
---- ------
AevtnUCfl and Ot'1rr Recelp1 9

---
hapter 4

· - - - - ·11 9
• Revenue fund - compri ses all fund s derived from the income sources of Revenue
of any government agency and availab le for a ppropriation or Reve:nues may a rise from excha
- YLRe and non .
expenditure in accordance with the law. ·cxchan8c l'ransa tion~.
• Depository fund - fund held in an a uth o·rized d eposito ry bank ii, Exchange transactions (Recipro
over which the recipient agency retains control for the la wful ·in w h'1ch o-n(;!, e-- · rt:ce,ves,.
n tity . ca1. lrans"cire)
. 'J' _ .i_re tran.sa.c:t,ons
.
. , "ssetRor se .•
purposes for which the fund was received . extingui s hed, a nd directly gi· _ · rvi c ' 8, or has liab-iliti 9
V{c:fl appr ·
• Special Account in the General Fund (SAGF) - estab li sh ed to anoth ~r entity in e xcha nge ,,, , ox,mately equul valu61 to
1,5Af:l '.1 .11 )
•
facilitate the funding of priority activities o f the governm ent. Exa m pl.E:!s: salt! of goods and r , d .
The SAGF is sou rced from sp ecific fees, grants and donation s, · -~n enng of servi ces.

and other sources identified und er the law. The following a re b. Non-exchange transactions (No .
n-rec1procal tr t/1 ·J
relevant legal provisions regarding the SAG F: transaction s in wh ich an entity ··h · . ans ers - are
. . e,. er receives value from
a. All income and collections for Special and Fiduciary Funds another e ntity w,ithout directly giv· .
. _ . ing approximately equa l
sha ll be remitted to the Treasury and treated as SAGF. valu e in exch ange, or gives value to a t.h . .
. . . · ' no er e ntity without
b. The SAGF shall be consi dered as being au tomatically directly rece1vmg approximately equal val · h
appropriated for purposes authorized by law, except (PPSAS 9. 11) ue in exc a nge.

when the General Appropriations Act (GAA) provid es
otherwise.
c. SAGF shall be released to government agencies subject to
the approval of the Presid ent.
• Special Purpose Funds (SPFs) - are " fund s that the President
allocates for special programs and projects. Un like for other
funds, SPFs are not under the accountability of any particular
government agency/office or unit." (2012 Annual Financial Report of the
Republic of the Philippines)
Relevant provision of law:
, All money collected on any tax levied for a specia l purpose
shall be treated as a special fund and paid out for such
purpose only. If the purpose for which a special fund was
created has been fu lfilled or abandoned, the balance, if any,
shall be transferred to the general funds of the Government.
(Art . VI. Sec. 29(3) , Philippine Constitution)
Exampl es: tax revenue, fin es and penalties and donations .
When th e consideration transferred does not approximate
the fair valu e of the reso urces received, the entity d etermines
whether the tra nsacti on includ es a comb'ination of exchange and
non-exchange transactions. Each component shall be recogni zed
separately. (PPS/\S 23.10)
If it is no t immediately clea r whether a transactlon is a n
exchange or non-excha nge transaction, the substa nce of the
transaction shall be exa mined to determine its type. Por exa mpl e,
the sa le of goods is norm ally an exchange transaction. Howev •r, if
the tran saction price is subsidized, the transacti on fa ll s within the
definition of a non-exchange tran saction.
The receipt o f trade di scounts, quantity discounts, or ot~er
:eductions in price does not necessa rily mea n that the transact ion
15
a non -exchange transaction. (PPSAS 23 -11 )
L

E ch nge Tran acti n

R , .'lute>: from ch,mg" lrans.1ctiun,' ari l'. f11m lht' followin g :
ii. Tlw l'ntlt U<H·s not r , ,
lnvolvemt•n t or pff, Ii lain continuino m
ve ro ntr I ri
- .
.1r1.:igena1
121

