NATIONAL COLLEGE OF BUSINESS AND ARTS

Commonwealth Ave., cor. Regalado St., Fairview, Quezon City

Tel. No. 427-6413, 427-6502 / 427-0288 to 91

Student: GLAIZA B. DEL ROSARIO

Subject: Public Fiscal Administration
Professor: Dr. Dorothy Lagrada

Topic: The National Government Accounting System (NGAS) for National

Government Agencies

Pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of
the Philippines which provides that:

“The Commission on Audit shall have exclusive authority, subject to the

limitations in this Article, to define the scope of its audit and examination,
establish the techniques and methods required therefor, and promulgate
accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of government funds
and properties". (underscoring supplied)

Government accounting – encompasses the processes of analyzing, recording,

classifying, summarizing, and communicating all transactions involving the receipt
and disposition of government funds and property and interpreting the results
thereof. (Sec. 109, PD No. 1445)

The Commission on Audit Circular No. 2001-04 dated October 30, 2001 prescribed
the use of the New Government Accounting System (NGAS) Manual. The NGAS
presents the basic policies and procedures; the new coding system; the accounting
systems, books, registries, records, forms, reports, and financial statements; and
illustrative accounting entries to be adopted by all national government agencies
effective January 1, 2002. The objectives of the Manual are to prescribe the
following:

a. Uniform guidelines and procedures in accounting for government funds

and property;
b. New coding structure and chart of accounts;
c. Accounting books, registries, records, forms, reports, and financial
statements; and
d. Accounting entries.
Basic Features
The NGAS has the following basic features and policies, to wit:

a. Accrual Accounting. A modified accrual basis of accounting shall be

used. Under this method, all expenses shall be recognized when incurred

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 and reported in the financial statements in the period to which they relate.
Income shall be on accrual basis except for transactions where accrual
basis is impractical or when other methods are required by law.

b. One Fund Concept. This system adopts the one fund concept. Separate
fund accounting shall be done only when specifically required by law or by
a donor agency or when otherwise necessitated by circumstances subject
to prior approval of the Commission.

c. Chart of Accounts and Account Codes. A new chart of accounts and

coding structure with a three-digit account numbering system shall be
adopted. (See Volume III, The Chart of Accounts)

d. Books of Accounts. All national agencies shall maintain two sets of

books, namely:

Regular Agency (RA) Books. These shall be used to record the

receipt and utilization of Notice of Cash Allocation (NCA) and other
income/receipts which the agencies are authorized to use and to deposit
with Authorized Government Depository Bank (AGDB) and the National
Treasury. These shall consist of journals and ledgers, as follows:

Journals
 Cash Receipts Journal (CRJ)
 Cash Disbursements Journal (CDJ)
 Check Disbursements Journal (CkDJ)
 General Journal (GJ)
Ledgers
 General Ledger (GL)
 Subsidiary Ledgers (SL) for:
 Cash
 Receivables
 Inventories
 Investments
 Property, Plant and Equipment
 Construction in Progress
 Liabilities
 Income
 Expenses

National Government (NG) Books. These shall be used to record

income which the agencies are not authorized to use and are required to
be remitted to the National Treasury. These shall consist of:

 Cash Journal (CJ)

 General Journal (GJ)
 General Ledger (GL)
 Subsidiary Ledger (SL)

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 With the implementation of the computerized agency accounting
system, only the General Journal shall be used together with the ledgers
by both books.

e. Financial Statements. The following statements shall be prepared:

 Balance Sheet
 Statement of Government Equity
 Statement of Income and Expenses
 Statement of Cash Flows

Notes to Financial Statements shall accompany the above

statements.

f. Two-Money Column Trial Balance. The two - money column trial

balance showing the account balances shall be used.

g. Allotment and Obligation. Obligation accounting is modified to simplify

procedures in the incurrence and liquidation of obligations and the
recording of the budgetary accounts (allotments and obligations incurred
and liquidated). Separate registries shall be maintained to control the
allotments and obligations for each of the four classes of allotments,
namely:

 Registry of Allotments and Obligations - Capital Outlay (RAOCO)

