Since 1977

Advanced Financial Accounting and Reporting G/N/E DE LEON

AFAR.3014 – NGAS

LECTURE NOTES
Summary of Critical Points 13. Closing entries are as follows:
1. Budgetary accounts of appropriations and allotments 1. Reversion of the unused or unutilized Subsidy
are entered in the registry maintained by DBM. Income from National Government at the end of
Allotments and obligations are also entered in the year.
appropriate registries maintained by the agency.
Under NGAS budgetary accounts are no longer Subsidy Income from National Government X
journalized. Cash-National Treasury, MDS X
2. The notice of cash allocation (NCA) received by the
agency from DBM is journalized in the regular agency 2. Close the balance of the Subsidy Income from
books. (The other set of books of an agency is the National Government to Income & Expense
National Government books (NG). Summary Account.
3. The obligations incurred by the agency are not
journalized, but posted to the appropriate registry, Subsidy Income from National Government X
as follows: Income & Expense Summary X
For capital outlay - RAOCO
Personal Services - RAOPS 3. Close the balance of all revenue accounts to
Maintenance & Others - RAOMO Income & Expense Summary Account.
Financial expenses - RAOFE
4. Generally, withheld taxes by the agency are no Income from Government Services X
longer remitted to BIR, but retained and credited to Operations X
Subsidy Income from NG under the Tax Remittance Income from Government Business
Operations X
Advice (TRA) System. The NCA released to the
Income & Expense Summary X
agency is reduced by the amount of estimated
withholding taxes pertinent to the allotment covered
4. Close the balance of all expense accounts to
by the cash allocation.
Income & Expense Summary account.
5. Asset/perpetual inventory method will be followed in
the recording of expenditures if it applies to more
Income & Expense Summary X
than one period or when payment is for materials for Salaries & Wages-Regular Pay X
stock. The expense is taken up when the items are
consumed. 5. Close the balance of the Income & Expense
6. Cost of ending inventory of supplies and materials Summary account to the Retained Operating
shall be computed using the Moving Average method. Surplus account.
7. Costs of assets being constructed are debited to
construction in progress account (using construction Income & Expense Summary X
period theory). This CIP account is closed to the Retained Operating Surplus X
appropriate asset account upon completion.
8. Constructed Public Infrastructures are not shown 6. Close the balance of the Prior Year’s Adjustments
among the fixed assets on the balance sheet, rather account to Retained Operating Surplus account.
they are deducted from government equity (as part
of closing entries) and transferred out to an Prior Year’s Adjustments X
appropriate registry. They are not subject to Retained Operating Surplus X
depreciation charges.
9. Depreciation on fixed assets are taken up on the 7. Close the balance of the Retained Operating
month following the month of purchase or completion Surplus to Government Equity account.
of construction. A 10% scrap value on the asset is
always assumed and the estimated life is prescribed Retained Operating Surplus X
by COA. Government Equity X
10. Income for which the agency is authorized to use for
its operation is recorded in the regular agency books. 8. Close Public Infrastructures or Reforestation
If the authority is with limitations, such as any Projects accounts to Government Equity account
excess is to be remitted to the National Treasury the and transfer the corresponding amounts to the
collections shall first be recorded in the regular respective registries.
agency books, the expenses journalized, and the Government Equity X
excess is to be remitted to the National Treasury and Public Infrastructures X
recorded in the agency’s NG books. Reforestation Projects X
11. Two trial balance are prepared:
a) Pre-closing TB – which is also the adjusted TB. 14. Summary of Coding structures
From this is prepared the statement of income Accounts
and expense. Account Codes
b) Post-closing TB – from this is prepared the Assets 100 – 299
balance sheet. Contra assets 300 – 399
12. Adjusting entries at end of period are the same as Liabilities 400 – 499
those recorded in commercial accounting. Equity 500 – 599
Revenue / Income 600 – 799

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 EXCEL PROFESSIONAL SERVICES, INC.

RECORDS OF THE AGENCY

General Acct. 600 – 699 Although the Agency will not journalize its appropriation
Specific Acct. 700 – 799 and allotment it shall maintain four registries for the
Expenses 800 – 899 allotments it receives and for the obligations it incurs.
Personal services 801 – 850 These are:
Maintenance & other 801 – 850 • Registry of Allotment and Obligations – capital
Ap. exp. Outlay (RAOCO)
Financial expense 951 – 960 • Registry of Allotment and Obligations –
Maintenance and other operating Expenses
RECORDS OF DBM (RAOMO)
1. Registry of Appropriations and Allotments (RAPAL); • Registry of Allotment and Obligations – Personal
Services (RAOPS)
DEPARTMENT OF BUDGET & MANAGEMENT • Registry of Allotment and Obligations – Financial
REGISTRY OF APPROPRIATIONS AND ALLOTMENTS Expenses (RAOFE)
(RAPAL)
OF (Name of Agency) Note that there is an a new expense classification, the
financial expenses. They are categorized separately from
Date Ref Capital Outlay Maintenance & Other
the MOOE since they are not operating expenses.
(1) (2) (3) Operating expenses
(4)
The following is a printout of one of the allotment
Allotment Appropriatio Allotment Appropriation classes.
n Balance Balance
REGISTRY OF ALLOTMENT AND OBLIGATIONS

