1.

Enumerate the fundamental principles for disbursement of

public funds.
Section 4 of P.D. No. 1445, the Government Auditing Code of the Philippines, provides
that all financial transactions and operations of any government entity shall be governed
by the following fundamental principles:
a. No money shall be paid out of any public treasury or depository except in pursuance
of an appropriation law or other specific statutory authority.
b. Government funds or property shall be spent or used solely for public purposes.
c. Trust funds shall be available and may be spent only for the specific purpose for
which the trust was created or the funds received.
d. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency.
e. Disbursement or disposition of government funds or property shall invariably bear the
approval of the proper officials.
f. Claims against government funds shall be supported with complete documentation.
g. All laws and regulations applicable to financial transactions shall be faithfully
adhered to.
h. Generally accepted principles and practices of accounting as well as of sound
management and fiscal administration shall be observed, provided that they do not
contravene existing laws and regulations.

2. Identify the basic requirements and certification for Disbursement of public funds.
a. Availability of allotment/budget for obligation/utilization certified by the Budget
Officer/Head of Budget Unit;
b. Obligations/Utilizations properly charged against available allotment/budget by the Chief
Accountant/Head of Accounting Unit;
c. Availability of funds certified by the Chief Accountant. The Head of the Accounting Unit
shall certify the availability of funds before an Agency Head or his duly authorized
representative enter into any contract that involves the expenditure of public funds based
on the copy of budget release documents;
d. Availability of cash certified by the Chief Accountant. The Head of the Accounting Unit
shall certify the availability of cash and completeness of the supporting documents in the
disbursement voucher and payroll based on the Registry of Allotments and Notice of
Cash Allocation/Registry of Allotment and Notice of Transfer of Allocation;
 e. Legality of the transactions and conformity with existing rules and regulations. The
requesting and approving officials shall ensure that the disbursements of government
funds are legal and in conformity with applicable rules and regulations;
f. Submission of proper evidence to establish validity of the claim. The Head of the
Requesting Unit shall certify on the necessity and legality of charges to allotments under
his/her supervision as well as the validity, propriety and legality of supporting
documents. All payments of government obligations and payables shall be covered by
Disbursement Vouchers (DV)/Payrolls together with the original copy of the supporting
documents which will serve as basis in the evaluation of authenticity and authority of the
claim. It should be cleared, however, that the submission of the supporting documents
does not preclude reasonable questions on the funding, legality, regularity, necessity
and/or economy of the expenditures or transactions; and;
g. Approval of the disbursement by the Head of Agency or by his duly authorized
representative. Disbursement or disposition of government funds or property shall
invariably bear the approval of the proper officials. The DVs/Payrolls shall be signed and
approved by the head of the agencies or his duly authorized representatives.

3. Explain the use of Notice of Cash Allocation (NCA)

Sec. 3. Notice of Cash Allocation. The NCA shall be the authority of an agency to pay operating
expenses, purchases of supplies and materials, acquisition of PPE, accounts payable, and other
authorized disbursements through the issue of MDS checks, ADA or other modes of
disbursements.
a. No MDS check/ADA shall be issued without the covering NCA. Hence, the total MDS
checks/ADA issued shall not exceed the total NCA received. To maximize the available
NCAs of the agency, the Common Fund System policy shall be adopted whereby cash
allocation balances of agencies under the Regular MDS Account may be used to cover
payment of current year’s accounts payable i.e., goods and services which have been
delivered and accepted during the year charged against appropriations of prior year/s after
satisfying their regular operating requirements as reflected in their Monthly Cash
Program.
b. NCA issued and credited to the Special MDS Accounts of agencies for payment of
retirement gratuity/terminal leave benefits as well as prior years’ accounts payable shall
be valid within the period prescribed under existing rules and regulations. The NCA shall
be monitored through the maintenance of the Registry of Allotments and Notice of Cash
Allocation (RANCA)(Appendix 30) by the Accounting Division/Unit.
c. NCA issued and credited to the Special MDS Accounts for Trust to cover payments of
authorized claims shall be valid within the period prescribed under existing regulations.
 d. For NCA issued for foreign assisted projects such as grants from foreign country with a
separate MDS account maintained by the spending agency with Government Servicing
Banks (GSBs), MDS check/ADA shall be issued only for specific purpose until full
implementation of the project, subject to pertinent DBM issuances prescribing the
validity of the NCA.

4. Explain the use of Notice of Transfer Of Allocation (NTA)

The NTA shall be the authority of the regional and operating units to pay their operating
expenses, purchases of supplies and materials, acquisition of PPE, accounts payable, and other
authorized disbursements through the issue of MDS checks, ADA or other modes of
disbursements.

