Module 2. Government Chart of Accounts, Accounting and Reporting

Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314
DETAILED LEARNING MODULE
Title: Government Chart of Accounts, Accounting and Reporting

Module No. 2
I. Introduction
This module will introduce discussions on Government Chart of Accounts under the responsibility
accounting and on the basic features of the new system. New Government Accounting System is
based on the concept of Obligation Accounting which is modified to eliminate the complicated
procedures in the incurrence of obligations and the recording of the budgetary accounts.
II. Learning Objectives

After studying this module, you should be able to:
1. Familiarize with the account titles used in the new government accounting system.
2. Understand the process of releasing funds to the different government agencies.
3. Understand how financial reporting differs for the government.
III. Topics and Key Concepts
The Revised Chart of Accounts
The standard government chart of accounts is a list of ledger accounts consisting of real and
nominal accounts.
It is prepared for use by all sectors of the national government. It provides the framework within
which the accounting records are based.
Balance Sheet accounts consist of assets, liabilities, and equity.
Income and Expense accounts consists of two major classifications of income and three major
classifications of expenses.
Income / Revenue Accounts
General Income Accounts – consists of all types of revenue / income generated by

government agencies in the exercise of their administrative and regulatory function, such as
income from public enterprise / investment and income from grants and donations.
Specific Income Accounts – encompasses all taxes imposed on taxable income, properties,
and use or sale of goods and services, taxes on international trade and transactions and other
taxes including fines and penalties.
Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Expense Accounts
Personal Services (PS) – one of the current operating expenses which include the pay proper,
all authorized allowances, bonus, cash gifts, incentives and benefits and other personnel
benefits paid to officials and employees of the government.
Maintenance and Other Operating Expenses (MOOE) – other current operating expenses
which include traveling expenses, training and seminar expenses, water,
Financial Expenses – includes bank charges, interest expense, commitment fees and other
financial charges. It also includes losses incurred relative to foreign exchange transactions
and subsidies to GOCCs for the repayment of their foreign loans.
Coding System
Coding is the systematic assignment of numbers to distinguish items within a given

classification from each other.
Codes are assigned to account groups to facilitate location of accounts in the general and
subsidiary ledgers, to provide systematic arrangement and classification of accounts and
facilitate preparation of the consolidated financial reports as follows:
The account code structure consists of eight (8) mandatory digits as follows:

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Account Group represents the accounts classification as to assets, liabilities, equity, revenue /
income, and expenses.
Major account group classifies the account within an account group, e.g., for assets major
accounts: cash and cash equivalents, investments, receivables, inventories, investment
property, etc.
Sub-major account group further classifies the account within the major account group, e.g.,
for cash and cash equivalents: Cash on Hand, Cash in Bank-Local Currency, Cash in Bank-
Foreign Currency, etc.
General ledger (GL) account represents the account to be presented in the detailed financial
statements, e.g., Cash-Collecting Officer, Petty Cash, etc. This is composed of two (2)
segments. The first two digits from left is the GL code and the last digit is reserved to indicate
whether it is a contra account like, Allowance for Impairment, Accumulated Depreciation, etc.
Coding of assets with and without contra accounts shall be as follows:

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Accounting for Appropriations, Allotments and Notice of Cash Allocation
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.
Notice of Cash Allocation (NCA) is authority issued by the DBM to central, regional and
provincial offices and operating units to cover the cash requirements of the agencies.
Classification of Expenditures
Expenditures of NGAs shall be classified into categories as may be determined by the DBM
including, but not limited to the following:
a. Entity incurring the obligation;
b. Program, Activity and Project (PAP);
c. Object of expenditures, including personnel services (PS), maintenance and other

operating expenditures (MOOE), financial expenses (FE), and capital outlays (CO);
d. Region or locality of use;
e. Economic or functional classification of the expenditures;

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
f. Obligational authority and cash transactions arising from fund releases; and
g. Such other classifications as may be necessary for the budget process.
Under the New Government Accounting System, the agency does not journalize the
appropriations and allotments.
The agency records the allotment receives in the Registry of Allotments and Obligations (RAO)
by means of a memo entry.
Upon receipt of the NCA, the accountant of the agency shall journalize it by the following
entry:
Cash – National Treasury – Modified Disbursement System 100