______________________________________
Financial Expense Personal Services Agency Name
(5) (6)
Sheet No. _____________
allotment Appropriate allotment Appropriate
balance balance Date Ref. P.P.A Account Allotment Obligation Balance
Code Received incurred

2. Registry of Allotment and Notice of Cash Allocation

Upon receipt of the NCA, the Accountant shall journalize
DEPARTMENT OF BUDGET AND MANAGEMENT
it as “Cash in the Treasury for Modified Disbursement
REGISTRY OF ALLOTMENTS AND NCA (RANCA)
System (MDS)” and Subsidy Income from National
OF (Name of Agency)
Government” which in effect identifies the share, of the
Agency in the income of the National Government. The
Date Ref Allotments NCA Unfunded
(1) (2) (3) (4) Allotment entry will be as follows:
(5)
Cash, National Treasury – MDS 100
CO MOOE PS EE Total
Subsidy, Income from NG 100

The obligation is recognized and will be entered in the

appropriate RAO when obligation is incurred as evidenced
RECORDS OF THE BTR by the approved Allotment and Obligation Slips (ALOBS).
Upon receipt of the copy of the NCA from the DBM, the
BTR shall enter it in the registry of NCA and The Accountant shall credit “Cash, National Treasury –
Replenishment (RENREP). It shall also enter in the MDS” each time a payment is made charged against the
RENREP the transfer of cash from its bank account(s) to NCA and debit the specific account being paid for, either
the appropriate MDS account. The following is the asset or expense account. The following are two
printout of the suggested format of the RENREP. examples:
Example 1:
BUREAU OF THE TREASURY Step 1. Memo entry in RAOCO
REGISTRY OF NCA REPLEMISHMENTS (RENREP) 2. Journal Entry
Office equipment 100
Date Ref NCA Replenishment Balance Cash – National Treasury - MDS 88
(1) (2) (3) (4) (4) Withholding Taxes payable 12

Eaxmple 2:
Step 1. Memo entry in RAOMO
The formats presented here are only suggested ones. 2. Journal Entry
The DBM and the BTr may formulate their own formats., Travel expenses 10
which they deem will serve their purposes better. Cash – National Treasury - MDS 10

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EXCEL PROFESSIONAL SERVICES, INC.
STRAIGHT PROBLEMS

Problem 1 (see schedule) 355,000#

Agency AAA is a national government agency unit. Net amount paid (disbursing officer’s
Selected transactions completed during the agency’s cash advance) P1,420,000
2020 operations follow:
# Withheld taxes P131,350
1. Approval of the annual budget of the agency for 2020 GSIS premiums 188,150
by DBM (thru a legislative enactment by Congress), Pag-ibig premiums 14,200
as follows: Phil Health premiums 21,300 P 355,000
Cancelled due to BIR (TRA) P 131,350
Personal services (PS) P2,000,000
Remitted other salary deductions to
Maintenance and other operating
pertinent payees 223,650
expenses (MO) 1,500,000
Capital outlay (CO) 1,200,000 8. Incurred an OBLIGATION for the Agency’s share on
Financial expenses (FE) 40,000 the following mandated contributions:
Total P 4,740,000 Life and Retirement P266,250
Pag-ibig 14,200
2. Approval of Agency’s budget matrix by DBM and Philhealth 21,300 P 301,750
related ALLOTMENT received out of the above
9. Incurred an OBLIGATION and paid bank
APPROPRIATIONS:
service charges of P 33,500
Personal services P 1,800,000
Maintenance and other operating Required:
expenses 1,350,000 (1) Account for the above-mentioned information I n the
Capital Outlay 1,100,000 books of the Agency.
Financial expenses 35,000 (2) Prepare adjusting entries at year-end for the
Total P4,285,000 following information
a. Three-fourths of the prepaid rent must be
3. Receipt of NOTICE of CASH ALLOCATION for the expensed.
above-mentioned ALLOTMENT for a total of b. Various operating expenses are accrued at year-
P4,100,000 end, P35,000
c. Fifteen percent (15%) of the recorded various
4. Incurred OBLIGATION and paid the following operating expenses are prepayments
d. The office equipment will be depreciated over an
maintenance and operating expenses
estimated life of 10 years, Depreciation expense
a. Various operating expenses P 1,100,000 for 8 months will be charged during the current
b. Prepaid rent P 120,000 year.
c. Travelling and other expenses of
the Treasurer, Pol Buba, for a P 40,000
scheduled seminar in Kutawi. P1,260,000 Problem 2.
• Refund of excess cash The following is the pre-closing trial balance of XYZ, a
advance for travelling national government agency for the fiscal year ended,
expenses by Pol B 3,000 June 30, 2020.
• Liquidation of the actual Debit Credit
travel and related expenses Cash-NT-MDS P 25,750
by Pol B. 37,000 Cash in Bank – LCCA 50,000
• Deposit of collection for Prepaid rent 30,000
excess cash advance to Prepaid expenses 165,000
Bureau of Treasury 3,000 PI Municipal park 376,000
Office equipment 400,000
5. Incurred OBLIGATION for the acquisition Accumulated
of office equipment P 800,000 depreciation P 24,000
• Receipt of office equipment per invoice Accrued Expenses 35,000
and delivery receipt 800,000 Government Equity 386,000
• Payment of office equipment, less 12% Subsidy Income from NG 3,807,000
withholding tax 704,000 Other service income 15,000
• Issuance of TRA for the Sales revenue 35,000
withholding tax 96,000 Traveling 37,000
Salaries 1,562,000
6. Collection of other income which the Agency is PERA 213,000
authorized to use in their operations: Life and retirement 266,250
• Other service income P 15,000 Pag-ibig 14,200
• Sales revenue 35,000 Philhealth 21,300
• Deposited the above collections in the Depreciation 48,000
bank P 50,000 Rent 90,000
Various operating
7. Incurred an OBLIGATION for personal expenses 970,000
services P 1,775,000 Bank service charges 33,500
• The disbursing officer is granted a cash Totals P4,302,000 P4,302,000
advance of 1,420,000 Required:
• Salaries and other allowances are paid by the 1. Prepare closing entries at year-end.
disbursing officer, 2. Prepare a post-closing trial balance for year ended
as follows: Salaries P1,562,000 2020.
PERA 213,000 P1,775,000 3. Prepare a Statement of Revenues and Expenses and
Less salary deductions a Statement of Financial Position for 2020
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 EXCEL PROFESSIONAL SERVICES, INC.