Iii. It i'l probobl0 that l' on . \) ov,r th g d 'i -old ·

P ) •isii 1s (f : -· ii ~ tt, third p,1rliL" nr othL'r orn1c b ~nef . ,
i. x.~s tJ • i . Rcvt•nut• Cun h, m , 0 u d _ 1 will flow t th~ e_ntity·
gO\·emment en titi s. '· r · reltabl '
v. ~os t.'l rl'l .:lt ing to th ' tr l . y; dnd
, nsact1 11 11 L
c l ' rnt:a ' ured r liab l .
xampl .::: Rl'11dai11s <~/ Scrvicc:i: ·
a. i e In - l'ermi t Fee ,, 11,t~sis tratit) n l~ees, Fra nchising Re ve nue from th ·· s upply of c . • _
. -~ rv1 ,s r o . d • -
Fees. Li<-ensin, F '. L1cw,1 h-es, l\ 1. spt)rt ,md Vi sn 1:ees, /illl' bllFIS ove r th e p riod the e . . gniz. on .l ~trn1gh1
rv1c are rend r>d .
I ·ing ~ · a nd the like. Ho weve r, reve nue is recognized b
. Yrefor •nc > 'l the ,;fage of
comple/1011 (e.g., percentuge of ompletion thod . - · ' ·
b. Fees, Exa mination Fees, . m ) 11 the ou t me
of the transaction ca n be es tim a ted r liabl h h
me, o mmuni a lion Network F e, lnco,ne . .. y. sue a w n all of the
following conditions are sati fied :
trom H re rmitori -, ales Revenue, Hospital Fees, i. The s tage of completion of th e tTanc""tl'on t th ·
are in the Profit of J in t Ven tu~, and the like. ' '-X''- a e repo rtin g
dute can be m eusured reliab ly;
ii. It is probable that economic benefi will now to the en ti ty;
ii. Use by other entity f a ts yielding interest, royalties and iii. Revenue can be measured reliabl ; and
d ividends r similar di tributions. iv. Costs relating to U1e transaction can be mea ured reliabl .

-_ampl -·
a. Interest income - charges for the use of cash or cash
equivalents, or amounts due to the entity;
b. Royalties - fees paid for the use of the entity's assets such
a· trademarks, patents, software, and copyrights; and
c. Dividends - share of the National Government from the
earnings of its ca pital/equity investments in Government-
Owned or Controlled Corporations (GOCCs) and other
entitie .
For practical purposes, when ervice a:re performed by an
indeterminate number of acts over a specified time frame, revenue
is recognized on a straight line basis over the spediied ti me frame
unless there is evidence that some other method better represents
the stage of completion. (PPSAS 9.24)
When the outcome of the transaction involving the
·rendering of services cannot be estimated reliabl . re enue is
recognized only to the e, tent o.f the expenses recognized that a.re
recoverable. (PPSAS 9.25)

Recognition of Revenue from Exchange Transactions

Interest, Royalties & Dividends . .
a· /nterest is recognized on a ame
· ProF,ortion basis • that takes mto
Sa/p of Goods:
account the effective yield on the asset; d ' th
Re venue from the sale of goods shall be recognized when all of the b R 1 re earned in accor a nce w1
1
· oya//ies are recognized as t 1e) a
following conditions are sati.sfied:
nent· and
i. Significant risks and rewards of ownership of the goods the substance of the relevant agreer ' ' t , . right to receive
c· o 1V1de11ds
· · .
are recognize d when the ent1 y ~
are transferred to the bu ye r;
payment is established.
 7,£,9;

r ir value o! the Recognition of Revenue from N01~td\ail'tft

~"enue from non-e, change
· until a reliabl me
Arto-rdingly, the ~ t and re e
nge transaction are recognized when lected or
art> m ASurabl and legally llectible. 1c~,. 1tor ' ·
 ,..
Chapter, ues and Other Receipts
~1~2~4-- - - - - - - - - - - - - - - - -- -----.!.-= , :,.,.------
~11('!_:.---
- -- - - - - - - - - -_ _ _ _ _:::_12~5

. and penalties
Tax revenue f,,,es .
. and penalhes are recognized as . .
);:> Tax revenue is recognized at a gross amount and not reduced f 1rie5 income in th
llected. (GAM for NGAs, Chapter 2, Sc--c. 33 ) e yea r they are
for expenses paid through the tax system. CO
However, f"mes a re recognized
Expenses paid through the tax system are those expenses as revenue when the
ceivable meets th e recognition criteri f
which should be paid irrespective of whether the tax payer re h b · a or asset and are
pays taxes, or uses a particu lar mechanism to pay taxes. ~!M asured at t e est estimate of inflow of
for NGAs, C hap ter 5, Sec. 24) resources to the entity.

