The New Government Accounting System

(NGAs)
The New Government Accounting System (NGAs) was introduced in January 1, 2002 to
simplify the recording of government transactions and generate financial statements that are
reflective of the government’s true state of affairs.
The old system was done manually and was prone to material errors in recording and
journalizing. In addition, the manual system was ineffective in providing financial
information in a timely manner, and therefore more difficult to use for decision making.
With computerization, and the adoption of NGAs, recording of transactions became easier
and updates to financial reports, faster.

The Manual on the New Government Accounting System replaces the Government Accounting
and Auditing Manual (GAAM), Volume II, prescribed under COA Circular No. 91-368, dated
December 19, 1991.

LEGAL BASIS • On October 30, 2001, based on the authority granted under Sec. 2 (2), Art. IX-
D of the 1987 Constitution, COA Circular No. 2001-005 prescribed the use by local government
units of the New Government Accounting System (NGAS) effective January 1, 2002 which
provide that:

“The Commission on Audit shall have exclusive authority, subject to the limitations in this
Article, to define the scope of its audit examination, establish the techniques and methods
required therefor, and promulgate accounting and auditing rules and regulation, including those
for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and properties”.

OVERVIEW OF THE ACCOUNTING SYSTEM • General Accounting Plan - shows the

overall accounting cycle in the Local Government Unit. Transactions shall emanate from the
different offices / departments of the of the Local Government Units (LGUs).

These offices/ departments will provide/ produce the source documents and other accounting
forms leading to the perfection of the transaction whether it be budgetary, collections or
disbursements. These source documents and accounting forms shall be the basis for the recording
and the preparation of the Financial Statements.

GENERAL ACCOUNTING PLAN LOCAL GOVERNMENT UNITS

Budgetary Accounts • Appropriations – refers to an authorization made by ordinance, directing

the payment of goods and services from local government funds under specified conditions or for
specific purposes. The local sanggunian approves the annual budget thru the issuance of
appropriation ordinance.
Allotments – is the authorization issued by the Local Chief Executive (LCE) to a department
/office of the LGU, which allows it to incur obligations, for specified amounts, within the
appropriation ordinance. Allotments are released quarterly based on the Work and Financial Plan
and Request for Release of Allotment.

Obligations – refer to the amounts committed to be paid by the LGU for any lawful act made
by an accountable officer for and in behalf of the local government unit concerned. For each
obligation, the requesting department /office shall prepare the Allotment and Obligation Slip
(ALOBS) signed by the department or office head as requesting official and forward this
together with supporting documents , to the Budget Officer. Per COA Circular No. 2006-02
dated January 31, 2006 ALOBS is now called OBR – Obligation Request.

BASIC FEATURES AND POLICIES OF NGAS • Accrual Accounting – A modified accrual

basis of accounting is used, wherein, all expenses and Income (except where accrual basis is
impractical) shall be recognized when incurred. • One fund Concept – As required under
Sections 308, 309 and 310 of the Local Government Code, separate books shall be maintained
for the General Fund, Special Education Fund and Trust Fund.

Special Accounts in the General Fund Special Accounts, complete with subsidiary ledgers
shall also be maintained for the following : 1. Public Utilities and other economic enterprises: 2.
Loans , interests, bond issued, and other contributions for specific purposes; 3. Development
Projects funded from the Share in the Internal Revenue Collections; 4. Such other special
accounts which may be created by law or ordinance.

Chart of Accounts and Account Codes – A three- digit account numbering system is adopted.

Financial Statements – the following statements is prepared monthly, quarterly and annually. •
Balance Sheet – shows the financial condition of the Agency at a specific date. • Statement of
Income and Expenses – shows the income and expenses of the agency at the end of a particular
period. • Statement of Cash Flows– shows the agency’s cash activites. * Notes to Financial
Statement shall accompany year-end reports.

Trial Balance – The two money- column trial balance is used.

Appropriations, Allotments and Obligations - Journal Entry shall no longer be prepared to

record the appropriations, receipt of allotments and incurrence of obligations. In lieu of this,
separate registries shall be maintained by the Accounting Unit to control the appropriations,
allotments and obligations for each classes of expenditures, namely:

1. Registry of Appropriations, Allotments, and Obligations – Capital Outlay ( RAAOCO)

2. Registry of Appropriations, Allotments, and Obligations – Maintenance and Other

Operating Expenses (RAAOMO)

3. Registry of Appropriations, Allotments, and Obligations – Personal Services (RAAOPS) •

4. Registry of Appropriations, Allotments, and Obligations – Financial Expenses (RAAOFE) •
COA Accounting Circular Letter No. 2007-002 dated January 19, 2007, these registries shall be
maintained by the City Budget Office.

COMPUTERIZATION OF NGAS (e-NGAS)

Now that the importance of technology has been recognized as a tool for industrial and
economic development, the Commission on Audit (COA) developed e-NGAS – the
computerization of NGAS which encompasses the various accounting processes from recording,
to classifying, summarizing and communicating all the financial results. As such, the e-NGAs
provides an accurate, on time and standardized financial reports. The Electronic New
Government Accounting System complies with the basic policies and procedures of the New
Government Accounting System (NGAS).

Basic Features • Automated recording of accounting entries to the general journal, posting to the
subsidiary ledger and the general ledger through JEV PREPARATION where accounting entries
are created for all types of government transactions and which are generally grouped into cash
receipt, cash disbursement and non cash transactions.

There is an automatic checking of balances between debits and credits. Once these JEVs are
approved by authorized approving officer, it gets posted to the General Ledger and Subsidiary
Ledger.

Adequate security control mechanisms for data integrity and accuracy.

Up-to-date generation of government standard reports necessary for management and

auditing purposes • Real- time query of interim reports and documents

User-friendly screen

Simplified entry of financial transactions and activities, using transaction templates

Use of responsibility accounting for a more detailed financial reporting and analysis

It also provides an on-line inquiry of the following: - Journal Entry Voucher

Expense per Responsibility Center • Income per Responsibility Center

Repair History of PPE. • Schedule of payable/ receivable accounts inventory schedule. •

PPE schedule • Schedule of Balance Sheet Accounts • Registry of Public Infrastructure •
Recorded supporting documents

It also has a facility to generate the following reports and records: Trial Balance

Statement of Income and Expenses

Balance Sheet • Statement of Government Equity • Statement of Cash Flows

 BARANGAY ACCOUNTS

PREPARATION ACCOUNTABILITY AUTHORIZATION THE BUDGET CYCLE

EXECUTION REVIEW

SOURCE • Manual on the New Government Accounting System (For Local

Government Units) (Volume I, II and III). • e-NGAS Functional Training Manual.

The purposes of government accounting are: To carry out the financial business of government
in a timely, efficient and reliable manner (e.g. to make payments, settle liabilities, collect sums
due, buy and sell assets etc.) subject to necessary financial controls.

Unlike the financial (for-profit business) accounting, in the governmental accounting, the
consumptions are not calculated as part of the facility assets. The accounts of the governmental
accounting do not discriminate between the capital expenses and the current revenue
expenditures."
A community tax, also called a residence tax or poll tax, is imposed on all the inhabitants of the
community who are eighteen years old and above as well as to juridical persons, like
corporations, doing business in the community or whose office or establishment is located in the
community. The term inhabitant of the Philippines means a person who stayed in the Philippines
for more than three months. Therefore the community taxpayers are classified into individuals
and corporations.

Individuals – the following individuals are required by the law to pay community tax:

1. Eighteen years old (18) and above;

2. Regularly employed on a on a wage or salary basis for at least thirty consecutive working
days during any calendar year; or
3. Engaged in trade, business or occupation; or
4. Owner of property with an aggregate assessed value of one thousand pesos (P1,000.00)
or more; or
5. Required by law to file an income tax return (ITR)

Corporations – every corporation, no matter how it was created or organized, domestic or

foreign, engaged or doing business in the Philippines.

Exempt from Community Tax – Persons exempt from the payment of community tax:

1. Diplomatic and consular representatives

2. Transient visitors when their stay in the Philippines does not exceed three month.

COMMUNITY TAX RATES

TAX TYPE INDIVIDUALS CORPORATIONS

Basic Community Tax Five Pesos (P5.00) Five Hundred Pesos (P500.00)
(Minimum)
Additional Community Tax One (P1.00) peso for Two (P2.00) pesos for every P5,000 of:
every P1,000 of
income from 1. Assessed value of real property in the
business, exercise of Philippines owned by a corporation
profession or from
property which in no 2. Gross receipts or earnings from business in
case shall exceed the Philippines by a corporation
P5,000
Maximum additional community tax for a
corporation shall not exceed P10,000.00
Maximum Community Tax Five Thousand Five Ten Thousand Five Hundred Pesos
Pesos (Php5,005.00) (Php10,500.00)

Illustrations:
1. Individual Earning Pure Compensation Income: Mr. Sid Gwapodaw, a resident citizen of
the Philippines, earned pure compensation income from his employer amounting to 10,000.00 a
month with an aggregate earnings for the preceding year of 130,000 which includes his 13th
month pay. The community tax due for Mr. Sid Gwapodaw would be as follows:

Basic Community Tax 5.00

Additional Community Tax (130,000/1,000.00)*P1.00)) 130.00
Total Community Tax 135.00

2. Individual Earning Mixed Income and Owns Real Properties: Mr. Ty Koy is a
businessman and resident citizen of the Philippines. In the preceding year his gross receipts
includes business income earned in China amounting to 300,000, business income earned in the
Philippines amounting to 200,000. He also acquired a real property in China with a value of
P3,000,000 and a land here in the Philippines amounting to 2,500,000.00. He also earned a
compensation income from part-time teaching in a university amounting to 100,000. The
community tax due would be computed as follows:

Basic Community Tax 5.00

Additional Community Tax
2,800.00
(200,000+2,500,000+100,000)/1,000.00)*P1.00))) *
Total Community Tax 2,805.00

Note: Only income earned in the Philippines and the assessed value of the real property located
in the Philippines are used as basis for the computation of additional community tax.

3. CTC of a Domestic Corporation: ABC Corporation is a domestic corporation in the

Philippines and earned a gross receipts of 100,000,000.00. ABC Corporation’s community tax
will be computed as follows:

Basic Community Tax 500.00

Additional Community Tax (100M/5000)*P2) OR 10,000
10,000
whichever is lower
Total Community Tax 10,500

Note: Community tax has a threshold. For a corporation, additional community tax must not
exceed 10,000.00

Legal Basis Collect Community Tax

Commonwealth Act No. 465 is the law that imposes the payment of residence tax for individual
and corporations. The community tax shall be paid in the place of residence of the individual; or
the place where the principal office of the corporation (or other juridical entity) is located. The
liability to pay the community tax is due on the last day of February. Payments of community tax
later than February is subject to interest.
" SECTION 139. Professional Tax

(a) The province may levy an annual professional tax on each person engaged in the exercise or practice of his
profession requiring government examination as such amount and reasonable classification as the Sangguniang
Panlalawigan may determine but shall in no case exceed Three hundred pesos (P300.00)

(b) Every person legally authorized to practice his profession shall pay the professional tax to the province
where he practices his profession or where he maintains his principal office in case he practices his profession
in several places: Provided, however, That such person who has paid the corresponding professional tax shall
be entitled to practice his profession in any part of the Philippines without being subjected to any other national
or local tax,license, or free for the practice of such profession.

(1) Any individual or corporation employing a person subject to professional tax shall require payment by that
person of the tax on his profession before employment and annually thereafter.

(2) The professional tax shall be payable annually on or before the thirty first (31st) day of January must,
however, pay the full tax before engaging therein. A line of profession does not become exempt even if conducted
with some other profession for which the tax has been paid. Professionals exclusively employed in the
government shall be exempt from the payment of this tax.

(3) Any person subject to the professional tax shall write in deeds, receipts, prescriptions,reports, books of
account, plans and designs, surveys and maps, as the case may be,the number of the official receipt issued to
him. "
(Source: Local Government Code of the Philippines)
 Receipt for 2019

What to bring:
For new application:
1. PRC ID
2. Authorization letter (if representative will appear on behalf of the applicant)

For renewal application:

1. Original previous receipt
2. PRC ID.
2. Authorization letter (if representative will appear on behalf of the applicant)

Fees:
Every month of January - PhP 300
For payments made later than January, surcharge and penalty applies
Penalties - PhP 75 + (2% of PhP 375) x number of months
 MANUAL ON THE
NEW GOVERNMENT ACCOUNTING SYSTEM
For National Government Agencies

ACCOUNTING POLICIES
Volume I

Chapter 1. Introduction

Sec. 1. Objectives of the Manual. The New Government

Accounting System (NGAS) Manual presents the basic policies and
procedures; the new coding system; the accounting systems, books,
registries, records, forms, reports, and financial statements; and
illustrative accounting entries to be adopted by all national government
agencies effective January 1, 2002. The objectives of the Manual are to
prescribe the following:
a. Uniform guidelines and procedures in accounting for
government funds and property;
b. New coding structure and chart of accounts;
c. Accounting books, registries, records, forms, reports and
financial statements; and
d. Accounting entries.

Sec. 2. Coverage. This Manual shall be used by all

national government agencies.

Sec. 3. Legal Basis. This Manual is prescribed by the

Commission on Audit pursuant to Article IX-D, Section 2 par. (2) of the
1987 Constitution of the Republic of the Philippines which provides that:
“The Commission on Audit shall have exclusive authority,
subject to the limitations in this Article, to define the scope of its
audit and examination, establish the techniques and methods
required therefor, and promulgate accounting and auditing rules
and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and
properties". (underscoring supplied)

1
 Chapter 2. Basic Features and Policies

Sec. 4. Basic Features and Policies. The NGAS has the

following basic features and policies, to wit:

a. Accrual Accounting. A modified accrual basis of

accounting shall be used. Under this method, all expenses
shall be recognized when incurred and reported in the
financial statements in the period to which they relate.
Income shall be on accrual basis except for transactions
where accrual basis is impractical or when other methods are
required by law.

b. One Fund Concept. This system adopts the one fund

concept. Separate fund accounting shall be done only when
specifically required by law or by a donor agency or when
otherwise necessitated by circumstances subject to prior
approval of the Commission.

c. Chart of Accounts and Account Codes. A new chart of

accounts and coding structure with a three-digit account
numbering system shall be adopted. (See Volume III,
The Chart of Accounts)

d. Books of Accounts. All national agencies shall maintain

two sets of books, namely:

Regular Agency (RA) Books. These shall be used

to record the receipt and utilization of Notice of Cash
Allocation (NCA) and other income/receipts which the
agencies are authorized to use and to deposit with
Authorized Government Depository Bank (AGDB) and the
National Treasury. These shall consist of journals and
ledgers, as follows:

Journals
• Cash Receipts Journal (CRJ)
• Cash Disbursements Journal (CDJ)
• Check Disbursements Journal (CkDJ)

2
 • General Journal (GJ)
Ledgers
• General Ledger (GL)
• Subsidiary Ledgers (SL) for:
❖ Cash
❖ Receivables
❖ Inventories
❖ Investments
❖ Property, Plant and Equipment
❖ Construction in Progress
❖ Liabilities
❖ Income
❖ Expenses

National Government (NG) Books. These shall be

used to record income which the agencies are not authorized
to use and are required to be remitted to the National
Treasury. These shall consist of:

• Cash Journal (CJ)

• General Journal (GJ)
• General Ledger (GL)
• Subsidiary Ledger (SL)

With the implementation of the computerized agency

accounting system, only the General Journal shall be used
together with the ledgers by both books.

e. Financial Statements. The following statements shall be

prepared:

• Balance Sheet
• Statement of Government Equity
• Statement of Income and Expenses
• Statement of Cash Flows

Notes to Financial Statements shall accompany the

above statements.

3
f. Two-Money Column Trial Balance. The two - money
column trial balance showing the account balances shall be
used.

g. Allotment and Obligation. Obligation accounting is

modified to simplify procedures in the incurrence and
liquidation of obligations and the recording of the
budgetary accounts (allotments and obligations incurred and
liquidated). Separate registries shall be maintained to
control the allotments and obligations for each of the four
classes of allotments, namely:

• Registry of Allotments and Obligations - Capital

Outlay (RAOCO)
• Registry of Allotments and Obligations -
Maintenance and Other Operating Expenses
(RAOMO)
• Registry of Allotments and Obligations - Personal
Services (RAOPS)
• Registry of Allotments and Obligations- Financial
Expenses (RAOFE).

h. Notice of Cash Allocation (NCA). The receipt of NCA by

the agency shall be recorded in the books as debit to account
“Cash-National Treasury, Modified Disbursement System
(MDS)” and credit to account “Subsidy Income from
National Government”.

i. Financial Expenses. Financial expenses such as bank

charges, interest expenses, commitment charges and other
related expenses shall be separately classified from
Maintenance and Other Operating Expenses (MOOE).

j. Perpetual Inventory of Supplies and Materials. Supplies

and materials purchased for inventory purpose shall be
recorded using the perpetual inventory system. Regular
purchases shall be coursed thru the inventory account and
issuances thereof shall be recorded as they take place except

4
 those purchased out of Petty Cash Fund which shall be
charged directly to the appropriate expense accounts.

k. Valuation of Inventory. Cost of ending inventory of

supplies and materials shall be computed using the moving
average method.

l. Maintenance of Supplies and Property, Plant and

Equipment Ledger Cards. For appropriate check and
balance, the Accounting Units of agencies, as well as the
Property Offices, shall maintain Supplies Ledger
Cards/Stock Cards by stock number and Property, Plant and
Equipment Ledger Cards/Property Cards by category of
property, plant and equipment, respectively.

m. Construction of Assets. For assets under construction, the

Construction Period Theory shall be applied for costing
purposes. Bonus paid to the contractor for completing the
work ahead of time shall be added to the total cost of the
project. Liquidated damages charged and paid for by the
contractor shall be deducted from the total cost of the
project. Any related expenses incurred during the
construction of the project, such as taxes, interest, license
fees, permit fees, clearance fee, etc. shall be capitalized, and
those incurred after the construction shall form part of
operating cost.
n. Registry of Public Infrastructures/Registry of
Reforestation Projects. For agencies that construct public
infrastructures, such as roads, bridges, waterways, railways,
plaza, monuments, etc., and invest on reforestation projects,
a Registry of Public Infrastructures (RPI)/Registry of
Reforestation Projects (RRP) shall be maintained for each
category of infrastructures/reforestation projects. Examples
are:

• Registry of Public Infrastructures - Bridges (RPIB)

• Registry of Public Infrastructures - Roads (RPIR)
• Registry of Public Infrastructures - Parks (RPIP)
• Registry of Reforestation Projects (RRP)

5
 A Summary of Public Infrastructures/Reforestation
Projects shall be prepared and included in the Notes to
Financial Statements.

o. Depreciation. The straight-line method of depreciation

shall be used. Depreciation shall start on the second month
after purchase of the property, plant and equipment, and a
residual value equivalent to ten percent of the purchase cost
shall be set-up. Public infrastructures/reforestation projects
as well as serviceable assets that are no longer being used
shall not be charged any depreciation.

p. Reclassification of Assets. Serviceable assets no longer

being used shall be reclassified to “Other Assets” account
and shall not be subject to depreciation.

q. Allowance for Doubtful Accounts. An Allowance for

Doubtful Accounts shall be set up for estimated uncollectible
trade receivables to allow for their fair valuation.

r. Elimination of Contingent Accounts. Contingent accounts

shall no longer be used. All financial transactions shall be
recorded using the appropriate accounts. Cash shortages and
disallowed payments, which become final and executory,
shall be recorded under receivable accounts “Due From
Officers and Employees” or “Receivables-Disallowances/
Charges”, as the case may be.

s. Recognition of Liability. Liability shall be recognized at

the time goods and services are accepted or rendered and
supplier/creditor bills are received.

t. Interest Accrual. Whenever practical and appropriate,

interest income and/or expense shall be accrued and
recognized in the books of accounts.

u. Accounting for Borrowings and Loans. All borrowings

and loans incurred shall be recorded to the appropriate
liability accounts.

6
v. Elimination of corollary and negative journal entries.
The use of corollary and negative journal entries shall be
stopped. Acquisition/Disposition of assets shall be
debited/credited to the appropriate asset accounts. If an error
is committed, a correcting entry to adjust the original entry
shall be prepared.

w. Petty Cash Fund. The Petty Cash Fund shall be maintained

under the imprest system. As such, all replenishments shall
be directly charged to the expense account and at all times,
the Petty Cash Fund shall be equal to the total cash on hand
and the unreplenished expenses. The Petty Cash Fund shall
not be used to purchase regular inventory/items for stock.

x. Foreign Currency Adjustment. Cash deposits in foreign

currency and outstanding foreign loans shall be computed at
the exchange rate prescribed by the Bangko Sentral ng
Pilipinas at balance sheet date. The total cash deposits and
foreign loans payable shall be adjusted at the end of each
month and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign currency
obligations shall reflect the appropriate foreign currency in
which the loan is payable. The liability shall be expressed
both in the foreign and local currency.

7
 Chapter 3. Accounting Systems

Sec. 5. General Accounting Plan. The General Accounting

Plan (GAP) shows the overall accounting system of a government
agency/unit. It includes the source documents, the flow of transactions
and its accumulation in the books of accounts and finally their
conversion into financial information/data presented in the financial
reports. Presented on next page is the General Accounting Plan for
national government agencies.

The following accounting systems are:

a. Budgetary Accounts System;
b. Receipts/Income and Deposit System;
c. Disbursement System; and
d. Financial Reporting System.

A. BUDGETARY ACCOUNTS

Sec. 6. Budgetary Accounts System. The Budgetary

Accounts System encompasses the processes of preparing Agency
Budget Matrix (ABM), monitoring and recording of allotments received
by the agency from the DBM, releasing of Sub-Allotment Release Order
(Sub-SARO) to Regional Offices (RO) by the Central Office (CO);
issuance of Sub-SARO to Operating Units (OU) by the RO; and
recording and monitoring of obligations.

Sec. 7. Budgetary Accounts. Budgetary accounts consist of

the appropriations, allotments and obligations. Appropriations refer to
authorizations made by law or other legislative enactment for payments
to be made with funds of the government under specified conditions
and/or for specified purposes. Appropriations shall be monitored and
controlled through registries and control worksheets by the DBM and
COA, respectively. Budgetary accounts allotments and obligations are
discussed in the succeeding sections.

8
INSERT GENERAL ACCOUNTING PLAN
for
National Government Agencies

9
 Sec. 8. Agency Budget Matrix (ABM). The ABM refers
to a document showing the disaggregation of agency expenditures into
components like, among others, by source of appropriations, by
allotment class and by need of clearance.

Sec. 9. Procedures for the Preparation of the ABM

Area of Seq.
Responsibility No. Activity

Budget Unit
Concerned Staff 1 Based on the approved General
Appropriations Act (GAA) and in
coordination with the DBM, prepares the
ABM by appropriations/financing sources
to support expenditures to be made during
the year broken down by allotment
class/expenses.

Note 1
The ABM shall contain, among others, the
following information:
▪ The amount to be released categorized
under “Not Needing Clearance”
column, and
▪ The amount that will be released
through the issuance of Special
Allotment Release Order (SARO)
categorized under "Needing
Clearance” column including
continuing appropriations based on
the Statement of Allotments,
Obligations and Balances (SAOB).

2 Initials under 'Prepared by' portion of the

ABM.

Head, Budget Unit 3 Reviews and signs ‘Prepared by’ portion

10
 Area of Seq.
Responsibility No. Activity

of the ABM.
Concerned Staff 4 Forwards the ABM together with a
transmittal letter for the DBM to the Head
of the Agency for signature/approval.

Head of the Agency 5 Approves/Signs the ABM and the

transmittal letter.

Concerned Staff 6 Records in the logbook maintained and

submits the signed ABM to the DBM for
approval.

Sec. 10. Allotment Release Order (ARO). The ARO is a

formal document issued by the DBM to the head of the agency
containing the authorization, conditions and amount of an agency
allocation. The document may be the ABM, where the amount of
allocation not needing clearance is indicated, or the Special Allotment
Release Order (SARO), where the release of which is subject to
compliance with specific laws or regulations or is subject to separate
approval or clearance by competent authority. In the case of agencies
with decentralized accounting procedures, Sub-ARO/Sub-SARO is
issued/released.

Sec. 11. Recording of Allotments. Upon receipt of the

approved ABM and ARO, the Budget Officer/Head of the Budget
Unit/Designated Budget Officer shall record the allotment in the
respective registries through the Allotment and Obligations Slip
(ALOBS). Separate registries shall be maintained for the four allotment
classes by Program/Project/Activity (P/P/A), to wit:

1. Registry of Allotments and Obligations - Capital Outlay

(RAOCO)
2. Registry of Allotments and Obligations - Maintenance and
Other Operating Expenses (RAOMO)
3. Registry of Allotments and Obligations - Personal Services
(RAOPS)

11
 4. Registry of Allotments and Obligations - Financial
Expenses (RAOFE)

Sec. 12. Procedures in the Monitoring and Recording of

Allotments Received from DBM

Area of Seq.
Responsibility No. Activity

Budget Unit 1 Receives the approved ABM/SARO from

Concerned Staff the DBM. Records the same in the logbook
and forwards the ABM/SARO to Budget
Staff for preparation of an Allotment and
Obligation Slip (ALOBS).