MULTIPLE CHOICE

1. Which of the following is most likely recognition of Salaries and

stale check? Wages-Regular 701 645,000
a. Cash Collecting officer 102 100,000 c. Government Equity 501 2,000,000
Electricity Expenses 767 100,000 Public
b. Cash National Treasury Infrastructures 2,000,000
– MDS 108 100,000 d. Allowance for bad
Electricity Expense 767 100,000 debts 100,000
c. Cash Disbursing Officer 103 100,000 Income and
Telephone Expense Exp. Summary 512 100,000
– landline 772 100,000
d. Cash in Bank –Current Items 5-7 relates to the following:
Account 111 100,000 Agency A is a National Government with an NCA from
Miscellaneous the DBM for MOOE amounting to P5,500,000. Of the
Income 100,000 total amount, P4,675,000 was obligated and 80% was
paid. The remaining 20% was recognized as accounts
2. What is the appropriate entry to record receipt of NCA payable.
from the DBM? 5. How much is the un-obligated balance that should be
a. Cash in Bank shown in the Registry of Allotment and Obligation-
Current Account 111 5,000,000 MOOE?
Subsidy Income
from National a. P825,000 c. P1,760,000
Government 651 5,000,000 b. P935,000 d. P110,000
b. Cash National
Treasury – MDS 108 5,000,000 6. How much is the utilization rate of obligation?
Government a. 80% c. 85%
Equity 501 5,000,000 b. 20% d. 38%
c. Cash National
7. What entry should be prepared to record the unutilized
Treasury - MDS 108 5,000,000
subsidy income from national government?
Subsidy
a. Subsidy Income from
Income from
National Government 651 935,000
National
Cash National
Government 651 5,000,000
Treasury – MDS 108 935,000
d. Subsidy Income
b. Subsidy Income from
from National
National Government 651 825,000
Government 651 5,000,000
Cash National
Government
Treasury – MDS 108 825,000
Equity 501 5,000,000
c. Subsidy Income from
National Government 651 110,000
Cash National
3. What is the appropriate entry to record the issuance of
Treasury – MDS 108 110,000
check for payment of payroll with net amount of
d. Subsidy Income from
P600,000 received by the disbursing officer?
National Government 651 825,000
a. Salaries and Wages-
Government Equity 501 825,000
Regular 701 680,000
Due to BIR 412 45,000 8. What is the appropriate entry to record remittance of
Due to GSIS 413 30,000 withholding taxes deducted from salaries of
Due to Philhealth 415 5,000 government employees through TRA’s?
Due to Officers and
employees 403 600,000 a. Due to BIR 412 120,000
b. Salaries and Wages- Cash National
Regular 701 680,000 Treasury – MDS 108 120,000
Due to BIR 412 45,000 b. Due to BIR 412 120,000
Due to GSIS 413 30,000 Subsidy Income
Due to Philhealth 415 5,000 from National
Cash-National Government 120,000
Treasury-MDS 108 600,000 c. Due to BIR 412 120,000
c. Cash Disbursing Officer 103 600,000 Due to officers and
Cash National Employees 403 120,000
Treasury-MDS 108 600,000 d. Due to BIR 108 120,000
d. Cash Disbursing Officer 103 600,000 Cash In Bank –
Due to officers and Current Account 111 120,000
employees 403 600,000
Items 9-10 relate to the following:
4. Which of the following is not a closing entry? X, a national government agency, established a petty
a. Subsidy Income cash fund of P20,000. During the month, P12,000 of
from National the petty cash liquidated but was not replenished. The
Government 651 350,000 total amount liquidated pertains to the following:
Cash National Gas and oil P8,000
Treasury – MDS 108 350,000 Office supplies 4,000
b. Income and Of the P4,000 office supplies, P1,500 is on hand at the
expense Summary 512 645,000 end of the month.

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EXCEL PROFESSIONAL SERVICES, INC.