1
);:> Tax revenue shall not be grossed up for the amount of tax
( An entity · ca pan·ty o f an agent shall
. collecting fines in the
not treat those fin es as revenue.
expenditures.
· Tax expenditures are preferential prov isions of thl~ tax
Gifts, Donations and Goods In-kind
la vv tha t provide certain tax payers with concessions that are
Gifts, donations and goods in-kind are recognized as reven ue
not available to others. Tax expenditures are foregone
when it is probable that future economic benefits or ~rvice
revenue, not ex penses.
potential will flow to the entity. Those that are received without
Taxable event conditions are recognized immediately as revenue. Those with
T11pe of tax
» Earning of taxable income conditions are initially recognized as liability and recognized as
a. Income tax
revenue only when the conditions are satisfied.
b. Value added tax » Undertaking of a taxable
activity
Purchase or sale of taxable
Services In-kind
c. Goods and services tax );:>
Services In-kind are not recognized as revenue due to the
goods or services
uncertainties affecting the entity's ability to control those services
d. Customs du ty );:> Movement of dutiable
and measure them at fair value. Examples of services in-kind
goods or services across the
include technical assistance from foreign bodies, communi ty
customs boundary
services rendered by persons convicted of offenses, volunteer
e. Death duty »· Death of the owner of the
services, and the like. Services in-kind received may be disclosed
taxable property
m the notes.
Property tax » Passage of the time period
for which the tax is levied
Measurement
Transfers Assets, liabilities and revenue ansmg from a non-exchange
tranSaction are measured as follows:
•!•Transfers are inflows of future economic benefits or service
potential from non-exchange transactions, other than taxes. :· A~sets - at the acquisition-date fair value. .
(PPSA5 23) Liabilities _ at present value, when the effect of time value of
Transfers include fines, gifts, donations and goods and money is material.
services in-kind, deb t fo rgiveness, bequests, and grants. All of c. Revenue _ at the amount of increase in net assets. U the non-
these transactions transfer resources without approximate exchange transaction is initially recognized as a liability, the
equal value in exchange and are not taxes but some are with ·
conditions.
''
126

ub
Chapter4

uent reduction in that liability (e.g., because the 3.

ues and Other Receipts
~-----'-----
Recei pt of grant
- 127

condition i satisfied) i recognized as reven ue.

Books o the NG - BTr
Books O DPWH
sh in Bank-LocaJ Currency,
~gJ<o 5entraJ ng Pilipinas 10M SCash - Modified o·1s bursement
Debt Forgiveness ystem (MOS), Regular !OM
Qther Deferred Credits 10M
Subsid from NG lOM
When a lender cancels the debt of a government entity, the debtor
recognizes revenue equal to the carryi ng amount of the debt b· Disbursements for materials and labor amounting
. to PlOM
forgiven .
However, when a controlling entity cancels the debt of a
Books o the NG - BTr Books o DPWH
wholly owned controlled entity, the cancelled debt is treated as
Subsidy from NG lOM Construction in Progress-
contribution from o.....vners and not revenue. Cash in Bank-Local Currency, lnfrastructure Assets 1OM
Bangko Sentral ng Pilipinas !OM Cash - Modified Disbursement
To recognize replenishment of System (MOS), Regular 10M
Bequests MDS checks issued for payment of tire
Bequests are transfers made according to the prov1s1ons of a ateri.als and labor for the cons truction of
111
i:leceased person's will. A bequest that satisfies the recognition a ood control stem
criteria for asset is recogn ized as revenue, measured at the fair
value of the resources recei ved or receivable. c. Completion of the project

Books o the NG - BTr Bookso DPWH

Grant with Condition
Other Deferred C redits 10M Flood Control Systems lOM
An asset received und e r a grant with condition is initially Income from G rants and Construction in Progress-
recognized as liability and recognized as revenue only when the Donations in Cash IOM lnfrnstru ctu re Assets lOM
condition is sa tisfied .

Illustration:
The national government (NG) recei ved a foreign grant of ,10M
conditioned on the construction of a flood control system which
must be completed within the next 2 years, otherwise the grant
must be returned to the grantor. The Department of Public Works
and Highways (DPWH) is the implementing entity.
The journal entries are as follows:
Pledges
Pledges are unenforceable undertakings to transfer assets to the
recipient entity.
Pledges are not recognized as revenue because they do not
meet the recognition criteria for asset, i.e., at present, the entity has
not Yet obtained control over the item pledged.
. If the pledged item is subsequently transferred to the
tecipient entity, it is recognized as a gift or donation. Pledges ma
warrant disclosure as contingent assets.
 hap t r 4 . and Other Receipt ·
12 129
~ - -·~ -------
0 ,t'(ll ll e:i ------------

