Accounting for

Government Transactions
Rei Marian D. Leynes

Reference: Zeus Millan

GAM for NGAs
Objectives
• Describe the nature of government accounting.
• Present the New Government Accounting System of chart of accounts.
• Perform the accounting procedures for the books of a government agency.
 Introduction

• Government
- Defined under PD 1177 (Budget Reform Decree of 1977) as the National
Government, including the Executive, the Legislative and the Judicial
Branches, and the Constitutional Commissions.
 Government Vs. Commercial Enterprise
GOVERNMENT COMMERCIAL

Ownership Entire People Owner/Proprietor

Purpose Render Service Profits

Organization Co-equal Branches Owners/ BOD

Financing Involuntary Voluntary

Income Not for Income Generate Returns

 Overview of Government Accounting

Accounting
• “the art of recording, classifying, and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least, of financial character, and
interpreting the results thereof”
- American Institute of Certified Public Accountants (AICPA))

• “the process of identifying, measuring and communicating economic information to

permit informed judgments and decisions by users of information”
- American Accounting Association (AAA)
Combined Accounting Definition from AAA and AICPA

Identifying Recording Classifying Summarizing Interpreting

Prepare Prepare Reverse

Analyze Journalize Post Adjust Close
TB FS (Optional)
 Government Accounting

• Encompasses the process of analyzing, recording, classifying, summarizing

and communicating all transactions involving the receipt and disposition of
government funds and property, and interpreting the results thereof.
 Objectives of Government Accounting

1. To produce information concerning past operations and resent decision

2. To provide a basis for guidance for future operations
3. To provide for control of the acts of public bodies and officers in the
receipt, disposition and utilization of funds and property
Sources and utilization of Government Funds

Sources Utilization
- Receipt from
taxes and other - Expenditures
on
fees
Programs
- Borrowings
Projects
- Grants from
other govt and - Unanticipated
international losses from
bodies calamities
 Responsibility, Accountability and Liability
over Government Funds and Properties

• 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
 Objectives of Government Accounting

4. To report on the financial position and the results of operations of

government agencies for the information of all persons concerned
 Government Offices with Accounting
Responsibility
Promulgates accounting and COA Keeping of general accounts;
auditing rules and regulations submits financial reports

Govt Responsible Formulation and

Required by law to have
DBM implementation of the
accounting units of divisions Agencies Offices National Budget

BTr Cash Custodian

 Financial Reporting System of the National
Government
Consolidates financial reports
Accounting books are subject to
audit by COA
COA
Submits financial reports to COA Office of the President
for consolidation
Congress
Maintains accounting books and Govt Reconciles budget
registries with DBM
budget registries Agencies
budget records of
DBM

BTr
Reconciles accounting books
with cash records of BTr
 The GAM for NGAs

Government
New Government Accounting Manual
“Old” Government
Accounting System for National
Accounting System
(NGAS) Government Agencies
(GAM for NGAs)
2002 2016
Promulgate to harmonize the
government accounting standards
with the international accounting
standard, the International Public
Sector Accounting Standards (IPSAS),
which is based on IFRS
 The GAM for NGAs
Legal Basis Coverage Objective

• Article IX-D, • preparation of the a. standards, policies,

Section 2 par. (2) general purpose guidelines and
financial statements procedures in
of the 1987 in accordance with the accounting for
Constitution of PPSAS and other government funds
the Republic of financial reports as and property;
the Philippines may be required by
laws, rules and b. coding structure and
regulations; and accounts; and

• reporting of budget, c. accounting books,

revenue and registries, records,
expenditure in forms, reports and
accordance with laws, financial statements.
rules and regulations.
 Basic Accounting and Budget Reporting System

✓ Should Comply with PPSAS and other relevant laws, rules and regulations;
✓ Accrual basis of accounting;
✓ Budget basis of presentation of budget information in the financial statements;
✓ Revised chart of accounts prescribed by COA;
✓ Double Entry Bookkeeping;
✓ FS based on accounting and budgetary records;
✓ Fund Cluster accounting (books of accounts are maintained according to the
type of funds being accounted for
Qualitative Characteristics of Financial Reporting
Under Conceptual Framework