9. How much should be reported as petty cash at the end

of the month assuming that a financial report is to be 13. Mario is an employee of a national government
prepared? agency. Mario was granted and received a cash
a. P20,000 c. P12,000 advance of P30,000 for official travel. Mario liquidated
b. P 8,000 d. P 1,500 the cash advance as follows:
Travel expenses P10,000
10. What is the appropriate entry to record the liquidation
Training expenses 10,000
of the petty cash fund?
Representation expenses 8,000
a. Gas and oil 8,000
Total P28,000
Office supplies expense 4,000
Petty cash fund 12,000 The amount advanced had an un-liquidated balance of
b. Gas and oil 8,000 P2,000. What is the appropriate entry to record the
Office supplies expense 4,000 liquidation of the cash advance?
Cash in bank 12,000 a. Travel expenses 10,000
c. Gas and oil 8,000 Training expenses 10,000
Office supplies inventory 1,500 Representation expenses 8,000
Office supplies expense 2,500 Cash Disbursing Officer 28,000
Cash in bank 12,000 b. Travel expenses 10,000
d. Gas and oil 8,000 Training expenses 10,000
Office supplies inventory 1,500 Representation expenses 8,000
Office supplies expense 2,500 Due from officers and
Petty cash fund 12,000 Employees 2,000
Cash Disbursing Officer 30,000
11. M is the cashier of DILT a national government. During c. Travel expenses 10,000
the month, she received total collections from Training expenses 10,000
earnings amounting to P250,000 of which P150,000 Representation expenses 8,000
was income that should be deposited to the National Due from officers and
Government and the P100,000 was income received Employees 2,000
from its own agency operation. The P 150,000 was Cash National Treasury 30,000
deposited to the National Treasury and the remaining d. Travel expenses 10,000
balance was deposited to the agency’s bank account. Training expenses 10,000
What should be the entry to record the deposit of the Representation expenses 8,000
collections received by the collecting officer? Cash Collecting Officer 2,000
a. Cash National Treasury 108 150,000 Due from officers and
Cash in Bank Current Employees 30,000
Account 111 100,000
Cash Collecting
Officer 102 250,000 14. What is the appropriate entry to record cash overage?
b. Due to National a. A cash overage is returned to the cashier and not
Treasury 108 150,000 recorded.
Cash in Bank Current b. A cash overage is debited to Cash and credited to
Account 111 100,000 Miscellaneous Income.
Cash Collecting c. A cash overage is not recorded and should be
Officer 102 250,000 distributed to all employees equally.
c. Due to National d. A cash overage is debited to Accounts
Treasury 108 150,000 receivable and credited to Cash.
Cash In Bank Current
GHI, a national government agency unit incurs an
Account 111 100,000
obligation for the purchase of garbage truck for P450,000
Income 250,000
on March 15, 2016. The dump truck is to be delivered on
d. Cash National Treasury 108 150,000
March 31, 2016 and the motor firm has agreed for a 30-
Cash In Bank Current
day, interest free-delayed payment, i.e. payable on April
Account 111 100,000
30, 2016 Assume a 12% tax on the purchase covered by
Income 250,000
TRA:
12. W, a national government agency received cash 15. On March 15, 2016, the entry to be recorded by GHI
allotment from its head agency totaling P1,000,000. will be:
Of the total amount received, W distributed P100,000 a. Equipment 450,000
to one of its operating units as subsidy. What entry Accounts payable 450,000
should be prepared to record the distribution of the
subsidy to W, operating units? b. Equipment 450,000
a. Subsidy from National Accounts payable 396,000
Government 100,000 Subsidy income from NG 54,000
Cash National Treasury –
MDS 100,000 c. Equipment 450,000
b. Subsidy to National Accounts payable 396,000
Government 100,000 Due to BIR 54,000
Cash National Treasury –
MDS 100,000 d. Memorandum entry in RAOCO
c. Subsidy to Operating units 100,000
Cash National Treasury –
MDS 100,000
d. Subsidy to Operating unit 100,000 16. On March 31, 2016, the entry to be recorded by GHI
Subsidy from National will be:
Government 100,000 a. Equipment 450,000
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EXCEL PROFESSIONAL SERVICES, INC.

Accounts payable 450,000 d. Accounts payable 396,000

Due to BIR 54,000
b. Equipment 450,000 Cash – NT – MDS 396,000
Accounts payable 396,000 Subsidy income from NG 54,000
Subsidy income from NG 54,000
c. Equipment 450,000 18. The entry by GHI to record to subsequent disposal of
Accounts payable 396,000 the withheld tax will be:
Due to BIR 54,000 a. Due to BIR 54,000
Cash – NT – MDS 54,000
d. Memorandum entry in RAOCO b. Due to BIR 54,000
Withholding tax payable 54,000
17. On April 30, 2016, the entry to be recorded by GHI c. Due to BIR 54,000
will be: Subsidy income from NG 54,000
a. Accounts payable 450,000 d. Memorandum entry in RAOFE
Cash – NT –MDS 450,000
b. Accounts payable 396,000
Due to BIR 54,000
Cash – NT – MDS 450,000
c. Accounts payable 450,000
Cash – NT – MDS 396,000
Due to BIR 54,000
- now do the drill-