5. Enumerate and discuss the two types of checks being issued by government agencies.
a. Modified Disbursement System (MDS) Checks-issued by government agencies
chargeable against the account of the Treasurer of the Philippines, which are maintained
with different MDS - Government Servicing Banks (GSBs). These are covered by Notice
of Cash Allocation, an authorization issued by the DBM to government agencies to
withdraw cash from the National Treasury through the issuance of MDS checks or other
authorized mode of disbursements.
b. Commercial Checks- issued by government agencies chargeable against the Agency
Checking Account with GSBs. These are covered by income/receipts authorized to be
deposited with AGDBs; and funding checks received by RO/OUs from COs/ROs,
respectively.

6. List down the COA rules and regulations (and other issuances) governing the grant and
liquidation of cash advances.
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 granted shall not exceed the maximum cash
accountability covered by his/her bond;
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 checks or for liquidation of a
previous cash advance.
The specific rules and regulations on the granting, utilization and liquidation of cash advances
are provided for under COA Circular No. 97-002 dated February 10, 1997, as amended by COA
Circular No. 2006-005 dated July 13, 2006.

7. Explain briefly the following:

A. Accounting for inventory measurement.
Inventories shall be measured as follows:
a. At the lower of cost and net realizable value. However, where inventories are acquired
through a non-exchange transaction, their costs shall be measured at their fair value as at
the date of acquisition; (Pars. 15-16, PPSAS 12)
b. At the lower of cost and current replacement cost where they are held for distribution at
no charge or for a nominal charge, or for consumption in the production process of goods
to be distributed at no charge or for a nominal charge; or (Par. 17, PPSAS 12)
c. In accordance with PPSAS 27, inventories comprising agricultural produce that an entity
has harvested from its biological assets shall be measured on initial recognition at their
fair value less costs to sell at the point of harvest. (Par. 29, PPSAS 12)

B. Accounting for PPE:

The cost of an item of PPE shall be recognized as assets if, and only if:
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.Under this recognition principle, an entity
shall evaluate all its PPE costs at the time they are incurred. These costs include cost
incurred initially to acquire or construct an item of PPE and costs incurred subsequently
to add to, replace part of, or service the PPE.
Sec. 4. Applying the Capitalization Threshold of P15, 000. The capitalization threshold of P15,
000 represents the minimum cost of an individual asset recognized as a PPE on the Statement of
Financial Position.
1. 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).
166 Expenditures incurred on purchasing, developing, and operating hardware, like web
servers, staging servers, production servers and internet connections of a website is
accounted for as PPE if the total management or construction)
2. Costs of site preparation;
3. Initial delivery and handling costs;
4. Installation and assembly costs;
5. Costs of testing whether the asset is functioning properly, after deducting the net
proceeds from selling any items produced while bringing the asset to that location and
condition(such as samples produced when testing equipment); and
6. Professional fees.
The initial estimate of the costs of dismantling and removing the item and restoring the site on
which it is located, the obligation for which an entity incurs either when the item is acquired, or
as a consequence of having used the item during a particular period for purposes other than to
produce inventories during that period.

C. Accounting for Infrastructure Assets

Accounting for infrastructures refers to the recognition, measurement, and processing of
financial information about the fundamental facilities and systems serving a country, city, or
other geographic public area, including the services and facilities necessary for its economy to
function.
8. Discuss briefly the modes of acquiring PPE and the related accounting policies and
principles.
Sec. 7. Modes of Acquisition of PPE. Acquisition is the process through which one entity gains
possession or takes over the ownership of a particular PPE. The different modes of acquiring
PPE includes purchase, construction, exchange transaction, non-exchange transaction, transfer
and finance lease. Sec. 8. Purchase of PPE. PPE acquired through purchase are charged against
appropriations/allotments or special budget for capital outlay. PPE can be purchased on cash
basis, on account, on installment basis, with promotional items, and at a lump sum price.