Fundamental Qualities
Verifiability
✓ Relevance
⁻ Confirmation Value
⁻ Predictive Value Comparability Enhancing
Characteristics
✓ Faithful Representation
⁻ Completeness Understandability
⁻ Neutrality
⁻ Free from Errors
Timeliness
 Qualitative Characteristics of Financial Reporting
Under GAM for NGAs (PPSAS 1)

✓Understandability ✓Substance over form

✓Relevance ✓Neutrality
✓Materiality ✓Prudence
✓Timeliness ✓Completeness
✓Reliability ✓Comparability
✓Faithful Representation

GAM for NGAs Volume I, Chapter 19

Elements and Components of General Purpose
Financial Statement

6. Statement of Comparison of
Budget and Actual Amounts
(SCBAA)
Revenue Funds
- Comprises all funds from the income of any agency of the government
and available for appropriation or expenditure in accordance with law
 Budget Process in
the Philippines
Budget
Preparation

Budget Budget
Accountability Legislation

Budget
Execution
Definition of Terms
Appropriations • Authorization made by the legislative body to allocate funds for purposes specified by
the legislative or similar authority

• Authorization issued by the DBM to NGAs to incur obligations for specified amounts
Allotments contained to a legislative appropriation in the form of BUDGET release documents. Also
referred to as Obligation Authority

• is an act of a duly authorized official which binds the government to the immediate or
Obligation eventual payment of a sum of money. Obligation maybe referred to as a commitment
that encompasses possible future liabilities based on current contractual agreement.

Disbursements • are the actual amounts spent or paid out of the budgeted amounts
 Government Accounting Process
Accounting Records Budget Records

Journal Ledger Registries

❑General Ledger ❑ Reg of Revenue and Other
❑General Journal Receipts

❑Subsidiary Ledger ❑ Reg of Appropriations and

❑Cash Receipts Journal Allotments

❑Cash Disbursement
Accounting Budget
❑ Reg of Allotments Obligations
Journal and Disbursements
Unit/ Division Unit/ Division
❑Check Disbursement ❑ Reg of Budget, Utilization and
Journal Disbursements
 RROR Registries of Revenue and Other Receipts

RAPAL Registry of Appropriations and Allotments

Monitoring of
the Budget RAOD
Registries of Allotments, Obligations and
Disbursements

ORS Obligation Request and Status

RBUD Registries of Budget, Utilization and Disbursements.

RROR
RAPAL
RAOD
ORS
RBUD
 Government Accounting Process

Objects of Expenditures
Registries
1. Personnel Services (PS)
❑ Reg of Revenue and Other
2. Maintenance and Other Operating Expenses (MOOE) Receipts (ROR)

3. Financial Expenses (FE) ❑ Reg of Appropriations and

Allotments (RAPAL)
4. Capital Outlays (CO) ❑ Reg of Allotments
Obligations and
Disbursements (RAOD)
Note: Separate RAOD and RBUD shall be maintained ❑ Reg of Budget, Utilization
for each object of expenditure and Disbursements
(RBUD)
Government Accounting Process

APPROPRIATION

Entity A (a government agency) receives its GAA consisting of the

following

Personnel Services 100,000.00 The receipt of the

MOOE 60,000.00 appropriation is
posted (recorded) in
Financial Expenses 0.00 the Registry of
Capital Outlay 200,000.00 Appropriations and
Allotments (RAPAL)
Total Appropriations for the current year 20xx 360,000.00

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

ALLOTMENT
The receipt of the appropriation
Entity A (a government agency) receives its allotment from DBM is posted (recorded) in the
consisting of the following Registry of Appropriations and
Allotments (RAPAL) and
Registries of Allotments,
Personnel Services 90,000 Obligations and
MOOE 40,000.00 Disbursements (RAOD)
Financial Expenses 0.00
Capital Outlay 170,000.00

