ACCOUNTING FOR

DISBURSEMENTS
AND OTHER
RELATED TRANSACTIONS
PETERSON Y. MANALAC, CPA
 DISBURSEMENT

• All cash paid during a given period whether in cash or

other mode of payment
• Disbursement System
• Receipt of Disbursement Authority
• Preparation and processing of Disbursement Voucher
• Disbursement Control Number Structure

• Preparation and issuance of check/ADA

• Payment by cash 2
• Granting, utilization, and liquidation/replenishment of cash advances
FUNDAMENTAL PRINCIPLES OF
DISBURSEMENT OF PUBLIC FUNDS

• No money shall be paid out of any public treasury or depository

except in pursuance of appropriation law or other specific statutory
authority
• Government funds or property shall be spent or used only for
public purposes
• Trust fund shall be used only for their specific purpose
• Disbursement shall be approved by proper officials
• Supported with proper documentation
• Adherence to law and regulations for financial transactions: GAAP,
management and fiscal administration 3
BASIC REQUIREMENTS FOR DISBURSEMENTS
AND REQUIRED CERTIFICATIONS

• Availability of allotment/budget for obligation/utilization – Budget Officer/Head of Budget

Unit
• Obligations/Utilization charged against available allotment/budget – Chief
Accountant/Head of Accounting Unit
• Availability of Funds and Completeness of Documents – Chief Accountant
• Availability of Cash – Chief Accountant
• Legality and conformance with existing rules and regulations of the transaction –
Requesting and Approving Officials
• Necessity and legality of disbursements, with proper documentation – Head of
Requesting Unit
• Approval of Disbursement – Head of Agency or authorized representative
ADD A FOOTER 4
“No funds shall be disbursed, and no expenditures or obligations
chargeable against any authorized allotment shall be incurred without
securing certification of the Chief Accountant as to the availability of
funds and allotment to which the obligation may be properly charged.”

5
“No obligations shall be certified as accounts payable unless the
obligation is founded on a valid claim that is supported with sufficient
evidence and there is proper authority of its incurrence. Certification
on fictitious obligation shall be considered void”

6
DISBURSEMENT AUTHORITY

• NOTICE OF CASH ALLOCATION (NCA)

• NOTICE OF TRANSFER OF ALLOCATION (NTA)
• TAX REMITTANCE ADVICE
• NON-CASH AVAILMENT AUTHORITY (NCAA)
• CASH DISBURSEMENT CEILING (CDC)

7
NCA

• Authority issued by DBM to the GAs for payment of expenses

• Modes of Disbursement
• MDS check
• Authority to Debit Account (ADA)
• Electronic Modified System (eMDS)
• Cashier or Cash Collecting Officer shall not issue Official
Receipt
• Monitored through RANCA by the Accounting Unit

8
NTA

• Transfer of Cash Allocation from Central Office to regional and

other operating offices
• Valid within the period prescribed under existing rules and
regulations
• Monitored through RANTA

9
NCAA

• Authority issued by DBM to agencies to cover the liquidation of their actual

obligations incurred against available allotments for availment of proceeds
from loans/grants through supplier’s credit/constructive cash
• Disbursement through NCAA is also called as Direct Payment Method or
Direct Payment Scheme of Loan Availment

10
CDC

• Authority issued to DFA and DOLE to utilize their

income collected/retained by their Foreign Service
Posts to cover their operating requirements

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MODES OF DISBURSEMENT

• MDS CHECK/COMMERCIAL CHECK

• CASH – THROUGH CASH ADVANCES
• AUTHORITY TO DEBIT ACCOUNT (ADA)
• eMDS
• Cashless Purchase Card System
• NCAA
• TRA

