Differences Between Government Accounting and
Commercial Accounting
Following are the main differences between
government accounting and commercial accounting:
1. Meaning
The accounting system maintained by the
government offices is known as government
accounting.
The accounting system maintained by business
organizations is known as commercial accounting.
2. Objective
Government accounting is maintained by the
government offices to know the position of public
fund.
Commercial accounting is maintained by business
organizations to know the profit or loss
and the financial position of the business.
3. Budget
Government accounting strictly follows the
government budgeting system.
Commercial accounting does not follow the
government budgeting system.
4. Rules and Provisions
Government accounting is strictly maintained by
following the financial rules and provisions of
government.
Commercial accounting is maintained by following
the rules and principles of 'Generally Accepted
Accounting Principles'.
5. Information
Government accounting provides information to the
government about the receipts, transfer and
deposition of public funds. Commercial accounting
provides information to the concerned parties about
the operating result and financial position of the
business.
6. Auditing
The Commission on Audit (COA) audits the book of
accounts kept under government accounting. A
professional auditor can audit the books of accounts
kept under commercial accounting.
Chapter 1: Overview of Government Accounting
Government Accounting- is the process of analyzing,
recording, classifying, summarizing and
communicating all transactions involving the receipt
and disposition of government funds and property,
and interpreting the result thereof.
Objectives
1. To produce information concerning past
transactions and present condition
2. Provide a basis for guidance for future operations
3. Provide for control of the acts of public bodies and
officers in the receipt, disposition and utilization of
funds and property.
4. To report on the financial position and the results
of operations of government agencies
Government accounting places emphasis on
a. Sources and utilization of government fund
b. Responsibility, accountability and liability of
entities entrusted with government funds and
properties
Sources of government fund
a. Taxes and fees (ex. Income Tax, Estate Tax, Import
Duties, Documentary Stamp Tax, Permit Fees,
Registration Fees, Clearance and Certification Fees,
Franchising Fees, Licensing Fees, Fines and Penalties-
Service Income, School Fees, Transportation System
Fees, etc.)
b. Borrowings
c. Grants from other government and international
bodies
Utilization
a. includes expenditures on programs, projects,
unanticipated losses from calamities and the like.
Responsibility over government Fuds
➢ The head of government agency is directly
responsible in implementing this policy and is
primarily responsible for government resources
entrusted to his agency
Accountability over Government Funds and Property
➢ Government officer entrusted with the possession
(accountable officer) of government resources is
responsible for the safekeeping in accordance with
the law and should be properly bonded
Liability over government fund and property
➢ Unlawful use of government fund shall be the
personal liability of the employee
➢ Accountable officer shall be liable for the losses or
negligence in the safekeeping of government
resources
➢ Shall immediately notify COA for any loss of
government funds from unforeseen events within 30
days
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
governments resources in their custody and are
liable for any loss.
Accounting Responsibility
The following offices are charged with government
accounting responsibility:
1. Commission on Audit (COA)
➢ Has the exclusive authority to promulgate
accounting and auditing rules and regulations.
➢ Keep the general accounts of the government,
supporting vouchers and other documents
➢ Submit financial documents to the president and
congress
2. Department of Budget and Management (DBM)
➢ Responsible for the formulation and
implementation of the national budget
3. Bureau of Treasury
➢Function under the Department of Finance and is
the Cash custodian of the government.
➢ Receive and keep national funds and manage and
control the disbursement thereof.
 Maintain accounts of financial transactions of all
national governments offices, agencies and
instrumentalities.
4. Government Agencies
➢ Refers to any department, bureau or office of the
national government, or any of its political
subdivision, as well as any government owned or
control corporation
(GOCC)
(SSS, GSIS, DBP, HDMF, PHIC, Philippine Crop
Insurance Corporation)
 Responsible in directly implementing the projects
thereof and performing the functions delegated.
GOVERNMENT ACCOUNTING MANUAL (GAM)
➢ New Government Accounting System (2002)
➢ Replace by GAM for NGAs (Jan. 1, 2016)
➢ Was promulgated to harmonized the government
accounting standards with international accounting
standards, particularly the International Public
Sector Accounting Standards (IPSAS), PPSAS
(Philippine Public Sector Accounting Standard).