an official receipt ( R) upon r ceipt of any th

Concessionary/ Loans are loans recei
Cn11cessio11ary om1s -
d b an en tity a l below
sub idie /a tance. The journal entries .:ire follow-,:
market tem1s. h
The entit) con~id r whether the difference be tween t e
tran achon
. . (I oan proc ed ) and the fair aluc of the. loa n on
pnce I .000
initial recognition i a non-exchange tran n li on . If it is . o, ~he 60,000
difference i recognized a revenue, e cept if a pre en'. o~l'. ga t1 on 0,000
10, 0
exi ts in which ca e the difference is r cognized a a ltab1lity a nd To recoxnize receipt of s11bsidyla 1.H,m t'
reco~zed a revenue only when the obliga ti o n i sa tisfied . ram other ovi:rm11ent n encie
o~tr Cash-Treasury/ Agency Depo it, Trust IOJ,000
Cash-Collecting Officers J 00,000
Impairment Losses and Allowance for Impairment Losses To recognize remittance of collections to
When an amount already recognized as revenue becomes the BTr
uncoUectible, it is recognized as expense (i mpairment loss) rather
than as an adju tment to the revenue originally recognized. c. Receipt of excess cash ~dvance granted to o 1cers and employee.
Entitie hall evaluate the collectability of accounts (e.g., receipt of excess cash ad vance for travel). (St-,.> "'1mp le joum..tl
entries in Chapter 3)
receivable on an ongoing basis based on historical bad debts,
cu tomer/ recipient credit-worthiness, current economic . trends
and changes in payment activity. An allowance is provided for d. Receipt of refund of overpayment of expenses.
known and estimated bad debts. (GAM for NGAs, Chapter 5, Sec. 9)
Date
Cash-Collecting Officer s 10,000
Appropriate ex pense account 10,000
Other Receipts
To recognize collection of refund of
Other receipts include, but not limited to, the following: overpai;men t o_[ expe11ses
Date
Cash-Treasury/ Agency Deposit, 10,000
a. Receipt of subsidy from the Na tional Government (i .e,., (Regular, Special Account or Trnst)
di bursement authority), ~uch as receipt of: Cash-Collecting Offi cer · 10,000
i. Notice of Cash Allocation (NCA) (•l To recognize remittance o collections 10
the BT,
ii .
iii.
Tax Remittance Advice <•J
Non-Cash Availment Authority Cbl
-----
iv. Cash Disbursement Ceiling Cb> e. Receipt of performance bond or security deposit. A performance
b0
nd 1s. a security deposit. requue · d from a contractor or
(•J See journal entrie in Chapter 3.
(b) See journal entries in Chapter 5.
sUpp li er to guaranty the ful l an d fru·thful performance of a
~ontract. lt may be in the form of cash or certified check. The
1°urna\ entries are as follows:
b. Receipt of subsidy or assistance from other govern men t agencies,
including LGUs and GOCCs. Tke Collecting Officer shall issue
 ,...
"" and Other Receipts
,uve1111=
130
:::.:----- 131

chapter 4 Summary:
100,000
Dale
100,000
A ll revenu es s hall be remitted to the BT rand m· d d d .
u e m the
General Fund, unless another Jaw 5 'fi 11
. . . pea ca a 11ows
100,000 otherwise. Recording m other tvpes , of fu nd (e.g., 5peaa· 1
Dnlc
'100,000 Fund) s hall be made only when authorized by law.
Receipts shall be properly acknowledged through pre-
numbered ORs. Receipts can be in the form of checks.
thl' l3 Tr
Revenues of a government entity may arise from e-xclum e and
f. ollrctions ma,fr 011 behalf of a11otlier entity. . ,, non-exchange transactions. Exchange transactions involve
he collecti ng ent ity record s the collection as a credit _to_the D~e giving and rece1vmg resources while non-e change
to NGAs" account. Upon receipt of remittance, the rec1p1ent entity transactions involve either giving or receiving but not both.
records the collection as a credit to the "Trust Liabilities" account. Revenue from exchange transactions are measured at the fair
value of the consideration received or receivable.
g. Jntra -agmcy and Inter-agency fund transfers. Nature of receipt RecoK7'1tion
•:• Sale of Goods ; Revenue is recognized
~ lnt ra-agencv Fund Transfer (transfers within same agency : when significant risks and
Dale Cash-Collecting Offi ce rs 100,000 rewards are transferred;