Budget Staff 2 Prepares ALOBS in two copies, assigns

number and initials the same. Forwards the
ALOBS and ABM/SARO to the Head of
the Budget Unit for review and signature.

Note 1
The numbering structure of the ALOBS
shall be as follows:
PS 00 00 0000
Serial Number
(One series for
the whole year)
Month

Year

Allotment Class
(PS, MOOE, CO
and FE) shall be
used only when
obligations are
recorded in the
ALOBS

12
 Area of Seq.
Responsibility No. Activity

Note 2
The ALOBS shall be prepared in two
copies and shall be distributed as follows:
Original-Retained by the Budget Unit to
support recording in the
registries
Copy 2 -Accounting Unit

Head of the Budget 3 Reviews, checks the small box opposite

Unit the 'Received' portion in Box A of the
ALOBS and affixes signature certifying
receipt of allotment. Returns to the Budget
Staff for recording in the appropriate
Registry of Allotments and Obligations
(RAOs).

Budget Staff 4 Records the ALOBS in the appropriate

RAOs. Files the ALOBS for reference.

Note 3
The following RAOs shall be maintained
by the Budget Unit:
✓ Registry of Allotments and
Obligations - Personal Services
(RAOPS)
✓ Registry of Allotments and
Obligations -Maintenance and Other
Operating Expenses (RAOMO)
✓ Registry of Allotments and
Obligations -Capital Outlays
(RAOCO)
✓ Registry of Allotments and Obligations
- Financial Expenses (RAOFE)

5 Forwards Copy 2 of the ALOBS to the

Accounting Unit for reference.

13
 Sec. 13. Procedures for the Recording of Sub-Allotment
Release Order (Sub-ARO) by RO/ OU

Area of Seq.
Responsibility No. Activity

Central Office/
Regional Office
Budget Unit 1 Based on the approved ABM received
Budget Staff from the DBM, prepares Sub-ARO for
RO/OU. Forwards the Sub-ARO to the
Head of the Budget Unit CO/RO for
review.

Head of the 2 Reviews and signs Sub-ARO. Forwards

Budget Unit the same to the Head of the CO/RO for
approval.

Head of Central 3 Approves the Sub-ARO.

Office/Regional
Office/
Authorized
Officer

Budget Staff 4 Based on the approved Sub-ARO, prepares

ALOBS in two copies. Assigns number
and initials the ALOBS. Forwards the
same with a copy of approved Sub-ARO to
the Head of the Budget Unit for review
and signature.

Note 1
Distribution of ALOBS shall be as
follows:
Original - CO/RO Budget Unit
Copy 2 - CO/RO Accounting Unit

Note 2
Refer to ALOBS numbering structures in

14
 Area of Seq.
Responsibility No. Activity

Note 1 Sec. 12, Procedures in the

Monitoring and Recording of Allotments
Received from DBM

Head of the 5 Reviews, checks the small box opposite

Budget Unit the ‘Sub-allotted’ portion of Box A of the
ALOBS and affixes signature certifying as
to the amount sub-allotted to RO/OU.
Forwards the same with the approved Sub-
ARO to Budget Staff for recording in the
appropriate RAOs.

Budget Staff 6 Records the ALOBS in the appropriate

RAOs. Files the ALOBS and a copy of the
Sub-ARO.
Note 3
The ALOBS covering sub-allotment for the
RO/OU shall be entered in the RAOs as
negative entry in the ‘Allotment’ column
and shall be deducted from the allotment
balance.
Note 4
A copy of the ALOBS covering allotment of
the RO/OU shall be furnished the
Accounting Unit for reference.

Concerned Staff 7 Records in the logbook the release of the

Sub-ARO to RO/OU.
Regional Offices/
Operating Units
Budget Unit
Concerned Staff 8 Receives the approved Sub-ARO from the
CO/RO. Records the same in the logbook

15
 Area of Seq.
Responsibility No. Activity

maintained. Forwards the Sub-ARO to the

Budget Staff for the preparation of
ALOBS.

Budget Staff 9 Prepares ALOBS in two copies, assigns

number and initials the same. Forwards
the ALOBS and Sub-ARO to the Head of
the Budget Unit for review and signature.

Note 5
Refer to Notes 1 and 2 of Sec.12,
Procedures for the Monitoring and
Recording of Allotments Received from the
DBM.

Head of the 10 Reviews the ALOBS based on the

Budget Unit Sub-ARO. Checks the small box opposite
the “Received” portion of Box A of the
ALOBS and affixes signature certifying
that the allotment was received. Forwards
the ALOBS and Sub-ARO to the Budget
Staff for recording in the appropriate
RAOs.
Note 6
Refer to Note 3, of Sec.12, Procedures for
the Monitoring and Recording of
Allotments Received from the DBM.

Budget Staff 11 Records the ALOBS in the RAOs. Files

the Sub-ARO and original of the ALOBS.

12 Forwards copy 2 of the ALOBS to the

Accounting Unit for reference.

16
 Sec. 14. Accounting for Obligation. Obligation refers to a
commitment by a government agency arising from an act of a duly
authorized official which binds the government to the immediate or
eventual payment of a sum of money. The agency is authorized to incur
obligations only in the performance of activities which are in pursuits of
its functions and programs authorized in appropriation acts/laws within
the limit of the ARO.
Obligations shall be taken up in the registries through the
ALOBS prepared/processed by the Budget Unit. The Budget Officer/
Head of the Budget Unit/designated Budget Officer shall certify to the
availability of allotment and such is duly obligated by signing in the
appropriate box of the ALOBS. On the other hand, the Accountant/Head
of the Accounting Unit shall certify to the correctness and validity of
obligations, and availability of funds. Both Budget and Accounting
Units shall coordinate in the filling up of the Status of the Obligation in
their respective copies of the ALOBS

Sec. 15. Procedures for the Recording of Obligations

Area of Seq.
Responsibility No. Activity
Budget Unit
Concerned Staff 1 Receives the Disbursement
Voucher/Payroll (DV/P), and supporting
documents, Contract/ Purchase Order
(C/PO) from concerned offices/personnel.
Verifies completeness of the documents. If
incomplete, returns the documents to
concerned offices for completion. If
complete, records the same in the logbook
maintained. Forwards the documents to
Budget Staff for the preparation of the
ALOBS.

Budget Staff 2 Verifies availability of allotment based on

the RAOs. If no allotment is available,
returns the documents to the
office/personnel concerned except as
authorized by the DBM.

17
 Area of Seq.
Responsibility No. Activity
3 If there is an available balance of allotment
to cover the obligations, prepares an
ALOBS in three copies. Initials the
ALOBS and forwards the same to the
Head of the Budget Unit for review and
signature.
Note 1
Copy 3 of ALOBS shall be attached to the
DV. Refer to Note 2, Sec. 12, Procedures
for the Monitoring and Recording of
Allotments Received from DBM for the
distribution of the other copies of ALOBS.
Head of the 4 Reviews, checks the small box opposite
Budget Unit the ‘Available and duly obligated’ portion
of Box A of the ALOBS and affixes
signature. Forwards the ALOBS and
documents to the Budget Staff for
recording in the appropriate RAOs.
Budget Staff 5 Records the amount obligated under the
‘Obligation’ column of the RAOs.
Forwards all copies of the ALOBS and the
documents to the Accounting Unit for
processing and signature.
Note 2
Obligations shall be posted in the
‘Obligation Incurred’ column of the RAOs
to arrive at the balance of allotment still
available at a given period.
6 Receives original of ALOBS from the
Accounting Unit. If there is no correction,
files the same to support the RAOs.
Otherwise, effects correction in the RAOs
or prepares a new ALOBS, as the case
may be.

18
 Area of Seq.
Responsibility No. Activity
Note 3
For the succeeding activities, refer to
Sec. 34, Procedures for Disbursements By
Checks.

Note 4
There is no need to prepare a new ALOBS
for corrections/adjustments made by the
Accounting Unit after the processing of the
claims but before payment is made.
Adjustment in the RAOs shall be effected
thru a positive entry (if additional
obligation is necessary) or a negative
entry (if reduction) in the ‘Obligation
Incurred’ column.
Note 5
Preparation of new ALOBS for the
following adjustments of obligations as
negative entries in the ‘Obligation
Incurred’ column shall be made:

▪ refund of cash advance granted during

the year
▪ overpayment of expenses during the
year
▪ disallowances/charges which become
final and executory

Certified copies of official receipts for the

overpayments/refunds, copies of bills for
overpayments and Notice that the
disallowances are final and executory
shall be furnished the Budget Unit by the
Accounting Unit for the preparation of
new ALOBS taking up the adjustments.

19
B. INCOME/COLLECTIONS AND DEPOSITS

Sec. 16. Receipts/Income Collections and Deposits System.

The Receipts/Income Collections and Deposits System covers the
processes of acknowledging and reporting income/collections, deposits
of collections with Authorized Government Depository Bank (AGDB) or
through the AGDB for the account of Treasurer of the Philippines, and
recording of collections and deposits in the books of accounts of the
agency.

Sec. 17. Sources of Income of the National Government.

The income of the National Government are classified into general
income accounts and specific income accounts. The following comprise
the general income accounts, among others:
1. Subsidy Income from National Government
2. Subsidy from Central Office
3. Subsidy from Regional Office/Staff Bureaus
4. Income from Government Services
5. Income from Government Business Operations
6. Sales Revenue
7. Rent Income
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and Properties
12. Foreign Exchange (FOREX) Gains
13. Miscellaneous Operating and Service Income
14. Fines and Penalties-Government Services and Business
Operations
15. Income from Grants and Donations
The specific income accounts of national government
agencies are classified as follows:

1. Income Taxes
2. Property Taxes
3. Taxes on Goods and Services
4. Taxes on International Trade and Transactions

20
 5. Other Taxes
6. Fines and Penalties-Tax Revenue
7. Other Specific Income

The descriptions of all the accounts and the instructions as to

when these are to be debited and credited are provided in Volume III of
the NGAS Manual.
Sec. 18. Methods of Accounting for Income. National
government agencies adopt the following accounting methods of
recording income:
1. Accrual Method - Accrual method of accounting shall be
used by national government agencies when income is
realized (earned) during the accounting period regardless of
cash receipt. Accounts receivable is set up and the general
or specific income accounts according to nature and
classification are credited.
2. Modified Accrual – Under the modified accrual basis,
income of an agency is recorded as “Deferred Credits to
Income” and the appropriate receivable account is debited.
The income account is recognized upon receipt of collection
and the “Deferred Credits to Income” account is adjusted
accordingly.
3. Cash Basis - Cash basis of accounting shall be used for all
other taxes, fees, charges and other revenues where accrual
method is impractical. The income account is credited upon
collection of the cash or its equivalent.
Sec. 19. Fines and Penalties. Fines and penalties, either on
tax revenues or other specific income accounts, shall be recognized as
income of the year these were collected.
Sec. 20. Other Receipts. Other receipts of national
government agencies shall be comprised of, but not limited to the
following:
1. Refund of cash advances - When cash advances for official
travels are granted, the account “Due from Officers and

21
 Employees” is debited and when refunds are made, the
same account is credited. Cash advances for salaries and
wages shall be recorded as debits to the account “Cash-
Disbursing Officers” and any refunds thereof shall be
credited to the same account.

2. Receipts of performance/bidders/bail bonds - Performance

bond posted by contractor or supplier to guaranty full and
faithful performance of their contract may be in the form of
cash or certified checks or surety. Performance bond in cash
or certified check shall be acknowledged by the issuance of
official receipt and recorded in the book of accounts by the
Accountant thru a Journal Entry Voucher (JEV) for the
purpose. In case of surety bond, an acknowledgement
receipt shall be issued by the authorized official.

3. Refund for overpayment of expenses - Refunds as a result of

overpayment of expenses shall be recorded as a credit to the
appropriate expense account if paid in the same year or to
Prior Years’ Adjustments if paid in the ensuing year. This
transaction shall reduce the amount of expense previously
recorded.

4. Collections made on behalf of another agency or private

companies - Collections made on behalf of other agencies
which are later remitted to them are recorded under accounts
“Due to NGAs”, “Due to LGUs” or “ Due to GOCCs” as
the case maybe. Authorized collections made on behalf of
private entities, like shares of proponents of Built-Operate-
Transfer (BOT) Projects are recorded as “Other Payables”.

5. Inter-agency transferred funds - Cash received from another

agency for the purpose of implementing projects of that
agency is recorded in the books as a credit to account “Due
to NGAs” or “Due to LGUs”, as the case maybe.

Sec. 21. Deposit of Collections. All Collecting Officers shall

deposit intact all their collections, as well as collections turned over to
them by sub-collectors/tellers, with AGDB daily or not later than the

22
next banking day. They shall record all deposits made in the Cash
Receipts Record.

Sec. 22. Reporting of Collections and Deposits. At the

close of each business day, the Collecting Officers shall accomplish the
Report of Collections and Deposits (RCD) in accordance with the
instructions provided in Volume II of the NGAS Manual for the RCD.
All collections shall be deposited with AGDB for the account of the
agency or the Treasurer of the Philippines daily or not later than the next
banking day.

Sec. 23. Procedures for Collections and Deposits Through

the Collecting Officer

Area of Seq.
Responsibility No. Activity

Cash Unit Daily

Designated Staff 1 Receives cash/check from payor
representing collection based on the Order
of Payment (OP) prepared by the
Accounting Unit.

2 Issues Official Receipt (OR) to

acknowledge receipt of cash/check.

Note 1
Funding Checks received by the Cashier/
Collecting Officer of the RO/OU for its
operational requirements shall be issued
corresponding OR..
Note 2
Separate sets of ORs shall be used for the
RA and NG Books.

23
 Area of Seq.
Responsibility No. Activity

Note 3
The OR shall be prepared in three copies
and shall be distributed as follows:
Original - Payor
Copy 2 - To be attached to the Report
of Collections and Deposits
(RCD)
Copy 3 - Cash Unit file

3 Records collections in the Cash Receipts

Record (CRR).
Note 4
Separate CRR shall be maintained for
collections under the RA and NG Books.

4 Prepares Deposit Slip (DS) in three copies.

Note 5
The DS shall be distributed as follows:
Original - AGDB
Copy 2 - To be attached to RCD
Copy 3 - Cash Unit file

5 Deposits collections with AGDB.

Note 6
Collections pertaining to NG Books shall
be deposited with the AGDB for the
account of the Treasurer of the Philippines
6 Based on the validated DS from the
AGDB and copy of the ORs on file,
prepares Report of Collections and
Deposits (RCD) in two copies. Initials on

24
 Area of Seq.
Responsibility No. Activity

the RCD and forwards the same together

with Copy 2 of the ORs and DS to the
Head of the Cash Unit for review and
signature.
Head of the Cash 7 Reviews and signs the RCD. Forwards
Unit original of RCD, Copy 2 of the ORs and
DS to the Designated Staff for submission
to the Accounting Unit.

Note 7
The RCD shall be distributed as follows:
Original - Accounting Unit together
with Copy No. 2 of the
ORs and DS - to support
the JEV
Copy 2 - Cash Unit file

Designated Staff 8 Records the RCD in the logbook

maintained and forwards the same with the
ORs and DS to the Accounting Unit for
recording in the books of accounts.

Accounting Unit
Accounting Staff 9 Receives original of RCD with Copy 2 of
the ORs and DS from the Cash Unit.
Records receipt in the logbook maintained
for the purpose and forwards the same to
the Bookkeeper for review and preparation
of the JEV.

Bookkeeper 10 Based on the RCD, prepares JEV in two

copies and signs “Prepared by” portion of
the JEV. Forwards the JEV and documents
to the Head of the Accounting Unit for
review and signature.

25
 Area of Seq.
Responsibility No. Activity

Head of the 11 Reviews and signs ‘Certified Correct by’

Accounting portion of the JEV. Forwards the JEV and
Unit documents to the Bookkeeper for
recording in the Cash Receipt Journal
(CRJ) and/or Cash Journal (CJ) as the case
may be.

Note 8
CRJ shall be used to record collection
under the RA Books while the CJ shall be
used to record collections under the NG
Books.

Note 9
For the succeeding activities, refer to
Sec. 71, Preparation and Submission of
Trial Balances and Other Reports.

Sec. 24. Procedures for Collections through Accredited

Agent Banks (AAB)

Area of Seq.
Responsibility No. Activity

Accounting Unit
Receiving/ 1 Receives collection documents from the
Releasing Staff AAB/AGDB. Records receipt in the
logbook maintained for the purpose.
Forwards the same to the Bookkeeper for
preparation of the JEV.

Bookkeeper 2 Based on the received collection

documents, prepares JEV in two copies,
Signs “Prepared by” portion of the JEV.
Forwards the JEV and documents to the
Head of the Accounting Unit for review

26
 Area of Seq.
Responsibility No. Activity

and signature.

Head of the 3 Reviews and signs “Certified Correct by”

Accounting Unit portion of the JEV. Forwards the JEV and
documents to the Bookkeeper for
recording in the General Journal (GJ).

Note 1
For the succeeding activities, refer to
Sec. 71, Preparation and Submission of
Trial Balances and Other Reports.

Sec. 25. Dishonored Checks. There are instances that checks

received by Collecting Officers in payment of taxes, fees and other debt
due the government are dishonored by the drawee banks. A check is said
to be dishonored by non-payment when, upon its being duly presented
for payment, such payment is refused or cannot be obtained. (Sec. 83,
RA No. 2031, Negotiable Instrument Law). It may also be defined as
those checks paid to the agency, which were dishonored by the AGDB
due to Drawn Against Insufficient Fund (DAIF) or Drawn Against
Uncleared Deposits (DAUD).

27
 Sec. 26. Procedures in Recording Dishonored Checks

Area of Seq.
Responsibility No. Activity

Cash Unit
Designated Staff 1 Receives from AGDB the Debit Memo
(DM) and copies of dishonored checks.

2 Verifies the dishonored checks against the

previous months’ RCDs maintained on file
to ascertain that the checks were included
in the previous months’ collections. If not
included, verifies from AGDB the details
of the dishonored checks.

3 If dishonored checks are included in the

RCDs, prepares Notice of Dishonor to
inform the drawers/indorsers/payors that
the checks were dishonored by the AGDB.

Note 1
The Notice of Dishonor shall be prepared
in three copies and shall be distributed as
follows:
Original - Drawer (To be delivered
personally or thru registered mail)
Copy 2 - Accounting Unit file
Copy 3 - Cash Unit file

4 Retrieves from file copy of the OR

covering the dishonored check and
indicates in the OR the following notation:

“Cancelled (date of Notice of Dishonor) per

Bank Debit/Voucher No._____ dated
_________”

28
 Area of Seq.
Responsibility No. Activity

5 Retrieves CRR on file and records the

dishonored checks with the following
notation:
“To take up Bank’s Debit Memo No. ___
dated ____ covering Check No. ___ for
P ____________ acknowledged under
OR No. _____ dated _______”.

6 Prepares list of dishonored checks in two

copies. Forwards Copy 2 of the list and the
dishonored checks to the Accounting Unit
for preparation of the JEV.

Accounting Unit 7 Receives the list together with originals of

Accounting Staff dishonored checks and the Debit Memo
from the Cash Unit and records the same
in the logbook maintained for the purpose.

8 Based on the list, prepares the JEV in two

copies. Signs “Prepared by” portion of the
JEV and forwards the same to the Head of
the Accounting Unit for review and
signature.

Head of the 9 Reviews and signs “Certified Correct by”

Accounting Unit portion of the JEV. Forwards the JEV
supported by the list, originals of
dishonored checks and notice of dishonor
to the Bookkeeper for recording in the
books of accounts.

Note 2
For the succeeding activities, refer to
Sec.71, Preparation and Submission of
Trial Balances and Other Reports.

29
C. DISBURSEMENTS

Sec. 27. Disbursements Defined. Disbursements constitute

all cash paid out during a given period either in currency (cash) or by
check. It may also mean the settlement of government
payables/obligations by cash or by check. It shall be covered by
Disbursement Voucher (DV)/Petty Cash Voucher (PCV) or payroll.

Sec. 28. Basic Requirements for Disbursements. The basic

requirements applicable to all types of disbursements made by national
government agencies are as follows:

1. Existence of a lawful and sufficient allotment certified as

available by the Budget Officer;

2. Existence of a valid obligation certified by the Chief

Accountant/Head of Accounting Unit;

3. Legality of transactions and conformity with laws, rules and

regulation;

4. Approval of the expense by the Chief of Office or by his

duly authorized representative; and

5. Submission of proper evidence to establish the claim.

Sec. 29. Disbursements System. The Disbursements System

involves the preparation and processing of disbursement voucher (DV);
preparation and issuance of check; payment by cash; granting,
utilization, and liquidation/replenishment of cash advances.

Sec. 30. Certification on Disbursements. Disbursements

from government funds shall require the following certifications on the
DV:
1. Certification and approval of vouchers and payrolls as to
validity, propriety and legality of the claim (Box A of DV)
by head of the department or office who has administrative
control of the fund concerned;

30
 2. Necessary documents supporting the DV and payrolls as
certified and reviewed by the Accountant/Head of
Accounting Unit (Box B of DV); and

3. Certification that funds are available for the purpose by the

Accountant/Head of Accounting Unit (Box B of DV).

Sec. 31. Disbursements by Checks. Checks shall be drawn

only on duly approved DV or PCV. These shall be reported and recorded
in the books of accounts only when actually released to the respective
payees.

Two types of checks are being issued by government agencies

as follows:

1. 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.

2. 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.

Sec. 32. Recording of Check Disbursements in the Check

Disbursements Record (CkDR). All checks issued including cancelled
checks shall be recorded chronologically in the CkDR. The dates checks
were actually released shall be indicated in the appropriate column
provided for in the CkDR.

Sec. 33. Reporting of Checks Issued/Released. All checks

actually released to claimants shall be included in the Report of Checks

31
Issued (RCI), which shall be prepared daily by the Cashier. The RCI
shall be submitted to the Accounting Unit for the preparation of JEV.
All unreleased checks as of the report date shall be enumerated in a “List
of Unreleased Checks” to be attached to the RCI.

Sec. 34. Procedures for Disbursements by Checks.

Area of Seq.
Responsibility No. Activity

A. Processing of Disbursement Voucher

(DV)
Accounting Unit
Receiving/ 1 Receives Copies 1-3 of DV, originals of
Releasing Staff supporting documents and Copies 1-3 of
ALOBS from the Budget Unit. Checks
completeness of supporting documents. If
incomplete, returns to the concerned party
for compliance.

2 If complete, stamps “Received” and

indicates date of receipt and initials on the
stamped ‘Received’ portion of the DV.

Note 1
DV that shall be paid out of non-budgetary
receipts shall not pass the Budget Unit.
No ALOBS is needed. (Example - refund of
cash bond).

3 Assigns DV number and records in the

logbook the DV number and date, payee,
particular and amount. Forwards Copies
1-3 of DV, originals of supporting
documents and Copies 1-3 of ALOBS to
the Designated Staff for processing.

32
 Area of Seq.
Responsibility No. Activity

Note 2
The numbering structure for DV shall be
as follows:
00 - 00 - 0000

Serial Number
(One series for each year)

Month of Issue

Year of Issue

Note 3
DV number shall also be indicated on
every sheet of the supporting documents.

Designated Staff 4 Receives Copies 1-3 of DV, originals of

supporting documents and Copies 1-3 of
ALOBS from the Receiving/Releasing
Staff. Reviews DV for completeness and
propriety of supporting documents.

5 Checks Index of Payments (IP) from file

and determines whether there was prior
payment of the same claim. If the claim
was already paid, returns the DV and
supporting documents to the
Receiving/Releasing Staff to be returned to
claimant.

6 If not yet paid, records the following in the

IP: name and address of creditor, DV date
and number, particulars and amount.

7 Accomplishes Box B of ALOBS and

initials.

33
 Area of Seq.
Responsibility No. Activity

8 Initials in Box B of DV and forwards

Copies 1-3 of DV, originals of supporting
documents and Copies 1-3 of ALOBS to
the Head of Accounting Unit for review
and signature.

Head of the 9 Reviews DV and supporting documents.

Accounting Unit Signs in Box B of DV and ALOBS.
Forwards the documents to the
Receiving/Releasing Staff.