ADD A FOOTER 12
 DISBURSEMENT THROUGH CHECK
• Used for payment of regular expenses which cannot be conveniently nor practically paid
using the ADA or not authorized to be paid using the Petty Cash Fund or advances for
operating expenses.
• Reported and recorded in the books of accounts whether released or unreleased to the
respective payees, including cancelled checks
• Two types of checks:
• Modified Disbursement System Checks – are checks issued by government agencies
chargeable against the account of the Treasurer of the Philippines, which are maintained with
different MDS-GSBs.
• Commercial Checks – are checks issued by NGAs chargeable against the Agency Checking
Account with GSBs. These shall be covered by income/receipts authorized to be deposited with
AGDBs.
• Recorded chronologically in the Checks and ADA Disbursements Record
(CkADADRec) maintained by the Cash/Treasury Unit
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• All checks/ADA drawn whether released or unreleased shall be included in the Report of
Checks Issued (RCI), which shall be prepared daily by the Cashier.
 DISBURSEMENT THROUGH CHECK
Accounting for Cancelled Checks
•Checks may be cancelled when they become stale, voided or spoiled.
•The depository bank considers a check stale, if it has been outstanding for over six months
from date of issue or as prescribed.
•A stale, voided or spoiled check shall be marked cancelled on its face and reported as
follows:
a. Voided, spoiled or unclaimed stale checks with the Cashier shall be reported as
cancelled in the List of Unreleased Checks that will be attached to the RCI.
b. New checks may be issued for the replacement of stale/spoiled checks in the hands of
the payees or holders in due course, upon submission of the stale/spoiled checks to the
Accounting Division/Unit. A certified copy of the previously paid DVs shall be attached
to the request for replacement. A JEV shall be prepared to take up the cancellation. The
replacement check shall be reported in the RCI.
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DISBURSEMENT THROUGH CASH

• Cash disbursements constitute payments out of cash advances granted to

the regular and special disbursing officers for personal services, petty
expenses and MOOE for field operating requirements.
• All cash payments shall be covered by duly approved DVs/payrolls/petty
cash vouchers (PCVs)

15
DISBURSEMENT THROUGH CASH

The granting and liquidation of cash advances shall be governed by the

following existing COA rules and regulations and other pertinent issuances:
a. No cash advance shall be given unless for a legally authorized specific
purpose;
b. A cash advance shall be reported on and liquidated as soon as the purpose for
which it was given has been served;
c. No additional cash advance shall be allowed to any official or employee unless
the previous cash advance given to him/her is first settled/liquidated or a
proper accounting thereof is made;
d. Except for cash advance for official travel, no officer or employee shall be
granted cash advance unless he/she is properly bonded in accordance with
existing laws or regulations. The amount of cash advance which may be 16
granted shall not exceed the maximum cash accountability covered by his/her
bond;
DISBURSEMENT THROUGH CASH

The granting and liquidation of cash advances shall be governed by the

following existing COA rules and regulations and other pertinent
issuances:
e. Only permanently appointed officials shall be designated as disbursing
officers;
f. Only duly appointed or designated disbursing officer may perform
disbursing functions. Officers and employees who are given cash
advances for official travel need not be designated as Disbursing Officers;
g. Transfer of cash advance from one accountable officer to another shall not
be allowed; and
h. The cash advance shall be used solely for specific legal purpose for which
it was granted. Under no circumstance shall it be used for encashment of 17
checks or for liquidation of a previous cash advance.
DISBURSEMENT THROUGH CASH

The granting and liquidation of cash advances shall be governed by

the following existing COA rules and regulations and other pertinent
issuances:
i. Cash advances shall be liquidated as soon as the purpose for which it
has been given has been served.
• Cash Advances for Payroll - The Advances for Payroll shall not be used
for encashment of checks or for liquidation of previous or other types of
cash advances. It shall be equal to the net amount of the processed payroll
corresponding to the pay period. Liquidation of the advances shall be made
within five (5) days after the end of the pay period. Any unclaimed
salaries/allowances shall be refunded and issued official receipt to close the
account.
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 DISBURSEMENT THROUGH CASH
The granting and liquidation of cash advances shall be governed by the following
existing COA rules and regulations and other pertinent issuances:
i. Cash advances shall be liquidated as soon as the purpose for which it has been given has
been served.
• Cash Advances for Travel
• Local Travel - liquidation shall be done within a period of 30 days upon return to the personnel’s
workstation.
• Foreign Travel - liquidated within 60 days upon return to the Philippines.