Subsidy Income from National Government 100
The NCA received by the agency may be net of the amount of the taxes withheld by the agency.
The agency shall issue the Tax Remittance Advice (TRA) to take up the remittance of the tax
withheld.
The TRA issued is recorded by the agency by the following entry:
Due to BIR 10
If the NCA includes the taxes to be withheld by the agency, the entry to record the remittance
of the taxes withheld by the agency is:
Due to BIR 10
Accounting for Obligations
These are amounts to be paid by a government agency arising from act of a duly authorized
administrative officer binding the government to the immediate or eventual payment of a sum
of money.
These are peso amounts of orders placed, services received and other transactions requiring
future payments of money.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Under the new system, the incurrence of obligations is not journalized by the agency. Instead,
the agency records the obligations incurred in the Registry of Allotments and Obligations
classified according to type of obligation by means of a memo entry.
Accounting for Disbursements
These are payments of obligations incurred by the Agency. The NCA is used for the payment
of the following types of transactions:
1. Personal services
2. Maintenance and other operating expenses
3. Financial expenses
4. Purchase and/or construction of fixed assets such as building and structures, land, land
improvements, equipment, etc., charged against the capital outlay.
5. Miscellaneous transactions, such as cash transfer to another agency to implement a
project to the Agency.
The accountant shall credit Cash – National Treasury – Modified Disbursement System each
time a payment is made and debit the specific account being paid for, either asset or expense
account.
Personal Services
Payment for salaries, wages, and other remuneration to the personnel of the Agency may be
made through the following:
1. Payroll Fund in the hands of Disbursing Officer (DO).

2. Payroll Fund deposited in an authorized depository bank, withdrawal by the employees
is through the automated teller machine (ATM)
3. Direct payment to employees by individual checks.
Illustration:
Assume the following payroll fund:
Salaries and Wages P360

Additional Compensation 100
Personal Economic Relief Allowance 60
Gross Payroll P520
Less: Withholding tax P20

GSIS contribution 30
Pag-Ibig contribution 30
Philhealth contribution 20 100
Net Payroll P420

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
The Agency enters the obligation for the gross payroll of P520 in the Registry of Allotments
and Obligations – Personal Services (RAOPS).
The net payroll of P420 is advanced to a Disbursing Officer and is recorded by the
following entry:
Cash – Disbursing Officer 420

The payment of Salaries and Wages and other allowances is recorded by the Agency as
follows:
Salaries and Wages – Regular Pay 360

Additional Compensation (ADCOM) 100
Personnel Economic Relief Allowance 60
Due to BIR 20
Due to GSIS 30
Due to Pag-Ibig 30
Due to Philhealth 20
Cash – Disbursing Officer 420
The obligation of the government representing his share in the life and retirement
insurance, Pag-Ibig and Philhealth contributions are also recorded by the Agency in the
RAOPS by a memo entry and in its regular books by the following entry:
Life and Retirement Insurance Contributions (LRIC) 30

Pag-Ibig Contributions 30
Philhealth Contributions 20
Due to GSIS 30
Due to Pag-Ibig 30
The remittance of salary deductions and government share is recorded by the Agency as
follows:
Due to GSIS 60
Due to Pag-Ibig 60
Maintenance and Other Operating Expenses
Under the NGAS, the Asset Method will be used in recording disbursements when
expenditures apply to more than one accounting period.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Illustration:
Rent. The government signed a contract for the rental of office space with 3 months
advance payment of P90 starting November.
The agency enters the obligation of P90 in the Registry of Alloments and Obligations-
Maintenance and Other Operating Expenses, and records the payment in its book by the
following entry:
Prepaid Rent 90
Supplies and Materials. Assume the following transactions about office supplies:
1. Issued Purchase Order (PO) for office supplies, P60.

2. Paid the PO less withholding tax of P5.
3. Withdrawal of office supplies for office use, P40.
4. Remittance of withholding tax thru Tax Remittance Advice (TRA)
The above transactions are recorded by the Agency as follows:
1. The agency enters the obligation for office supplies in the RAOMO, P60.
2. The payment of the PO is recorded by the following entry:
Office Supplies Inventory 60

Due to BIR 5
3. The entry to record withdrawal of office supplies is:
Office Supplies Expense 40

Office Supplies Inventory 40
4. The agency entry to record the issuance of TRA is
Due to BIR 5
Cash Advances. Assume the following transactions for cash advances:
1. Set up petty cash fund for miscellaneous expenses, P120.

2. Release of the cash advance to the disbursing officer.
3. Request for replenishment of the petty cash fund for the following expenses:

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Office Supplies P50

Transportation fares 10
Repairs 20
FEDEX Air Cargo 15
Total P95
4. Replenishment of the petty cash fund.