Receiving/ 10 Records in the logbook the date of release

Releasing Staff of Copies 1-3 of DV, originals of
supporting documents and Copy 3 of
ALOBS. Forwards to the Head of Agency
or Authorized Representative for approval
of the DV. Forwards Copy 1 of ALOBS to
the Budget Unit and retains Copy 2 of
ALOBS for file.

Head of Agency 11 Reviews and approves DV. Forwards

or Authorized Copies 1-3 of DV, Copy 3 of the ALOBS
Representative and originals of supporting documents to
the Cash Unit for check preparation.

B. Preparation and Approval of Checks

Cash Unit
Receiving/ 12 Receives Copies 1-3 of approved DV,
Releasing Staff Copy 3 of ALOBS and originals of
supporting documents. Records in the
logbook the date of receipt, DV number,
payee, particulars and amount.

Designated Staff 13 Verifies completeness of signatories on the

DV. Prepares check in three copies.

34
 Area of Seq.
Responsibility No. Activity

14 Retrieves from file the Check

Disbursements Records (CkDR) and
records the date, reference or check
number, name of payee, nature of payment
and amount of the DV and extract the new
balance of the NCA/bank account.
Forwards Copies 1-3 of check, Copies 1-3
of DV, Copy 3 of ALOBS and originals of
supporting documents to Cashier for
review and signature.

Cashier 15 Verifies completeness of signature on the

DV. Reviews the amount of the check
against the DV and supporting documents.
Signs the check.

Authorized 16 Countersigns check. Forwards Copies 1-3

Official of check, Copies 1-3 of DV, Copy 3 of
ALOBS and supporting documents to the
Receiving/Releasing Staff for return to the
Cashier.
Receiving/ 17 Records in the logbook the date of release
Releasing Staff of Copies 1-3 of check, Copies 1-3 of DV,
Copy 3 of ALOBS and supporting
documents.

Cashier 18 Releases the original of check and Copy 3

of DV to the payee. Attaches OR/Invoice
on Copy 1 of DV. Files Copies 2-3 of
check, Copies 1-2 of DV, originals of
supporting documents.

35
 Area of Seq.
Responsibility No. Activity

C. Preparation of Report of Checks Issued

(RCI)

Daily,
19 With Copies 1-2 of DV, Copy 3 of ALOBS,
supporting documents, Copies 2-3 of
checks, prepares RCI in two copies.
Note 6:
RCI shall include only those checks
actually released to the payees during the
day including cancelled ones.
Note 7:
The RCI shall be distributed as follows:
Original - Accounting Unit together
with the originals of the
paid DVs/payroll and
supporting documents for
JEV preparation
Copy 2 - Cash Unit file

20 Initials in ‘Certification’ portion of the

RCI.

Head of the Cash 21 Reviews RCI and signs in ‘Certification’

Unit portion.

Designated Staff 22 Forwards original of RCI together with

Copy 2 of checks, Copy 1 of DVs, Copy
3 of ALOBS and supporting documents to
the Accounting Unit for the preparation of
JEV. Retains Copy 2 of RCI, Copy 3 of
checks and Copy 2 of DVs for file.

36
 Note 8:
The “List of Unreleased Checks” shall be
attached to the RCI to be submitted to
Accounting Unit for reference.

D. Preparation of JEV

Accounting Unit Daily

Receiving/ 23 Records receipt of Copy 1 of RCI together
Releasing Staff with Copy 2 of checks, Copy 1 of DVs,
Copy 3 of ALOBS and originals of
supporting documents from Cash Unit in
the logbook. Forwards the documents to
the Designated Staff for JEV preparation.

Designated Staff 24 Examines DVs and checks against RCI.

Verifies if the serial number of checks
actually issued, including spoiled and
cancelled ones, are all accounted for.

25 Prepares JEV in two copies and signs in

the “Prepared by” portion.

Head of the 26 Reviews correctness of the journal entries

Accounting and signs on ‘Certified Correct by’ portion
Unit/Authorized of the JEV. Forwards Copies 1-2 of JEV
Signatory and Copy 1 of RCI, Copy 2 of checks,
Copy 1 of DVs, Copy 3 of ALOBS and
originals of supporting documents to
Designated Staff for recording in the
Check Disbursements Journal (CkDJ).

E. Recording in the CkDJ

37
 Designated Staff 27 Receives Copies 1-2 of JEV and Copy 1 of
RCI, Copy 2 of checks, Copy 1 of DVs,
Copy 3 of ALOBS and supporting
documents. Records the JEV in the CkDJ.
Retains Copy 2 of JEV for file. Forwards
Copy 1 of JEV, RCI and DV, Copy 2 of
checks, Copy 3 of ALOBS and supporting
documents to the Receiving/Releasing
Staff for submission to COA for audit.
Receiving/ 28 Records in the logbook the date of
Releasing Staff submission of Copy 1 of JEV, RCI, DVs,
Copy 3 of ALOBS, Copy 2 of checks and
originals of supporting documents.
Forwards the documents to COA for audit.

Note 9:
For the succeeding activities, refer to
Sec. 71, Preparation and Submission of
Trial Balances and Other Reports.

Sec. 35. Disbursements by Cash. Disbursements by cash

shall be made from cash advances drawn and maintained in accordance
with COA rules and regulations. Cash payments shall be made based on
duly approved payrolls/disbursements vouchers.
Sec. 36. Cash Advances for Travel. Cash advances granted
for travel shall be accounted for as Due from Officers and Employees and
these are subject to liquidation upon travel completion. For liquidation of
travel where the amount of cash advance is equal to or more than the
travel expenses incurred, the Liquidation Report form shall be prepared by
the officers/employees concerned and submitted to the Accounting Unit 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, a Liquidation
Report shall be submitted to liquidate the cash advance previously granted
and a DV shall be prepared to claim reimbursement of the deficiency in
amount.

38
 Sec. 37. Procedures for Disbursements by Cash - Payment
for Payroll and Other Expenses

Area of Seq.
Responsibility No. Activity

Cash Unit
Accountable/ 1 Receives the approved check from the
Disbursing Cashier. Records in the Cash
Officer Disbursements Record (CDR) the date,
reference, name of payee, particulars and
the amount of check in the debit column.

2 Encashes check in a GSB.

3 Pays officials and employees/other payees.

Note 1
Employees/payees shall sign on the
received portion of the payroll/DV to
acknowledge receipt of payment.

Note 2
If there are unclaimed salaries, refund the
same within a reasonable time. OR
representing the refund shall be issued by
the Cashier.

4 Records payment including the refund for

unclaimed salary in the credit column of
the CDR.

At the End of the Month

5 Based on the paid payroll/DV and

supporting documents, prepares Report of
Disbursements (RD) in two copies. Signs
the “Certification” portion of the RD.

39
 Area of Seq.
Responsibility No. Activity

Note 3
The RD shall serve as the liquidation
report of the cash advance granted to the
Disbursing Officer.
Note 4
The RD shall be distributed as follows:
Original - Accounting Unit together with
the originals of the paid
DVs/Payrolls and supporting
documents for JEV preparation
Copy 2 - Cash Unit file

Accounting Unit
Releasing/ 6 Records in the logbook, indicates
Receiving Clerk ‘Received’ and signs all copies, forwards
the RD to the Bookkeeper for JEV
preparation, and returns Copy 2 to the
Cash Unit.

Bookkeeper 7 Prepares JEV based on the RD and

supporting documents received.

Note 5
For the succeeding activities, refer to
Sec.71, Preparation and Submission of
Trial Balances and Other Reports.

8 Records payroll payment in the individual

Index of Payments (IP) of officials and
employees.

40
 Sec. 38. Disbursements Through Bank - Payroll Payment

Area of Seq.
Responsibility No. Activity

Cash Unit
Cash Staff 1 Receives the approved check, DV and
Following Months' Payroll (FMP), signs
the logbook of the releasing office, and
forwards the documents to the Cashier.
2 Deposits the check to the Bank Payroll
Account together with the original of the
Summary of Employees Net Earnings
(SENE) received from Accounting Unit.
Files temporarily Copies 1-2 of FMP, copy
2 of the check, and Copies 1-3 of DV for
the preparation of RCI.
Note 1
The payee of the check is the Servicing
Bank whose authorized representative shall
acknowledge receipt of the check by
signing on the original of the DV.

Note 2
Refer to Seq. No. 19, Sec.34, Procedures
for Disbursements by Checks.

Note 3
Payroll payment through bank shall also
be recorded in the IP maintained by the
Accounting Unit.

41
 Sec. 39. Disbursements Through Petty Cash Fund. Petty
Cash Fund shall be maintained under the imprest system. The fund shall
be sufficient for the non-recurring, emergency and petty expenses of the
agency. Disbursements from the fund shall be through the Petty Cash
Voucher (PCV) which shall be approved by authorized officials and
signed by the payee to acknowledge the amount received. The official
receipt or its equivalent is attached to the PCV.

Sec. 40. Procedures for Disbursements Through Petty

Cash Fund

Area of Seq.
Responsibility No. Activity

Receipt of Check for the Establishment/

Various Unit Replenishment of Petty Cash Fund
Petty Cash
Custodian 1 Receives check from Cashier for the
establishment/replenishment of petty cash
fund. Retrieves Cash Disbursement Record
(CDR) and records the date, reference and
the amount of check in the
‘Disbursements’ column.

2 Encashes check in GSB and keeps the cash

in a safety vault.

Utilization of Petty Cash Fund

Requesting 3 Accomplishes Box A ‘Requested by’

Personnel portion of the Petty Cash Voucher (PCV).

Immediate 4 Signs Box A ‘Approved by’ portion of the

Supervisor PCV and returns to Requesting Personnel.

Requesting 5 Submits to the Petty Cash Custodian for

Personnel the release of fund.

42
 Area of Seq.
Responsibility No. Activity

Petty Cash 6 Receives from the Requesting Personnel

Custodian the PCV duly approved by concerned
official.

7 Upon granting of the petty cash advance

and signs in Box B ‘Paid by’ portion of the
PCV.

Requesting 8 Receives petty cash and signs in Box B

Personnel ‘Cash Received by’ portion of the PCV.

Petty Cash 9 Issues Copy 2 of the PCV to requesting

Custodian personnel

10 Retrieves CDR from file and records paid

PCVs. Fills up the following columns:
date, reference, name of payee, nature of
payment, amount in the credit column and
cash advance balance.

11 Files the original of PCV awaiting

liquidation.
Liquidation of Petty Cash Advance
12 Receives from Requesting Personnel
Copy 2 of the PCV together with
supporting documents. Checks and
reviews completeness of documents such
as the date, amount and nature of expenses
paid as shown in the supporting
documents.
13 If incomplete, returns to Requesting
Personnel for completion of needed
supporting documents.

43
 Area of Seq.
Responsibility No. Activity

If complete, retrieves the original of PCV

from file and fills up Box D ‘Liquidation
Submitted’ portion of the original and
Copy 2 of PCVs.

14 Checks the appropriate boxes for

‘Received Refund’ or ‘Reimbursement
Paid’ portion and signs Box C of the PCV.

Requesting 15 Checks and fills up the appropriate boxes

Personnel for ‘Liquidation Submitted’ and
‘Reimbursement Paid’ upon submission of
necessary supporting documents and
receipt or reimbursement of cash, if any,
and signs the PCV.

Petty Cash Fund 16 Returns Copy 2 of the PCV to the

Custodian Requesting Personnel.

17 If the amount granted is equal to the

amount paid as shown in the liquidated
PCV, proceeds to Sequence No. 18.

If the amount is not equal to the amount

paid, retrieves from file the CDR and
records the necessary adjustments based
on the liquidated PCV. Fills up the
following columns: date, reference, name
of payee, and nature of payment, amount
in the appropriate debit, credit and
balance columns.

18 Files the original of the PCV together with

the supporting documents awaiting
replenishment.

44
 Area of Seq.
Responsibility No. Activity

Replenishment of Petty Cash Fund

Petty Cash Fund 19 Retrieves from file the original of the PCV
Custodian together with the supporting documents.
Checks the completeness of all PCVs for
replenishment.

20 Prepares the Petty Cash Replenishment

Report (PCRR) in two copies based on
PCVs in numerical sequence and fills up
the following columns: date, PCV No.,
particulars and amount.

21 Signs in the ‘Certified Correct by’ portion

of the PCRR.

22 Based on the PCRR, prepares DV in three

copies. Forwards Copies 1-3 of the DV,
original of the PCRR and PCV, and
supporting documents to Authorized
Official for review and signature.

Authorized 23 Signs in Box A portion of the DV.

Official

Petty Cash Fund 24 Forwards Copies 1-3 of the DV, originals

Custodian of PCRR and PCVs and supporting
documents to Budget Division for
preparation of the ALOBS.

Note 1
For the succeeding activities, refer to
Sec.15, Procedures in the Recording of
Obligations.

45
G. PROPERTY, PLANT AND EQUIPMENT, AND INVENTORY
ACCOUNTS

Sec. 41. Purchase or Construction of Property, Plant and

Equipment. Property, plant and equipment acquired through purchase
shall include all costs incurred to bring them to the location necessary for
their intended use, like transportation costs, freight charges, installation
costs, etc. These are recorded in the books of accounts as Assets after
inspection and acceptance of delivery.

During construction period, property, plant and equipment shall

be classified and recorded as “Construction in Progress” with the
appropriate asset classification. As soon as these are completed, the
"Construction in Progress" account shall be transferred to the appropriate
asset accounts.

Accounts “Public Infrastructures” and “Reforestation Projects”

are closed to “Government Equity” account and the asset is recorded in
the Registry of Public Infrastructures/Reforestation Projects at the end of
the year.

Sec. 42. Property and Inventory Accounting System. The

Property and Inventory Accounting System consists of the system of
monitoring, controlling and recording of acquisition and disposal of
property and inventory.

The system starts with the receipt of the purchased inventory

items and equipment. The requesting office in need of the inventory
items and equipment after determining that the items are not available in
stock shall prepare and cause the approval of the Purchase Request (PR).
Based on the approved PR and after accomplishing all the required
procedures adopting a particular mode of procurement, the agency shall
issue a duly approved Purchase Order. Procedures relative to the
obligation of the purchase order and payment of the deliveries are

46
discussed under Sections 14 and 31, Accounting for Obligation and
Disbursements by Check, respectively.
The sub-systems are as follows:

1. Receipt, Inspection, Acceptance and Recording Deliveries of

Inventory Items and Equipment
2. Requisition and Issuance of Inventory Items
3. Requisition and Issuance of Equipment

Sec. 43. Perpetual Inventory Method. Purchase of supplies

and materials for stock, regardless of whether or not they are consumed
within the accounting period, shall be recorded as Inventory account.
Under the perpetual inventory method, an inventory control account is
maintained in the General Ledger on a current basis.

Regular purchases shall be recorded under the Inventory account

and issuance thereof shall be recorded based on the Report of Supplies
and Materials Issued. Purchases out of the Petty Cash Fund shall be
charged immediately to the appropriate expense accounts.

The Accounting Unit shall maintain perpetual inventory records,

such as the Supplies Ledger Cards for each inventory stock, Property,
Plant and Equipment Ledger Cards for each category of plant, property
and equipment including work and other animals, livestock, etc. The
subsidiary ledger cards shall contain the details of the General Ledger
accounts.

For check and balance, the Property and Supply Office/Unit shall
maintain Property Cards (PC) for property, plant and equipment, and
Stock Cards (SC) for inventories. The balance in quantity per PC and SC
should always reconcile with the ledger cards of the Accounting Unit.

Sec. 44. Moving Average Method. The moving average

method of costing shall be used for costing inventories. This is a method
of calculating cost of inventory on the basis of weighted average on the
date of issue. The Accounting Unit shall be responsible in computing the
cost of inventory on a regular basis.

47
 Sec. 45. Procedures in the Receipt, Inspection, Acceptance
and Recording Deliveries of Inventory Items and Equipment

Area of Seq.
Responsibility No. Activity

Property and Delivery of Equipment and Inventory

Supply Unit Items
Property/
Supply Officer 1 Signs “Received” portion of the original
and Copy 2 of the Delivery Receipt (DR).
Files the original and returns Copy 2 of the
DR to the Supplier/Procurement Service.

2 Prepares Inspection and Acceptance

Report (IAR) in three copies. Forwards
IAR, original of DR, and Copy 2 of
approved PO from file to Property
Inspector for inspection of deliveries.

Note 1
Distribution of the IAR shall be as follows:
Original - Supplier (to be attached to
the DV)
Copy 2 - Property Inspector/
Inspection Committee
Copy 3 - Property and Supply Unit file

Property 3 Inspects and verifies items as to quantity

Inspector and conformity with specifications based
on the DR and approved PO. If in order,
signs and indicates date of inspection in
the “Inspection” column of the IAR.
Retains copy 3 of IAR and forwards the
items and Copy 1-2 of IAR, original of DR
and Copy 2 of PO to Property/Supply
Officer for acceptance.

48
 Area of Seq.
Responsibility No. Activity

4 If specifications are not in order or

delivery is not complete, indicates notation
on the IAR that the deliveries are not in
conformity with specifications agreed
under the approved PO or deliveries are
not complete. Forwards the IAR to the
Property/Supply Officer.

Property/Supply 5 Signs in ‘Acceptance’ column,

Officer acknowledging receipt of the items
delivered. Checks the appropriate box
whether complete or partial (indicate
quantity received) delivery, and indicate
the date of receipt and remarks, if any.
Forwards items to Property/Supply
Custodian for safe-keeping/storage.

6 Prepares DV indicating the Supplier as

Payee. Attaches the original IAR, Copy 2
of DR, PO and photocopy of PR.
Forwards documents to Budget Unit for
the preparation of ALOBS. Forwards copy
2 of IAR and copy of PO to the
Property/Stock Card Keeper for recording
in the Property/ Stock Cards.
Note 2
For succeeding activities on processing of
payment for delivered inventory items and
equipment, refer to Sec.15, Procedures in
the Recording of Obligations and Sec. 34
Procedures in Disbursements by Checks.

49
 Area of Seq.
Responsibility No. Activity

Note 3
For purchases made through the
Procurement Service (PS), the DV shall be
prepared on the basis of the Approved
Agency Procurement Request. The
payment shall be made directly to the PS.

Accounting Unit After Payment of Deliveries

PPELC/SLC
Keeper 7 Posts necessary information to the
Property, Plant and Equipment Ledger
Card (PPELC)/Supply Ledger Card (SLC)
based on the paid documents forwarded by
the Cash Unit.

Sec. 46. Procedures in the Requisition and Issuance of

Inventory Items

Area of Seq.
Responsibility No. Activity

Concerned Office Inquiry for the availability of supplies

Requesting
Personnel 1 Prepares the Supplies Availability Inquiry
(SAI) in two copies. Accomplishes the
form for item description, unit and
quantity.

2 Fills up the ‘Inquired by’ portion of SAI

and forwards the same to Accounting Unit
for processing.

Accounting Unit
Accounting Staff 3 Receives SAI from Requesting Personnel.
Reviews and verifies the completeness of
information.

50
 Area of Seq.
Responsibility No. Activity

4 Retrieves from file the SLC and

determines availability/status of stocks.

5 Fills up the number, stock number, status

of stock and ‘Status provided by’ portion
of the SAI. Returns the original to the
Requesting Personnel and files Copy 2 of
the SAI.
Concerned Office
Requesting
Personnel 6 Receives the original of SAI from the
Accounting Staff. If stock is not available,
prepares Purchase Request (PR) for the
item requested and forwards the same to
Property and Supply Unit for processing of
the request. If stock is available, prepares
Requisition and Issue Slip (RIS) in three
copies. Fills up all the necessary
information except for the issuance portion
and signs ‘Requested by’ portion of the
RIS. Forwards the RIS to Authorized
Official for approval.

Note 1
The RIS shall be distributed as follows:
Original - Accounting Unit
Copy 2 - Property and Supply Unit
Copy 3 - Requesting Office

Authorized 7 Signs the ‘Approved by’ portion of the

Official RIS.

Requesting 8 Receives signed RIS and forwards to the

Personnel Property and Supply Unit together with the
original of SAI for withdrawal of
inventory items requested.

51
 Area of Seq.
Responsibility No. Activity

Property and Supply

Unit
Supply Officer 9 Reviews and verifies RIS as to
completeness of information. Fills up the
RIS No./Date, and Quantity, Remarks and
initials ‘Approved by’ portion of the RIS,
and records RIS in the logbook.

Head of the 10 Signs the ‘Approved by’ portion of RIS

Property and and returns to the Supply Officer for
Supply Unit issuance of the stock.
Supply Officer 11 Fills up and signs the ‘Issuance’ portion of
the RIS and issues inventory items
requested to the Requesting Personnel.

Concerned Office
Requesting 12 Receives supplies requested and sign in the
Personnel ‘Received by’ portion of the RIS.

13 Files permanently in numerical order Copy

2 of RIS and files temporarily the originals
of RIS and SAI for the preparation of
Report of Supplies and Materials Issued
(RSMI).

Preparation of RSMI

14 Retrieves the original copies of RIS and

SAI from temporary file. Checks the
completeness of the RIS. If not complete,
verifies with the Supply Officer. If
complete, prepares RSMI in three copies.

15 Initials in the ‘Certified by’ portion of the

RSMI.

52
 Area of Seq.
Responsibility No. Activity

Property and Supply

Unit
Head of the 16 Signs in the ‘Certified by’ portion of the
Property and RSMI.
Supply Unit

Stock Card 17 Receives signed RSMI and forwards to

Keeper Accounting Unit the original and Copy 2
of RSMI together with originals of RIS
and SAI. Files Copy 3 of RSMI.

At the Start of the Day

Accounting Unit
Accounting Staff 18 Receives original and Copy 2 of RSMI,
and original SAI and RIS. Checks and
verifies the completeness of information.
Retrieves SLC from file and fills up the
‘To be filled up in the Accounting Unit’
portion of RSMI. Records RSMI in the
SLC.

19 Signs in the ‘Posted by/date’ portion of the

RSMI.
20 Files permanently in numerical order Copy
2 of RSMI and files temporarily the
original RIS, SAI and RSMI for recording
issuance of inventory items in the books of
accounts.

At Month End

21 Retrieves the original RIS, SAI and RSMI

from temporary file.

22 Prepares JEV in two copies based on the

RSMI to record the issuance of stock.

53
 Area of Seq.
Responsibility No. Activity

23 Signs in the ‘Prepared by’ portion of the

JEV.

Head of the 24 Sign in the ‘Certified Correct by’ portion

Accounting Unit of the JEV.

Accounting Staff 25 Receives signed JEV and forwards to

Bookkeeper the JEV, RSMI, RIS, and SAI
for recording in the General Journal. Files
copy 2 of JEV.
Note 2:
For succeeding activities, refer to Sec. 71,
Preparation and Submission of Trial
Balances and Other Reports.

Sec. 47. Procedures in the Requisition and Issuance of

Equipment

Area of Seq.
Responsibility No. Activity

Concerned Office
Requesting
Personnel 1 Upon receipt of notice of availability of
the equipment requested, prepares RIS in
three copies.

Fills up the necessary information

pertaining to requisition, except ‘Issuance’
column of the RIS.

Authorized 2 Reviews RIS and signs ‘Requested By’ in

Official the Requisition column.

Requesting 3 Records the signed RIS in the logbook and

Personnel indicate date, particulars and remarks.

54
 Area of Seq.
Responsibility No. Activity

Forwards the same to Property and Supply

Unit for processing of the requisition.

Property and Supply

Unit
Receiving Staff 4 Receives signed RIS from Requesting
Office. Records the date, particulars and
Requesting Office in the logbook. Assigns
number on RIS and issues Copy 3 to
Requesting Personnel for file.

Property Officer 5 Verifies RIS and checks against the PR.

6 Initials RIS and forwards the original and

Copy 2 of RIS to the Head of the Property
and Supply Unit for review and approval.

Head of the 7 Reviews RIS and signs the ‘Approved By’

Property and portion of RIS. Forwards Copies 1-2 of
Supply Unit RIS to Property Custodian.

Property 8 Based on the approved RIS, assigns

Custodian number on the property being transferred/
issued. Indicates the number in the RIS.

9 Prepares Acknowledgment Receipt of

Equipment (ARE). Indicates the quantity,
unit, description and property number of
the items being issued. Signs in the
‘Received from’ and ‘Issued by’ portions
of the ARE and RIS, respectively.
Records the date, number and particulars
in the ARE logbook.

55
 Area of Seq.
Responsibility No. Activity

Note 1
ARE shall be distributed as follows:
Original - Property and Supply Unit file
Copy 2 - Recipient or user of the
property file
Concerned Office
Requesting 11 Retrieves Copy 3 of RIS. Checks item if it
Personnel is in conformity with RIS. Signs
‘Received By’ portion of original and
Copy 2 of ARE and RIS.