✓ PPSAS based on IPSAS which are in turn based on
IFRS/PFRS.
Coverage
Provides basic concepts to be used on
1. Preparing general purpose financial statement in
accordance with PPSAS
2. Reporting of budget, revenue and expenditure
Objective
Aim to update the following
1. Standards, policies, guidelines and procedures in
accounting for government funds and
property
2. Coding structure and accounts
3. Accounting books, registries, records, forms,
reports and financial statement.
Basis Accounting and Budget reporting principles
Government entities shall comply with the following
1. PPSAS
2. Accrual basis of accounting (transactions are
recognized when they occur not when cash is
received or paid)
3. Budget basis for presentation of budget
information in the financial statements
4. Revised chart of account
5. Double entry bookkeeping
➢ an entry is recorded in at least two accounts as a
debit or credit. In a double-entry system, the
amounts recorded as debits must be equal to the
amounts recorded as credits.
6. Financial statement are based on accounting and
budgetary records
7. Fund clustering
01- Regular agency Fund
02- Foreign Assisted Projects Fiund
03- Special Account- Locally Funded/ Domestic
Grants Fund
04- Speical Account- Foreign Assisted/Foreign Grants
Fund
05- Internally Generated Fund
06- Business Related Funds
07- Trust Receipts
Qualitative Characteristics of Financial Reporting
A. Understandability- information is understandable
when users can reasonable be expected to
comprehend its meaning
B. Relevance- if it can assist users in evaluating past,
present or future events in confirming or correcting
past evaluations. In order to be relevant information
must also be timely.
C. Materiality- affects relevance of information.
➢ It is material if its omission or misstatement could
influence the decision of user.
➢ It depends on the nature and size of the item or
error.
D. Timelines- information loses relevance if there is
undue delay in its reporting.
E. Reliability- information is reliable if free from
material error and bias and can be depended on by
users to represent faithfully that which if purport to
represent or could reasonably be expected to
represent.
F. Faithful representation- it should presented in
accordance with the substance of the transactions
and other events and not merely their legal form.
G. Substance over form-
➢ The substance of transactions or other events is
not always consistent with their legal
form.
➢ It is necessary that they be accounted for and
presented in accordance with their substance and
economic reality and not merely their legal form
H. Neutrality- an information is neutral if it is free
from bias
➢ Information shall not be selected or presented in a
manner that is designed to influence the user’s
decision in order to achieve a predetermined
outcome
I. Prudence- is the exercise of a degree of caution
when making estimates under conditions of
uncertainty, such as asset or revenue are not
overstated and liabilities or expenses are not
understated
J. Completeness- information should be complete
within the bounds of materiality and cost
K. Comparability- when users are able to identify
similarities and differences between that information
and information in other reports
COMPONENTS OF FINANCIAL STATEMENT
1. Statement of Financial Statement
2. Statement of Financial Performance
3. Statement of Changes in Net Assets/ Equity
4. Statement of Cash Flows
5. Statement of Comparison of Budget and Actual
Amounts (not found in business/commercial
accounting)
6. Notes to Financial Statement
Elements of Financial Statements
Assets- are resources controlled by entity as a result
of past event, and from which future economic
benefits or service potential are expected to flow to
the entity.
a. Must be controlled by the entity
b. Must have arisen from a past event
c. Future economic benefit or service potential must
be expected to flow to the entity
Recognition of an asset
1. It is probable that the future economic benefit will
flow the entity
2. The asset has a cost or value (FV) that can be
measured reliably
Liabilities- present obligations of the entity arising
from past event, the settlement of which is expected
to result in an outflow from the entity of resources
Equity - residual interest in the asset of the entity
after deducting all its liabilities
Revenue - inflow of economic benefits or service
potential
Expenses - decrease in economic benefits or service
potential
 Contribution 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.
  Distribution to owners – are future economic
benefits distributed by the entity to its
owners.
 Revenue funds – comprise all funds derived
from the income of any agency of the
government and available for appropriation
or expenditure in accordance with law.
 Control – means the ability to benefit from an
asset or prevent others from benefitting.
 Benefit – means the ability to use, exchange,
lease, sell or use the asset to settle liabilities.