I Du to (Cen tral Office. Regional Office,

Op rating Units or Other Funds) 100,000
control is not retained;
inflow of economic benefit
To recognize receipt of intra-entity fund is probable; and revenue
tra11sfr, and related costs can be
Date Ca h-Trea ury/Agency Deposit, Trust 100,000 measured reliablv.
Cash-Coll ecting Officers 100,000
•!• Rendering of Services :,. Revenue is recognized on a
To reco~11ize remittance of collections to
straight line basis.
1/ir BTr
,. Howeve r, revenue i
recognized by reference to
;... Inte r-agen cy Fund Transfer (transfers between different the ::,iage of cvmpldion if this
a encies : can be measured reliably.
Da l.e Ca h-Collecting Officers 100,000 ,. When the outcome cannot
Due to (NGAs, LGUs or GOCCs) 100,000 be estimated reliably,
To recognize receipt of inter-entity fund revenue is recognized only
t-ran.s er to the extent of reco erable
Date Cash-Treasury/Agency Deposit, Trust 100,000
Cash-Coll ecti ng Officers 100,000 -:------------i-;:--;c~o:sts:·:::-;~~tin~--l
To recognize remittance of collections to -;-l11terest ,. Recognized on a time
proportion basis u ing
the BTr effective interes t method .
 'hapter 4
132

~ R cognizcd based n the -

•!• Dividends
•!• Exchanges of goods or services
•!• Gifts, Donations and Goods
In-kind
•!• Services In-kind
•!• Debt Forgiveness
•:• Bequests
•:• Grant with Condition
•!• Concessionary Leans
•:• Subsidy from NG and other
NGAs
~
substance of the agrc mcnt.
Recognized when right to
-
receive pay ment is
established .
),> If similar, no revenue is
recognized .
» lf dissimilar, revenue is
recognized at the (1) FV of
asset received or (2) FV of
asset given up. Any cash
paid or received is adjusted
to the FV.
) If without condition,
recognized immediately.
~ If with condition, initially
recognized as liability until
conditio~issatisfied.
> Not recognized as revenue.
> Carrying amount of debt
forgivenjs recognized as·
revenue.
~ Recognized as revenue '
measured at fair value, if
asset recognition criteria are
met.
> Initially recognized as
liability until condition is
satisfied.
> Not reco ·zed.
> Difference between fair
value and transaction price
is recognized as revenue, if
non-·exchange transaction.
) Recognized as revenue
from assistance and
subsidy. ,
-
 ' v11rsen1r nfs
01s---------------------.....--~
,,-- 139

Chapter 5
Disbursements

[,earnina 06jectives
I. State the m ain concepts in the d. 6
fund s. is ursement of government
2· Account for the different modes of d 1' s bursements.

Introduction
Disbursements constitute all payments in cash, in whatever manner
(i.e., through cash, check, or other means). Disbursements shall be
supported by Disbursement Vouchers (including Petty Cash
Vouchers) or Payroll.