12 Returns original ARE and Copies 1-2 of

RIS to Property Custodian/Officer for
recording in the Property Card. Files Copy
2 of ARE and Copy 3 of RIS.
Supply and Property
Unit
Property Officer 13 Files original of ARE per accountable
officer/employee and Copy 2 of RIS.
Forwards the original RIS to the
Accounting Unit.

Accounting Unit 14 Receives original of the RIS. Retrieves the

PPELC Keeper PPELC and posts information pertaining
to issuance/transfer of property.

E. MISCELLANEOUS TRANSACTIONS

Sec. 48. Miscellaneous Transactions. Miscellaneous transactions

are transactions types that are unique and not recurring in the ordinary
course of government operations. These seldom take place or should not
happen at all. Some of the miscellaneous transactions are as follows:

1. Loss of Cash and Property

2. Request for Relief from Accountability
3. Cash Overage

56
 4. Stale MDS and Commercial Checks
5. Set-up and Settlement of Disallowances
6. Refund of Overpayments
Sec. 49. Accounting for Loss of Cash and Property. Loss of
cash and property may be due to malversation, theft, robbery, fortuitous
event or other causes.
Cash shortage discovered during cash examination conducted by
auditors is reported through the Report of Cash Examination. The
Auditor issues an audit report in case of shortage in property
accountability. As soon as a shortage is definitely established, the
Auditor shall issue a memorandum pertaining thereto and the Accountant
shall draw a JEV to record the shortage as a receivable from the
Accountable Officer concerned.
In case of loss of property due to other causes like, theft, force
majeure, fire, etc., a report thereon shall be prepared by the Accountable
Officer concerned for purposes of requesting relief from accountability.
No accounting entry shall be made but the loss shall be disclosed in the
notes to financial statements pending result of request for relief from
accountability.
Sec. 50. Grant of Relief from Accountability. When a
request for relief from accountability for shortages or loss of funds is
granted, a copy of the decision shall be forwarded to the Chief
Accountant who shall draw a JEV to record the transaction. The loss
shall be debited to the Loss of Assets account and credited to the
appropriate receivable account. In case the request for relief is denied,
immediate payment of the shortage shall be demanded from the
Accountable Officer. Restitution shall be acknowledged by the issuance
of an official receipt.
In case the request for relief from accountability for loss of
property caused by fire, theft, force majeure or other causes is granted, a
copy of the decision shall likewise be forwarded to the Chief Accountant
for the preparation of the JEV. The loss shall be debited to the Loss of
Assets account and credited to the appropriate asset account. If request
for relief from accountability is denied, the loss shall be taken up as a
receivable from the Accountable Officer or employee liable for the loss
and shall be credited to the appropriate asset account.

57
 Sec. 51. Accounting for Cash Overage. In case the cash
examination disclosed cash overage, as determined by the Auditor during
cash examination, the amount shall be forfeited in favor of the
government and an official receipt shall be issued by the Cashier. The
cash overage shall be taken up as Miscellaneous Income.

Sec. 52. Accounting for Stale Checks. Checks may be

cancelled when they become stale. The depository bank considers a
check stale, if it has been outstanding for over six months from date of
issue or as prescribed.
reported in the RC
A stale check shall be marked cancelled on its face and reported
as follows:

1. Unclaimed stale checks which are still with Cashier shall be

cancelled and reported in the List of Unreleased Checks as
cancelled. The List of Unreleased Checks is attached to the
RCI.

2. For stale checks which are in the hands of the payees or

holders in due course and requested for replacements, new
checks may be issued upon submission of the stale checks to
the Accounting 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.

Sec. 53. Accounting for Disallowances. Disallowances shall

be taken up in the books of accounts only when they become final and
executory. The Accountant shall prepare the JEV to take up the
Receivable-Disallowances/Charges and credit the appropriate expense
account for the current year or Prior Years’ Adjustment account if
pertaining to expenses of previous years.

Cash settlement of disallowances shall be acknowledged through the

issuance of an official receipt and reported by the Cashier in the RCD.

58
 Sec. 54. Accounting for Overpayments. Sometimes
overpayments or even double payment of expenditures do happen in
agencies. These could be avoided with the institution of proper controls
but some could not be avoided because of built-in procedures. One
example is the payment of payrolls. Payrolls are prepared in advance
and some agencies pay their employees through the banking system. All
these are done before reports of attendance are submitted, making it
impossible to know the exact amount to be paid in case there are
absences without pay during the pay periods. In case of overpayments,
refunds shall be demanded of the employees concerned.

Sec. 55. Pro-forma Accounting Entries. The following are

the pro-forma accounting entries for miscellaneous transactions:

Acct.
Particulars Account Title Code Dr. Cr.

1. Cash Shortage

a. Cash shortage of the Disbursing Officer

To take up cash Due from Officers and Employees 128 150

shortage Cash-Disbursing Officers 107 150

b. Cash Shortage of the Collecting Officer

To take up cash Due from Officers and Employees 128 150

shortage Cash-Collecting Officers 106 50

2. Relief from Accountability for Loss of Government Funds and Property

a. Request for Relief from Accountability Granted.

To take up relief from

accountability

for current year - - Loss of Assets 948

or
for prior years - - Prior Years’ Adjustments 533 50
Due from Officers and
Employees 128 50

59
 Acct.
Particulars Account Title Code Dr. Cr.

b. Request for Relief from Accountability Denied.

To record the loss of Due from Officers and Employees 128 150
fund by a Disbursing Cash-Disbursing Officers 107 150
Officer (allegedly
thru theft ) - P150

c. Cash Settlement/Restitution in case of denial of Request for Relief from

Accountability

To take up receipt of Cash-Collecting Officers 106 50

settlement Due from Officers and
Employees 128 50

To record deposit
c.1 current year Subsidy Income from National 601 50
Government
Cash-Collecting Officers 106 50

c.2 prior year Prior Years’ Adjustment 533 50

Cash-Collecting Officers 106 50

3. Cash Overage

To take up cash Cash – Collecting Officers 106 50

overage discovered Due to National Treasury 433 50
during cash Miscellaneous Operating
examination and Service Income 50

To record deposit Due to National Treasury 433 50

Miscellaneous Operating
and Service Income 50
Cash-Collecting Officers 106 50

4. Stale Checks

a. Stale MDS check issued in the current year for replacement

Check cancellation Cash-National Treasury, MDS 102 50

Accounts Payable 401 50

Replacement Accounts Payable 401 50

Cash-National Treasury, MDS 102 50

60
 Acct.
Particulars Account Title Code Dr. Cr.

b. Stale MDS check issued in the prior years for replacement

Check cancellation Prior Years’ Adjustments 533 50

Accounts Payable 401 50

Replacement Accounts Payable 401 50

Cash-National Treasury, MDS 102 50

c. Stale commercial check issued in the current and prior years for replacement

Check cancellation Cash in Bank-Local Currency,

Current Account 110 50
Accounts Payable 401 50

Replacement Accounts Payable 401 50

Cash in Bank-Local Currency,
Current Account 110 50

5. Disallowances

a. Recording of disallowances for current year’s transaction

When the disallowances

becomes final and Receivables-Disallowances/
executory - Charges 138 10
overpayment of office Office Supplies Expenses 849 10
supplies
Amount paid - P100
Should be - 90
Difference - 10

Settlement of Cash-Collecting Officers 106 10

Disallowance Receivables-Disallowances/
Charges 138 10

Deposit of collection Subsidy Income from National

Government 601 10
Cash-Collecting Officers 106 10

61
 Acct.
Particulars Account Title Code Debit Credit

b. Recording of disallowance for prior year’s transaction

When the disallowance Receivables - Disallowances/

becomes final and Charges 138 10
executory Prior Years’ Adjustments 533 10

Settlement of Cash - Collecting Officers 106 10

disallowance Receivables - Disallowances/
Charges 138 10

Deposit of collection Prior Years’ Adjustments 533 10

Cash-Collecting Officers 106 10

6. Refund of Overpayment

a. Overpayment taken up as receivable

To record Due from Officers and Employees 128 10

overpayment of Salaries and Wages - Regular
salaries and wages Pay 801 10
(When overpayment
is ascertained)

To record receipt of Cash-Collecting Officers 106 10

refund Due from Officers and
Employees 128 10

Deposit of collection Subsidy Income from National

Government 601 10
Cash-Collecting Officers 106 10

b. Refund of overpayment not taken up as receivable

To record receipt of Cash - Collecting Officers 106 10

refund of Salaries and Salaries and Wages – Regular
Wages - Regular Pay Pay 801 10
during the current
year

Deposit of collection Subsidy Income from National

Government 601 10
Cash-Collecting Officers 106 10

62
 Acct.
Particulars Account Title Code Debit Credit

To record receipt of Cash-Collecting Officers 106 10

refund of Prior Years’ Adjustments 533 10
0verpayment in the
ensuing year

Deposit of collection Prior Years’ Adjustments 533 10

Cash-Collecting Officers 106 10

63
 Chapter 4. Trial Balances, Financial Reports
and Statements

The Financial Statements Process

Statement of
Pre-
Income and
Closing
Expenses
TB
Unadjusted
Trial
Balance Sec. 1. S
tateme Statement
of
nt of Cash
Gover Closing Flows
Journal
nment Entries
Equity
Adjusting . The
Entries
Statem
Post-
Balance
Closing
ent of Sheet
TB
Gover
nment
Equity
(Appen
dix 48)
shows
Sec. 56. Financial Reporting System. This Financial
the
Reporting System (FRS) includes the preparation and submission of trial
financi and other reports needed by fiscal and
balances, financial statements
regulatory agencies. Thealsub-systems are as follows:
transac
1. Preparationtions
and Submission of Trial Balances and Other
Reports which
2. Preparationresulte
and Submission of Financial Statements
d to
the
change
in
Gover
nment 64
Equity
accoun
t at the
end of
the
year.
TB
 Sec. 57. Trial Balance. The Trial Balance shows the equality
of debit and credit balances of all general ledger accounts as of a given
period. It is prepared and submitted monthly, quarterly and annually. At
the end of the fiscal year, the pre-closing and the post-closing trial
balances shall be prepared.

Sec. 58. Purposes of the Trial Balance. The trial balance is

prepared to:

1. prove the mathematical equality of the debits and credits

after posting;
2. uncover errors in journalizing and posting; and
3. serve as basis for the preparation of the financial
statements.

Sec. 59. Pre-Closing Trial Balance. The Pre-Closing Trial

Balance (Appendix 2) shall be prepared after recording the adjusting
journal entries in the General Journal and posting the same to the
General Ledger. It shows the adjusted balances of all accounts as of a
given period. This is also described as the adjusted trial balance.

Sec. 60. Adjusting or Correcting Journal Entries. Under

the matching principle, adjustments shall be made for economic activities
that have taken place but are not yet recorded at the time when the
financial statements are prepared. Such adjusting journal entries are
made to ensure that revenues and expenses are recorded in the period
when they are earned or incurred. Adjustments are of two main types:
accrued items and deferred items.

Sec. 61. Adjustment for Accrued Item. It is an adjusting

entry for an economic activity already undertaken but not yet recorded
into an asset and revenue accounts or a liability and expense accounts. It
requires asset/revenue adjustments and liability/expense adjustments.

Sec. 62. Asset/Revenue Adjustment. It involves earned

revenues not yet recorded as assets and income at the end of the
accounting period. Examples are receivables for revenues already
earned but not yet collected nor billed as of the year end.

65
 Account
Account Title Code Debit Credit
Interest Receivable 161 500
Interest Income 624 500

Sec. 63. Liability/Expense Adjustment. It involves

expenses, which already exist but remain unpaid at the end of the
accounting period. Examples are salaries, wages and other expenses
already incurred but not yet paid.
Account
Account Title Code Debit Credit
Salaries and Wages-Regular Pay 801 1,000
Due to Officers and Employees 428 1,000

Sec. 64. Adjustment for Deferred Items. These are

adjusting entries transferring data previously recorded in an asset account
to an expense account, or data previously recorded in a liability account
to a revenue account. It also requires asset/expense adjustments and
liability/revenue adjustments.

Sec. 65. Asset/Expense Adjustments. These pertain to

assets, portion of which shall be recorded as expense of the agency at the
end of the accounting period. Examples are prepaid expenses, bad debts
and depreciation.
Account
Account Title Code Debit Credit

Original Entry:
Prepaid Rent 161 1,000
Cash-National Treasury, MDS 102 1,000

Adjusting Entry:
Rent Expenses 841 900
Prepaid Rent 161 900

Sec. 66. Bad Debts. Trade receivables shall be valued at

their face amounts minus, whenever appropriate, allowance for doubtful
accounts. Bad Debts expense and/or any anticipated adjustments, which
in the normal course of events will reduce the amount of receivables
from the debtors to estimated realizable values, shall be set up at the end
of the accounting period.

66
 The Allowance for Doubtful Accounts shall be provided in an
amount based on collectibility of receivable balances and evaluation of
such factors as aging of the accounts, collection experiences of the
agency, expected loss experiences and identified doubtful accounts.

The determination of bad debts expense shall be derived from

computations based on percentages and aging of accounts receivable as
follows:
Age of Accounts Percentage

1 - 60 days 1%
61 - 180 days 2%
181- 1 year 3%
More than 1 year 5%

An adjusting journal entry to take up bad debts expense is as follows:

Account
Account Title Code Debit Credit
Bad Debts 929 1,000
Allowance for Doubtful Accounts 301 1,000

Sec. 67. Depreciation for Property, Plant and Equipment.

The costs of property, plant and equipment are allocated to the periods
benefited through the provision of accumulated depreciation.
Depreciation is the systematic and gradual allocation of the depreciable
amount of asset over its useful life. The depreciable or estimated useful
life for different types of agency assets are presented as Appendix 1.

Sec. 68. Method of Depreciation. Depreciation shall be

computed using the Straight Line Method. Depreciation shall start on the
second month from purchase. A residual value equivalent to ten percent
of the cost shall be set. Annual depreciation is computed as follows:
Annual Depreciation = Asset Cost less Estimated Residual/Salvage Value
Estimated Useful Life

Asset Cost - Purchase or Acquired Value of the Asset

Estimated Salvage Value - 10% of the asset cost
Estimated Useful Life - Estimated number of years the asset shall be
used as determined by the Commission
on Audit

67
 A sample adjusting journal entry for depreciation expense is
as follows:
Account
Account Title Code Debit Credit
Depreciation-Office Equipment 922 1,000
Accumulated Depreciation-Office 322 1,000
Equipment

Sec. 69. Closing Journal Entries. Closing journal entries are

general journal entries which close out the balances of all nominal/
temporary and intermediate accounts at the end of the accounting period.
The nominal and intermediate accounts that shall be closed at the end of
the accounting period are as follows:

1. Reversion of the unused or unutilized Subsidy Income from

National Government at the end of the year due to the DBM
policy that NCA will only be valid within the year of issue
except NCA for accounts payable, which is valid one month
after its issuance. There is no need to issue an MDS Check
when reverting the account.
Account
Account Title Code Debit Credit
Subsidy Income from National 601 100
Government
Cash-National Treasury, MDS 102 100

2. Close the balance of the Subsidy Income from National

Government account to Income and Expense Summary
account.
Account
Account Title Code Debit Credit
Subsidy Income from National 601 1,000
Government
Income and Expense Summary 532 1,000

3. Close the balance of all income accounts to Income and

Expense Summary account.
Account
Account Title Code Debit Credit
Income from Government Services 611 500
Income from Government Business
Operations 612 400
Income and Expense Summary 532 900

68
 4. Close the balance of all expense accounts to Income an
Expense Summary account.

Income and Expense Summary 532 800

Salaries and Wages-Regular Pay 801 800

5. Close the balance of the Income and Expense Summary

Account to the Retained Operating Surplus account.

Income and Expense Summary 532 1,100

Retained Operating Surplus 534 1,100

5. Close the balance of the Prior Year’s Adjustments account to

Retained Operating Surplus account.

Prior Years’ Adjustments 533 200

Retained Operating Surplus 534 200

6. Close the balance of the Retained Operating Surplus to

Government Equity account.

Retained Operating Surplus 534 1,300

Government Equity 501 1,300

7. Close Public Infrastructures or Reforestation Projects

accounts to Government Equity account and transfer the
corresponding amounts to the respective registries.

Government Equity 501 1,300

Public Infrastructures/ 243/
Reforestation Projects 244 1,300

Sec. 70. Post-Closing Trial Balance. The Post-Closing

Trial Balance (Appendix 3) shall be prepared after recording the closing
journal entries in the General Journal and posting to the General Ledger.
It contains a listing of all general ledger accounts that remain open after
the closing process is completed.

69
 Sec. 71. Procedures in the Preparation and Submission of
Trial Balances and Other Reports

Area of Seq.
Responsibility No. Activity

Preparation of Unadjusted Trial Balance

Accounting Unit
Bookkeeper 1 Records JEVs for the month in the Special
Journals and General Journal.

2 Posts the journal entries from the Special

Journals and General Journal to the
respective General Ledgers.

3 Records the source/summarizing

documents to the respective Subsidiary
Ledgers.
Note 1
The summarizing/source documents are
the following:
▪ Report of Checks Issued (RCI)
▪ Report of Collections and Deposits
(RCD)
▪ Report of Disbursements (RD)
▪ Journal Entry Voucher (JEV)
▪ Disbursement Voucher (DV)
▪ Other Supporting Documents (OSD)

4 Foots and extracts the balances of the

General Ledgers and Subsidiary Ledgers.
5 Based on the General Ledgers, prepares the
Unadjusted Trial Balance (UTB) to check
the postings made on the General Ledgers
or the equality of debit and credit balances
of the general ledger accounts. Files
temporarily.

70
 Area of Seq.
Responsibility No. Activity

Preparation of Pre-Closing Trial Balance

6 Prepares adjusting journal entries thru the

JEV for unrecorded transactions and for all
accounts that need to be adjusted/
corrected. Records the JEV in the General
Journal.
Note 2
Adjusting journal entries shall be prepared
for the following transactions:

✓ Adjustment for Accrued Items

✓ Adjustment for Deferred Items
✓ Correction/Reclassification Entries
✓ Provision for Allowance for Doubtful
Accounts
✓ Provision for Accumulated Depreciation

7 Posts the adjusting journal entries from the

General Journal to the General Ledgers
and Subsidiary Ledgers.

8 Foots and extracts balances of the General

Ledgers and Subsidiary Ledgers.

9 Based on the General Ledgers, prepares

Pre-Closing Trial Balance in four copies.
Files temporarily the Pre-Closing Trial
Balance.

Note 3
Use of a Worksheet to facilitate the
preparation of the trial balances is
encouraged. The preparation of the
Worksheet is discussed in Sec. 82.

71
 Area of Seq.
Responsibility No. Activity

Note 4
The preparation of the adjusting journal
entries is at month end or as necessary.

Preparation of Other Reports

10 Reconciles the totals of the Subsidiary

Ledgers with the totals of the General
Ledgers accounts. If unreconciled, checks
the difference and prepares adjusting/
correcting entries as maybe necessary thru
the JEV.

11 If reconciled, prepares individual

supporting schedules per account based on
the Subsidiary Ledgers.

12 Initials the supporting schedules and the

Pre-Closing Trial Balance and forwards the
same to the Head of the Accounting Unit
for review and signature.

Head of the 13 Reviews and signs the ‘Certified Correct’

Accounting portion of the Pre-Closing Trial Balance
Unit and the supporting schedules.

Designated 14 Submits the Pre-Closing Trial Balance to

Staff the Offices concerned. Records submission
in the logbook maintained. Files Copy 4 of
the Pre-Closing Trial Balance and Copy 4
of supporting schedules for preparation of
financial Statements.

72
 Area of Seq.
Responsibility No. Activity

Preparation of Post-Closing Trial Balance

at year-end.

Bookkeeper 15 Prepares closing journal entries thru JEV

and records the same in the General
Journal.
Note 5
The following accounts shall be
closed/reverted at year-end:

▪ Unused Subsidy Income from National

Government(Balance of account Cash-
National Treasury, MDS)
▪ Nominal/Intermediate Accounts
✓ Income accounts (including
Subsidy Income from National
Government, RO and OU) to
the Income and Expense
Summary (IES) account
✓ Expense accounts to IES account
✓ Prior Years’ Adjustments account
to Retained Operating Surplus
(ROS) account
✓ Balance of IES account to ROS
account
✓ ROS account to Government
Equity account
.
Note 6
In addition to the closing journal entries,
the account Infrastructure Projects/
Reforestation Projects shall be
transferred at year- end to the Registry of
Infrastructures/Registry of Reforestation
Projects.

73
 Area of Seq.
Responsibility No. Activity

16 Posts the journal entries from the General

Journal in the respective General Ledgers.

17 Foots and extracts the balances of the

General Ledgers and the Subsidiary
Ledgers.

18 Based on the General Ledgers, prepares

Post-Closing Trial Balance in four copies.

19 Reconciles the supporting schedules with

Post-Closing Trial Balance. If not
reconciled, prepares the necessary
corrections thru JEV. Records the JEV in
the General Journal.

20 Initials the ‘Certified Correct by’ portion

of the Post-Closing Trial Balance and
‘Prepared by’ portion of supporting
schedules.

21 Prepares transmittal letter and forwards the

same together with the Post-Closing Trial
Balance and supporting schedules to the
Head of the Accounting Unit.

Head of the 22 Reviews and signs ‘Certified Correct by’

Accounting portion of the Post-Closing Trial Balance,
Unit supporting schedules and transmittal letter,
and forwards the same to the Accounting
Staff for distribution.

Accounting Staff 23 Distributes the Post-Closing Trial Balance

and supporting schedules to the Concerned
Offices. Records in the logbook the
submission of the same.

74
 Area of Seq.
Responsibility No. Activity

Note 7
Trial Balances and supporting schedules
shall be distributed as follows:
Copy 1 – COA Resident Auditor
Copy 2 – Accountancy Office, COA
Copy 3 – DBM
Copy 4 – Accounting Unit File
Note 8
The frequency of submission of Pre-
Closing Trial Balance/Post-Closing Trial
Balance and other reports shall be as
follows:
▪ Pre-Closing Trial Balance and other
reports – monthly, within ten days
after the end of the month to the COA
Resident Auditor and DBM
▪ Year-end Pre-Closing Trial Balance/
Post-Closing Trial Balance and other
reports – on or before Feb. 14 of the
following year to the COA Resident
Auditor, DBM and COA, Accountancy
Office.

Sec. 72. Generation of Financial Statements and

Supporting Schedules. Financial statements and their supporting
schedules are the products of the government accounting processes.
These are the principal comprehensive means by which the information
accumulated and processed in the state accounting system is periodically
communicated to those who use them. The financial statements generally
prepared in the National Government are: the Balance Sheet, Statement
of Income and Expenses, Statement of Government Equity, and
Statement of Cash Flows.

75
 Sec. 73. Responsibility for Financial Statements.
Responsibility for the fair presentation and reliability of financial
statements rests with the management of the reporting agency. This
responsibility is discharged by applying generally accepted state
accounting principles that are appropriate to the entity’s circumstances,
by maintaining effective system of internal control and by adhering to
the chart of accounts prescribed by the Commission on Audit.
To achieve fair presentation and reliable information of the
financial statements, the following standards shall be observed.
a. Fairness of presentation. This refers to the overall
propriety in disclosing financial information. Full disclosure
in financial aspects requires observance of the following
standards of reporting:
All essential facts relating to the scope and purpose of
each report and the period involved shall be included and
clearly displayed.
➢ All financial data presented shall be accurate, reliable,
and truthful. The requirement for accuracy does not
rule out the inclusion of reasonable estimates when the
making of precise measurements is impracticable,
uneconomical, unnecessary, or conducive to delay.
All appropriate steps shall be taken to avoid bias,
unclear facts, and presentation of misleading
information.
➢ Financial reports shall be based on official records
maintained under an adequate accounting system that
produces information objectively and discloses the
financial aspects of all events or transactions taking
place. Where financial data or reports based on
sources other than the accounting systems are
presented, their basis shall be clearly explained.
➢ The financial data reported shall be derived from
accounts that are maintained in all material respects on
a consistent basis from period to period; material

76
 changes in accounting policies or methods and their
effect shall be clearly explained.
➢ Consistent and non-technical terminology shall be
used in financial reports to promote clarity and
usefulness.
b. Compliance. The report shall be in accordance with
prescribed government requirements and international
accounting standards of reporting.
c. Timeliness. All needed reports shall be produced promptly
to be of maximum usefulness.
d. Usefulness. Financial reports shall be carefully designed to
present information that is needed and useful to reports
users.
Sec. 74. Statement of Management Responsibility for
Financial Statements. The Statement of Management Responsibility for
Financial Statements (Appendix 4) shall serve as the covering letter in
transmitting the agencies financial statements to the Commission on
Audit, Department of Budget and Management, other oversight agencies
and other parties. It shows the agency’s responsibility for the preparation
and presentation of the financial statements. The statement shall be
signed by the Director of Finance and Management Office or
Comptrollership Office, or the Chief of Office who has direct
supervision and control over the agency’s accounting and financial
transactions, and the Head of Agency or his authorized representative.
Sec. 75. Balance Sheet. The Balance Sheet (Appendices 5
and 6) is a formal statement which shows the financial condition of the
agency as of a certain date. It includes information on the three elements
of financial position - assets, liabilities and government equity. It shall
be prepared from information taken directly from the year-end Post-
Closing Trial Balance. The Balance Sheet shall be supported with the
following schedules/statements:
▪ Schedules of Accounts Receivables (SAR) (Appendix 7)
▪ Schedules of Accounts Payables (SAP) (Appendix 8)
▪ Schedules of Public Infrastructures (SPI) (Appendix 9)
▪ Other schedules as may be required

77
 Although the allotments and obligations of the agency are not
recorded in the books of accounts, the Statement of Allotments,
Obligations and Balances (SAOB) (Appendix 10) shall be submitted to
the Commission on Audit by the Budget Officer/Agency Officer
concerned. This statement shall to be included among the
aforementioned schedules for information of government officials and
oversight agencies.