 Past event -a transaction or event giving rise
to control of future economic benefits must
have occurred.
Chapter 2: The Budget Process
Government budgeting
 is the critical exercise of allocating revenues
and borrowed funds to attain the economic
and social goals of the country. It also entails
the management of government expenditures
in such a way that will create the most
economic impact from the production and
delivery of goods and services while
supporting a healthy fiscal position.
 Government budgeting is important because
it enables the government to plan and
manage its financial resources to support the
implementation of various programs and
projects that best promote the development
of the country. Through the budget, the
government can prioritize and put into action
its plans, programs and policies within the
constraints of its financial capability as
dictated by economic conditions.
National Budget
National Budget- is the government’s estimate of the
sources and uses of government funds within a fiscal
year. This forms the basis for expenditures and is the
governments key instrument for promoting its socio-
economic objectives.
The Philippine Constitution and other laws require
government funds to be utilized in accordance with
national budget that is duly approved by legislation.
Government accounting therefore is, concerned with
providing information useful in assessing the
conformance of utilizations of government funs with
the approved budget.
Government Accounting is primarily budgetary
accounting. It does not only aim to provide
information on past events and transactions but also
budget information in accordance with PPSAS 24.
 PPSAS 24/IPSAS 24 (Presentation of Budget
and Information in Financial Statements)-
prescribes a comparison of budget amounts
and the actual amounts arising from
execution of the budget to be included in the
financial statements entities. This Standards
also requires disclosure of an explanation of
the reason for material differences between
the budget and actual amounts
BUDGET PROCESS
Budgeting for the national government involves four
(4) distinct processes or phases:
1. budget preparation,
2. budget authorization,
3. budget execution and
4. Budget accountability
While distinctly separate, these processes overlap in
the implementation during a budget year.
Budget preparation for the next budget year
proceeds while government agencies are executing
the budget for the current year and at the same time
engaged in budget accountability and review of the
past year's budget.
Budget Preparation
The preparation of the annual budget involves a
series of steps that begins with the determination of
the overall economic targets, expenditure levels,
revenue projection and the financing plan by the
Development Budget Coordinating Committee
(DBCC). The DBCC is an inter-agency body composed
of the DBM Secretary as Chairman and the Bangko
Sentral Governor, the Secretary of the Department of
Finance, the Director General of the National
Economic and Development Authority and a
representative of the Office of the President as
members.
The major activities involved in the preparation of
the annual national budget include the following:
A. Issuance by the DBM of the Budget Call which
defines the budget framework; sets economic and
fiscal targets; prescribe the priority thrusts and
budget levels; and spells out the guidelines and
procedures, technical instructions and the timetable
for budget preparation;
B. Preparation by various government agencies of
their detailed budget estimates ranking programs,
projects and activities and submission of the same to
DBM.
C. Conduct a budget hearing where agencies are
called to justify their proposed budgets before DBM
technical panels;
 This is conducted after the agencies submit
their budget proposals.
 Each agency defends its budget proposal
before the DBM.
 The DBM deliberates on the budget proposal,
makes recommendations and consolidate the
deliberated proposals into the National
Expenditure Program (NEP) and Budget of
Expenditure and Sources of Financing (BESF).
D. Submission of the proposed expenditure program
of department/agencies/special for confirmation by
department/agency heads.
E. Presentation of the proposed budget levels of
department/agencies/special purpose funds to the
DBCC for approval.
F. Review and approval of the proposed budget by
the President and the Cabinet;
 The President and Cabinet members review
the proposed budget
 After the President approves the proposed
budget, the DBM finalizes the budget
documents to be submitted to the Congress.
This time the proposed budget is now
referred to as President’ Budget.
 The President Budget contain the following
documents
1. President’s Budget Message- contains he
President explanation of the country’s fiscal
policy and budget priorities
2. National Expenditure Program (NEP)-
contains the details of all the government
entities proposed expenditures in the coming
year.
3. Budget of Expenditures and Sources of
Financing (BESF)- contains the estimated
expenditures accompanied by estimates of
expected sources of financing.
G. Submission by the President of proposed budget to
Congress
 The President shall submit the proposed
budget to the Congress within 30 days from
the opening of every regular session (Art. VII
Section 22 Philippine Constitution)
Budget Legislation
 Government funds shall only be spent in
pursuance of an appropriation made by law.