5. Liquidation at year end for Office Supplies Expense, P80 and Traveling Expense, P20.
6. Return of unused petty cash fund (PCF).
The accounting procedures to record the above transactions are as follows:
1. The agency enters the obligation for the petty cash fund (PCF) in the RAOMO, P120.
2. The release of the cash advance is recorded by the agency as follows:
Petty Cash Fund 120

3. The request for the replenishment of the PCF is recorded in the RAOMO, P95.
4. The entry to record the replenishment of the PCF is:

Traveling Expenses-Local 10
Office Equipment Maintenance 20
Other Expenses 15
5. At year-end, agency record the liquidation of expenses as follows:

Traveling Expenses-Local 20
Petty Cash Fund 100
6. The RAOMO is adjusted for the unused PCF of P20. The agency records the return of
the unused PCF by the following entry:
Cash – Collecting Officer 20

Petty Cash Fund 20
Financial Expenses
These are expenses which are not used in the actual operation of the agency. Examples of
these are interest expenses and bank charges.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
To illustrate the accounting procedures involving these expenses, assume the following:
1. Bank charges per bank statement, P5.

2. Interest expense upon receipt of the bill, P8.
The agency records the above financial expenses as follows:
1. The agency enters the obligation for bank charges in Registry of Allotments and
Obligations – Financial Expenses, P5. The entry to record the bank charges in the
regular books of the agency is:
Bank Charges 5
Cash in Bank – Local Currency – Current Account 5
2. The receipt of the bill for interest is entered in the RAOFE and recorded in books of the
agency by the following entry:
Interest Expenses 5
Accounts Payable 5
The payment of interest expense is recorded by the agency as follows:
Accounts Payable 5
Purchase / Construction of Fixed Assets
Fixed asset accounts are recognized upon purchase; all incidental expenses are to be
capitalized.
Depreciation is taken up starting on the month succeeding the month of purchase or

completion of construction. Straight-line method is to be used.
The historical cost of acquiring an asset should include all costs necessarily incurred to bring
it to the condition and location necessary for its intended use.
Assets for use of the general public such as roads, bridges, railways, etc., shall be classified
as Public Infrastructures.
Costs of construction shall be debited to Construction in Progress account with the

appropriate asset classification. Upon completion, the Construction in Progress account is
closed, and the asset is entered in a separate registry, Registry of Public Infrastructures.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Illustration:
Case 1. Purchase of Office Equipment
1. Issued PO for the office equipment, P150.
Enter the obligation of P150 in the Registry of Allotments and Obligations – Capital
Outlay, P150.
2. Received the office equipment with the charge invoice.
Office Equipment 150

Accounts Payable 150
3. Paid the office equipment less withholding tax of P10.

Due to BIR 10
Case 2. Construction of Building by Contract
1. Signed the construction contract for the construction of the building, P200.
The obligation for the contract price is entered in the RAOCO, P200.
2. Paid 30% of the contract price, P60.
Advances to Contractor 60
3. Received the first billing, 50% of the contract price, P100.
Construction in Progress – Agency Assets 100

Advances to Contractor 60
Accounts Payable 40
4. Paid the first billing less withholding tax of P8.
Accounts Payable 40
Due to BIR 8

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
5. Received the second billing for the balance of the contract price, 100% completed.

6. Paid the second billing less withholding tax of P20.

Due to BIR 20
7. To recognize the Building account and to close the Construction in Progress account.
Buildings 200
8. To close Withholding Tax Payable account to Subsidy Income from the National
Government
Due to BIR 28
Case 3. General Repair / Construction of Building by Administration
For repair or construction of building and other structures undertaken by the

administration, the materials purchased shall be recorded to the Construction Materials
Inventory account.
This account is credited for all materials issued and labor paid for the construction or
repairs with a corresponding debit to Construction in Progress – Agency Assets account.
Upon completion of the project, the appropriate fixed asset account is recognized and the
Construction in Progress – Agency Assets account is closed.
Case 4. Purchased of Land and Building
When land and building are purchased together, the cost of each asset is segregated to
establish separate accounts so that appropriate depreciation on the building can be
recorded.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
To illustrate, assume the following transactions:
1. Signed contract to purchase land and building, P300.
The obligation to pay P300 for the land and building is entered in the RAOCO, P300.
2. Assessed value of the land, P180.
Land 180
Building 120
3. Paid the land and building less 10% withholding tax.