Sec. 76. Statement of Income and Expenses. The

Statement of Income and Expenses (Appendices 11 & 12) shows the
results of operation/performance of the agency at the end of a particular
period. This statement shall be prepared by the Accounting Unit from
information taken directly from the Pre-Closing Trial Balance.

Sec. 77. Statement of Government Equity. The Statement

of Government Equity (Appendix 13) shows the financial transactions,
which resulted to the change in Government Equity account at the end of
the year.

Sec. 78. Statement of Cash Flows. The Statement of Cash

Flows (Appendix 14) is a statement summarizing all the cash activities of
an agency. This includes the operating, investing and financing activities
of the entity and provides information on the cash receipts and cash
payments during the period. The primary purpose of the Statement of
Cash Flows is to give relevant information on the agency’s overall cash
position, liquidity and solvency. Using the Statement of Cash Flows,
managers, investors and creditors could easily assess if the agency could
meet its obligations in operating, investing and financing activities.

Sec. 79. Preparation of the Statement of Cash Flows. To

facilitate the preparation of the Statement of Cash Flows, the use of a
Working Paper is encouraged. It shall show the increase or decrease in
the cash accounts between two periods. The net increase in cash
provided by 1) operating 2) investing and 3) financing activities in
addition to the cash balance at the beginning shall equal to the cash
balance at the end of the period.

1) Operating Activities. Operating activities involves the

principal resources producing activities of the enterprise and

78
 other activities that are not investing or financing (SFAS 22).
Generally, these include the cash effect on transactions that
enter in the Income and Expense Summary account.

2) Investing Activities. Investing activities involves the

acquisition and disposal of long-term assets and other
investments not included in cash equivalent (SFAS 22). These
activities include cash transactions covering non-operating
assets, such as the purchase of property, equipment, short and
long-term investments and other non-current assets.

Non-cash investing activities are not included in the

statement of cash flows.

3) Financing Activities. Financing activities are derived from

the equity capital and borrowings of the agency (SFAS 22).
These include cash transactions involving the government
equity and non-operational liabilities.

Non-cash financing activities are not included in the

statement of cash flows.

The increase or decrease in the cash accounts are analyzed and

the following computations are made:

Cash flows from operating activities

Cash Inflows:
▪ Receipt of Notice of Cash allocation (NCA) from the
DBM
▪ Receipt of Notice of Transfer of Allocation to Agency
RO/OU from CO
▪ Cash receipts from all sources of revenues
▪ Receipt of Inter – agency cash transfers (Due to)
▪ Cash receipts from the sale of goods or rendition of
services
▪ Cash receipt of interest income, rental income, dividend
income, etc.
▪ Receipt of payment for liquidated damages

79
 ▪ Receipt of refund of deposits
▪ Receipt of refunds of cash advance or excess payments
▪ Collection of receivables
▪ Cash receipt of grants and donations
▪ Receipt of cash dividends from enterprises (e.g. PLDT)

Cash Outflows:
▪ Payments of accounts payable
▪ Cash purchase of merchandise for sale
▪ Cash advances granted for travel
▪ Inter-agency transfers (Due from)
▪ Notice of Transfer of Allocation to Agency RO/OU
issued by the NGA Main Office to RO/OU and/or
attached agencies through Government Servicing
Banks
▪ Return of unused NCA
▪ Cash payment for operating expenses
▪ Remittance of taxes withheld not covered by TRA and
other deductions (if any)
▪ Cash purchase of supplies and equipment
▪ Cash payment of retirement benefits
▪ Cash payment of claims for damages
▪ Cash payment for liabilities incurred in operations
▪ Cash payments for interest

Cash flows from investing activities:

Cash Inflows:
▪ Proceeds from sale of marketable stocks and bonds
▪ Cash proceeds from the sale/disposal of equipment and
other property, plant and equipment
▪ Redemption of long-term investments or repayment by
GOCC/GFI of long-term loans

Cash Outflows:
▪ Purchase of property, plant and equipment
▪ Purchase of land
▪ Investment in stocks/bonds
▪ Investment in GOCC/GFI

80
 ▪ Exposure as other long-term investments

Cash flows from financing activities:

Cash Inflows:
▪ Cash received from domestic and foreign loans
▪ Issuance of treasury bills

Cash Outflows:
▪ Payment of domestic and foreign loans
▪ Redemption of treasury bills outstanding
▪ Payment of cash dividend

The net increase in cash provided by operating activities,

investing activities and financial activities for the year, and the
cash balance at the start of the year, shall equal the cash balance
at the end of the year. Such amount shall tally with the total cash
account shown in the balance sheet.

Sec. 80. Notes to Financial Statements. Notes to Financial

Statements (Appendix 15) are integral parts of financial statements,
which pertain to additional information necessary for fair presentation in
conformity with generally accepted accounting principles. These may
explain the headings captions or amounts in the statements of present
information that cannot be expressed in money terms, and description of
accounting policies.

Information shall be presented in a way that will facilitate

understanding and avoid erroneous implications. The headings, captions
and amounts shall be supplemented by enough additional data so that
their meaning would be clear and not overshadowed by so much
information that important matters are buried in mass trivia.

Where Notes to Financial Statements appear on a separate page,

indicate the phrase “See accompanying Notes to Financial Statements”
placed at the bottom of said statements.

Material changes in classification of accounts shall be indicated

and explained as notes to financial statements.

81
The four types of disclosure considered necessary are as follows:

a. Customary or routine disclosure. Information about

measurement bases of important assets, restrictions on assets
and government equity, important long-term commitments
not recognized in the body of the statements, information on
terms of owner’s equity and long-term debt, and certain
other disclosures required by pronouncements of the
Philippine Institute of Certified Public Accountants,
Accounting Standards Council, and regulatory bodies that
have jurisdiction are necessary for full disclosure.

b. Disclosure of changes in accounting principles. Changes

in accounting principles, practices, or the methods of
applying them, together with the financial effect, and the
justification for the change shall be disclosed in the financial
statements or a note thereto.

In particular, it shall include any of the following:

• Selection from existing acceptable alternatives

• Principles and methods peculiar to the agency
• Unusual application of generally accepted
accounting principles.

c. Disclosure of subsequent events. Disclosure of events that

affect the agency directly and that occur between the date of,
or end of the period covered by, the financial statements and
the date of completion of the statements is necessary if
knowledge of the events might affect the interpretation of the
statements, even though the events do not affect the
propriety of the statements themselves.

d. Disclosure of accounting policies. Description of the

accounting policies adopted by the reporting entity is
required as an integral part of the financial statements. It is
usually captioned “Summary of Significant Accounting
Policies”, and placed as first item in the Notes. It shall be

82
 limited to description of the policies and no quantitative data
shall be included.

Examples of accounting policy disclosures

commonly required:

• Consolidation principles
• Accounting for long-term investments
• Adoption of policy on increasing benefit
entitlements of the program members. The
effect of the increase shall be disclosed.
• Basis of revenue recognition

In general, disclosures shall include important

judgment as to appropriateness of principles relating to
recognition of revenues and allocation of asset costs to
current and future periods.

Sec. 81. Interim Reports. Interim reports are the financial

statements required to be prepared at any given period or at a financial
reporting period without closing the books of accounts. The following
interim financial statements shall be prepared and submitted quarterly
with the Notes to Financial Statements:

a. Statement of Income and Expenses;

b. Balance Sheet; and
c. Statement of Cash Flows.

The interim financial statements shall be prepared employing the

same accounting principles used for annual reports. Adjusting and
closing journal entries shall be prepared. However, only the adjusting
journal entries are recorded in the books of accounts. To facilitate the
preparation of the interim financial statements, the use of the worksheet
is recommended.

Sec. 82. Worksheet. A worksheet is a tool for accumulating

and sorting information needed for the preparation of the financial
statements. It is a columnar sheet used to adjust and close account

83
balances in preparation for the preparation of the financial statements.
The format of the worksheet shall be as follows:
Agency Name
Worksheet
As of __________, 20__

Statement Post-
Unadjusted Adjusted/Pre-
Closing of Income Closing Balance
Accounts Trial Adjustments Closing Trial
Entries and Trial Sheet
Balance Balance
Expenses Balance
Title Code Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

a. Account Title and Code columns show the accounts of the

General Ledger.

b. The Unadjusted Trial Balance columns reflect the amount

balances of the General Ledger accounts.

c. Adjustments columns show adjusting journal entries effected

for the accounts.

d. Adjusted/Pre-Closing Trial Balance columns show the

balances of all the accounts after adjustments are
added/deducted from the balances of accounts in the
unadjusted trial balance.

e. Closing Entries debit and credit columns show the amounts

debited and credited to close the nominal accounts.

f. Statement of Income and Expenses columns show all the

debit and credit amount balances of the nominal accounts
(subsidies, income and expenses) and intermediate accounts.

g. Post-Closing Trial Balance columns show the debit and

credit amount balances of all accounts after posting the
closing entries.

h. Balance Sheet columns show all the debit and credit amount
balances of all real accounts in the post-closing trial balance
(assets, liabilities and government equity).

84
 Chapter 5. Responsibility Accounting

Sec. 83. Responsibility Accounting Defined. Responsibility

accounting is a system that relates the financial results to a responsibility
center, which provides access to cost and revenue information under the
supervision of a manager having a direct responsibility for its
performance. It is a system that measures the plans (by budgets) and
actions (by actual results) of each responsibility center.

Sec. 84. Responsibility Center Defined. It is a part,

segment, unit or function of a government agency, headed by a manager,
who is accountable for a specified set of activities. Except for some,
which derive most of their income from collection of taxes and fees,
national government agencies are basically cost centers whose primary
purpose is to render service to the public at the lowest possible cost.
Cost centers are established to provide each government agency
accessibility to cost information and to facilitate cost monitoring at any
given period. While the use of Subsidiary Ledgers is sufficient to control
cost, it requires considerable time to summarize the cost incurred by
agency for its different programs, projects, activities and
offices/divisions, hence, responsibility accounting shall be done only
under the computerized accounting system.

Sec. 85. Objectives of Responsibility Accounting.

Responsibility accounting aims to: a) ensure that all costs and revenues
are properly charged/credited to the correct responsibility center so that
deviations from the budget can be readily attributed to managers
accountable therefore; b) provide a basis for making decisions for future
operations; and c) facilitate review activities, monitoring the
performance of each responsibility center and evaluation of the
effectiveness of agency’s operations.

Sec. 86. Concepts of Responsibility Accounting. The

following are the concepts of responsibility accounting:

a. Responsibility accounting involves accumulating and

reporting data on revenues and costs on the basis of the

85
 manager’s action who has authority to make the day-to-day
decisions about the items;

b. Evaluation of a manager’s performance is based on the matters

directly under his control;

c. Responsibility accounting can be used at every level of

management in which the following conditions exist:

1. Cost and revenues can be directly associated with the

specific level of management responsibility;

2. Costs and revenues are controllable at the level of

responsibility with which they are associated.

3. Budget data can be developed for evaluating the

manager’s effectiveness in controlling the costs and
revenues.

d. The reporting of costs and revenues under responsibility

accounting differs from budgeting in two respects:

1. A distinction is made between controllable and non-

controllable costs.

a) A cost is considered controllable at a given level

of managerial responsibility if that manager has
the power to incur it within a given period of
time. It follows that (1) all costs are controllable
by top management because of the broad range
of its activity; (2) fewer costs are controllable as
one moves down to lower level of managerial
responsibility because of the manager’s
decreasing authority.

b) Non-controllable costs are costs incurred

indirectly and allocated to a responsibility level.

86
 2. Performance reports either emphasize or include
only items controllable by individual manager.

e. A responsibility reporting system involves the preparation of a

report for each level of responsibility. Responsibility reports
usually compare actual costs with flexible budget data. The
reports show only controllable costs and no distinction is made
between variable and fixed costs.

f. Evaluation of a manager’s performance for cost centers is

based on his ability to meet budgeted goals for controllable
costs.

Sec. 87. Responsibility Center Code Structure. Each

government agency shall be assigned a responsibility center code. The
coding structure shall be as follows:

000-00-000-000-000

Department/Agency/Province/City

Responsibility Area (CO/RO)

Sub-responsibility Area (District/

Division)

Sub-responsibility Area
(Office/Unit/Program/Project)

Account Code
Examples:

87
 Example 1

000 -01- 000 -122 - 831

Department of ABC
Office of the Secretary

Central Office

None

Accounting Unit
Travelling Expense-Local

Example 2

000 - 06- 021 - 401 - 831

Department
Office of the Secretary

Regional Office III

Operating Unit I

Local Project -
Computerization
Travelling Expense - Local

Sec. 88. Computerized Accounting System. Since

responsibility accounting cannot be done under the manual system, the
details of this shall be discussed on the Manual for Computerized
Accounting system to be issued by the Commission on Audit.

88
 Chapter 6. Illustrative Accounting Entries

Sec. 89. Illustrative Accounting Entries in Regular

Agency (RA) Books.

a. Illustrative Accounting Entries for Typical Transactions of

Central/Regional Offices and Operating Units (CO/RO/OU)
receiving Notice of Cash Allocation (NCA) from the
Department of Budget and Management (DBM).

Central/Regional Offices and Operating Units receiving

NCA directly from the DBM shall be guided by the
illustrative accounting entries shown in Annex A.

b. Illustrative Accounting Entries for Decentralized Agencies

Regional Offices and Operating Units receiving NCA

directly from the DBM and funding checks from CO/RO
shall be guided by the illustrative accounting entries shown
in Annex B.

Sec. 90. Illustrative Accounting Entries in National

Government (NG) Books.

National Government Agencies whose income/collections are

required to be recorded in the NG Books and remitted to the National
Treasury through Authorized Government Depository Banks shall follow
the illustrative accounting entries shown in Annex C.

89
GROUP 1
TOPIC: The Unified Account Code Structure and The Revised Chart of Accounts

Leader: Quilang, Christy C.

Members: Ambe, Fritz Angie
Alavata, Sophia Bianca
Damasco, Danna Angel
Prado, Abegail Rose
Santos, Anne Margareth
Tullao, Mary Grace

The Unified Account Code Structure

Joint Circular No. 2013-1 dated August 6, 2013

➢ Developers
• Department of Budget and Management (DBM)
• Department of Finance (DOF)
• Bureau of Treasury (BTr)
➢ Unified Account Code Structure
• Government-wide coding framework
• Provide harmonized Budgetary and Accounting Code classification
• Facilitate efficient and accurate financial reporting
• Fiscal Year (FY) 2014

WHAT?
➢ UACS is a government-wide harmonized budgetary, treasury, and accounting
code classification framework to facilitate reporting of all financial transactions of
agencies.

WHY?
➢ UACS is used to simplify and consolidate format for financial reports. It enables
reporting of actual revenues and actual expenditures compared to what was
projected to be collected and expended in the budget. It also enables the
comparison of disbursement for activities with their approved appropriations.

WHERE?
UACS is used on the following:
• Budget Cycle
• Reporting Appropriation
• Allotment and Disbursement
• Cash Management
• Payrolls and Budgets
• Performance Measurement
The Unified Account Code Structure Five Key Elements

Funding Source (8 Digits)

• Fund Cluster (2-digit code)
• Financing Source (1-digit code)
• Authorization Code (2-digit code)
• Fund Category (3-digit code)
Organization Code (12 Digits)
• Department Code (2-digit code)
• Agency Code (3-digit code)
• Operating Unit Classification (2-digit code)
• Lower-Level Operating Unit (5-digit code)
Location Code (9 Digits)
• Region (2-digit code)
• Province (2-digit code)
• City/Municipality (2-digit code)
• Barangay (3-digit code)
MFO/Program, Activity, and Project (15 Digits)
• Sector/Horizontal Outcomes (5-digit code)
• Program/Project (1-digit code)
• MFO/Project Category (2-digit code)
• Activity Level 1/Project Sub-Category (2-digit code)
• Activity Level 2/Project Title (5-digit code)
Object Code (10 Digits)
• Revised Chart of Accounts (8-digit code)
• Sub-Object Code (2-digit code)

KEY ELEMENTS OF UACS

The key elements of UACS are as follow:
1. Funding Source Codes
It is a six-digit code to reflect the Financial Source, Authorization and Fund Category.
However, per Joint Circular no. 2014-1 dated November 7, 2014, the six-digit Funding
Source Code was enhanced by adding another two digits code for the Fund Cluster for
purposes of accounting, banking, and reporting: thus, it becomes eight digits.
a. Fund cluster code values
The Fund Cluster code values as provided by joint circular number 2014-1, were as
follows:
Fund Cluster Fund Cluster Description
Code
01 Regular Agency Fund
02 Foreign Assisted Project Fund
03 Special Accounts – Locally Fund/Domestic Grants Fund
04 Special Accounts – Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
 07 Trus Receipts

b. Financial Source Code:

PARTICULARS UACS
General Funds 1
Off-Budgetary Fund 2
Custodian Funds 3

General funds are funds available for any purpose that Congress may choose to apply
and compose of all receipts or revenues that do not otherwise accrue to other funds.
Off-Budgetary funds refer to receipts for expenditure items that are not part of the
National Expenditure Program, and which are authorized for depositing in government
financial institutions. These are categories into:
1.) Retained income/receipt, and
2.) Revolving funds
Custodial Funds refer to receipt of cash received by any government agency, whether
from a private source or another government agency, to fulfill a specific purpose.
Custodial receipts include receipts collected as an agent for another entity. These
include trust receipts, both from an individual or corporation, that are required to be held
by government until the outcome of a court's case or procurement activity is determined,
as well as a department or agency acted as a trustee for the fulfillment of some
obligations.

c. Authorization Code

PARTICULARS UACS
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

New General Appropriations are annual authorizations for incurring obligations, in

terms of specific amounts for:
1.) Personnel Services (PS)
2.) Maintenance and Other Operating Expenses (MODE)
3.) Financial Expenses (FinEX), and
4.) Capital Outlays (CO) during a specified budget year, as listed in the General
Appropriation Act (GAA).
Continuing Appropriations are authorizations to support obligations for a specified
purpose or project, even when these obligations are incurred beyond the budget year.
Because Maintenance and Other Operating Expenses and Capital Outlays
appropriations are valid for two (2) years, unobligated and unreleased appropriations for
these budget items are valid until the end of their second year and are classified as
Continuing Appropriations.

Supplemental Appropriations are additional appropriations enacted by Congress to

augment original appropriations that have proven insufficient for their intended purpose
because of economic, political or social conditions. It must also be supported by a
certification of availability of funds by the BTr.

Automatic Appropriations are authorization made annually or for some other periods
prescribed by law, by virtue of standing legislation, which do not require periodic action
by the Congress. These are automatically and annually included in the National
Expenditure Program of the National Government, (e.g., Retirement and Life Insurance
Premiums; Pension under R.A. No. 2087, as amended by P.D. No. 1625 and R.A. No.
5059; Domestic Grant Proceeds; Custom duties and Taxes, including tax expenditures;
Internal Revenue Allotment; etc.)

Unprogrammed Funds are standby appropriations for priority program or project of the
government. The utilization of these funds may be approved if any of the following
conditions are met:
• Revenue collections for the year exceed targets;
• New revenues not included in the original revenue targets are successfully
generated; or
• Foreign loan proceeds are generated for newly approved projects covered by
perfected loan agreements.

Retained Income/Funds are collections that are authorized by law to be used directly
by agencies for their operation or specific purpose. These include but are not limited to
receipts from following:
• State Universities and College - tuition and matriculation fees and other internally
generated receipts.
• Department of Health - hospital income.
•
Revolving Funds are receipts derived from business-type activities of
departments/agencies as authorized by law, and which are deposited in an authorized
government depository bank. These funds shall be self-liquidating. All obligations and
expenditures incurred, due to these business-type activities, shall be charged against
the Revolving Funds.

Trust Receipts are receipts that are officially in the possession of government agencies
or a public officer as trustee, agent, or administrator, or which have been received for
the fulfillment of a particular obligation.
d. Fund Category Code
PARTICULARS UACS
Specific Budgets of National Government Agencies 101 to 150
GoP Counterpart Funds and Loans/Grants from Development Partners 151 to 250
Allocations to Local Government Units 251 to 275
Budgetary Support to Government Corporations 276 to 300
Financial Assistance to MMDA 301 to 320
Special Accounts in the General Fund 321 to 400
Special Purpose Funds 401 to 420
Unprogrammed Funds 421 to 440
Funds Retained Income/Funds 441 to 500
Revolving Funds 501 to 600
Trust Funds 601 to 610
Others (Specify) 611 to 999

Specific Budget of National Government Agencies refers to the budget appropriated

for a specific department or agency of the National Government.

GoP Counterpart Funds and Loans/Grants from Development Partners refer to the
Multilateral/Bilateral Assistance. The fund category for counterpart funds, loan proceeds
and grants proceeds will be selected according to the name of the institution providing
funds from the list provided by UACS manual. Furthermore, the preceding authorization
code will vary depending on whether funds were loans or grants, as well as if they were
unprogrammed or included in the regular budget. Appropriated loan proceeds will use
authorization Code 01, grant proceeds will use authorization Code 04 and
unprogrammed loan proceeds will use authorization Code 05.

Allocation to Local Government Unit LGU (ALGU) refers to the share of LGU from
the revenue collections of the National Government. The total ALGU is based on a
sharing scheme computed for each LGU, as provided for under the Local Government
Code and other special laws.

Budgetary Support to Government Corporations refers to either subsidies for

operations or projects, equity contributions, and net lending and/or advances to GOCC
for loan repayments.

Financial Assistance to MMDA refers to national government subsidy in the form of

regular appropriation as provided in the General Appropriation Act (GAA) which shall
only be used to augment any deficiency in the consolidated funds of the MMDA to cover
valid and authorized expenditures.

Special Accounts in the General Fund (SAGF) is a fund where proceeds from
specific revenue measures and grants earmarked by law for priority projects are
recorded and are automatically appropriated.
Special Purpose Funds are lump-sum funds included in the GAA which are not within
the approved appropriations of departments/agencies/lower-level operating units, and
which are available for allocation to any department/agency/lower operating unit or
LGU for a specific purpose level, as may be duly approved in accordance with special
provisions on the use of these fund

(NOTE: For the Unprogrammed Funds, Retained Income/Funds, and Trust Funds, see
the preceding Authorization Code topic.)

The first digit of the Funding Source indicates whether the expenditure is sourced
inside or outside the general fund, which is the case for all budgeted spending and
continuing or automatic appropriation. The next two digits (2nd and 3rd) are for
Authorization. And the last three digits (4th to 6th) are for the Fund Category, which
identifies specific fund maintained by the agency for accounting purposes, as well as for
recording and reporting financial transactions.

Organization Codes
A. Department Codes
DEPARTMENTS UACS
Congress of the Philippines 1
Office of the President 2
Office of the Vice-President 3
Department of Agrarian Reform 4
Department of Agriculture 5
Department of Budget and Management 6
Department of Education 7
State Universities and Colleges 8
Department of Energy 9
Department of Environment and Natural Resources 10
Department of Finance 11
Department of Foreign Affairs 12
Department of Health 13
Department of the Interior and Local Government 14
Department of Justice 15
Department of Labor and Employment 16
Department of National Defense 17
Department of Public Works and Highways 18
Department of Science and Technology 19
Department of Social Welfare and Development 20
Department of Tourism 21
Department of Trade and Industry 22
Department of Transportation and Communication 23
National Economic and Development Authority 24
Presidential Communications Operations Office 25
Other Executive Offices 26
Autonomous Region in Muslim Mindanao 27
Joint Legislative-Executive Councils 28
The Judiciary 29
Civil Service Commission 30
Commission on Audit 31
Commission on Election 32
Office of the Ombudsman 33
Commission of Human Rights 34
Budgetary Support to Government Corporations 35
Financial Assistance to MMDA 36
Joint Legislative-Executive Councils 28
The Judiciary 29
Civil Service Commission 30
Commission on Audit 31
Commission on Election 32
Office of the Ombudsman 33
Commission of Human Rights 34
Budgetary Support to Government Corporations 35
Financial Assistance to MMDA 36
b. Agency Codes
It refers to any of the various unit if the government, including an office, instrumentality
or GOCC that may not approximate the size of a department, but which nevertheless
performs tasks that equally important and whose area of concern is nationwide in
scope.

c. Operating Unit Classification Codes

Operating Units are organizational entities charged with carrying out specific
substantive functions or with directly implementing programs / projects of a department
or agency, such as line bureaus and filled units.