 In Congress, the proposed budget goes first to
the House of Representatives, which
assignsthe task of initial budget review to its
Appropriation Committee.
Process to legalize the proposed budget
1. House Deliberations- upon receipt of the
President’s Budget, the House of Representative
conduct hearings to scrutinize the various agencies
respective proposed programs and expenditures.
 Preparations of General Appropriation Bill
2. Senate Deliberation- normally starts after the
Senate received the (General Appropriation Bill) GAB
from House of Representative.
3. Bicameral Deliberations
 If there is conflict between the
Representative and Senate version of the
GAB, a committee called the Bicameral
Conference Committee is formed to
harmonized the two conflicting version of the
House of Rep and Senate.
 Bicam’ version (harmonized version) is
submitted back to both Houses for
ratification.
 After ratification, the final GAB is submitted
to the President for enactment.
4. President’s enactment
 The President enact the budget known as
General Appropriation Act (GAA)
 Before the enactment though, the President
may exercise his veto power as conferred to
him under the Philippine Constitution.
Approved Budget
Approved Budget – is the expenditure authority
derived from appropriation laws, government
ordinances, and other decisions related to the
anticipated revenue or receipts for the budgetary
period. The approved budget consists of the
following:
UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07 Trust Receipts 08
1. New General Appropriations – are annual
authorizations for incurring obligations during a
specified budget year, as listed in the GAA.
2. Continuing Appropriations – are the authorizations
to support obligations for a specific purpose or
project, such as multi-year construction projects
which require the incurrence of obligations even
beyond the budget year.
3. Supplemental Appropriations – are additional
appropriations authorized by law to augment the
original appropriations which proved to be
insufficient for their intended purpose due to
economic, political or social conditions supported by
a Certification of Availability of Funds (CAF) from the
BTr.
4. Automatic Appropriations – are the authorizations
programmed annually or for some other period
prescribed by law, by virtue of outstanding
legislation which does not require periodic action by
Congress.
5. Unprogrammed Funds- standby appropriations
authorized by congress in the GAA which may be
availed only when
 revenue collections exceed targets
 new revenue sources arise (sources not
originally considered in the BESF
 newly approved loans
6. Retained Income Funds- Collections which are
authorized by law to be used directly by agencies
concerned for their operation or specific purposes.
 Example. SUCs Internally Generated Income-
Tuition and matriculation fees/other
receipts-R.A. 8292
7. Revolving Funds- receipts derived from business-
type activities of departments/ agencies which are
authorized by law to be constituted as such and
deposited in an authorized government depository
bank.
 These funds shall be self liquidating and all
obligations expenditures incurred by virtue of
said business-type activity shall be charged
against said fun.
Example.
1. DA-Agricultural Training Institute Revolving Fund-
Charges from dormitory operations, printing,
publication, rental facilities, other business and
grants/donations
2. DEPED-Applied Nutrition Center Revolving Fund-
Income from Dormitory
Operations, Miscellaneous Income
3. DOLE-TESDA Revolving Fund-All income derived
from various training-cum production activities –
E.O. 939
8. Trust Receipts- receipts by any government agency
acting as trustee, agent or administrator for the
fulfillment of some obligations or conditions
1. Example. (Inter-Agency Transferred Fund)
BUDGET EXECUTION
- Phase where government funds are spent
1. Release of guidelines and BEDS- DBM issues
guidelines on the release and utilization of
funds.
A. Budget Execution Documents (BEDs) - summarizes
an agency’s fiscal year plans and performance. It
includes
 Physical and financial plan
 Monthly cash program
 Estimate of monthly income
 List of Obligations that are not yet due and
demandable
The following are the recipient of budget
B. National Government Agency (NGAs)
 Executive Branches
 Legislative Branch
 Judicial Branch
  Constitutional Commissions
C. Local government Units
 Autonomous regions
 Provinces and cities independent from
province
 Component cities (part of the province) and
municipalities
 Barangays
D. Government Owned or Controlled Corporations
(GOCCs) - vested with functions relating to public
needs
2. Allotment
 DBM formulate the Allotment Release
Program (ARP) to set the limit for allotment
releases during the year. This is control
device to ensure that releases conform to the
national budget
 Cash Release Program- sets the disbursement
limits for the year, for each quarter, and for
each month.