• The Liquidation Report (LR) shall be prepared by the officers/employees concerned

and submitted to the Accounting Division/Unit with appropriate SDs as basis for JEV
preparation.
• The excess cash advance shall be refunded and an OR shall be issued to acknowledge
receipt thereof.
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• In case the amount of cash advance is less than the travel expenses incurred, the LR
shall be submitted to liquidate the cash advance previously granted and a DV shall be
prepared to claim reimbursement of the deficiency in amount.
DISBURSEMENT THROUGH CASH

The granting and liquidation of cash advances shall be governed by the following
existing COA rules and regulations and other pertinent issuances:
i. Cash advances shall be liquidated as soon as the purpose for which it has been given
has been served.
• Cash Advances for Petty Operating Expenses
• sufficient for the recurring petty operating expenses of the agency for one month
• Imprest System
• All replenishments shall be directly charged to the expense account and at all times
• the PCF shall be equal to the total cash on hand and the unreplenished expenses
• The PCF shall be replenished as soon as disbursements reach at least 75% or as needed.
• Payments out of PCF, which shall be made through a Petty Cash Voucher (PCV), should be
allowed only for amounts not exceeding P15,000 for each transaction, except when a higher
amount is allowed by law and/or specific authority by the COA.
• The unused balance of the PCF shall not be closed/refunded at the end of the year. The fund shall be
closed only upon termination, separation, retirement or dismissal of the Petty Cash Fund Custodian 20
(PCFC), who in turn shall refund any balance to close his/her cash accountability
• At the end of the year, the PCFC shall submit to the Accounting Division/Unit all unreplenished Petty Cash
Vouchers (PCVs) for recording in the books of accounts.
DISBURSEMENT THROUGH CASH
The granting and liquidation of cash advances shall be governed by
the following existing COA rules and regulations and other pertinent
issuances:
i. Cash advances shall be liquidated as soon as the purpose for which it
has been given has been served.
• Cash Advances for Petty Operating Expenses
• Payments out of PCF, which shall be made through a Petty Cash Voucher
(PCV), should be allowed only for amounts not exceeding P15,000 for each
transaction, except when a higher amount is allowed by law and/or specific
authority by the COA.
• The unused balance of the PCF shall not be closed/refunded at the end of the year. The
fund shall be closed only upon termination, separation, retirement or dismissal of the
Petty Cash Fund Custodian (PCFC), who in turn shall refund any balance to close
his/her cash accountability 21
• At the end of the year, the PCFC shall submit to the Accounting Division/Unit all
unreplenished Petty Cash Vouchers (PCVs) for recording in the books of accounts.
DISBURSEMENT THROUGH CASH

Cash Advances for Payroll Example

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DISBURSEMENT THROUGH CASH

Cash Advances for Travel Example

Agency A granted and approved the cash advance for local travel of Bee amounting
to 5,000.00. Upon liquidation, the actual travel expense of Bee is 3,500.00 – Bee
remitted the excess cash advance to the Cash Collecting Officer.

23
DISBURSEMENT THROUGH CASH

Cash Advances for Petty Operating Example

Agency A authorizes Cee as PCF custodian and granted PCF amounting to 50,000.00.
Expenses incurred are as follows:

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DISBURSEMENT THROUGH CASH

Accounting for Cash Shortage/Overage of Disbursing Officer

• Cash overage discovered by the Auditor that cannot be satisfactorily
explained by the Disbursing Officer shall be forfeited in favor of the
government and an official receipt shall be issued by the Collecting
Officer/Cashier. The cash overage shall be taken up as Miscellaneous
Income. Cash shortage which is not restituted by the Disbursing Officer
despite demand in writing by the Auditor shall be taken up as receivable
from the Disbursing Officer.

25
DISBURSEMENT THROUGH CASH

Accounting for Cash Shortage/Overage of Disbursing Officer

Pro-forma entries
• Cash Overage
Cash Collecting Officer xxx
Miscellaneous Income xxx
*to recognize cash overage

Cash-Treasury/Agency Deposit, Regular xxx

Cash Collecting Officer xxx
*to recognize the remittance of forfeited cash overage to the BTr 26
DISBURSEMENT THROUGH CASH

Accounting for Cash Shortage/Overage of Disbursing Officer

Pro-forma entries
• Cash Shortage
Due from Officers and Employeesxxx
Advances for OE/Payroll xxx
*To recognize cash shortage of Disbursing Officer