OPERATING UNITS UACS

Central Office 1
Staff Bureaus 2
Department / Agency Regional Offices Centers for Health Development /
3
Regional Field Units - DA
State Universities and Colleges - Campuses 4
Provincial Offices - DAR and DENR 5
National Irrigation Administration Regional Offices - DA 6
Extension or Filled Offices - CDA-DOF / Penal Colonies-BUCOR 7
Schools Division / District Offices - DepEd 8
Secondary Scools - DepEd / Campuses - PSHS 9
Collection Districts** - BOC 10
Revenue Regional Offices* - BIR 11
Revenue District Offices** - BIR 12
Embassies - Consulates General / Manila and Regional Consular Offices
13
- DFA
Special - Retained Hospitals - DOH 14
Treatment and Rehabilitation Centers - DOH 15
Technical / Vocational Schools - TESDA 16
Key Budgetary Units - DND 17
District Engineering Offices and Sub-District Engineering Offices - DPWH 18
Land Transportation Offices - DOTC 19
Land Transportation Franchising and Regulatory Board - DOTC 20
Regional Developments Councils - NEDA 21
Autonomous Region in Muslim Mindanao 22
Land Transportation Offices - DOTC 19
Land Transportation Franchising and Regulatory Board - DOTC 20
Regional Developments Councils - NEDA 21
Autonomous Region in Muslim Mindanao 22
Land Transportation Offices - DOTC 19

Staff Bureau
• is a principal subdivision of a department which primarily performs policy,
program development, and advisory functions.
Regional Office (RO)
• is an organizational subdivision, headed by a regional director, who is
responsible for the performance of an entity’s functions within a region.
CDA Extension Office
● is a unit established in each of the country’s regions or as may be necessary, as
well as financially viable for implementing integrated and comprehensive plans
and programs on cooperative development.
Schools Division (DepEd)
● is a unit established in each province or city with at least 750 public elementary
and secondary school teachers, including Head Teachers and Principals.
DepEd Secondary School
● is a learning institution that offers a six-year secondary course and is supervised
by either, a Teacher-in-Charge a Head Teacher or a Principal.
Technical Education and Skills Development Authority (TESDA)
● Technical Vocational School Is a unit that offers non-degree program at the post-
secondary education level leading to skill proficiency-oriented courses
DFA Consular Offices
● are units established locally and abroad, and which are responsible for delivering
front-line foreign affairs services, including those related to passports, visas and
the legalization of documents.
Customs Collections Districts (BOC)
● are units headed by a district collector of customs and are composed of one
principal port of entry. Shall have as many sub-ports as necessary to maximize
revenue collections and prevent smuggling and other forms of customs fraud.
Revenue Regional Offices (RROs)
● administer and enforce internal revenue laws in a region, including the
assessment and collection of all internal revenue taxes, charges and fees from
taxpayers within the region's jurisdiction.
Revenue District Offices (RDOs)
● is a revenue regional office implementing units that directly serves taxpayers
within its prescribed area of jurisdiction.
Treatment and Rehabilitation Centers (TRCs)
● are centers which undertake the treatment, after-care and follow-up treatment of
drug dependents.
District Engineering Offices (DEOs)
● are responsible for all highways, flood-control and water resource development
system and other public works within the district and is headed by a District
Engineer.
Key Budgetary Units
● are organization units under the armed forces of the Philippines with distinct and
separate budgetary allocations in the General Appropriation Act.

Lower Level Operating Units

As a general rule, the last five digits of the Lower Level Operating Unit Code refer to
the assigned food for the individual operating units without reference to the Region
Code.
 If an agency has been moved from one department to another or refund operating
unit has been moved from one agency to another, all new coding numbers that apply
shall be used.
The old codes shall never be assigned to any new agency/operating unit so as to
preserve the transaction history of each agency.

Location Codes
To facilitate central agency analysis across the National Government, local coding
should first enable the analysis of data by region, and then by province, municipality/city
and barangay. The coding structure relies upon the codes used by the National
Statistical Coordination Board (NSCB) only. Location code is a nine-digit code
composed of Region, Province, City/ Municipality, and Barangay.

A. Region
It is a sub-national administrative unit composed off several provinces having more or
less homogenous characteristics, such as ethnic origin of inhabitants, dialect spoken,
agricultural produce, etc.

• Region code is a two-digits code (1st and 2nd) that identifies a specific region. It
ranges from 01 to 99 and generally corresponds to the region number

Province
It is a Political corporate unit of government which consists of a cluster of municipalities,
Or municipalities in component cities. It serves as a dynamic mechanism for
developmental processes effective governance of local government units within its
territorial jurisdiction.
Provice Codes

PROVINCE UACS
CAR – Cordillera Administrative Region
Abra 01
Apayao 81
Bengeut 11
Ifugao 27
Kalinga 32
Mountain Province 44
Region I – Ilocos Region
Ilocos Norte 28
Ilocos Sur 29
La Union 33
Pangasinan 55
Region II – Cagayan Valley
Batanes 09
Cagayan 15
Isabela 31
Quirino 57
Nueva Vizcaya 50
Region III – Central Luzon
Aurora 77
Bataan 08
Bulacan 14
Nueva Ecija 49
Pampanga 54
Tarlac 69
Zambales 71
Region IV-A - CALABARZON
Batangas 10
Cavite 21
Laguna 34
Quezon 56
Rizal 58
Region IV-B - MIMAROPA
Marinduque 40
Occidental Mindoro 51
Oriental Mindoro 52
Palawan 53
Romblon 59
Region IV-B - MIMAROPA
Marinduque 40
Occidental Mindoro 51
Oriental Mindoro 52
Palawan 53
Romblon 59
Region VI – Western Visayas
Aklan 04
Antique 06
Capiz 19
Guimaras 79
Iloilo 30
Negros Occidental 45
Region VII – Central Visayas
Bohol 12
Cebu 22
Negros Oriental 46
Siquijor 61
Region VIII – Eastern Visayas
Biliran 78
Eastern Visayas 26
Leyte 37
Northern Samar 48
Southern Leyte 64
Samar (Western Samar) 60
Region IX – Zamboanga Peninsula
Zamboanga del Norte 72
Zamboanga del Sur 73
Zamboanga Sibugay 83
Region X – Nothern Mindanao
Bukidnon 13
Camiguin 18
Lanao del Norte 35
Misamis Occidental 42
Misamis Oriental 43
 Region X – Nothern Mindanao
Bukidnon 13
Camiguin 18
Lanao del Norte 35
Misamis Occidental 42
Misamis Oriental 43
Region XII - SOCCKSARGEN
North Cotabato 47
Sarangani 80
South Cotabato 63
Sultan Kudarat 65
Region XIII – CARAGA
Agusan del Norte 02
Agusan del Sur 03
Surigao del Sur 67
Surigao del Norte 68
Dinagat Islands 85
Region XIII – CARAGA
Agusan del Norte 02
Agusan del Sur 03
Surigao del Sur 67
Surigao del Norte 68
Dinagat Islands 85

Province code is a two-digit code (3rd and 4th) that identifies the province. It ranges
from 01 to 99 and generally defining the relative alphabetic sequence of all provinces in
the Philippines, except those created after 1977, which are added to the list following
the updating procedures. A Province Code is independent of the Region Code, which
means that even if a province is transferred to another region, its Province Code
remains the same.
Municipality
It is a political corporate unit of government which consists of a group of barangays. It
serves primarily as a general-purpose government for the coordination and delivery of
basic, regular and direct services and effective governance of the inhabitants within its
territorial jurisdictions.
Municipality code is a two-digit code (5th and 6th) that generally defines the relative
alphabetical sequence of municipalities within the province. It ranges from 01 to 99;
therefore, the first code (01) is assigned to the first municipality in the alphabetical
sequence within that province.

d. Barangay

It is the basic political unit of government. It serves as the primary planning and
implementing unit of government policies, plans, programs, projects and activities in the
community, and also as o forum where the collective views of its constituents may be
expressed, crystallized and considered, and where disputes may be amicably settled.
Barangay code is a three-digit code (7th to 9th) which generally defines the relative
alphabetical sequence of the barangays within the municipality. It ranges from 001 to
099; therefore, like the Municipality Code, the first code (001) is assigned to the first
barangay in the alphabetical sequence within that municipality. The Barangay Code is
dependent upon the Municipality Identifier to fully establish the identity of a given
barangay.

Municipality Identifier
The Municipality Identifier is a four-digit number that defines the identity of the
municipality. It is the core of the national standard geographic system, and is composed
of the Province Code, followed by Municipality Code.
Illustration 1:
Assume that Municipality Identifier is 7310.
The first two-digits (73) is the Province Code for the province of Zamboanga del Sur
The last two-digits (10) is the Municipality Code, which is Kabasalan, the 10 municipality
in the province of Zamboanga del Sur.
Therefore, the Municipality Identifier 7310 is Kabasalan, Zamboanga del Sur.

Illustration 2:
Assume that Barangay Identifier 7310001.
As shown in Illustration 1, the first four-digits (7310) represents the Municipality
Identifier (Kabasalan, Zamboanga del Sur). The last three-digits in Illustration 2 (001) is
the Barangay Code, which refers to the first barangay within the municipality with
Municipality Identifier 7310, in this case, refers to Barangay Balongis. Therefore, the
Barangay Identifier 7310001 is Barangay Balongis in Kabasalan, Zamboanga del Sur
4. Major Final Output (MFO)/Program, Activity & Project (PAP) Codes
A Major Final Output (MFO) is a good or service that a department or agency in
mandated to deliver to external clients through the implementation of program, activities
and projects.
should be within the department or agency's control and be measurable, manageable
and auditable
include regulatory services, health services, education services and agricultural support
services
A Program is an integrated group of activities that contributes to an agency or
department's continuing objective
include General Administration and Support, Support to Operations, etc.
An Activity is a work process that contributes to the fulfillment of a program or project.
A Project is considered an investment toward expanding the capacity of a
department/agency to deliver MFOs
As provided by Joint Circular No. 2014-1, dated November 7, 2014, MFO/PAP
Codes is now a 15-digit code comprised of the following:
a. Sector/Horizontal Outcomes
a 3-digit code for the Sector Outcomes was added as a prefix of the MFO/PAP
Codes, as shown below:
Sector Values:

Code Values Descriptions Type

100 General Public Services Sector
120 Defense Sector
140 Public Order and Safety Sector
160 Economic Affairs Sector
180 Environmental Protection Sector
Housing and Community
200 Sector
Amenities
220 Health Sector
240 Recreation, Culture and Religion Sector
260 Education Sector
280 Social Protection Sector

Sub-Sector Values:

Code Values Descriptions Type

100 General Public Services Sector
101 Executive and legislative organs Sub-Sector
financial and fiscal affairs, external
affairs
 102 Foreign economic aid Sub-Sector
103 General services Sub-Sector
104 Basic research Sub-Sector
105 R&D General public services Sub-Sector
106 General public services n.e.c. Sub-Sector
107 Public debt transactions Sub-Sector
108 Transfers of a general character Sub-Sector
between different levels of
government
109 Governance/Government Institutions Sub-Sector
and Regulatory Regime
110-119 Not yet assigned Sub-Sector
120 Defense Sector
121 Military Defense Sub-Sector
122 Civil Defense Sub-Sector
123 Foreign Military Aid Sub-Sector
124 R&D Defense Sub-Sector
125 Territorial Integrity Sub-Sector
126 Defense Against Cybercrimes Sub-Sector
127 Defense n.e.c. Sub-Sector
128-139 Not yet assigned Sub-Sector

To provide the tagging of the horizontal outcomes, another 2-digit code was added, for
Horizontal Outcomes, next to Sector Outcomes, as shown below:
Code Values Descriptions
01 Disaster Related
02 Climate Change - Mitigation
03 Climate Change - Adaptation

6. Program/Project/Purpose
Programs, Projects or Purpose UACS
General Administration and Support (GAS) 1
Support to Operations (STO) 2
Operations (O) 3
Locally Funded Projects 4
Foreign -Assisted Projects 5
Purpose (for Special Purpose Funds only) 6

c. MFO/Project Category Codes

PARTICULARS UACS
Physical Infrastructure:
Buildings and Other Structures 01
Flood Control and Drainage 02
Non-Road Transport Infrastructure 03
 Power and Communication Infrastructure 04
Roads and Bridges 05
Water Management 06
Non-Physical Infrastructure Projects:
Economic Development 07
Education 08
Environmental Protection 09
Governance 10
Health 11
Recreation, Sports and Culture 12
Research and Development 13
Social Protection 14
Buildings and Other Structures
School Building 0100
Health Facilities 0101
Multi-Purpose Facilities 0102
Agricultural Facilities 0103
Government Buildings 0104
Housing 0105
Flood Control and Drainage 0200
Flood Control Structures/Facilities 0201
Drainage/Protection 0202
Non-Road Transport Infrastructure 0300
Aviation 0301
Railways 0302
Ports, Lighthouses and Harbors 0303
Accessibility Facilities 0304
Multi-Purpose Pavement 0305
Power and Communication Infrastructure 0400
Electrification 0401
Energy Resource Development 0402
Energy Efficiency and Conservation 0403
Energy Investment/Promotion/Innovation 0404
Communication 0405
Non-Road Transport Infrastructure 0300
Aviation 0301
Railways 0302
Ports, Lighthouses and Harbors 0303
Accessibility Facilities 0304
Multi-Purpose Pavement 0305
Power and Communication Infrastructure 0400
Electrification 0401
Energy Resource Development 0402
Energy Efficiency and Conservation 0403
Energy Investment/Promotion/Innovation 0404
 Communication 0405
Economic Development 0700
Economic Affairs 0701
Agriculture and Fisheries 0702
Asset Reform 0703
Mining and Manufacturing 0704
Trade and Industry 0705
Enterprise Development 0706
Micro-Enterprise Development 0707
Credit Facility Development 0708
Tourism Development 0709
Industry Manpower Development 0710
Education 0800
Basic Education 0801
Technical and Vocational Education 0802
Tertiary Education 0803
Education Not Definable by Level 0804
Environmental Protection 0900
Waste Management 0901
Pollution Abatement 0902
Protection of Biodiversity and Landscape 0903
Reforestation 0904
Governance 1000
General Public Services 1001
Defense 1002
Public Order and Safety 1003
Systems Development 1004
Capacity Development 1005
Governance and Accountability Improvement 1006
Health 1100
Public Health Services 1101
Improved Parenting 1102
Improved Women's Health 1103
Recreation Sports and Culture 1200
Recreation and Sports 1201
Culture 1202
Broadcasting and Publishing Services 1203
Research and Development 1300
Agriculture and Food 1301
Environment and Natural Resources 1302
Disaster Mitigation and Management 1303
Energy 1304
Health 1305
Information and Communication Technology 1306
Biotechnology 1307
 Nanotechnology 1308
Genomics 1309
Technology Transfer 1310
Science and Technology 1311
Defense 1312
Social Protection 1400
Sickness and Disability 1401
Senior Citizens 1402
Survivors 1403
Family and Children 1404
Unemployment 1405
Food Programs 1406
Social Security Welfare and Employment 1407
Poverty Reduction 1408
Housing 1409
Livelihood 1410
Peace and Development 1411
Trafficked Persons 1412
Youth Development 1413

d. Project Title
The list of projects by title is shown in the NEP/GAA.

Object Codes
It is a ten – digit code composed of the first eight digits (1st to 8th ) are for COA Chart of
Accounts Object, and the next two digits (9th and 10th ) are for Sub- Object.
This particular key element of UACS provides information on the object code
classification for Assets, Liabilities, Equity, Income and Expense accounts. The object
classification covers all financial transactions of the government, such as , but not
limited to, goods or services acquired, payments made, the source of revenue or the
cause of increases or decreases in assets and liabilities.
The sources of account descriptions and codes in the UACS object coding elements
includes the following:
1. The codes from the COA Revised Chart of Accounts prepared for accrual
basis financial reporting.
2. The addition of some sub-objects codes; and
3. Additional expenditure accounts designed for cash basis budgeting such as
those capital outlays.
The basis for coding the object classification in the COA Revised Chart of Accounts is
accrual accounting, which requires transactions to be recorded in the period when they
occur. The elements recognized under accrual accounting are Assets, Liabilities, Equity,
Income and Expenses.

As provided by COA in the Revised Chart of Accounts, the classification coding

framework for Object Coding is as follows:
 PARTICULARS UACS
Assets 1
Liabilities 2
Equity 3
Income 4
Expenses 5

Assets refer to the economic resources of an agency that recognized and measured in
conformity with generally accepted accounting principles. As assets is any owned
physical object (tangible) or rights (intangibles) with economic value that is expressed in
terms of its cost or some other value.

Liabilities refer to the economic obligations of an agency that are recognized and
measured in conformity with generally accepted accounting principles. Liabilities may
include certain deferred credits that are not actual obligations, but are nonetheless
recognized and measured according to accounting principles as outlined in the
Philippine Public Sector Accounting Standards (PPSAS)

Equity refers to the residual interest of the government in an agency, which is the
excess of the agency assets over liabilities.

Income refers to the gross inflow of economic benefits or service potential during the
reporting period, when those inflows result in an increase in net assets/ equity, other
than increase relating to contributions from the government. The term “income” is
broader than revenue and includes gains in addition to revenue.

Expenses refer to decrease in economic benefits or service potential during the

reporting period in the form of outflows or consumption of assets or incurrence of
liabilities that result in decrease in net assets/equity, other than those relating to
distribution to owners. (PPSAS 1 – Presentation of Financial Statements)

The categorization of expense description and codes in the UACS involves an

amalgamation of all of the expenditure codes from the COA Revised Chart of Accounts
prepared for accrual basis financial reporting, the addition of some sub-object codes
and the addition of expenditure accounts designed for cash basis budgeting, such as all
of the accounts for capital outlays. Collectively, these provide the harmonized budgetary
and accounting expenditure classification codes.

For object coding, descriptions and codes are drawn from the COA Revised Chart of
Accounts. If disaggregation is necessary, sub-object codes shall be used to show the
breakdown of selected assets, income and expenses. Otherwise, two zeros will be
used. Some examples of object codes for Personnel Expenses(PS)and Maintenance
and Other Operating Expenses(MOOE) are as follows:
Personal Expenses:
PARTICULARS COA UACS
Salaries and Wages – Regular 50101010 50101010 00
Basic Salary – Civilian 50101010 01
Base Pay – Military / Uniformed Personnel
Salaries and Wages – Casual/ 50101020 50101020 00
Contractual

Maintenance and Other Operating Expenses

PARTICULARS COA UACS
Rent / Lease Expenses 50299050 50299050 00
Rent – Building and Structures 50299050 01
Rent – Land 50299050 02
Rent – Motor Vehicles 50299050 03
Rent – Equipment 50299050 04
Rent – Living Quarters 50299050 05
Operating Lease 50299050 06

Harmonization of Coding for Capital Outlays

From the time budget is appropriated until funds are disbursed, relevant amounts of
allotment, cash release and obligations should be processed in capital outlay accounts,
such as one of the accounts for Infrastructure Capital Outlays. According to accrual
accounting principles, the expenditure should be recognized as an asset in the form of
Infrastructure Construction in Progress at the point of disbursement. This process would
most likely be automated in Government Integrated Financial Management Information
System (GIFMIS) so that the spending is shown as capital outlays in DBM management
reports, and as capital outlays in the Cash Flow Statement, but as an asset in the
Statement of Financial Position and not disclosed in the Income and Expense
Statement.
Once the project is completed, the Infrastructure Construction in Progress account
would be credited and a Public Infrastructure Asset is recognized, as an example, an
asset account like Road Networks account is debited.

Transitory Measure
According to National Budget Circular No. 554 dated March 14,2014,“Conversion of
Codes to Conform to the UACS,” as a transition measure to allow Government
Agencies/Operating Units sufficient time in the familiarization of the UACS codes, the
DBM shall still reflect the previous codes alongside the UACS codes in the release
documents. However, all National Government Agencies and Operating Units are
authorized to make the necessary conversion of the appropriate codes, particularly on
the funding source and organization codes, to conform to the prescribed UACS codes.
In case of any discrepancy noted in the indicated UACS codes per SARO/NCA vis-à-vis
the UACS Manual, the codes per UACS Manual shall be adopted by the agency
concern.
The Revised Chart of Accounts
The International Public Sector Accounting Standards board (IPSASB) of the
International Federation of Accountants acknowledges the right of governments and
national standard setters to establish their respective accounting standards and
guidelines for financial reporting in their jurisdictions. And to provide new accounts for
the adoption if the Philippine Public Sector Accounting Standards (PPSAS) which were
harmonized with IPSAS to enhance the accountability and transparency of the financial
reports and ensure compatibility of financial information.

The COA recognizes the need to revise the existing NGAS Chart of Accounts
prescribed in COA Cir. No. 2004-008 dated September 20, 2004

As per Government Accounting Manual Volume III, The Chart of Accounts as Object
Code in the Unified Accounts Code Structure (UACS) is based, primarily, on the
following:
• COA Circular No 2013-002 dated January 30, 2013 precribing the adoption of the
Revised Chart of Accounts (RCA) for National Government Agencies (NGAs)
effective January 1, 2014
• COA Resolution No. 2014-003 dated January 24, 2014 prescribing the adoption
of Philippine Public Sector Accounting Standards (PPSAS)
• COA Cir No. 2014-003 dated April 15, 2014 providing the implementing rules and
guidelines on the COnversion from the Philippine Government Chart of Accounts
under the NGAS per COA Cir. No. 2004-008 dated September 20, 2004, as
amended, to the Revised Chart of Accounts for NGAs;
• COA-DBM-DOF Joint Circular No. 2013-1 dated August 6, 2013 prescribing the
IACS, and
• COA-DBM-DOF Joint Circular No. 2014-1 dated November 7, 2014 providing the
enhancement of UACS prescribed under COA-DBM-DOF Joint Cir. No 2013-1
These revisions will enable the agencies to properly recognize and present their
financial transactions. This Chart of Account as Object Code in the UACS, Volume III of
the GAM for NGAs, includes additional and modified accounts

Elements of Financial Statement

The basis for coding the object classification in the COA Revised Chart of Accounts is
accrual accounting.
Elements directly related to the measurement of financial position as shown in the
Balance Sheet are assets, liabilities and equity. The elements directly related to the
measurement of performance are shown in the Statement of Income and Expenses as
revenue/income and expenses. The codes, per COA Cir. No 2013-002 dated January
30, 2013, and definitions of the different element are as follows:
Code Account Groups

Assets refer to the economic resources of an agency that recognized and

1 measured in conformity with generally accepted accounting principles. As
 assets is any owned physical object (tangible) or rights (intangibles) with
economic value that is expressed in terms of its cost or some other value
Liabilities refer to the economic obligations of an agency that are recognized
and measured in conformity with generally accepted accounting principles.
Liabilities may include certain deferred credits that are not actual obligations,
2
but are nonetheless recognized and measured according to accounting
principles as outlined in the Philippine Public Sector Accounting Standards
(PPSAS)
Equity refers to the residual interest of the government in an agency, which is
3 the excess of the agency assets over liabilities.
Income refers to the gross inflow of economic benefits or service potential
during the reporting period, when those inflows result in an increase in net
4 assets/ equity, other than increase relating to contributions from the
government. The term “income” is broader than revenue and includes gains in
addition to revenue.
Expenses refer to decrease in economic benefits or service potential during
the reporting period in the form of outflows or consumption of assets or
5 incurrence of liabilities that result in decrease in net assets/equity, other than
those relating to distribution to owners. (PPSAS 1 – Presentation of Financial
Statements)

COA Cir. No. 2013-002 further provides that the account code structure consists of
eight (8) mandatory digits as follows:

distinguish the coding of assets with and without contra accounts, the following shall be
observed:
Asset with Contra Account

Asset with Contra Account

Asset without Contra Account

Group 2
Leader: Suratos, Jhon Kenneth Q.
Members:
Luis Hussein Brillantes
John Darwin Pontigon
Vyron Galit
Michael Christian Socha
Charish Hazel Parilla

Accounting for Budgetary Accounts

Learning Focus

Section 29 (1), Article VI of the 1987 Constitution provides, “No money shall be paid out
of the Treasury except in pursuance of an appropriation by law.”