Due to BIR 30
4. Remitted the withholding tax, which was included in the NCA for the land and building.
Due to BIR 30
Miscellaneous Transactions
Inter-agency transfer of funds to implement an agency project. The agency making the
transfer is the Source Agency (SA) and the receiving agency is the Implementing Agency (IA).
Illustration:
1. Agency ABC is to transfer cash of P400 to Agency XYZ for a land beautification
project.
Enters the obligation in RAOCO, P400.
2. Cash is transferred to Agency XYZ.
Due from NGA – Agency XYZ 400

3. Received report from Agency XYZ.
Land Development 400

Due from NGA – Agency XYZ 400

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Accounting for Income, Collections and Related Transactions
The sources of income and collections made by the agency are:
1. Taxes
2. Operating and Service Income
3. Grants and Donations
4. Borrowings
5. Miscellaneous Receipts and Collections
The accounting procedures to record the collections will depend on the agency’s authority to
use the income collected.
Without Authority to Use
All revenues collected by the agency, regardless of the amount and frequency of collections
are to be remitted to the National Treasury.
Such income shall be recorded by the collecting agency in a separate book of accounts it shall
maintain, the National Government Books.
The collection shall be credited to the income account of the collecting agency, and which
shall be debited upon remittance to the National Treasury.
Illustration:
Income Taxes
1. Collection of income taxes from individuals by the Bureau of Internal Revenue, P100.

Income Taxes – Individuals 100
2. Remits the above collections to Bureau of Treasury.
Income Taxes – Individuals 100


City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
Taxes on Goods and Services
1. Receipt of excise tax payment to Bureau of Customs, P200

Excise Tax on Articles 200
2. Remittance to Bureau of Treasury thru bank.
Excise Tax on Articles 200

Motor Vehicles Registration Fees
1. Land Transportation Office collected motor vehicles registration fees, P300.

Registration Fees 300
2. Remittance to Bureau of Treasury thru bank.
Registration Fees 300

With Authority to Use
For agencies which are authorized to use income collected for their operations, the
collection shall be recorded as income in the Regular Agency Books.
Illustration:
Rent
1. Issuance of bill for the rent of office space, P20.
Accounts Receivable 20
Rent Income 20
2. Collection of the rent.

Accounts Receivable 20

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
3. Deposit to the bank.
Cash in Bank – Local Currency, Current Account 20

4. Use of the collection for the repair of the office space.
Repairs and Maintenance – Office Building 20

Service Fees
1. Collection of inspection fees, P10.

Inspection Fees 10
2. Deposit of collections to the bank.

3. Use of income collected to pay for overtime services.
Overtime and Night Pay 10

Trial Balance
Under the New Government Accounting System, the two-money column or the trial balance
of balances is required.
The column headings of the trial balance are:
Account Title Account Code Debit Credit
Adjusting Entries
Under the NGAS, before the preparation of financial statements, adjusting entries are to be
prepared for proper matching of revenues and expenses.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
As in commercial accounting, there are two principal types of adjustments: accrued items and
deferred items.
Depreciation accounting will be followed in the NGAS. Like in commercial accounting,

depreciation shall be recorded in the books as expense and is credited to the accumulated
depreciation. Straight-line method of computing depreciation is to be used.
Closing Entries
Under the NGAS, the following shall be closed at the end of the year:
Unused Notice of Cash Allocation
At the end of the year, the unused NCA is to be reverted to the Bureau of Treasury (BTR)
because of the policy of the Department of Budget and Management (DBM) that the NCA
will only be used for the year it was issued.
Illustration:
Total NCA received for the year P 100,000

Total MDS checks issued 90,000
Unused NCA P 10,000
The closing entry would be:
Subsidy, Income from National Government 10,000

Cash, National Treasury - MDS 10,000
Nominal or Temporary Accounts
As in commercial accounting, under the NGAS, all income and expense accounts shall be
close to the Income and Expense Summary account.
The following are the procedures of the closing process:
1. Close all income accounts to Income and Expense Summary.

2. Close all expense accounts to Income and Expense Summary.
3. Close the balance of Income and Expense Summary account to Retained Operating
Surplus.
4. Close the balance of Prior Year’s adjustments to Retained Operating Surplus account.
5. Close the balance of the Retained Operating Surplus account to Government Equity
account.