Fundamental Principles for Disbursement of Public Funds

a. All government resources shall be used only in accordance
with the law and only for public purposes.
b. Trust funds shall be used only for their specific purpose.
c. Fiscal responsibility shall be strictly shared by all those
exercising authority over a government agency.
d. The use of government resources shall be approved by proper
officials.
e. Claims against government funds shall ~e supported with
complete documentation.
f. All laws and regulations applicable to financial transactions
shall be faithfully adhered to, including generally acce~ted
principles and practices of accounting, management and _fi~cal
administratison, provided that they do not contravene eXIsting
laws and regulations.
(P.D. No. 1445)
 140 C h a pte r 5 Ois/111rse111e11 Is
141
Ex pe nditures fund ed by borrowi ngs a re includ ed in the Rcnts- BuJlding a nd Stru ctures 80
expenditure program of th e en ti ty . The loan proceed s shall not be Cash In Bank-Foreign
c urrency, Current Account 80
used w itho ut the corresponding release of fund s through a SpeciaJ To recog11ize /J!lymen t of expc,1se8
Budget. (GAM for NGAs, Cha pter 2, Sec. 35) d,arged to CDC
L----- - - - - - L_ __ _ _ __J
Authority to Disburse/Pay
An entity can m ake di s burse me nts onl y after it has received 8 Basic Requirements & Certifications fo r Disbursements
di sb urseme nt authority, based on the fo llowing: The following a re required when disbursing fund s:
a. Notice of Cash Allocation (NCA)
b . Notice o f Transfer of Allocation (NT A) a. The Budget Officer (or Head of Budget Unit) shall certify the
c. Tax Remittan ce Advice (TRA) availability of allotment;
(/ /ems 'a ' to 'c' al1oue are disrnsst:d i11 Chapll'rs 2 a,1d J)
d . Non-Cash Availment AutJ1ority (NCAA) -see discussio11 lat er
b. The Chief Accountant (or Head of Accounting Unit) shall
e. Cash Di s bursem ent Ceiling (CDC) - authority issued by the charge obligations against available allotment;
DBM to agencies with foreign operations (i.e., Department of
Foreign Affairs 'DFA' and Departme nt of Labor and
) The foregoing a re to ensure that no overdraft shall be
Employment 'DOLE') a ll owing them to use the income , incurred . An ove rdraft is incurred if obligati ons exceed the
collected by their Foreign Service Posts (FSPs) to cover their allotment. The incurrence of overdraft is prohibited .
operating requirements.
c. The Chief Accountant (or Head of the Accounting Unit) shall
The entries related to CDC are as follows · certify the availability of funds/cash and the completeness of the
Books ofDFA or DOLE Books ofBTr supporting documents before the Head of Agency (or his
Cash-Colleci-ing Officer 100 authorized representative) can enter into any contract
Passport and Vi sa Fees 100
To mcognize colleclio11 of rcvent1e of involving the expenditure of public fund s;
FSPs
-
Cash in Bank-Foreign ~ All di sbursements require the ce rtifi cation of the Chjef
Currency, Current Account JOO Accountant (or Head of Accounting UnH) . Certifications
Cash-Collecting Officer 100 must be based on valid and properly a·uthorized claims.
To recognize dq,osit of collections to
Any certification for fictitious obligation i~ void. The
a11thoriu d scroicinfl bank of the FSPs
Cash-Constructive Income Subsidy to NGAs 80
- certify' ffi .al shall be dismissed from service and shall
Remittance 80
mgo CJ. I d ' th
Cash-Constructive lncome be held criminally liable. Others who are invo ve m e
Subsi dy from NG 80 Remittance 80 . titi ous transac ti' on are also liable. (GAM for NGAs, Chapter 2,
f1c
To recognize receipt of CDC fro m To recognize constructive rl!ceipl 0/
Sec. 37)
DBM remitted coll~cliom by FSPs and '
disbursement charged to the issued CDCs to
FSPs
 142 hapter S o,s. bursemenl
143

d . The requesting and approving officials shall ensure that thC income/rece ipts auth ori zed t0 b
. ' de ·
disbursements are l<'gal and conform to appli ca ble rul es and Government Depo itory Ba ks POSH d with Auth . d
n (ACDB ). onz1t
regulations;
All checks drawn wh th
. ' e e r released
e. The Head of the Requesting Unit shall certify the necessity and ayees, inclu d mg cancelled checks or unreleased to
P k / AD , are record d ch
legality of disb ursements. Payments shall be made through . the O,ec s A Disbursem t R. e ronologically
t11 en ecord ·
Disbu rsemen t Vouchers (DVs) or Payroll and supported by the eashffreasury Unit. maintained by the
origi nal copies of supporting documents; and
mustra tion:
f. The Head of Agency (or his authorized representative) shall EJ1tity A disburses ~10,000 for electn·CL·ty expense The . .
ap7'Tove all DVs or Payr-olls. as follows : · entries are
(GAM for NGA&, Chapter 2, Sec. 36)
MDS Check
Commercia.l Check
Electricity Expense 10K Electricity Expense JOK
Modes of Disbursements Cash-Modified Disbursement Cash in Bank-Local
The different modes of disbursements are as follows: S stem (MOS), Re ular lOK Currenc , Current Account 10K
a. Check
b. Cash
c. Cashless payments: Disbursements through Cash
i. Advice to Debit Account (ADA) Cash disbursements constitute paymen ts through cash advances,
ii. Electronic Modified Di sbursement System (eMDS) including payments out of the petty cash fund . Cash ad vances are
iii. Cashless Purchase Card System (Credit Card) governed by the following rules:
iv. Non-Cash Availment Authority (NCAA)
v. Tax Remittance Ad vice (TRA) a. Cash advances shall be made only for a legally authorized
(C AM fo r NCAs, Cha pter 2, Sec. 29 and Chapter 6, Sec. 7) specific purpose (i.e., payments for personnel services, petty
expenses, and MOOE for field operating requirements).