 Registry of Allotments and Obligations - Maintenance and Other
Operating Expenses (RAOMO)
 Registry of Allotments and Obligations - Personal Services
(RAOPS)
 Registry of Allotments and Obligations- Financial Expenses
(RAOFE).

h. Notice of Cash Allocation (NCA). The receipt of NCA by the agency

shall be recorded in the books as debit to account “Cash-National
Treasury, Modified Disbursement System (MDS)” and credit to account
“Subsidy Income from National Government”.

i. Financial Expenses. Financial expenses such as bank charges, interest

expenses, commitment charges and other related expenses shall be
separately classified from Maintenance and Other Operating Expenses
(MOOE).

j. Perpetual Inventory of Supplies and Materials. Supplies and materials

purchased for inventory purpose shall be recorded using the perpetual
inventory system. Regular purchases shall be coursed thru the inventory
account and issuances thereof shall be recorded as they take place except
those purchased out of Petty Cash Fund which shall be charged directly to
the appropriate expense accounts.

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k. Valuation of Inventory. Cost of ending inventory of supplies and
materials shall be computed using the moving average method.

l. Maintenance of Supplies and Property, Plant and Equipment Ledger

Cards. For appropriate check and balance, the Accounting Units of
agencies, as well as the Property Offices, shall maintain Supplies Ledger
Cards/Stock Cards by stock number and Property, Plant and Equipment
Ledger Cards/Property Cards by category of property, plant and
equipment, respectively.

m. Construction of Assets. For assets under construction, the Construction

Period Theory shall be applied for costing purposes. Bonus paid to the
contractor for completing the work ahead of time shall be added to the
total cost of the project. Liquidated damages charged and paid for by the
contractor shall be deducted from the total cost of the project. Any related
expenses incurred during the construction of the project, such as taxes,
interest, license fees, permit fees, clearance fee, etc. shall be capitalized,
and those incurred after the construction shall form part of operating cost.

n. Registry of Public Infrastructures/Registry of Reforestation Projects.

For agencies that construct public infrastructures, such as roads, bridges,
waterways, railways, plaza, monuments, etc., and invest on reforestation
projects, a Registry of Public Infrastructures (RPI)/Registry of
Reforestation Projects (RRP) shall be maintained for each category of
infrastructures/reforestation projects. Examples are:

 Registry of Public Infrastructures - Bridges (RPIB)

 Registry of Public Infrastructures - Roads (RPIR)
 Registry of Public Infrastructures - Parks (RPIP)
 Registry of Reforestation Projects (RRP)
A Summary of Public Infrastructures/Reforestation Projects shall be
prepared and included in the Notes to Financial Statements.

o. Depreciation. The straight-line method of depreciation shall be used.

Depreciation shall start on the second month after purchase of the
property, plant and equipment, and a residual value equivalent to ten
percent of the purchase cost shall be set-up. Public
infrastructures/reforestation projects as well as serviceable assets that are
no longer being used shall not be charged any depreciation.

p. Reclassification of Assets. Serviceable assets no longer being used

shall be reclassified to “Other Assets” account and shall not be subject to
depreciation.

q. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts

shall be set up for estimated uncollectible trade receivables to allow for
their fair valuation.

r. Elimination of Contingent Accounts. Contingent accounts shall no

longer be used. All financial transactions shall be recorded using the

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 appropriate accounts. Cash shortages and disallowed payments, which
become final and executory, shall be recorded under receivable accounts
“Due From Officers and Employees” or “Receivables-Disallowances/
Charges”, as the case may be.

s. Recognition of Liability. Liability shall be recognized at the time goods

and services are accepted or rendered and supplier/creditor bills are
received.

t. Interest Accrual. Whenever practical and appropriate, interest income

and/or expense shall be accrued and recognized in the books of accounts.

u. Accounting for Borrowings and Loans. All borrowings and loans

incurred shall be recorded to the appropriate liability accounts.

v. Elimination of corollary and negative journal entries. The use of

corollary and negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be debited/credited to the
appropriate asset accounts. If an error is committed, a correcting entry to
adjust the original entry shall be prepared.