a. On Cash Basis. PPE acquired through cash purchase shall initially be recognized at cost
which includes cash paid plus all costs incurred infringing 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.
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 nonrefundable
purchase taxes, after deducting trade discounts and rebates.
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 capitalized as allowed in PPSAS 5, Borrowing Cost.
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: 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.
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 reallocate to the total quantity purchased.
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
g. Construction of PPE. 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.
Sec. 9. Exchange Transactions. One or more items of PPE may be acquired in exchange for a
non-monetary asset, 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 176 be capable of operating in
the manner intended by management. Therefore, costs incurred in using or redeploying an item is
not included in the carrying amount of that item. The following costs are not included in the
carrying amount of an item of PPE:
a. Costs incurred while an item capable of operating in the manner intended by management
has yet to be brought into use or is operated at less than full capacity;
b. Initial operating losses, such as those incurred while demand for the item's output builds
up; and
c. Costs of relocating or reorganizing part or all of the entity’s operations
Sec. 11. Non-exchange Transaction. PPE acquired through a non-exchange transaction, such as
donation, presidential proclamation, taxes, transfers and grants, its cost shall be measured at its
fair value as at the date of acquisition. However, this does not constitute revaluation. If the fair
value cannot be determined, the asset shall be recorded at a nominal value (the value that is
stated on currency or face value).
Sec. 12. Donation without Condition. Cost of PPE acquired through donation without condition
shall be taken up at its fair value at the date it is acquired. All expenses incurred in connection
with the donated asset, such as delivery and installation costs, shall be included in the 177-
amount recognized as asset. The fair value of the PPE shall be recognized as “Income from
Grants and Donations in Kind.”
Sec. 13. Donation with Condition. Where a PPE is acquired through donation with conditions or
restrictions, a liability account shall be recognized until the conditions or restrictions have been
fulfilled.
Sec. 14. Intra-agency transfers of PPE (from Central Office to Regional Offices/Staff Bureaus or
vice versa). These shall be recognized at the carrying amount of the asset received. The receiving
department/office shall recognize the asset at its original historical cost less accumulated
depreciation and accumulated impairment loss.
Sec. 15. Inter-agency transfer of PPE. Transfer from one government entity to another shall be
recognized by the recipient entity at net carrying value. The transferor shall derecognize the PPE
account upon transfer.
Sec. 16. Grants. Grants are assistance in the form of transfer of resources, in cash or in kind, to
an agency/entity from other levels of government, private sectors or international institutions
with or without conditions relating to the operating activities of the agency/entity. These grants
shall be recognized as in come over the periods necessary to match them with the related costs
which they are intended to compensate on a systematic basis. Grants, including non-monetary its
cost shall be measured at its fair value as at the date of acquisition, and shall be recognized when
there is reasonable assurance that:
a. The entity will comply with the conditions attached, and
b. The grants will be received.
Sec. 17. Acquisition of PPE through Fund Transfer to other Government Agencies or Civil
Society Organizations a. Acquisition by Source Agency/Entity. Implementation of projects
through funds transferred to other government agencies may require the acquisition of the
necessary PPE. For proper monitoring and accountability, the following policies shall be
followed:
1. The source agency/entity shall record and monitor the PPE purchased out of inter-agency
transferred funds when the PPE meets the recognition criteria and the MOA/U provides that the
PPE will be returned to the source agency/entity.
2. The depreciation of PPE shall be in accordance with Sec. 28 of this Chapter. b. Acquisition by
Implementing Agency/Entity. In most cases, implementation of projects funded by other
government agencies requires the acquisition of the necessary PPE. Therefore, for proper
monitoring and accountability, the following policies shall be
followed:
1. The funds received from inter-agency fund transfer shall be recorded in the fund cluster for
trust receipts as asset.
2. The implementing agency/entity shall record and monitor the PPE purchased out of inter-
agency transferred funds when the PPE meets the recognition criteria and the MOA/U provides
that the PPE will be donated to the implementing agency/entity. At the end of the project, the
transfer shall be made in accordance with the MOA/U as in the following cases: i. Case 1 – The
MOA/U provides that the PPE will be donated to the implementing agency/entity. ii. Case 2 –
The MOA/U provides that the PPE will be returned by the implementing agency/entity to the
Source Agency/Entity.
Sec. 18. Finance Lease. Another mode of acquiring PPE is through finance leases. A finance
lease is a kind of lease that transfers substantially all the risks and rewards incident to ownership
of an asset. At the start of the lease term, lessees shall recognize assets acquired under finance
leases as assets, and the associated lease obligations as liabilities in their statements of financial
position. The appreciable amount of a leased asset is allocated to each accounting period during
the period of expected use on a systematic basis consistent with the depreciation policy the lessee
adopts appreciable assets that are owned. If there is reasonable certainty that the lessee will
obtain ownership by the end of the lease term, the period of expected use is the useful life of the
asset; otherwise, the asset is depreciated over the lease term or its useful life, whichever is
shorter.