SUGGESTED SOLUTIONS TO STRAIGHT PROBLEMS

Problem 1. Due from Officers

1. APPROVAL OF ANNUAL BUDGET (APPROPRIATION) and employees 37,000
• Deposit of collection
*DBM enters in RAPAL, P4,740,000. • Agency prepares a journal entry
*COA prepares spreadsheets on appropriations. Subsidy income from NG 3,000
Cash –Collecting Officer 3,000
2. APPROVAL OF AGENCY’S BUDGET MATRIX (ALLOTMENT)
5. INCURRED OBLIGATION FOR ACQUISITION OF
*DBM enters in RAPAL and in RANCA, P4,285,000. EQUIPMENT
*Agency enters in RALOBS, as follows
• Agency enters in RAOCO
a. RAOCO for capital outlay P1,100,000
b. RAOMO for M & O expenses 1,350,000 • Journal entry for receipt of eqpt
c. RAOPS for personal services 1,800,000 Office Equipment 800,000
d. RAOFE for financial expenses 35,000 Accounts payable 800,000
Total P4,285,000
• Journal entry for payment
3. RECEIPT OF NOTICE OF CASH ALLOCATION (NCA) Accounts payable 800,000
Cash – NT –MDS 704,000
• DBM enters in RANCA, P4,100,000 Due to BIR 96,000
• BTR enters in RENREP, P4,100,000
• Agency prepares a journal entry: • Journal entry for issuance of TRA
Cash – National
Treasury – Modified Due to BIR 96,000
Disbursement System P4,100,000 Subsidy Income from the 96,000
Subsidy Income NG
from the National 4,100,000
Government 6. COLLECTION OF OTHER INCOME WHICH THE AGENCY IS
AUTHORIZED TO USE
4. INCURRED OBLIGATION FOR VARIOUS MOOEs
• Journal entry for the collection
• Agency enters in RAOMO Cash – Collecting Officer 50,000
*Agency prepares the following compound entry: Other service income 15,000
Prepaid rent 120,000 Sales revenue 35,000
Due from officers and 40,000
Employees • Journal entry for the deposit
Various other Operating
Expenses 1,100,000 Cash in Bank – LCCA 50,000
Cash – NT – MDS 1,260,000 Cash – Collecting officer 50,000

• Refund of excess cash advance

• Agency enters in RAOMO (negative entry) 7. INCURRED OBLIGATION FOR PERSONAL SERVICES
• Agency prepares a journal entry:
Cash – Collecting 3,000 • Agency enters in RAOPS
officer • Journal entry for the cash advance

Due from Officers 3,000 Cash – Disbursing Officer 1,420,000

and employees Cash – NT – MDS 1,420,000
* Liquidation of cash
advance • Journal entry for the payment
• Agency prepares a journal entry
Traveling expenses 37,000 Salaries & wages 1,562,000
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EXCEL PROFESSIONAL SERVICES, INC.

PERA 213,000 Salaries 1,562,000

Due to BIR 131,350 PERA 213,000
GSIS premiums payable 188,150 Life & retirement 266,250
Pag-ibig premiums 14,200 Pag-ibig 14,200
payable Philhealth 21,300
Philhealth premiums 21,300 Depreciation 48,000
payable Rent 90,000
Cash – disbursting officer 1,420,000 Various operating
Expenses 970,000
• Journal entry for remittance to BIR of WT Bank service charges 33,500
Due to BIR 131,350
SI from the NG 131,350 Income & expense 576,000
Retained operating
• Journal entry for remittance to various payees surplus 576,000

GSIS premiums payable 188,150 Retained operating

Pag-ibig premiums 14,200 surplus 576,000
payable Government Equity 576,000
Phil-health premiums 21,300
payable Government Equity 376,000
Cash – NT – MDS 223,650 PI-municipal park 376,000

8. INCURRED OBLIGATION FOR SHARE IN CONTRIBUTIONS

2. POST-CLOSING TRIAL BALANCE AT FISCAL-YEAR-END
• Agency enters in RAOPS Debits Credits
• Journal entry for the payments Cash-in-Bank – LCCA P 50,000
Life & Retirement 266,250 Prepaid expenses 165,000
contributions Prepaid rent 30,000
Pag-ibig contributions 14,200 Office equipment 400,000
Phil-health contributions 21,300 Accumulated depreciation – P 24,000
Cash – NT – MDS 301,750 OE
Accrued expense 35,000
Government equity ________ 586,000
9. INCURRED OBLIGATION FOR BANK SERVICE CHARGES Totals P645,000 P645,000

• Agency enters in RAOFE 3. STATEMENT OF REVENUES AND EXPENSES

• Journal entry for payment Revenues:
Subsidy income from the
Bank service charges 33,500 National Govt. 3,781,250
Cash – NT – MDS 33,500 Other service income 15,000
Sales revenues 35,000
REQUIREMENT 2 – ADJUSTING ENTRIES Total P3,831,250

a. Rent expense 90,000 Less Expenses:

Prepaid rent 90,000 Bank service charges P33,500
b. Various operating 35,000 Traveling 37,000
expenses Rent 90,000
Accrued expenses 35,000 Depreciation 48,000
c. Prepaid expense 165,000 Life & Retirement
Other operating contributions 266,250
supplies 165,000 Pag-ibig contributions 14,200
d. Depreciation expenses 48,000 Phil-health contributions 21,300
Accumulated Salaries 1,562,000
depreciation 48,000 PERA 213,000
Other operating 970,000 3,255,250
Net Savings P 576,000
PROBLEM 2
1. Closing entries at year-end 4. STATEMENT OF FINANCIAL POSITION
Cash-in-bank – LCCA P50,000
SI from NG 25,750 Prepaid rent 30,000
Cash-NT-MDS 25,750 Prepaid expense 165,000
Office equipment P400,000
SI from NG 3,781,250 Less accumulated
Income & Expense 3,781,250 depreciation 24,000 376,000
Total P621,000
Service income 15,000
Sales revenue 35,000 Accrued expense P35,000
Income & Expense 50,000 Government equity 586,000
Total P621,000
Income & Expense 3,255,250
Travelling 37,000
Problem 3. 3. Agency prepares a journal entry
1. Agency enters in RAOCO CIP – Building 1,000
2. Agency prepares a journal entry Accounts payable 850
Advances to contractor P 300 Advances to contractors 150
Cash – NT – MDS P 300
4. Agency prepares a journal entry

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EXCEL PROFESSIONAL SERVICES, INC.