w. Petty Cash Fund. The Petty Cash Fund shall be maintained under the
imprest system. As such, all replenishments shall be directly charged to
the expense account and at all times, the Petty Cash Fund shall be equal
to the total cash on hand and the unreplenished expenses. The Petty
Cash Fund shall not be used to purchase regular inventory/items for stock.

x. Foreign Currency Adjustment. Cash deposits in foreign currency and

outstanding foreign loans shall be computed at the exchange rate
prescribed by the Bangko Sentral ng Pilipinas at balance sheet date. The
total cash deposits and foreign loans payable shall be adjusted at the end
of each month and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign currency obligations shall
reflect the appropriate foreign currency in which the loan is payable. The
liability shall be expressed both in the foreign and local currency.

Recent developments brought about by the Philippine Public Financial Management

Reforms and significant changes in the field of accounting prompted the
harmonization of the existing accounting standards with the international accounting
standards. The Commission on Audit revised the New Government Accounting
System (NGAS) Manual prescribed under COA Circular No. 2002-002 dated June
18, 2002, to make it responsive to dynamic changes and modern technology. Hence,
COA Circular No. 2015-007 dated October 20, 2015, was issued to prescribe the
Government Accounting Manual (GAM) for use of all National Government Agencies
consisting of department, bureaus, offices and instrumentalities, including state
universities and colleges, in accordance with pertinent accounting and budgeting
rules and regulations.

Contents of GAM

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 Volume I Volume II Volume III
22 Chapters, 19 Annexes, 92 Appendices 3 Chapters
Acronyms
Accounting Standards Books, Registries, List of Accounts
and Policies Records, Forms and
Reports Codes and Descriptions
 Accounting of Accounts
 Budget
 Treasury
 Property/Supply
Management
Guidelines and Instructions: How to
Procedures Accomplish
 Accounting
 Budget When/Where to Submit
 Treasury
 Property/Supply
Management
Illustrative Accounting
Entries
Sample Format of the FS

Particulars NGAS Manual GAM

1. FS Title 1. Balance Sheet 1. Statement of Financial
2. Statement of Income Position
and Expenses 2. Statement of Financial
3. Statement of Performance
Government Equity 3. Statement of Changes in
4. Cash Flow Net Assets/Equity
Statement 4. Statement of Cash Flow
2. Components of FS Four Six
In addition to the above:
1. Statement of
Comparison of Budget
and Actual Amounts
2. 6. Notes to Financial
Statements
3. Chart of AccountsCOA Circular 2004-008, COA Circular 2013-002,
September 20, 2004 January 30, 2013
COA Circular 2014-003, April
15, 2014
COA Circular 2015-007,
October 22, 2015
4. Unified Accounts None Compliant
Code Structure
5. Books Maintained Regular Agency Book and By Fund Cluster
National Government Book

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6. Estimated Useful Prescribed by COA Management prerogative
Lives of PPE
7. PPE Threshold None PhP15,000 and above
8. Inventory Costing Moving Weighted Average Moving Weighted Average;
Specific Identification
9. Fund Maintenance One Fund Concept Fund Clustering
01 – Regular Agency Fund
02 – Foreign-Assisted Projects
Funds
03 – Special Accounts – Locally
Funded/Domestic Grants Fund
04 – Special Account – Foreign
Assisted/Foreign Grants Fund
05 – Internally Generated
Funds/Retained Income Fund
06 – Business Related
Funds/Revolving Fund
07 – Trust Receipts
10. Cash Flow Direct Method Direct Method
11. Completed Public Derecognized Recognized
Infrastructure
12. Statement of Without distinction With distinction
Financial Position Current and Non current
Assets and
Liabilities
13. Statement of Form part of Income Not part of Revenue from
Financial Current Operation
Performance
Subsidies, Transfers
14. Impairment Loss None Recognized
15. Adjustment Uses Prior Year’s Direct adjustment to Equity
affecting Government Adjustment account
Equity
16. Income Collection Without authority to use- Recorded by NGAs
BTr
With authority to use-NGAs
17. Accounting for
Donation
With conditionality Income Liability
Without conditionality Income Revenue
With restriction - Revenue
18. Monitoring of None Section C of Obligation
Obligation/Payment Request and Status
19. Residual Value 10% At least 5%
20. New Standards PPSAS 3- Accounting Policies,
Changes in Accounting
Estimates and Errors