The aforecited lays down the legal bedrock for government accounting, particularly for
budgetary accounts. It simply means that no public fund may be spent if there is no law
authorizing the payment of money and specifying the purpose for which the same will be
spent.

Accordingly, it may be said that accounting for budgetary accounts formally commences
upon enactment of the General Appropriations Act (GAA), which contains the legal
authorization to use public money for the various programs, activities, and projects of the
national government. The approved appropriations are, in turn, the bases of the
Department of Budget and Management (DBM) for issuing allotments or the authority of
government agencies to incur obligations or enter into commitments to spend government
funds. The level of allotments, on the other hand defines the amount of cash allocations
which shall be released by the DBM.

The appropriations, allotments and cash allocations mainly constitute the budgetary
accounts, the accounting of which are discussed in detail in this module.

ACCOUNTING SYSTEMS

The General Accounting Plan (GAP) shows the overall accounting system of a
government agency/unit. It includes the source documents, the flow of transactions z its
accumulation in the books of accounts and finally the conversion into financial
information/data presented in the financial reports. The following accounting systems are:
1.Budgetary Accounts System
2.Receipt/Income and Deposit System
3.Disbursement System
4.Financial Reporting System

The National Budget Budgeting is basically planning and control. Planning involves the
development of future objectives and the preparation of various budgets to achieve these
objectives. Control involves the steps taken by management to ensure that the objectives
set down at the planning stage are attained, and to ensure that all parts of the organization
function are in a manner consistent with organizational policies.

A government budget is a plan for financing the government activities for a fiscal year
prepared and submitted by responsible executive to a representative body whose
approval and authorization are necessary before the plan can be executed.

It is a definite proposal of estimate or statement of receipts and expenditures that may be

approved or rejected. As such, it should present a detailed demonstration of the revenues
and expenditures of the government for the past and ensuing years, and should furnish
not only definite information regarding the general character, purpose and amount of
government expenditures, but also detailed data regarding the cost entailed in
maintaining particular units of organization and in performing particular units of
organization and in performing particular activities.

Form and Contents of the National Budget

The budget proposal of the President shall include current operating expenditures and
capital outlays. It shall comprise of such funds as may be necessary for the operation of
the programs, projects and activities of the various departments and agencies. Section
22, Article VII of the Constitution of the Philippines provides that “The President of the
Philippines shall submit to Congress within 30 days from the opening of every regular
session, as the basis of the general appropriation bill, a budget of expenditures and
sources of financing, including receipts from existing and proposed revenue measures.”
The budget shall be presented to Congress in such form and content as may be approved
by the President and may include the following:
1. A budget message setting forth in brief the government’s budgetary thrust for the
budget year, including their impact on development goals, monetary and fiscal objectives,
and generally on the implications of the revenue, expenditure and debt proposals; and
2. Summary financial statements setting forth:
a. Estimated expenditures and proposed appropriations necessary for the support of the
government for the ensuing fiscal year, including those financed from operating revenues
and from domestic and foreign borrowings.
b. Estimated receipts during the ensuing fiscal year under the laws existing at the time
the budget is transmitted and under the revenue proposals, if any, forming part of the
year’s financing program.
c. Actual appropriations, expenditures, and receipts during the last completed fiscal year;
d. Estimated expenditures and receipts and actual or proposed appropriations during the
fiscal year in progress; and
e. Statements of the condition of the National Treasury at the end of the last completed
fiscal year, the estimated condition of the Treasury at the end of the fiscal year in progress
and the estimated condition of the Treasury at the end of ensuing fiscal year.
Fundamental Principles of Fiscal Operations
Budget activities are governed by legal provisions/fundamental principles relating to
financial transactions and operations of the government. The principles, as provided for
by the law, are:
1. No money shall be paid out of the public treasury or depository except in pursuance of
an appropriation law or other specific statutory authority;
2. Government funds or property shall be spent or used solely for public purposes;
3. Trust funds shall be available and may be spent only for the specific purpose for which
the trust was created;
4. Fiscal responsibility shall, to he greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency;
5. Disbursements or disposition of government funds or property shall invariably bear the
approval of the proper officials;
6. Claims against government funds shall be supported with complete documentation;
7. All laws and regulations applicable to financial transaction shall be faithfully adhered
to; and
8. Generally accepted principles and practices of accounting, as well as, of sound
management and fiscal administration shall be observed, provided they do not
contravene existing laws and regulations.
Kinds of Budget
1. As to Nature
a. Annual Budget - a budget which covers a period of one year. It is the basis of an
annual appropriation.
b. Supplemental Budget - a budget which supplements or adjusts a previous budget
which is deemed inadequate for the purpose it is intended. It is the basis for a
supplemental appropriation.
c. Special Budget - a budget of special nature and generally submitted in special forms
on account that itemizations are not adequately provided in the Appropriation Act or that
the amounts are not at all included in the Appropriation Act.
2. As to Basis
a. Performance Budget - a budget emphasizing the program or services conducted and
based on functions, activities, and projects, which focus attention upon the general
character and nature of work to be done, or upon the services to be rendered.
b. Line-Item Budget - a budget the basis of which is the objects of expenditures such
as: salaries and wages, traveling expenses, freight, supplies and materials, equipment,
etc.

Balanced Budget
It is a budget where the proposed expenditures are equal to or less than the estimated
revenues. Currently, the government is operating with a budget deficiency. As such, it is
serving government priorities to achieve a balanced budget by increasing revenues and
cutting on expenditures.
THE BUDGET PROCESS
1. Budget Preparation
This covers estimation of government revenues, the determination of budgetary priorities
and activities within the constraints imposed by available revenues and by borrowing
limits, and the translation of approved priorities and activities into expenditure levels.
Estimates are prepared by the various government agencies, reviewed, and finalized by
the President of the Philippines, and then submitted to the Legislative Department as
basis for the preparation of the annual Appropriation Act.
The budget proposals shall be reviewed on the basis of their own merits and not on the
basis of:
1. A given percentage or peso increase or decrease from a prior year’s budget level;
2. A given percentage of the aggregate budget level; or
3. A similar rule of thumb that is not based on specific justification.
The main agency involved is the Development Budget Coordination Committee
(DBCC) composed of the following agencies is as follows:
1. The Department of Budget and Management
2. The Department of Finance
3. The National Economic and Development Authority (NEDA)
4. The Bangko Sentral ng Pilipinas (Central Bank of the Philippines
5. The Office of the President of the Philippines
The Department of Budget and Management summarizes the proposals and submits an
analysis and recommendation on the agencies’ budget proposals, which are submitted to
the President of the Philippines before finalization and submission to Congress.
2. Legislative Authorization
It is the second phase of the budget process relative to the enactment of the General
Appropriation Bills based on the budget of receipts and expenditures submitted by the
President of the Philippines within 30 days from the opening- of its regular session, as the
basis of the general appropriation bill.
The General Appropriation Bill presents the proposals of the President of the Philippines
for new general appropriations in the coming year. The proposals are listed by agency or
lump sum fund and are detailed by budgetary function activities/projects. Each function
is briefly described in “appropriation language”. Any conditions governing agency
expenditures are presented as Special Provisions applicable to the agency, which also
identify the amount intended for the most significant activities of the agency. General
provisions are also provided in the Bill, representing the expenditure rules and conditions
applicable to all agencies or to groups of agencies. Budget briefing is conducted whereby
the various heads of agencies would explain to the Congress the details of their respective
budgets.
Appropriations are approved by the legislative body in the form of:
1. A General Appropriation Law which covers most of the expenditures of government;
2. Supplemental Appropriations laws that are passed from time to time, to augment or
correct an already existing appropriation; and
3. Certain automatic appropriations intended for fixed and specific purposes.
4. Continuing appropriations pertain to authorized amounts for MOOE and Capital
Outlays (CO), the validity of which extend to one year following the year in which they
were appropriated, hence, the term continuing appropriation.
3. Budget Execution and Operation
The third phase of the budget process covers the various operational aspects of
budgeting, thus making budgeting as one of the principal tools of management control to
ensure that public funds are spent only for the specific purposes for which they are
intended. It includes the development of the operating budget, which indicates the
program of work to be done or undertaken, the time within which it should be done, the
manpower and other resources needed to carry out the work, and finally, the peso
amounts required to accomplish the proposed programs.
Budget execution and operation is comprised, among others, of the following:
• the establishment of authority ceilings on obligations,
• the evaluation of work and financial plans for individual activities,
• the continuing review of government fiscal position, the regulation of fund releases,
• the implementation of cash payment schedules and
• other related activities such as updating of planning and scheduling of activities.
Budget execution and operation is concerned with the release of funds in the form of
allotments and corresponding cash allocations, the continuing review of the budget
program in the light of revenue and borrowings, prevailing economic conditions, as well
as, the review of proposed uses of agency savings and other related activities
4. Budget Accountability
The last phase of budget process consists of the following:
1. Periodic reporting by the government agencies of performances under their approved
budget;
2. Top management review of government activities and the fiscal policy implementations
thereof; and
3. The actions of Commission on Audit in assuring the fidelity of officials and employees
by carrying out the intent of the legislative regarding the handling of receipts and
expenditures.
Data on uses of funds evidences the implementation of the legislative and appropriation
intention and is a major basis of next year’s budget preparation and evaluation. Under
Sec. 63, P. D. 1177, agency officials are held liable for failure to submit reports (i.e. trial
balances, work and financial plans, special budgets, reports of operations and income,
and other reports as may be necessary and required by the Department of Budget and
Management) and shall automatically cause the suspension of payment of their salaries
until they have complied with the information requirements.
Budgetary Accounts
Budgetary accounts consist of the following:
1. Appropriation - an authorization made by law or other legislative enactment, directing
payment of goods and services out of government funds under specific conditions or for
special purpose.
There are several types of appropriation.
• New General Appropriation
• Automatic Appropriation
• Continuing Appropriation
2. Allotment - an authorization issued by the Department of Budget and Management to
the government agency, which allows it to incur obligations, for specified amounts, within
the legislative appropriation.
There are 4 allotment classes
• Personnel Services
• Maintenance and Other Operating Expenses
• Financial Expenses
• Capital Outlays
3. Obligation - a commitment by a government agency arising from an act of duly
authorized official which binds the government to the immediate or eventual payment of
a sum of money.

Budgetary Accounts System

The budgetary accounts system encompasses the processes of preparing the Agency
Budget Matrix (ABM), monitoring and recording of allotments received by the agency from
the Department of Budget and Management, releasing of Sub- Allotment Advices (SAAs)
to Regional Offices (RO) by the Central Office (CO), issuance of SAAs/LAAs to Operating
Units (OU) by the Regional Office, and recording and monitoring of obligations.
The Allotment Release Order (ARO) is a formal document issued by the Department of
Budget and Management to the agency containing the authorization, conditions and
amount of an agency allocation. The document may be the Agency Budget Matrix, which
effectively releases the amount indicated as not needing clearance, or the Special
Allotment Release Order (SARO), which is issued subject to compliance with specific
laws or regulations or is subject to separate approval or clearance by competent authority.
In case of agencies with decentralized accounting procedures, Sub-allotment
Advices/Letters of Advice of Allotments are issued or released.
Reporting Requirements
Per National Budget Circular No. 507, dated January 31, 2007, the Department of Budget
and Management requires national government agencies to submit, on a regular basis,
Budget Execution Documents (BEDs), which contain the agencies’ targets and plans for
the current year, and Budget Accountability Reports (BARs), which contain information
on the agencies’ actual accomplishments and performance for a given period. Data from
these reports are used for monitoring and providing the necessary information to the
President and fiscal agencies for the purpose of crafting sound policy decisions.
Using the prescribed Budget Execution Documents, government agencies shall submit
their plans, programs and targets for the year to the Department of Budget and
Management on or before April 15 of the current year. The Budget Execution Documents
include the following:
1. Physical and Financial Plan (PFP)
This document serves as overall plan of the national government agencies
encompassing the physical (targeted outputs) and financial (estimated
obligations/expenditures) aspects, consistent with their approved budget level for the
year, broken down by quarter. This shall be submitted to the concerned DBM offices
on or before February 15 of each year. The PFP indicates the major final outputs to
be delivered by the agency as well as the corresponding funds required to accomplish
them.
2. Monthly Cash Program (MCP)
This document shall reflect the monthly disbursement requirements of the national
government agencies. This shall be used by DBM as basis for issuance of Notice of
Cash Allocation (NCA), Cash Disbursement Ceiling (CDC), and other disbursement
authorities; and shall be submitted to the concerned DBM offices on or before
February 15 of each year.
3. Estimate of Monthly Income
This document shall reflect the estimated income of the national government agencies
for the current year by source, as contained under the Budget of Expenditures and
Sources of Financing (BESF) of the given year, broken down by month; and shall be
submitted to the concerned DBM offices on or before February 15 of each year.
4. List of Not Yet Due and Demandable Obligations
Due and demandable obligations represent claims against the government for goods
which were already delivered or services which were already rendered in favor of the
government.
The Budgetary Accountability Reports include the following:
1. Quarterly Physical Report of Operations
This report shall reflect the national government agencies’ actual physical
accomplishments for a given quarter, in term of performance measures indicated in
their Physical and Financial Plan. This shall be submitted on or before the 10th day of
the following quarter.
2. Quarterly Financial Report of Operations
This report shall reflect the national government agencies’ actual
obligations/expenditures incurred by programs/activities/projects and allotment class
for a given quarter, corresponding to the reported physical accomplishments for the
same period. This shall be submitted on or before the 10th day of the following quarter.
The data reflected under both the quarterly physical and financial reports are
compared with the targets indicated under the PFP to determine the agency’s
performance for a given period.
3. Quarterly Report of Actual Income
This report shall reflect the national government agencies/ actual income collections
from all sources for a given quarter broken down by month. This shall be submitted
on or before the 10,h day of the following quarter.
4. Statement of Allotment, Obligations and Balances
This report shall serve as the national government agencies’ summary report of
allotments received and corresponding obligations/expenditure incurred during the
month from all sources by object of expenditures. This shall be submitted on or before
the 10th day of the following month.
5. Monthly Report of Disbursements
This report, in lieu of the Summary of List of Checks Issued and Cancelled, shall reflect
all the disbursements of the national government agencies during the month, arising
from: Notice of Cash Allocation (NCA), Non-cash Availment Authority (NCAA), Cash
Disbursement Ceiling (CDC), and Tax Remittance Advice (TRA).
The national government agencies shall directly submit, physically or electronically,
their BEDs and BARs to the concerned DBM offices. All heads of the national
government agencies shall be responsible for the timely submission of the prescribed
documents/reports. Failure to submit the required BEDs/BARs on the set deadline,
the DBM shall send call up letters by applying the following procedures:
1. First call up letter signed by the DBM director concerned shall be addressed to
the head of the national government agency to remind them of non-compliance.
2. Second call up letter to be signed by the DBM Assistant Secretary/Undersecretary
shall be addressed to the official of equivalent rank of the department where the
agency is attached citing the “non-action” to date despite the first call up letter, which
shall also be cited.
3. Third call up letter to be signed by the DBM Secretary shall be sent to the
Secretary of the department where the agency is attached citing the two previous call
up letters sent.
4. In case of non-compliance with the reporting requirements despite the three call
up letters, the DBM shall strictly enforce the “no-report, no-release” policy, and include
in the report on the status of fund utilization to be submitted to the President, the list
of erring agencies.
General Guidelines on the Release of Funds
Pending the effective date of the new General Appropriation Act (GAA), national
government agencies are authorized to incur overdraft in allotment for obligations
corresponding to the actual requirement of their regular operations chargeable against
the GAA, as re-enacted.
A re-enacted budget pertains to the budget of the preceding year which, by operation
of laws, becomes re-enacted and shall remain in force in effect until the general
appropriation bill for the current year is passed by Congress. for obligation. The re-
enactment of the budget is a mechanism sanctioned by the constitution to allow the
use of public funds for regular operations pending the approval of the GAA. All
unutilized allotments of agencies immediately before the effective date of the new
GAA out of the SAROs issued chargeable against the re-enacted GAA shall no longer
be available
The Allotment Release Program (ARP), which determines the level of allotment
releases for a given fiscal year, is composed of the following:
1 Obligations incurred,
2. Obligations authorized as overdraft,
3. Special allotment release order (SAROs) issued from the beginning of current fiscal
year to the effectivity date of the current General Appropriation Act, and
4. Releases from the unprogrammed fund (UF). Allotment releases from the multi-
user Special Purpose Funds (SPFs) such as: Calamity Fund, Contingent Fund,
Government Fund, International Commitment Fund, Miscellaneous Personnel Benefit
Fund, National Unification Fund, Priority Development Assistance Fund, and Pension
and Gratuity Fund shall be over and above the agency Allotment Release Program.
The Agency Budget Matrix
The Department of Budget and Management, in coordination and consultation with
agencies, shall prepare and issue the Agency Budget Matrix (ABM) which shall be the
basis of the comprehensive release of allotment chargeable against the current year
GAA.
The Agency Budget Matrix shall contain the following:
1. Withheld Portion This corresponds to the amount programmed by agencies for their
regular operating requirement pending the effectivity of the GAA that is usually the
first quarter of the year.
2. Net Program This pertains to the amount intended for regular operating
requirements from the effectivity date of the GAA to December 31 of the fiscal year
segregated into: 1.) Needing Clearance (NC), and 2.) Not Needing Clearance (NNC).
The portion of Needing Clearance shall include Confidential and Intelligence Fund,
Procurement of motor vehicle and equipment which are subject to prior approval of
the President of the Philippines, Agency built-in lump-sum appropriations
necessitating the submission of certain documents requirements prior to its release,
Annually appropriated Special Account in the General Fund, Budgetary
items/provisions for conditional implementation under the President’s veto message,
Budgetary reallocations by the legislature, and Budgetary support of the national
government to GOCCs and LGUs.
The following built-in appropriation items can only be obligated by the agency
subject to compliance with the required clearance/approval/documentation:
1. Computers and other information technology equipment, which need clearance
from National Computer Center;
2. Communication equipment, which require clearance the National
Telecommunication Commission; 3. Firearms, which need the prior approval of the
Philippine National Police;
4. Research and development in the natural, agricultural, technological and
engineering sciences, which are subject to the approval of the Department of Science
and Technology and/or the department of Agriculture;
5. Books to be procured by agencies other than schools and the National Library
exceeding the authorized five copies per title, which need prior approval from DBM;
6. On-going foreign-assisted projects (FAPs), which require the attainment of certain
conditions; and
7. Grants, subsidies and contributions, which must be supported by details indicating
among others, the purpose, amount intended for each beneficiary and the list of
recipients.
Per National Budget Circular No. 519 dated March 27, 2009, allotments to be
comprehensively released to the agencies under the “This Release” portion of the
Agency Budget Matrix shall be equivalent to 100% of Personal Services. For
Maintenance and Other Operating Expenses, and Capital Outlay, at least 50% of the
Not Needing Clearance portion of the ABM shall be categorized under the “This
Release” portion, unless the projects under Capital Outlays are indivisible, in which
case the release therefore shall be 100%.
The following budgetary policies are still in effect:
1. Continuing appropriation for Maintenance and Other Operating Expenses (MOOE)
and capital outlay (CO) shall be valid until December 31 of the 2nd year of validity.
2. Appropriations under the current year’s GAA shall be valid for two years with the
exception of personal service, which shall lapse at the end of the current year.
3. All Special Allotment Release Orders (SAROs) chargeable against the re-enacted
GAA shall be valid while the new GAA is not yet in effect.
Guidelines on the Release of Disbursement Authorities
1. Release of Notice of Cash Allocation (NCA)
 The amount for Personal Service should fully provide for all filled positions inclusive
of fixed expenditures; and must take into consideration the timing of the grant of year-
end benefits and other similar items of expenditures, including pensions for uniformed
personnel and veterans.
 For seasonal periods or peak and slack times in the provision of Maintenance and
Other Operating Expenses adjustments should always be taken into consideration.
 Capital Outlay must likewise be programmed in accordance with scheduled work
targets. Initial construction activities will only entail fifteen percent (15%) mobilization
costs and the balance shall be in accordance with the work program. Likewise,
equipment will require payment only on the expected delivery date and not at the
bidding and procurement stages.
 For Foreign Assisted Projects, the release of the peso counterpart and loan
proceeds shall be synchronized. Moreover, the cash portion of the loan proceeds
component shall be released only upon receipt of the Bureau of Treasury certification
regarding availability of loan proceeds from the foreign lending institution.
2. Release of Non-Cash Availment Authority (NCAA)
Agencies availing of foreign loan proceeds through direct payment chargeable against
availment allotment, shall submit a request for the issuance of NCA A prior to
submission of availment application to Foreign Lending Institutions.
Request of NCAA shall be supported by the following: Photocopy of application for
withdrawal or equivalent document; certified list of obligation allotments; and Details
of disbursements.
3. Release of Cash Disbursement Ceiling (CDC)
CDC is an authority issued by DBM to Department of Foreign Affairs (DFA) and
Department of Labor and Employment (DOLE) to utilize their income collected and
retained by their Foreign Service posts to cover its operating requirements but not to
exceed the released allotment for the purpose.
Release of CDC shall be supported by the following accountability reports as
consolidated by DFA and DOLE home office: Monthly Report of Income, Status of
Working Fund, and Annual Report of Income.
Conduct of the Agency Performance Review
Analysis of agency performance, in terms of physical and financial outputs, shall be
undertaken by DBM on a regular basis based on the Budget Accountability Report
(BARs). The information on the agencies accomplishments contained in the BARs
shall be used and evaluated against the targets they presented in their BEDs. The
result of the agency performance review will be used as one of the basis for deciding
the following:
1. Release of the balance of the “For Later Release of the Not Needing Clearance”
portion of the approved Agency Budget Matrix.
2. Additional release from Special Purpose Fund.
3. Withdrawal of released allotment.
4. Approval of request for realignment.
5. Revision of cash Program; and 6. Revision of targets.
Common Fund System
The common fund system policy (for use of personal services, maintenance and other
operating expenses, capital outlays, and financial expenses without realignment) shall
continue to be used. However, the Common Fund Scheme will not apply to current
year A/Ps to external creditors of the five departments (i.e., DPWH, DepEd, DOH,
CHED, and State Universities and Colleges (SUCs) covered by the Direct Payment
Scheme. In such cases, specific NCAs shall be issued for the purpose through their
special MDS accounts, consistent with Circular Letter 2005- 2.
Books of the Department of Budget and Management
Appropriations and allotments are to be controlled and monitored by the Department
of Management through the registries it maintains such as: Registry of Appropriations
and Allotments (RAPAL), for the general appropriations; and Registry of Special
Purpose Fund Appropriation (RESPFA), special purpose funds. In addition, the
Department of Budget and Management shall also maintain the Registry of Allotments
and Notice of Cash Allocations (RANCA) for its control and monitoring of the Notice
of Cash Allocations (NCA) releases.

The Registry of Appropriation and Allotments shall be maintained by the

Department of Budget and Management for each department of the National
Government in order to control approved appropriations and allotments released.
The Registry of Special Purpose Fund Appropriation shall contain funds
appropriated for purposes other than those provided in the regular funds of
government agencies, like, Miscellaneous Personnel Benefits (Personal Services);
Calamity Fund (Capital Outlay); and Organizational Adjustment Fund (Maintenance
and Other Operating Expenses and Financial Expenses).

The Registry of Allotments and NCA shall be maintained by the DBM to control the
funding of allotments. Columns are provided for each allotment class and NCA
released to the department/agency. A column for the unfunded allotment is provided
to determine the balance of allotment without corresponding NCA.
Books of Bureau of Treasury
The Bureau of Treasury shall maintain the Registry of Notice of Cash Allocations and
Replenishments (RENREP) for the same purpose and for the monitoring of bank
transfers it makes in replenishing its Modified Disbursements Scheme (MDS)
accounts.
The Registry of NCA and Replenishment shall be used by the Bureau of Treasury
to record the NCA releases and the bank replenishments made to cover MDS checks
issued by the agencies.
Books of the Agency
The government agency shall maintain different Registry of Allocations and
Obligations for the control and monitoring of the allotments it receives and the
obligations it incurs. It should be noted that the agency will not journalize the receipt
of its appropriation and allotments, but instead simply post it in the respective registry,
as shown below.
Accordingly, when the obligation is incurred, as evidenced by the approved Allotments
and Obligation Slips (ALOBS), the obligation is recognized and will be entered in the
appropriate Registry of Allotment and Obligations’ obligation incurred column.
The following are the registries in the books of the agency:
1. Registry of Allotments and Obligations - Personal Services (RAOPS)
2. Registry of Allotments and Obligations - Maintenance and Other Operating
Expenses (RAOMO)
3. Registry of Allotments and Obligations - Capital Outlay (RAOCO)
4. Registry of Allotments and Obligations - Financial Expenses (RAOFE)
The Registry of Allotments and Obligations - Personal Services shall be used to
record allotments received and obligations incurred for expenses classified under
Personal Services, such as: basic pay, all authorized allowances, bonuses, cash gifts,
etc.