Accounts payable 850 7. Agency prepares a journal entry

Due to BIR 120 Accounts payable 850
Cash – NT – MDS 730 Due to BIR 120
Cash – NT – MDS 730
5. Agency prepares a journal entry
Due to BIR 120 8. Agency prepares a journal entry
Cash – NT – MDS 120 Due to BIR 120
6. Agency prepares a journal entry Cash – NT – MDS 120
CIP – Building 1,000
Accounts payable 850 9. Agency prepares a journal entry
Advances to contractor 150 Buildings 2,000
CIP – Building 2,000

DRILL

1. The Gensan Agency Unit in Southern Mindanao payable on the 30th of September, 2016. The entry to
received the following allotment for its approved record this transaction would be
budget matrix from DBM: a. No entry
Capital Outlay P25,000,000 b. Memorandum entry in RAOPS
Misc Other Operating Expenses 5,000,000 c. Debit, Cash – Disbursing Officer, P190,000;
Personal Services 2,500,000 Credit, Cash – NT-MDS, P190,000.
Financial Expenses 150,000
d. Debit, Cash – Disbursing Officer, P190,000; Credit,
P32,650,000
Subsidy Income from the National Government,
The entry to record the aforementioned allotment in P190,000.
GENSAN AGENCY records would be
a. No entry 5. Assume the cash advance granted to the Disbursing
b. Memo entry in Registry of Allotment and Officer is in relation to the following details of the
Obligations (RALOBs) Lucena’s bi-monthly payroll
c. Debit, National Clearing Account, P32,650,000; Salaries P200,000
Credit, Appropriation allotted, P32,650,000. PERA (Personnel Economic 30,000
d. Debit, Cash-National Treasury, MDS, P32,650,000; Relief Allowance)
Credit, Subsidy Income from NG, P33,650,000. Total P230,000
Less: Withholding Taxes (TRA) P24,000
Life and Retirement 10,000
2. The Gensan Agency received a Notice of Cash Pag-ibig 2,000
Allocation for the above allotment items for a total Philhealth 4,000 40,000
amount of P19,600,000, approximately 60% of the Net amount P190,000
approved allotment.
The entry to be recorded for the payment of salaries
The entry to be recorded for this transaction would be would be.
a. No entry a. Obligations liquidated P230,000
b. Debit, Appropriations allotted, P19,600,000; Cash – Disbursing Officer P190,000
Due to BIR 24,000
Credit, National Clearing Account, P19,600,000.
Due to GSIS 12,000
c. Debit, National Clearing Account, P19,600,000; Due to Philhealth 4,000
Credit, Appropriations allotted, P19,600,000. b. Salaries, etc. 230,000
d. Debit, Cash-National Treasury-Modified Due to BIR 24,000
Disbursement System, P19,600,000; Credit, Cash – Disbursing Officer 206,000
Subsidy Income from the National c. Salaries and Wages 200,000
Government, P19,600,000. PERA 30,000
Cash – Disbursing Officer 190,000
3. The Vigan Agency in Northern Luzon incurred an Due to BIR 24,000
Due to GSIS 10,000
obligation for the salaries of its employees amounting
Due to Pag-ibig 2,000
to P350,000 for the ensuing month of October, 2016. Due to Philhealth 4,000
The entry to record this obligation would be d. No entry is required.
a. No entry
b. Memo entry in Register of Allotments and 6. Using the same information in Item #5, what entry
Obligations for Personal Services, RAOPS for would be recorded for the remittance of the tax due to
P350,000. BIR?
c. Debit, Appropriations allotted, P350,000; Credit, a. Due to BIR P24,000
Obligations incurred, P350,000. Cash-NT-MDS P24,000
d. Debit, Cash – Disbursing Officer. P350,000; Credit,
b. Due to BIR P24,000
Cash-National Treasury-Mds, P350,000. Cash-Disb Officer P24,000

4. The Disbursing Officer of the Lucena Agency in c. Due to BIR P24,000

Due to NG P24,000
Southern Luzon was granted a cash advance of
P190,000 in connection with its bi-monthly payroll d. Due to BIR P24,000