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 PPSAS 4 – The Effects of
Changes in Foreign Exchange
Rates
PPSAS 5 – Borrowing Costs
PPSAS 8 – Interest in Joint
Ventures
PPSAS 9 – Revenue from
Exchange Transactions
PPSAS 12 – Inventories
PPSAS 13 – Leases
PPSAS 14 – Events after the
Reporting Date
PPSAS 16 – Investment
Property
PPSAS 17 – Property, Plant
and Equipment
PPSAS 19 – Provisions,
Contingent Liabilities,
Contingent Assets
PPSAS 20 – Related Party
Disclosures
PPSAS 21 – Impairment of
Non-Cash Generating Assets
PPSAS 23 – Revenue from
Non-Exchange Transactions
(Taxes and Transfers)

PPSAS 24 – Presentation of
Budget Information in Financial
Statements
PPSAS 26 – Impairment of
Cash-Generating Assets
PPSAS 27 – Agriculture
PPSAS 28, 29 and 30 –
Financial Instruments
(Presentation, Recognition and
Measurement, and Disclosures,
respectively)
PPSAS 31 – Intangible Assets
PPSAS 32 – Service
Concession Arrangements:
Grantor

Responsibility Accounting – provides access to cost and revenue information under

the supervision of a manager having a direct responsibility for its performance. It is a
system that measures the plans (by budgets) and actions (by actual results) of each
responsibility center.

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Responsibility accounting aims to:
a. ensure that all costs and revenues are properly charged/credited to
the correct responsibility center so that deviations from the budget
can be readily attributed to managers accountable therefor;
b. provide a basis for making decisions for future operations; and
c. facilitate review activities, monitoring the performance of each
responsibility center and evaluation of the effectiveness of agency’s
operations.
The following are the concepts of responsibility accounting:
a. Responsibility accounting involves accumulating and reporting data
on revenues and costs on the basis of the manager’s action who has
authority to make the day-to-day decisions about the items;
b. Evaluation of a manager’s performance is based on the matters
directly under his control;
c. Responsibility accounting can be used at every level of management
in which the following conditions exist:
i. Cost and revenues can be directly associated with the
specific level of management responsibility;
ii. Costs and revenues are controllable at the level of
responsibility with which they are associated; and
iii. Budget data can be developed for evaluating the
manager’s effectiveness in controlling the costs and
revenues.
d. The reporting of costs and revenues under responsibility accounting
differs from budgeting in two respects:
i. A distinction is made between controllable and non-
controllable costs.
1. 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. It
follows that (1) all costs are controllable by top
management because of the broad range of its
activity; and (2) fewer costs are controllable as one
move down to lower level of managerial responsibility
because of the manager’s decreasing authority.
2. Non-controllable costs are costs incurred indirectly
and allocated to a responsibility level.
ii. Performance reports either emphasize or include only
items controllable by individual manager.
e. A responsibility reporting system involves the preparation of a report
for each level of responsibility. Responsibility reports usually
compare actual costs with flexible budget data. The reports show
only controllable costs, and no distinction is made between variable
and fixed costs.

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 f. Evaluation of a manager’s performance for cost centers is based on
his ability to meet budgeted goals for controllable costs.

Basic Government Accounting and Budget Reporting Principles. Each entity

shall recognize and present its financial transactions and operations conformably to
the following:

a. generally accepted government accounting principles in

accordance with the PPSAS and pertinent laws, rules and
regulations;
b. accrual basis of accounting in accordance with the Philippine Public
Sector Accounting Standards (PPSAS);
c. budget basis for presentation of budget information in the financial
statements (FSs) in accordance with PPSAS 24;
d. Revised Chart of Accounts (RCA) prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records;
and
g. fund cluster accounting.

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