9. Discuss accounting policies for cash advances

Sec. 15. Cash Advance for Payroll.
Advances for Payroll shall be granted to Regular Disbursing Officers for payment of salaries,
wages, honoraria, allowances and other personnel benefits of officials and employees. 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.
Sec. 20. Cash Advances for Operating Expenses of Government Units without Complete Set of
Books of Accounts. Field/Extension/Satellite Offices are some of the government units under the
central/regional/district offices without complete set of books of accounts. Those offices may be
granted cash advances covering two months requirements for 78 MOOE/authorized expenses to
finance their operations. The cash advance shall be granted to the duly designated or appointed
Disbursing Officers.
Sec. 25. Cash Advances for Travel. Section 2 of Executive Order (EO) No. 248 dated May 29,
1995, as amended by EO No. 248A and EO No. 298 dated August 14, 1995 and March 23, 2004,
respectively, provide that travels shall cover only those that are urgent and extremely necessary,
will involve the minimum expenditure and are beneficial to the agency concerned and/or the
country.
a. No government fund shall be utilized to defray foreign travel expenses of any
government official or employee, except in the case of training, seminar or conference
abroad when the officials or other personnel of the foreign mission cannot effectively
represent the country therein, and travels necessitated by international commitments;
provided that no official or employee, including uniformed personnel of the Department
of the Interior and Local Government (DILG) and Department of National Defense
 (DND) will be sent to foreign training, conferences or attend international commitments
when they are due to retire within one year after the said foreign travel [Section 16(c) of
Fiscal Year (FY) 2012 GAA or pertinent provisions of the GAA for the Year]. Under
Memorandum Circular No. 52 dated October 2, 2003 of the Office of the President, the
grant of clothing allowance in all categories of trips is suspended indefinitely.
b. Officials and employees authorized to travel shall be granted cash advance to cover
traveling expenses. The amount to be granted shall be accounted as “Advances to
Officers and Employees”. No additional cash advance shall be granted to any official or
employee unless the previous cash advance given to him/her for travel is first liquidated
and accounted for in the books. For local travel, liquidation shall be done within a period
of 30 days upon return to the personnel’s workstation. On the other hand, cash advance
for foreign travel shall be liquidated within 60 days upon return to the Philippines. The
Liquidation Report (LR) (Appendix 44) 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. 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.

10. Explain briefly the Tax Remittance Advice according to Government Accounting
Manual (GAM) for National Government Agency.
Sec. 60. Disbursements through Tax Remittance Advice
The Tax Remittance Advice (TRA) refers to a serially-numbered document prescribed by the
DBM that should be used by the NGAs in the remittance of withheld taxes on funds coming
from DBM. With the inclusion of all NGAs among the taxpayers who are mandated to use the
Electronic Filing and Payment System (eFPS) under the Bureau of Internal Revenue Regulations
No. 1-2013 dated January 23, 2013, the TRA is accomplished on-line which is called the
Electronic TRA (eTRA). The eTRA is certified correct by the Chief Accountant/Head of
Accounting Division/Unit and approved by the Head of Agency/Authorized Official, and used to
record the remittance of taxes withheld to the BIR. The same document shall be the basis for the
BIR and the BTr to draw a JEV to record the tax collection and deposit in their respective books
of accounts. The JEV shall be recorded in the GJ. The eTRA shall be supported with the
Summary of Taxes Withheld (STW) certified by the Chief Accountant. The STW is the
document which summarizes the type and amount of taxes withheld. The Accounting
Division/Unit shall maintain SL to monitor remittances of taxes withheld from individual
employees, suppliers and contractors.

11. How should the Tax Remittance Advice be recorded in the books of the National
Government Agencies, Bureau of Internal Revenue, Bureau of Customs and Bureau Of
Treasury as provided by GAM.
Sec. 62. Illustrative Accounting Entries for Remittance of Taxes Withheld
through TRA Particulars Account Code Debit Credit.
A. Agency Books
1. Constructive Receipt of NCA for TRA
Cash-Tax Remittance Advice 10104070 P 5,000
Subsidy from National Government 40301010 P 5,000
To recognize constructive receipt of NCA for TRA
2. Remittance of taxes withheld through TRA
Due to BIR 20201010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
To recognize remittance of taxes withheld through TRA
B. BIR Books
1. Constructive Receipt of Tax Revenue through TRA from the NGAs
Cash-Tax Remittance Advice 10104070 P 5,000
Income Tax 40101010 P 5,000
To recognize constructive receipt of tax revenue based on the TRA received from the agency

C. BTr Books
1. Constructive Utilization of NCA for TRA by the remitting NGAs
Subsidy to NGAs 50214010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
 To recognize remittance of taxes withheld by the agency based on the TRA
received.