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Subsidy Income from NG P24,000 12. Tagum Agency of Central Mindanao received spare
parts amounting to P30,000 for the major overhaul of
7. Using the same information in Item #6, what entry its equipment and sets up a liability for that amount.
would be recorded for the remittance of the other
Tagum Agency would prepare the following entry
deductions from the bi-monthly payroll? a. Spare part expense P30,000
a. Due to GSIS P10,000 Accounts payable P30,000
Due to Pag-ibig 2,000
Due to Philhealth 4,000 b. Spare parts Inventory P30,000
SI from the NG P16,000 Accounts payable P30,000

b. Due to GOCCs P16,000 c. Spare parts inventory P30,000

Cash – Coll Officer P 16,000 Due from Suppliers P30,000

c. Due to GSIS P10,000 d. Memo entry in RAOMO P30,000

Due to Pag-ibig 2,000
Due to Philhealth 4,000 13. Tagum Agency paid in full the liability incurred in Item
Cash – Disb Offcr P16,000 12 net of withholding taxes at 12%. These withheld
taxes are not covered by the Tax Remittance Advice
d. Due to GSIS P10,000
Due to Pag-ibig 2,000 system (TRA). The entry that would be recorded by
Due to Philhealth 4,000 Tagum Agency would be
Cash – NT – MDS 16,000 a. Accounts payable P30,000
Cash – NT –MDS P30,000
8. The Naga Agency of Central Bicol Region incurred an
b. Accounts payable P30,000
obligation for a three-year rent amounting to P90,000. Cash-NT-MDS P26,400
What entry would be recorded for this initial Due to BIR 3,600
transaction? c. Obligation liquidated P30,000
Cash-NT-MDS P26,400
a. Rent expense P90,000
Due to BIR 3,600
Cash-NT-MDS P 90,000

b. Prepaid rent P90,000 d. Memo entry in RAOMO P30,000

Cash-NT-MDS P90,000
14. Tagum Agency would record the following entry upon
c. Rent expense P90,000 the remittance of the withheld taxes to BIR:
Prepaid rent P90,000 a. Due to BIR P 3,600
Cash-NT-MDS P 3,600
d. Memo entry in RAOMO
b. Memo entry in RAOMO only
9. When Naga pays the rent, the entry that would be
recorded is c. Due to BIR P 3,600
SI from the NG P 3,600
a. Rent expense P90,000
Cash-NT-MDS P 90,000
d. Due to BIR P 3,600
b. Prepaid rent P90,000 Cash-Disb Officer P 3,600
Cash-NT-MDS P90,000
15. Manila Agency in NCR grants a cash advance to its
c. Rent expense P90,000 Accountant, Glenn Larazabal, to attend a CPE seminar
Prepaid rent P90,000 in Subic in Western Luzon. The cash advance was for
d. Memo entry in RAOMO P20,000 and was to pay for all costs and expenses,
subject to accounting for its liquidation. The entry that
10. Virac Agency of Southern Bicol Region incurred an would be recorded for this transaction would be
obligation for the payment of electricity for P25,000, a. Cash – Collecting Officer P20,000
including tax of P3,000. The entry required to be Cash-NT-MDS P20,000
recorded would be b. Due from Officers P20,000
a. Debit, Electricity, P25,000; Credit, Cash-NT-MDS, Cash – NT –MDS P20,000
P25,000
c. Employee Benefits P20,000
b. Debit, Electricity, P25,000; Credit, Due to BIR,
Cash – NT – MDS P20,000
P3,000, and Cash-NT-MDS, P22,000
c. Memo entry only d. Cash – Disb Officer P20,000
d. No entry is necessary. Cash – NT – MDS P20,000

16. Glen L. presented a certificate of appearance and

11. Virac Agency paid the above-mentioned expense to the
authentic receipts to support a total cost of P16,425.
Electric Cooperative in the area. Virac The entry to be
Glen L. refunded to the Agency the unused cash
recorded by Virac would be
advance of P3,575. What would be the entry to be
a. Debit, Electricity, P25,000; Credit, Cash-NT-MDS,
recorded?
P25,000 a. Seminar Expenses P16,425
b. Debit, Electricity, P25,000; Credit, Cash-NT- Cash-Collecting Officer 3,575
MDS, P22,000, and Due to BIR, P3,000. Due from Officers P 20,000
c. Memo entry only b. Cash-Collecting Officer P 3,575
d. No entry is necessary. Cash – NT – MDS P 3,575

c. Cash – NT –MDS P 3,575

Employee Benefits P 3,575
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EXCEL PROFESSIONAL SERVICES, INC.

Cash-Disbursing Officer P1,500,000

d. Employee Benefits P 16,425
Cash – NT- MDS 3,575 d. Adv to Contractors P1,500,000
Due from Officers P 20,000 Cash in Bank – LC P1,500,000

17. The entry that would be recorded by Manila Agency

22. Using the information in Items 18 and 21, Sarangani
upon remittance of Glen L’s unused cash advance to
received a progress billing from the contractor, as
the Bureau of Treasury would be
follows:
a. Bureau of Treasury P 3,575
Cash – NT – MDS P 3,575 Progress Billings (P10,000,000 x
70%) P7,000,000
b. Due to NG P 3,575 Less, recoupment of cash advance
Cash – NT – MDS P 3,575 (P1,500,000 x 70%) 1,050,000
Net amount P5,950,000
c. SI from the NG P 3,575
Cash-Collecting Officer P 3,575 The entry to record the above transaction would be:
a. CIP – Agency Assets P5,950,000
d. SI from the NG P 3,575 Accounts payable P5,950,000
Cash – NT – MDS P 3,575
18. Sarangani Agency contracted an obligation for the b. CIP – Agency Assets P7,000,000
construction of an office building for a total cost of Accounts payable P5,950,000
Adv to Contractors 1,050,000
P10,000,000. The entry to record this transaction
would be c. Buildings P5,950,000
a. No entry, no transaction yet Accounts payable P5,950,000