Cash Collecting Officer xxx

Due from Officers and Employees xxx
* To recognize restitution of cash shortage

Cash-Treasury/Agency Deposit, Regular xxx

Cash Collecting Officer xxx
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*To recognize the remittance of restituted cash shortage to the BTr
DISBURSEMENT THROUGH ADA
• LDDAP-ADA – accountable form used as an authorization issued by the
government agency to the MDS-GSB instructing the bank to debit a
specified amount from its available NCA to pay its creditors/payees listed
in LDDAP-ADA
• Drawn to pay various payees with the same bank
• Reported in Report of ADA Issued (RADAI) prepared by the Cash/Treasury
Unit daily. All approved LDDAP-ADA including those not yet delivered to
the MDS-GSB shall be included in the RADAI. The RADAI together with
the original copies of the DVs and other SDs shall be submitted to the
Accounting Division/Unit for the preparation of JEV.

28
DISBURSEMENT THROUGH ADA
• The following are excluded from the implementation of ExMDPS:
a. Payment of Terminal Leave and Retirement Gratuity (TL/RG) benefits
which is governed by Republic Act No. 10154 as implemented by
CSC Resolution No.1300237 and Budget Circular No. 2013-1;
b. Remittance of social insurance premium contributions to government
corporations, such as GSIS, PHILHEALTH, and HDMF;
c. Payment of Accounts Payable to utility companies, such as: supplier
of petroleum, oil and lubricants, water, illumination and power
services, telephone, internet and other communication services; and
d. Other payables which cannot be conveniently nor practicably paid
using the ADA
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DISBURSEMENT THROUGH NCAA
• Issuance of Journal Entry Voucher (JEV) by BTr to the agency to record payment of goods and
services made directly by the lending institution to the supplier or contractor
• Recorded in the General Journal
ILLUSTRATION:
Agency A acquires communication equipment for 1M, on account, and subsequently settles the
account through Direct Payment Scheme
BOOKS OF AGENCY A BOOKS OF BTr

Communication Equipment 1M
Accounts Payable 1M
*to recognize receipt of PPE procured through
direct payment scheme
Accounts Payable 1M Subsidy to NGAs 1M
Subsidy from National Govt 1M Loan-Payable – Foreign 1M
*to recognize receipt of NCAA and payment of *to recognize replenishments made to 30

Payable AGSB negotiated MDS-Checks and payments

on account of NGA
DISBURSEMENT THROUGH TRA
• Constructive remittance of taxes and customs duties withheld to the BIR or BOC

31
End of Part I

ADD A FOOTER 32
ACCOUNTING FOR INVENTORY

• Measurement of Inventory
• LCNRV
• FV at acquisition date for non-exchange transaction
• Current Replacement Cost
• Specific Identification
• Perpetual Inventory Method
• Semi-expendable Property
• PPE amounting to 15,000 and below
• Expense when issued using Inventory Custodian Slip
ADD A FOOTER 33
ACCOUNTING FOR INVENTORY
• Inventory Accounting System
• Monitoring, controlling and recording of acquisition
and disposal of inventory
• Preparation of Purchase Request if inventory is not
available
• Accomplish procurement process
• Approval of purchase order
• Receipt, inspection, acceptance and recording of
delivered items
• Requisition and issue of inventory items 34

• Transfer or disposal of inventory items

ACCOUNTING FOR PPE

• PPE are tangible items that are:

• Held for use in the production or supply of
goods or services, for rental to others, or
for administrative purposes; and
• Expected to be used for more than one
reporting period
35
INFRASTRUCTURE ASSET

• Characteristics:
• Part of the system or network
• Specialized in nature and do not have alternative
uses
• Immovable
• Subject to constraints on disposal
• Examples: road network, sewer systems, water and
power supply systems and communication networks
36
ADD A FOOTER 37
PPE RECOGNITION PRINCIPLE

a. It is probable that the future economic benefits or

service potential associated with the item will flow to
the entity;
b.the cost or fair value of the item can be measured
reliably;
c.beneficial ownership and control clearly rest with the
government;
d.the asset is used to achieve government objectives;
and e. it meets the capitalization threshold of P15,000.
ADD A FOOTER 38
PPE RECOGNITION PRINCIPLE