Total Appropriations for the current year 20xx 300,000.00

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

IINCURRENCE OF OBLIGATION
Obligations shall be incurred
Entity A (a government agency) enters into the following through the issuance of
contracts: Obligation Request and Status
1. Personnel services- employment contracts (job order) (ORS)
amounting to P70,000;
2. Maintenance and other operating expenses- purchase contract
for office supplier worth P25,000;
3. Capital Outlays – purchase contract for office equipment The “obligations” are recorded
worth P160,000. in the Registries of Allotments,
Obligations and
Disbursements (RAOD)

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

Disbursement Authority

All of the recordings previously are

made on the budget registries.

Nothing is recorded yet in the

accounting books up to this point

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

Disbursement Authority- NCA

Entity A receives a Notice of Cash Allocation (NCA) from DBM
amounting to P200,000, net of Tax

Cash- MDS, Regular 200,000.00

Subsidy from National Government 200,000.00

The Journal entry for the NCA is recorded in the general

journal and posted to the general ledger

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

Employees have rendered services and are now entitled to

compensation. Details are as follow:

Salaries and Wages 35,000.00 Salaries and Wages 35,000

Personnel Economic Relief
Allowance (PERA) 5,000.00 Personnel Economic Relief Allowance 5,000
Gross Compensation 40,000.00 Due to BIR 10,000
Withholding Tax ( 10,000.00)
GSIS (2,000.00) Due to GSIS 2,000
PAGIBIG (2,000.00 ) Due to PAGIBIG 2,000
Philhealth (1,000.00 )
Due to Philhealth 1,000
Total Deductions (15,000.00)
Net 25,000.00 Due to Officers and Employees 25,000
Payable is posted in Section C of ORS and in appropriate ledgers

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
 Government Accounting Process

Grant of Cash Advance for Payroll The journal entry is posted on the
appropriate general ledgers and Section
C of the ORS is updated for the posting
Advance for Payroll 25,000 of disbursement.

Cash- MDS, Regular 25,000

Disbursement is also updated on the
Registry of Allotments, obligations and
Disbursements (RAOD)

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
 Government Accounting Process

Payroll Fund is liquidated

Due to Officers and Employees 25,000

Advances for Payroll 25,000

Taxes and mandatories withheld are remitted separately to the respective

government agencies

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

There is no actual physical

Tax Remittance to BIR
Due to BIR
Cash- Tax Remittance Advice
transfer of payment to BIR.
The use of Tax Remittance
10,000 Advice represents a
constructive remittance of
10,000 taxes withheld.

Cash- Tax Remittance Advice 10,000 The credit to Subsidy from

Subsidy from National Government
National Government means
10,000
that the entity has the
authority to use the amount
withheld for its operations.

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
 Government Accounting Process

Remittance of Mandatory Contributions

Due to GSIS 2,000

Due to PAGIBIG 2,000
Due to PhilHealth 1,000
Cash-MDS, Regular 5,000

The ORS and RAODs-PS are updated for the payments

Incurrence of Disbursement
Appropriation Allotment
Obligations Authority
Government Accounting Process

Reversion of Unused Notice of Cash Allocation

Government entities are required to revert any unused NCA at
the end of the accounting period

Cash- MDS, Regular

NCA receipt 200,000 25,000 Advances for Payroll
5,000 Mandatory remittances
200,000 30,000
Remaining NCA 170.000

Subsidy from National Government 170,000

Cash- MDS, Regular 170,000
Government Accounting Process
Summary of Basic Recordings

TRANSACTION RECORDING IN
Registries & Other Records Journal & Ledger
Appropriation RAPAL None
Allotment RAPAL & Appropriate RAODs None
Incurrence of Obligations ORS & Appropriate RAODs None
Notice of Cash Allocation RANCA
Disbursements Updating of ORS and Appropriate RAODs
Tax Remittance Advice Updating of ORS and Appropriate RAODs
Reversion of Unused NCA RANCA
Thank you!