b. Memorandum entry in RAOCO

c. Appropriations allotted P10,000,000 d. Buildings 7,000,000
Obligations incurred P10,000,000 Accounts payable P5,950,000
Adv to Contractors 1,050,000
d. Development Costs P10,000,000
Accounts payable P10,000,000 23. Using the same information in Item 22, Sarangani paid
the bill as follows:
19. Using information provided in Item 18, Sarangani Accounts payable P5,950,000
required and received a performance bond from the Less:
contractor the amount of P150,000. The entry that Withholding tax (P7,000,000 x 12%) 840,000
would be recorded is Net amount P5,110,000
a. Cash – Collecting Officer P150,000
The entry to record the above transaction would be
Performance bond P150,000
a. Accounts payable P5,950,000
payable
Due to the NG P840,000
Cash – NT – MDS 5,110,000
b. Cash-NT-MDS P150,000
Performance bond payable P150,000
b. Accounts payable P5,110,000
Cash – NT – MDS P5,110,000
c. Accounts receivable P150,000
Performance bond payable P150,000
c. Accounts payable P 5,950,000
Due to BIR 840,000
d. Due from Contractors P150,000
Cash-Disbursing Officer 5,110,000
Performance bond payable P150,000
d. Accounts payable 5,950,000
20. Using the same information in Item 19, Sarangani Due to BIR 840,000
deposited the bond to the Bureau of Treasury thru Cash – NT – MDS 5,110,000
AGDB (authorized government depository bank). The
24. Using information in items 18, 22, and 23, Sarangani
entry that would be recorded would be
Agency paid the final billing computed as follows
a. Due from the NG P150,000
Cash-Collecting officer P150,000 Final Billing P10,000,000 x 30% P3,000,000
Less Liquidated damages due to project
b. Due from the NG P150,000 delay 10,000
Cash-NT-MDS P150,000 Net cost P2,990,000
Less Recoupment of cash advance
c. Due from the NG P150,000 balance 450,000
Accounts receivable P150,000 Accounts payable P2,540,000
Less Due to BIR (P2,990,000 x 12%) 358,800
d. Cash – Treasury account P150,000
Due from Contractors P150,000 Net amount P2,181,200
The entry to record the payment for the final billing
21. Using the same information in Item 18, Sarangani paid would be
the contractor 15% of contract price, representing a. Accounts payable P2,540,000
mobilization fee, P1,500,000. The entry that would be Due to BIR 358,800
Cash Disbursing Officer P2,181,200
recorded is
a. Due from the NG P1,500,000 b. Accounts payable P2,540,000
Cash – NT – MDS P1,500,000 Due to BIR P 358,800
Cash – NT – MDS 2,181,200
b. Adv to Contractors P1,500,000
Cash-NT-MDS P1,500,000 c. Accounts payable P2,181,200
Cash – NT – MDS P2,181,200
c. Advances to Contractors P1,500,000

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EXCEL PROFESSIONAL SERVICES, INC.

d. Buildings P2,181,200 29. Albay Agency in Central Bicol had the following account
Cash – NT – MDS P2,181,200 balances for the fiscal year ended June 30, 2016:
25. Using the information in Item 25, the entry to record Current Assets P10,000,000
Plant assets 90,000,000
the liquidated damages would be
Other assets 5,000,000
a. No entry
Liabilities 18,000,000
b. Memo entry in RAOCO Contingent liabilities 5,000,000
Contingent Assets 3,000,000
c. Cash-Collecting Officer 10,000
Buildings 10,000 Determine the balance of Government Equity at June
30, 2015
d. Cash Disbursing Officer 10,000 a. P105,000,000 c. P87,000,000
Buildings 10,000
b. P 85,000,000 d. P82,000,000
26. Using all relevant information given for Sarangani
Agency, the entry to record the turnover and 30. What is the entry to record the collection of
acceptance of the building would be P15,000,000 corporate income tax by the BIR in its
a. Buildings P10,000,000 Agency Books?
CIP – Agency Assets P10,000,000 a. Memo entry

b. Memo entry in RAOCO b. Cash – Collecting P15,000,000

Officer
c. Buildings P9,990,000 Income Tax – Corp. P15,000,000
CIP – Agency Assets P9,990,000
c. Cash –NT-MDS P15,000,000
d. No entry is required Income Tax – Corporation P15,000,000
27. Using all relevant information given for Sarangani
d. Income Tax-Corp P15,000,000
Agency, except that the turnover were for the
Cash-Collecting Officer P15,000,000
completion of a People’s Park surrounded by waiting
sheds, the entry would have been
a. People’s Park P9,990,000
CIP – People’s Park P9,990,000

b. Public P9,990,000
Infrastructure
CIP – People’s Park P9,990,000

c. SI from the NG 10,000,000

CIP – People’s Park 10,000,000

d. SI fro m the NG 10,000,000

CIP – People’s Park 10,000,000

28. Assuming withheld taxes are not covered by TRA, the

remittance by Sarangani to BIR would be recorded as
follows:
a. Due to BIR P1,198,800
Cash-NT-MDS P1,198,800

b. Due to BIR P1,200,000

Cash-NT-MDS P1,200,000

c. Due to BIR P1,198,800

SI from the NG P1,198,800

d. Due to BIR P1,200,000

SI from the NG P1,200,000

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