The capitalization threshold of P15,000 represents the

minimum cost of an individual asset recognized as a
PPE on the Statement of Financial Position.

a. Items with individual values below the threshold but

which work together in the form of a group of network
asset whose total value exceeds the threshold shall be
recognized as part of the primary PPE. (Example:
computer network, PABX system, sewerage system).
ADD A FOOTER 39
PPE RECOGNITION PRINCIPLE

The capitalization threshold of P15,000 represents the

minimum cost of an individual asset recognized as a
PPE on the Statement of Financial Position.

b. This threshold shall be applied on an individual asset

or per item basis. Each item within the bulk acquisition
with aggregate or total value of PPE, such as library
books, computer peripherals and small items of
equipment, will need to meet the capitalization
ADD A FOOTER 40

threshold to be recognized as PPE

MODE OF ACQUISITION

• Purchase
a.On Cash Basis. PPE acquired through cash
purchase shall initially be recognized at cost
which includes cash paid plus all costs incurred
in bringing the asset to the location necessary for
its intended use such as delivery, installation
costs, etc. These are recognized in the books of
accounts as PPE after inspection and
acceptance of delivery.
ADD A FOOTER 41
MODE OF ACQUISITION

• Purchase
b. On Account. When an asset is acquired on
account subject to a cash discount, the cost of
the asset is equal to the purchase price,
including import duties and non-refundable
purchase taxes, after deducting trade discounts
and rebates.
ADD A FOOTER 42
 MODE OF ACQUISITION
• Purchase
c. On Installment Basis. The cost of an item of
PPE is the cash price equivalent or its fair value
at the recognition date. However, if acquired
through installment and payment is deferred
beyond normal credit terms, the difference
between the cash price equivalent and the total
payment is recognized as interest over the
period of credit, unless such interest is
ADD A FOOTER 43

capitalized as allowed in PPSAS 5, Borrowing

 MODE OF ACQUISITION
• Purchase
d. Purchase with promotional items. If promotional
items are received upon purchase of the PPE,
the allocation of cost for the promo items
received shall be as follows:
1. If the promotional item received is the same as
the PPE purchased, the total purchase cost shall
be allocated to the total quantity purchased plus
the promotional item.
ADD A FOOTER 44
 MODE OF ACQUISITION
• Purchase
e. If the promotional item received is different from
the PPE purchased, the cost of the promo item
shall be its fair value. It shall be deducted from
the total cost of the items purchased and the
balance shall be allocated to the total quantity
purchased

ADD A FOOTER 45
 MODE OF ACQUISITION
• Purchase
f. At a lump sum price. In case the acquisition of
PPE is at a “lump sum price”, the cost shall be
apportioned to the asset acquired in order to
have proper basis for computing depreciation.
The purchase cost shall be distributed based on
the relative fair value of the assets acquired.

ADD A FOOTER 46
 MODE OF ACQUISITION
• Construction
• During the construction period, all expenses incurred in
relation to the construction of the PPE shall be taken up
in the books as Construction in Progress (CIP) with the
appropriate asset classification. As soon as the
construction is completed, the “Construction in
Progress” account shall be reclassified to the proper
asset account. Likewise, all expenses such as interests,
license fees, etc., during the construction period shall
be capitalized.
ADD A FOOTER 47
 MODE OF ACQUISITION
• Construction
• However, where loans intended for the construction of
infrastructure projects that were contracted by the NG
and recorded in the BTr, borrowing cost shall not be
capitalized. Instead, the interest on loans shall be
recognized as expenses in the NG books of the BTr.

ADD A FOOTER 48
 MODE OF ACQUISITION
• Exchange
• One or more items of PPE may be acquired in exchange for a
non-monetary assets, or a combination of monetary and non-
monetary assets. The cost of such an item of PPE is measured
at its fair value unless (a) the exchange transaction lacks
commercial substance, or (b) the fair value of neither the asset
received nor the asset given up is reliably measurable.
However, if the acquired item is not measured at fair value, its
cost is measured at the carrying amount of the asset given up.
Recognition of costs in the carrying amount of an item of PPE
ceases when the item is in the location and condition necessary
for it to
ADD A FOOTER 49