Disbursements through Check

b. Cash advances, other than advances for travel, shall be given
Checks are used whenever payments cannot conveniently, or are
only to duly appointed Disbursing Officers who must be
not authorized to, be made through cash or ADA. The following .
properly bonded. The amount of cash advance shall not
are the two types of checks issued by government entities:
exceed the maximum cash account~bility under the bond.
a. Modified Disbursement System Checks - checks chargeable
against the account . of the Treasurer of the Philippines,
maintained with different Modified Disbursement Systern·
c. ~nly designated pisbursing Officers are allowed to perform
disbursing functions and only permanently appointed officials
Government Servicing Banks (MDS-GSBs).
b. Commercial Checks - checks chargeable against the Agency 1 shall be designated as disbursing officers.
Checking Account with GSBs. These are covered by
144
Chapter s ~----------
,/111rsement s
145

. bursernents through Advice to Deb·t

I Account (ADA)
d. A cash advance mu st be liquidated as soon as the purpose for D1s
,he ADA, or more s pecifi cally the List of Due a d D d bl
which it was given has been served . ts Payable - Advice to o bI·t A n eman a e
Accoun e ccount (LDDAP-ADA ) is an
ccountabl e form used as an auth . . . '
>" Cash advances for payroll shall be liquidated within 5 da ys a onzation issued by a
after the end of the pay period . Unclaimed salaries shall be go ve rnment
. .
agency to the MDS-GSB instr tin h
. uc gt e bank to deb1t
.
a specified amount from its available NCA th
refunded and issued official recei pt to close the account.
creditors/payees li sted in the LDDAP-ADA . to pay e

~ Cash advances for travel shall be liquidated as follows: The ADA w?rks like a check, except that one ADA can be
i. Local travel - within 30 days upon return to the drawn to pay vanous payees, as long as they all maintain
personnel's workstation. accounts in th e same bank where the ADA is drawn. Separate
ii. Foreign travel - within 60 days upon return to the ADAs shall be prepared for payees using other MD>GSBs. ADA
Philippines. No official or employee is allowed to go payments are directly credited to the payees' accounts.
on an official foreign travel if he is due to retire within Simply stated, an ADA is an authorization for a fund
1 year after the foreign travel. transfer (between accounts in same bank) or a bank transfer
(between accounts with different banks) from the issuing agency's
e. No additional cash advance shall be given to any official or NCA bank account to the bank accounts of specified payees.
employee unless the previous cash advance given to him is ThE; following expenditures shall not be paid through
first liquidated. ADA:
a. Payment of Terminal Leave and Retirement Gratuity benefits;
f. Transfer of cash advance from one officer to another is b. Remittance of GSIS, PhilHealth, and Pag-IBIG contributions;
prohibited. c. Payments to utility companies (e.g., electricity, water,
telephone, internet, petroleum, and the like) .
g. A cash advance shall not be used to encash checks or to d. Other payables which cannot be conveniently nor practicably
liquidate a previous cash advance. paid using the ADA .

Illustration: Illustration:
Entity A disburses Pl0,000 for certain expenses through cash Entity A pays Pl00,000 accounts payable through ADA.
advance. The entries are as follows
~~:-T----------------~-------
Accounts payable 100,000
Date Advances for/to ... (Appropriate Account) 10,000 · Cash-Modified Di$bursement 100,000
Cash-Modified Disbursement System (MDS), Regular
System (MDS), Regular 10,000 To recognize payment of payables to
To record the'JZrant of cash advances lierslcontractors throu h ADA
Date Expenses (Appropriate Account) 10,000
Advances for/to .. . (Appropriate Account) 10,000
To record the liquidation of cash advances

...d111111.....
148
"haptc r 5
---------
______ :..:.:,_
'149

lllustration:
corn
Book~ of f~ ti0J A_
mun iciJ tion l(quip men t I M -
----------;J;ii;--
---!!-9!!_ks
Enti ty A purchases office supplies worth ,10,000 through CPC. Aecounlb J'Jyablc JM
To rew:,< IIIZI' receipt of I'/'£:
Date Office Supplies Inventory 10,000 ,red tltrouxh the direct paymen t
proCI
Accounts Payable 10,000
To recognize delivery of office supplies sche/Tl£~ra-;;"i~- - - -1M-
ACcounts Payab lc lM
7~:i::7"-:-::-:-=-------_J
Sub<iidy tn /GA~ IM
based 0 11 the charge slip awl Inspection nnd Subsid y from Na tional Cov' t. lM 1.oafl6 Pa yabl~ - Fure g,, JM
Acceptance Report ([AR ) To reco;<nize receip t of NC AA and
To recogmu the replenishment s
I
Date Accounts Payable 10,000 payment of payable made to AC SB ne~otrated MO S-checks
Cash - Modified Disbursement and a men ts on accoun t o the NGA
System (MOS), Rt1Ul•r 10,000
To recogniu stttlerne1tt of CPC bf/ling
Notice that no cash is involved in the acqui sition of the
statement
equipment, settlement of the accounts payable, and recognHion of
• Withholding taxes are ignored to simplify the illustration. the loans payable. The lending institution directl y pa ys the
supplier.