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
IV. Learning Tasks
Read the following questions carefully and choose the letter that corresponds to the best answer.
1. Agency XY collected cash of P40,000 for the rent of its office space. The collection was
deposited to Philippine National Bank (PNB). Agency XY records the deposits in its regular
books as:
a. Cash in Bank – Local Currency, Current Account 40,000

Cash – Collecting Officer 40,000
b. Cash – Deposits 40,000

c. Cash – Deposits 40,000

Cash – Disbursing Officer 40,000
d. Cash in Bank – Local Currency, Current Account 40,000

Cash – Disbursing Officer 40,000
2. Agency BB’s allotment and Notice of Cash Allocation for the year were P10,000,000 and
P8,000,000 respectively. Checks issued during the year amounted to P7,000,000. What
closing entry is made for the unused NCA as of the end of the year?
a. Appropriation Allotted 1,000,000

National Clearing Account 1,000,000
b. Subsidy Income from National Government 3,000,000

Cash, National Treasury – MDS 3,000,000
c. Cash, National Treasury – MDS 1,000,000

Subsidy Income from National Government 1,000,000
d. Subsidy Income from National Government 1,000,000

3. The approved appropriation of Department JJ for 2020 was P10,000,000. Ninety percent of
this appropriation was released by the Department of Budget and Management accompanied
by Notice of Cash Allocation. During the year, the amount of obligations incurred was
equivalent to 80% of the NCA. 75% of these obligations was paid by checks. Department of
JJ records the receipt of the NCA as follows:
a. National Clearing Account 9,000,000

Appropriations Allotted 9,000,000

City of Olongapo
GORDON COLLEGE
Tel. No. (047) 224-2089 loc. 314
b. Cash, National Treasury – MDS 9,000,000

c. Subsidy Income from National Government 9,000,000

Notice of Cash Allocation 9,000,000
d. Cash, National Treasury – MDS 9,000,000

4. Using the same data above, the closing entry at the end of the year to close the unused NCA
is
a. Cash, National Treasury – MDS 3,600,000

b. Subsidy Income from National Government 3,600,000

c. National Clearing Account 5,400,000

Appropriations Allotted 5,400,000
d. Subsidy Income from National Government 5,400,000

5. Collection of P50,000 representing motor vehicles registration fees was recorded by LTO as
P55,000. The correcting entry under the NGAS is:
a. Cash – Collecting Officer 5,000

Registration Fees 5,000
b. Cash, National Treasury – MDS 5,000

Registration Fees 5,000
c. Registration Fees 5,000

d. Registration Fees 5,000

Cash, National Treasury – MDS 5,000
V. Teaching and Learning Materials and Resources
1. Government Accounting Manual for National Government Agencies Volume 1



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Republic of the Philippines

DETAILED LEARNING MODULE

Title: Government Chart of Accounts, Accounting and Reporting

II. Learning Objectives

III. Topics and Key Concepts

The Revised Chart of Accounts

Balance Sheet accounts consist of assets, liabilities, and equity.

Income / Revenue Accounts

General Income Accounts – consists of all types of revenue / income generated by

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Coding is the systematic assignment of numbers to distinguish items within a given

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Coding of assets with and without contra accounts shall be as follows:

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Accounting for Appropriations, Allotments and Notice of Cash Allocation

a. Entity incurring the obligation;

b. Program, Activity and Project (PAP);

c. Object of expenditures, including personnel services (PS), maintenance and other

d. Region or locality of use;

e. Economic or functional classification of the expenditures;

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

g. Such other classifications as may be necessary for the budget process.

Cash – National Treasury – Modified Disbursement System 100

The TRA issued is recorded by the agency by the following entry:

Accounting for Obligations

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Accounting for Disbursements

1. Payroll Fund in the hands of Disbursing Officer (DO).

Salaries and Wages P360

Less: Withholding tax P20

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Cash – Disbursing Officer 420

Salaries and Wages – Regular Pay 360

Life and Retirement Insurance Contributions (LRIC) 30

Maintenance and Other Operating Expenses

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

1. Issued Purchase Order (PO) for office supplies, P60.

The above transactions are recorded by the Agency as follows:

Office Supplies Inventory 60

3. The entry to record withdrawal of office supplies is:

Office Supplies Expense 40

4. The agency entry to record the issuance of TRA is

Cash Advances. Assume the following transactions for cash advances:

1. Set up petty cash fund for miscellaneous expenses, P120.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

Office Supplies P50

4. Replenishment of the petty cash fund.

The accounting procedures to record the above transactions are as follows:

Petty Cash Fund 120

Office Supplies Expense 50

5. At year-end, agency record the liquidation of expenses as follows:

Office Supplies Expense 80

Cash – Collecting Officer 20

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

1. Bank charges per bank statement, P5.

The agency records the above financial expenses as follows:

The payment of interest expense is recorded by the agency as follows:

Purchase / Construction of Fixed Assets