Appropriation - is the authorization made by a
legislative body to allocate funds for purposes
specified by the legislative or similar authority.
Allotment - is an authorization issued by the DBM to
NGAs to incur obligations for specified amounts
contained in a legislative appropriation in the form of
budget release documents. It is also referred to as
Obligational Authority.
Documents used in releasing allotment
1.General Appropriation Act Release Document
(GAARD)
2. Special Allotment Release Order (SARO)
3. General Allotment Release Order (GARO)
3. Incurrence of Obligation
 Government agencies incur obligation which
will be paid by the government
Obligation - is an act of a duly authorized official
which binds the government to the immediate or
eventual payment of a sum of money. Obligation
maybe referred to as a commitment that
encompasses possible future liabilities based on
current contractual agreement.
4. Disbursement Authority
 DBM issues disbursement authority to the
government
 This is the point where the agencies obtain
access to the government fund.
Documents used in releasing disbursement authority
1. Notice of Cash Allocation (NCA) - issued by the
DBM to central, regional, and provincial offices and
operating units to cover their cash requirement.
 specify the amount of cash that can be
withdrawn from a government servicing bank
in a certain period. This is based on
submitted Monthly Cash Program.
2. Notice of Cash Allocation - authority issued by the
agency’s Central Office to its regional and operating
unit to cover the latter’s cash requirement.
3. Non-Cash Availment Authority
4. Cash Disbursement Ceiling
Disbursement - actual amount paid out of the
budgeted amount
 Made through checks that are chargeable
against the account of the treasurer of the
Philippines. Check issued under this scheme
is called Modified Disbursement System
(MDS) Checks
 Modified Disbursement System (MDS) Check
– refers to a check issued by government
agencies chargeable against the account of
the Treasurer of the Philippines, which are
maintained with different MDS AGDBs. MDS
checks are covered by NCA
BUDGET ACCOUNTABILITY
 This phase occurs concurrently with budget
execution phase
 Monitoring of budget to determine the
conformance of actual results with the
planned targets
1. Budget Accountability Report - this refers to
submission of the following accountability reports:
A. Monthly Report of Disbursement
B. Quarterly Physical Report of Operation - This
report shall reflect the Department’s/Agency’s actual
physical accomplishments as at a given quarter, in
terms of the performance measures indicated in its
Physical Plan/targets
C. Statement of Appropriations, Allotments,
Obligations, Disbursements and Balances – This
report shall reflect the authorized appropriations and
adjustments, total allotments received including
transfers, total obligations, total disbursements and
the balances of unreleased appropriations,
unobligated allotments, and unpaid obligations of a
department/office/entity
D. Summary of Appropriations, Allotments,
Obligations, Disbursements and Balances by Object of
Expenditures - similar to above (c ) but provides
details by object of expenditures consistent with the
COA Revised Chart of Accounts per COA Circular No.
2013-002 dated January 30, 2013 and the Adoption
of the PPSAS per COA Resolution No. 2014-003 dated
January 24, 2014.
E. List of Allotments and Sub-Allotments - shows the
allotments received by the agency from the DBM and
the sub allotments issued by the agency’s central
office or regional office to lower operating units
F. Statement of Approved Budget, Utilizations,
Disbursements and Balances - this report shall reflect
the approved budget, the utilizations, disbursements
and balance of the entity’s income authorized by law
to use, such as OWWA/SUCs, duly approved by their
Board of Trustee/Regents.
G. Summary of Approved Budget, Utilizations,
Disbursements and Balances by Object of
Expenditures - similar to above (f) but provides
details of expenditures, consistent with the COA 29
Revised Chart of Accounts and shall be prepared by
Funding Source Code as clustered.
H. Quarterly Report of Revenue and Other Receipts -
This report shall reflect the actual revenue and other
receipts/collections from all sources remitted with
the BTr and deposited in other AGDB in a given
quarter.

2. Performance Review
 COA and DBM perform periodic reviews and
report to the President
3. Audit – only COA audits the agencies