Disbursements through Non-Cash Availment Authority (NCAA)
Non -Cash Availment Authority (NCAA) 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.
Disbursements through NCAA (also called 'Direct Payment
Method' or 'Direct Payment Scheme of Loan Availment') are made
through the Journal Entry Voucher (JEV) issued by the BTt to the
agency to record payment of goods and services made directly by
the lending institution to the supplier or contractor. The JEV is
recorded in the General Journal. ,
Disbursements thr9ugh Tax Remittance Advice (TRA)
TRA is used for the constructive remittance of taxes or customs
duties withheld to the BIR or BOC, respectively. (See discu ssion in
Chapter 3)
Accounting for Disallowances
Disallowances, refer to expenditures made by an agency that are
subsequently invalidated or disallowed by the COA because they
are fou,n.d to be irregular, unnecessary, excessive, extravagant or
unconscionable. Disallowances are recorded in the books of
accounts only when they become final and executory .

lilustration:
Illustration: Entity A acquired office supplies for ,100,000. It was found out
Entity A acquires communication equipment for ~lM, on a·ccount, th
at the correct amount should have been '90,000.
and subsequently settles the account through direct payment
scheme. ~rnount paid ('Entry made') 100,000
Should be' 90,000
Ov_erstaternent 10,000
 150 Chapter 5 oisbursemen_t_s_ _ _ __ _ __
;:;:--- _ __ _ _ _ _ __:1:..:5.::....1

The disallowance pertains

- - - ------~_:_:....:..::..:.:..:..:.:~:.:.:..;..:-.::..__r~
Current 11ear
to: _ _ _ _ _ _ __
~ _;_:__..:......
Prior period
- chapter 5 Summary:

Disbursement authorities:
Receivables-Disallowa nces/ Receiva bles-DisaUowances/
Charges l OK Cha rges 10K a. Notice of Cash Allocation (NCA);
Office Supplies Expense 10K Accumulated Surplus/ b. Notice of_ Transfer of Allocation (NTA);
To recognize the overpayment of (Deficit) 101( c. Tax Rerruttance Advice (TRA);
pu rchased office supplies To recognize the overpayment of
d. Non-C~sh A vailrnent Authority (NCAA); and
vurchased office supplies in prior ttear
e. Cash Disbursement Ceiling (CDq
Cash-Collecting Officers 10K Cash-Collecting Office rs 10K
Receiva bles-Disall owances/ Receivabl es-Disallowances/ • All disbursements require the following certifications:
Charges 10K Char ges 10K a. Availability of allotment - Budget Officer
To recognize the settlement of To recognize the settlement of b. Availability of funds and completeness of supporting documents
disallowa nce disallowance - Chief Accountant
Cash-Treasury/ Agency Cash-Treasury/ Agency c. Necessity and legality of disbursements - Head of the
Deposi t, Regul ar 1OK Deposit, Regular 10K
Requesting Unit
Cash-Collecti ng Officers 1OK Cash-Collecting Officers ] OK
To recognize the deposit of To recognize the deposit of • All disbursements shall be made through Disbursement
I collection collection Vouchers (DVs ) or Payroll which are approved by the Head of
Agency.
Notice that the accounting for di sallowances by a • Modes of Disbursements:
government entity is similar to the accounting for current and a. Check;
prior period errors by a business entity. b. Cash;
c. Cashless payments:
i. Advice to Debit Account (ADA),
, Accounting for Overpayments ii. Electronic Modified Disbursement System (eMDS),
"Sometimes overpayments or even double payment of iii. Cashless Purchase Card System (Credit Card),
expenditures do happen in agencies. These could be avoided with iv. Non-Cash Availment Authority (NCAA), and
the institution of proper controls but some could not be avoided
v. , Tax Remittance Advice (TRA)
because of built-in procedures. One example is the payment of
p ayrolls. Payrolls are prepared in advance and some agencies pay
their employees through the banking system. All these are done
before reports of attendance are submitted, making it impossible
to know the exact amount to be paid in case there are absences
without pay during the pay periods. In case of overpayments,
refund s shalJ be demanded of the employees concerned." (GAM for
N GAs, Chapte r 6, Sec. 48)
Correcting entries for overpayments are similar to the
acco unting for disallowances.