The Registry of Allotments and Obligations - Maintenance and Other Operating

Expenses shall be used to record allotments received and obligations incurred for
expenses classified under Maintenance and Other Operating Expenses, such as:
travelling expenses, supplies and materials, repairs and maintenance of property,
plant and equipment, representation expenses, training and seminar expenses, etc.

The Registry of Allotments and Obligations - Capital Outlay shall be used to

obligations incurred for Capital Outlay, such as: purchase and construction of proper
record allotments received and ty, plant and equipment.
The Registry of Allotments and Obligation - Financial Expenses shall be used to
record allotments received and obligations incurred for Financial Expenses, such as,
commitment fees, bank charges, interest expenses, documentary stamps expenses,
etc., to distinguish them from the regular maintenance and other operating expenses.
Upon receipt of Notice of Cash Allocation (NCA), the agency shall journalize the NCA
it receives as a debit to “Cash - National Treasury, Modified Disbursement Scheme”
and a credit to “Subsidy Income from National Government” in the Regular Books of
the Agency, as shown below. This journal entry will show that the NCA received is the
share of the agency in the income of the National Government and a proof that there
is cash allocated for the agency by the National Treasurer. The amount of NCA
received by the agency may be net of the amount of taxes to be withheld by the agency
under the Tax Remittance Advice (TRA) System, which will be discussed in the later
part of this chapter.
The agency shall credit “Cash - National Treasury, MDS” each time a payment is made
charged against the NCA and debit the specific account being paid for, either asset or
expense account. The NCA may be 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 (e.g. building and structures, land,
land improvement, equipment, etc., charged against the capital outlay.)
5. Miscellaneous Transactions (e.g. Cash to another agency to implement a project of
the agency, Guaranty Deposit, Cash Advances, etc.)
NON-PROFIT ORGANIZATIONS
Introduction
Although the International Financial Reporting Standards or the Philippine Financial
Reporting Standards here in the Philippines are designed to apply to business entities, they can
also be applied to non-profit organizations. This is evidenced by the following excerpts from the
International Financial Reporting Standards or the Philippine Financial Reporting Standards:
➢ International Financial Reporting Standards are designed to apply to the general purpose
financial statements and other financial reporting of profit-oriented entities. Although the
International Financial Reporting Standards are not designed to apply to not-for-profit
activities, entities with such activities may find them appropriate. (Preface to IFRSs.9)

➢ PAS 1 or the Philippine Accounting Standards 1 which is the Presentation of Financial

Statements uses terminology that is suitable for profit-oriented entities. If entities with not-
for-profit activities apply PAS 1, they may need to amend the descriptions used for
particular line items in the financial statements and for the financial statements themselves.
(PAS 1.5)

➢ International Financial Reporting Standards generally do not have scope limitations for
not-for-profit activities. Although International Financial Reporting Standards are
developed for profit-oriented entities, a not-for-profit entity might be required, or choose,
to apply International Financial Reporting Standards.

As can be inferred from the foregoing statements, the Philippine Financial Reporting
Standards can be applied to all reporting entities regardless of their form (i.e., sole proprietorship,
partnership, corporation or cooperative) and purpose (i.e., for-profit or not-for-profit).
However, just like in the case of accounting for sole proprietorships, partnerships,
corporations and cooperatives, the accounting for non-profit organizations differs in respect of
accounting for equity.

Current trend in practice

In practice, the accounting for non-profit organizations is essentially similar to the
accounting for business. The notable differences are the terminologies used in the financial
statements, which are modified to suit the non-profit organization’s purpose, and the presentation
and disclosure of equity.
Non-profit organizations in the private sector are normally organized as non-stock, non-
profit corporations. As such, they are required to file audited annual financial statements to the
Securities and Exchange Commission. In most cases, the auditor’s reports in these financial
statements state an opinion on the organization’s compliance with the Philippine Financial
Reporting Standards (or International Financial Reporting Standards, for international
organizations).
Example 1: Auditor’s Report
The following is an excerpt from an Independent Auditor’s Report on published audited financial
statements of a non-profit organization:

Opinion
From my perspective, the financial statements give a true and fair view of the financial position of
the Organization as at 31 December 2012, and of its financial performance and its cash flows for
the year then ended in accordance with International Financial Reporting Standards.

Since the Philippine Financial Reporting Standards do not provide specific guidance on the
accounting for non-profit organizations, many non-profit organizations resort to the exemptions
provided under PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (i.e.,
‘hierarchy of financial reporting standards’). For example, in cases where the Philippine Financial
Reporting Standards are silent regarding the accounting treatment for, or financial statement
presentation of, a transaction peculiar to non-profit organizations, the organization may refer to
the general guidelines set forth under the Conceptual Framework.

Example 2: Modified Statement of Compliance

The following is an excerpt from the notes to financial statements of a non-profit organizations
published financial statements:

Note 2.1 Statement of Compliance

The financial statements have been prepared in accordance with and comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board and
interpretations issued by the International Financial Reporting Interpretations Committee of the
International Accounting Standards Board and are presented in accordance with the Organization’s
Financial Regulations.

Currently, International Financial Reporting Standards do not contain specific guidance for non-
profit organizations concerning the accounting treatment and the presentation of financial
statements. Where International Financial Reporting Standards are silent or do not give guidance
on how to treat transactions specific to the not-for-profit sector, accounting policies have been
based on the general principles of International Financial Reporting Standards, as detailed in the
International Accounting Standards Board Conceptual Framework.

Characteristics of a non-profit organization

Non-profit organization ‘NPO’ (also called not-for-profit entity ‘NFP’ or non-commercial
organization ‘NCO’) is one that carries out some socially desirable needs of the community or its
members and whose activities are not directed towards making profit.
 The main objective of non-profit organizations may be educational, religious, social,
cultural or charitable. Non-profit organizations may be in the form of educational institutions,
hospitals and other health are providers, religious institutions, professional bodies, sports, social
or literary clubs, and other forms of charitable institutions.
Non-profit organizations earn revenues sufficient to cover their expenses. A major portion
of these revenues are derived from charitable donations and other fundraising activities. Surplus
revenues do not inure to the benefit of a particular individual or group of individuals but rather
retained in furtherance of the organization’s mission. Accordingly, none of the surplus revenues
are distributed as dividends.
Because non-profit organizations carry out their activities in the interest of the society and
without the intention of making profit, non-profit organizations are usually exempt from income
taxation.

Philippine Financial Reporting Standards principles applicable to Non-Profit Organizations

As stated earlier, the recognition, measurement, derecognition, presentation and disclosure
requirements of the Philippine Financial Reporting Standards can be applied to non-profit
organizations. Examples are provided below:
• Recognition criteria for assets and liabilities:
a) Meets the definition of an asset or liability;
b) Probable inflow or outflow of resources; and
c) Reliable measurement of cost or other value (e.g., fair value).

• Measurement of Asset or Liability:

a) Initial measurement at a cost excerpt when a relevant Philippine Financial
Reporting Standards requires measurement at fair value or some other value.
b) Subsequent measurement at amortized cost, under the cost model, or some other
measurement model required by a relevant Philippine Financial Reporting
Standards.

• Derecognition of Asset or Liability:

An asset or liability is derecognized when it ceases to provide inflow or required outflow
of resources embodying economic benefits. The difference between the carrying amount
and net proceeds or net settlement, if any, is recognized in change in net assets.

• Presentation of Financial Statements:

General features:
➢ Fair presentation and compliance with Philippine Financial Reporting
Standards
➢ Going concern
➢ Accrual basis
➢ Materiality and aggregation
 ➢ Offsetting
➢ Frequency of reporting
➢ Comparative information, and
➢ Consistency of presentation

Our succeeding discussions on the accounting for non-profit organizations are based in part on the
accounting principles specifically provided under U.S. GAAP Statement of Financial Accounting
Standards or SFAS No. 116 Accounting for Contributions Received and Contributions Made and
Statement of Financial Accounting Standards No. 117 Financial Statements of Not-for-Profit
Organization.
Although these principles do not have the same authority as those of the Philippine
Financial Reporting Standards, they may be adopted and used in conjunction with the Philippine
Financial Reporting Standards (to the extent that they do not contravene the provisions of the
Philippine Financial Reporting Standards) in order to provide more useful financial information to
users of non-profit organizations financial statements. Moreover, certified public accountant board
exam questions on accounting for non-profit organizations have traditionally been based on these
principles.

Fund theory vs. Fund accounting

The financial statements of most non-profit organizations are based on the fund theory. The fund
theory stresses great importance on the custody and administration of funds. Accordingly, the
source, nature and purpose of the funds held by the non-profit organization are disclosed in order
to give information necessary for users to assess the organization’s stewardship over those funds.
Although fund accounting is an off shoot of the fund theory, Statement of Financial
Accounting Standards 117 and the Philippine Financial Reporting Standards do not require the use
of fund accounting. However, entities are not prohibited from using it.
Under fund accounting, the main accounting unit is the fund. Accordingly, transactions
are accounted for in the books and presented in the financial statements strictly based on their fund
classifications as either:
(1) Unrestricted
(2) Temporarily restricted, or
(3) Permanently restricted

Fund theory-based financial statements Fund accounting-based financial statements

• Focuses on the reporting entity concept; • Views the entity as being made up of
thus, accounting unit is the whole component parts; thus, the accounting units
organization as a whole. are the various funds held.
• Adheres to the accounting point-of-view of • Adheres to the bookkeeping point-of-view
providing useful information to external of providing useful information to
users. managers.
 • The term “funds” is used to refer to specific
• The terms “funds” is more commonly used
funds consisting of cash and other non-
to refer to the net assets.
cash assets.
• Focuses on classifying assets, net assets,
• Provides disclosures on the types of
and changes in them strictly in accordance
restrictions on net assets and revenues (i.e.,
with their fund classifications (i.e.,
unrestricted, temporarily restricted, or
unrestricted, temporarily restricted, or
permanently restricted).
permanently restricted).
• Current trend • Traditional

Contributions
-Majority of the revenues of NPOs come from charitable and contributions or donation
-Contributions refers to resources received in non-reciprocal transactions. It excludes those that
result from exchange transactions
-SFAS 116 classifies contributions based on donor’s restriction as follows
1. UNRESTRICTED – available for immediate use and for any purpose
2. TEMPORARY RESTRICTED – restricted by the donor in such a way that the availability
of the contribution for the NPO’s use is dependent upon:
a) the performance of a specific task.
b) the happening of the future event; or
c)the passage of time

The temporary restricted contributions are available to the organization when the task
is performed, the even occur or the time restraint passes. At that time, the support is restricted
from temporarily restricted to unrestricted.
3) Permanently restricted – restricted by the donor in such a way that the
organization will never be able to use the contribution itself; however, the organization may be
able to use the income therefrom.
Recognition and Measurement
Cash and other non-cash assets
Cash and other non-cash assets receive as contribution are recognize as resources in the period
received and as assets decreases of liabilities or expenses depending on the form of the benefits
received.
Contributions are measured at fair value at the date of contribution and reported as either
- UNRESTRICTED SUPPORT- revenue from unrestricted contributions or
- RESTRICTED SUPPORT – revenue from temporarily restricted or permanent
*Restricted contributions whose restrictions are met in the same reporting period may be
reported as unrestricted support provided that the NPO discloses this accounting policy and
applies it consistently period to period.
*Unrestricted support increases unrestricted net assets while restricted support increases either
temporarily restricted net assets or permanently restricted net assets
Illustration 1: Unrestricted support
a non-profit organization receive cash of 200,000 and land with fair value of 1,000,000 to be
use at the entity’s discretion.

Illustration 2: Restricted support

on January 1, 20x1, Entity A, a non-profit organization, receives the ff.
cash of 2M to be used to acquire truck. Truck will be used in Entity A’s outreach programs
Investment in equity securities with fair value of 500,000 to be held indefinitely. Only the
investment income shall be used by Entity A in its operations.
UNCONDITIONAL PROMISES
-Unconditional promise to give cash or other non-cash assets in a future period is recognized
within unconditional promise to give is received from the donor. Generally, such unconditional
promise is classified as a temporarily restricted contribution because of the time restriction. If
the promised contribution becomes doubtful of collection, an allowance for uncollectable is
recognized.
CONDITIONAL PROMISES
-Conditional promise to give, which depend on the occurrence of specified future and uncertain
event to bind the promisor, are recognized only when the attached condition is substantially
met. A conditional promise to give is considered unconditional if possibility that the condition
will not be met is remote.

Illustration: Unconditional and Conditional promises.

On January 1,20x1, Entity A receives a formal promise from Donor X to donate 1,000,000.

Case 1: The donation is unconditional and is to be received on February 14,20x1

Case 2: The donation is condition in the submission of a detailed formal plan for a proposed
project. As of January 1 20x1, the plan is not yet substantially complete.

The conditional promise will be recorded when the attached condition is substantially met.
Case 3: (use the information in case 2 above). February 1, Entity A receives the promised
contribution before the attached condition is substantially met.
SERVICES
Contributions of services are recognized if the services received
a) Create of enhance nonfinancial assets or.
b) Required specialize skills, are provided by individuals possessing those skills, and would
typically need to be purchase if not provided by donation.
Illustration:
Entity A a non-profit organization, received the ff services.
a) Carpenters repair the ceiling of Entity A’s for free, the fv of the services is 20,000
b) JPIA members from various universities helped in tree planting activity initiated by
Entity A for free, the fv of the services might P50

Works of art and similar items

An entity need not recognize contributions of works of art, historical licensures and similar
assets if the donated items are added to collections that met all the ff conditions
a) Held for public exhibition, education or research in furtherance of public service rather
than financial gan.
b) Protected , kept unemcu,bered, cared for and preserved ;and
 c) Proceeds from sales of collection items are to be used to acquire other items for
collections(SFAS NO. 116.11)
ILLUSTRATION
Entity A receives the ff. donations
a) Unrestricted donation of 1 M cash
b) Cash of 2M restricted for the acquisition of a building
c) Investments in stocks of 3M. Entity A can only use the investment income

Entity A acquires a building of 2M and receives dividends of 100,000 from the

investment at the end of the period
Requirement: Record the transaction above under a fundaccounting system.
Solution: Under fund accounting transaction are recorded in a manner that is if the organization
is divided into its components part. Accordingly, transfer between the funds are viewed as
accountable events that are recorded through journal entries.
The net assets released from restrictions is shown in the statement of activities as a decrease in
temporarily restricted net assets and an increase in the statement of activities as a decrease in
temporarly restricted net assests and an increase in unrestricted net assets. The Balances of net
assets are determined as follows.

Other funds held by NPOs

• Endowment fund - classified into the following:
a. Term endowment fund - under the donor's restrictions, the NPO can use a portion of
the principal each period. This is classified as temporarily restricted.
b. Regular endowment fund - under the donor's restrictions, the NPO cannot spend any of
the principal. This is classified as permanently restricted.
Income from either term or regular endowment fund is used according to the donor's
instruction.
• Agency fund - funds held by the NO acting as a custodian. Agency funds are recognized
as liabilities. For example, an educational institution may receive funds from the
Commission on Higher Education (CHED) to be disbursed as student loans.
 • Plant fund - consists of the following:
a. unexpended funds for the acquisition of plant assets;
b. funds for the renewal and replacement of plant assets;
c. funds for the retirement of indebtedness; and
d. investment in plant assets.

• Board-designated fund (quasi-endowment) - funds which are restricted at the sole

discretion of the NO's governing board (i.e., Board of Trustees). Funds that are internally
restricted are classified as unrestricted. Only contributions with donor-imposed restrictions
are classified as restricted.

Treating the various funds held by an NPO as separate accounting units can make
accounting cumbersome. Thus, SFAS No. 117 and the PFRSs do not require fund accounting.
NPOs normally use fund accounting as a managerial tool rather than a system for providing
general-purpose financial statements.

Illustration 1: Classification of contributions

An NPO disclosed the following:
a. Net resources of $1,000,000 invested in plant assets.
b. Board-designated funds of P600,000.
c. Received P20,000 cash from a donor who did not specify any use restrictions on the
contribution. However, the donor specified that the donation should not be used until 20x2.
d. Received P800,000 from a donor who stipulated that the contribution shall be invested
indefinitely and that the earnings shall be used for scholarships. Investment income in 20x1
amounted to $50,000.
Requirement: How much of the items listed above would be included in (a) unrestricted, (b)
temporarily restricted, and (c) permanently restricted net assets, respectively?

Unrestricted net Temporarily Permanently

assets restricted net assets restricted net assets
(a) 1,000,000
(b) 600,000
(c) 20,000(a)
(d) 50,000(b) 800,000
Totals 1,600,000 70,000 800,000

Illustration 2: Contributions revenue

An NPO receives the following during 20x1:
• P120,000 proceeds from sales of calendars, mugs, T-shirts, and other souvenir items. The
fair value of the items sold is P75,000 while the cost is P50,000.
• P1,000,000 to be used only upon the completion of a new facility that is only 30% complete
as of December 31, 20x1. If the facility is not completed by September 2, 20x2, the cash
shall be returned to the donor.

Requirement: How much contribution revenue is recognized from the donations above?
Answer:
Excess of sale price over fair value of items sold
(120,000 - 75,000) 45,000
Total contribution revenue (unrestricted) 45,000

Notes:
➢ Only the excess of sale price over fair value is treated as contribution revenue. The P75,000
fair value is treated as sale revenue from exchange transaction.
➢ The P1,000,000 donation is initially recognized as a liability (refundable advance) and
recognized as contribution revenue only when the condition is met.

Illustration 3: Net effect on net assets

An NPO had the following transactions during 20x1:
a. Received a P200,000 contribution to be used for research purposes. Of this amount,
P120,000 were expended during the year.
b. Expended P50,000 in research activities from a P60,000 research grant received in previous
year.
Requirement: Determine the 20x1 net effects of the transactions in net assets.
Unrestricted net Temporarily
assets restricted net assets
(a) Contributions revenue, 20x1 200,000
Net assets released from restrictions 120,000 (120,000)
Expense (120,000)
Net effect in net assets, 20x1 - 80,000
(b) Net assets released from restrictions 50,000 (50,000)
Expense (50,000)
Net effect in net assets, 20x1 - (50,000)
Total net effect in net assets-20x1 - 30,000
Notes:
➢ Transaction (a) increased the temporarily restricted net assets in 20x1 by P80,000 but has
no effect on unrestricted net assets.
➢ Transaction (b) decreased the temporarily restricted net assets in 20x1 by P50,000 but has
no effect on unrestricted net assets.

Illustration 4: Receipt of resources as an Agent

An NPO received relief goods to be distributed to flood victims in a specified area. The NO has
no discretion in determining the parties to be benefited; it must deliver the resources to the
specified beneficiaries (i.e., flood victims). The relief goods have a fair value of P100,000. How
much contributions revenue shall be recognized on the goods received?
Answer:
None. The NPO is merely acting as an agent (i.e., as a recipient of goods to be distributed to
specified third-party beneficiaries).

Illustration 5: Intermediary between donor and donee

An NPO is formed to help patients find donors of blood. The NPO is not a blood bank and does
not accept blood donations. Instead, the NPO maintains a list of blood banks that are interested in
accepting and providing blood donations. The blood banks determine how they can serve the
referred patients.
During the period, the PO helped several patients get blood donations from blood banks.
Without the referrals, the patients would have spent P1M.
Requirement: How much is the NPO's contributions revenue?
Answer:
None - the NPO is merely acting as an agent in bringing together a willing donor and donee. The
blood donations are not contributions received by the NPO.

Illustration 6: Endowments
A donor establishes a P1M fund in a third-party trust company in favor of an NPO. The NPO
cannot withdraw the fund but is entitled to any investment income thereof.
Requirement: Prepare the journal entry to record the event in the NPO's books.
Answer:
No journal entry shall be made because no asset has been received. The event is recorded
through memo entry. A journal entry will be made when the fund earns investment income.

Illustration 7: Endowments
On January 1, 20x1, an NPO receives P100,000 cash donation under, a "charitable remainder
annuity trust agreement" with the following provisions:
• The NPO is the designated trustee who undertakes to invest the cash donation and make
annual year-end payments of P5,000 to Mr. A, the annuitant, for the remainder of his life.
• Upon death of Mr. A, the NO may use its remainder interest for any purpose consistent
with its mission.

Per actuarial valuation, the appropriate discount rate is 10% and the annuitant's life
expectancy is 5 years.

Requirement: Prepare the entry on January 1, 20x1.

Solution:
1/1/20x1 Cash 100,000
Annuities payable (a) 18,954
Contributions revenue – 81,046
temporarily restricted support(b)

(a) (5,000 x PV of ordinary annuity of 1 @ 10%, n=5) = 18,954

(b) (100,000 - 18,954) = 81,046
Note: The transaction is partly an exchange transaction and partly a contribution. The exchange
component is recognized as liability (annuities payable). This is subsequently measured at
amortized cost. The contribution component is recognized as temporarily restricted support
because of the 'time restriction.'

Deferral method of recognizing contributions

The “deferral method” is similar to the provision of PAS 20 Accounting for Government Grants and
Disclosure of Government Assistance, in such a way that income from donations is recognized based on
the “matching concept”.
Under the “deferral method,” restricted contributions are initially recognized as liability (i.e., as deferred
revenue) and recognized revenue in the same period where the related expenditures for which the
contributions were intended to reimburse, are incurred.

Illustration: Deferral Method - Canadian GAAP

On February 15, 20x1, an NPO receives P2M cash donations conditioned on the acquisition truck

Feb. 15, Cash 2,000,000

20x1 Deferred revenue 2,000,000

The NPO acquires a truck for P2M in January 1, 20x2. The truck will be depreciated over 10 year useful
life using the straight-line method

Jan. 01, Transportation equipment – truck 2,000,000

20x2 Cash 2,000,000

Dec. 31, Depreciation expense (2M + 10 yrs.) 200,000

20x2 Accumulated depreciation 200,000
Dec. 31, Deferred revenue 200,000
20x2 Contributions revenue 200,000

Financial statements

A complete set of general-purpose financial statements of an NPO consists of the following:

PFRSs SFAS No. 117

Statement of Financial Position Statement of Financial Position
Statement of activities Statement of activities
Statement of cash flows Statement of cash flows
Notes Notes

Statement of Financial Position

The statement of financial position shows information on assets, liabilities, and net assets.

Classification of Net Assets

SFAS No. 117 requires reporting of net assets in the statement of financial position according to the
following classifications:

1. Unrestricted net assets

2. Temporarily restricted net assets

3. Permanently restricted net assets

PFRS-based financial statements may present net assets using the classifications above either on the
statement of financial position or in the notes.

Statement of activities

The statement of activities shows information , on revenues, expenses, and changes in net assets for a
period. This statement takes the place of the income statement and statement of changes in equity for a
business entity. However, NPOs may opt to present a separate statement of changes in net assets (or
statement of changes in reserves). This separate statement takes the place of a statement of changes in
equity.

SFAS No. 117 requires that the statement of activities report the changes in net assets for each of three
categories of support separately (i.e., unrestricted, temporarily restricted and permanently restricted).

PFR based financial statements may present changes in net assets using the classifications above either
on the statement of activities or in the notes.

In a statement of activities, the term "profit" or “net income" is replaced by the term "change in net
assets."

NPOs adopting the PFRSs shall apply PFRS 15 Revenue from Contracts with Customers for revenues
arising from transactions other than charitable contributions.

Expenses

A statement of activities shall report expenses as decreases in unrestricted net assets.

SFAS No. 117 requires expenses to be presented in the statement of activities or in the notes according
to their function. The functional classifications are as follows:

1. Program services - are the activities that result in goods and services being distributed to
beneficiaries, customers, or members that fulfill the purposes or Illusion for which the organization
exists. Those services are the major purpose for and the major output of the organization and often
relate to several major programs.

2. Supporting activities - are all activities other than program services. Generally, these include
management and general, fund-raising, and membership-development activities. ( SFAS No.117, 26 to
28)·

lllustration: Functional classification of expenses

An NPO had the following expenses during the year:

Administrative salaries 50,000

Work to help elderly citizens 150,000

Fund-raising costs 25,000

Child care services provided for indigent families 140,000

The expenses are classified according to function as follows:

Program Support

Administrative salaries 50,000

Work to help elderly citizens 150,000

Fund-raising costs 25,000

Child care services provided for indigent families 140,000

290,000 75,000

Statement of cash flows

Statement of cash flows of an NPO is similar to that of a business entity and can also be prepared using
the direct or indirect method.

Restricted assets acquired during the period that are used for a long term purposes because of donor
restrictions or classified as financing activities

Illustration: Statement of cash flows

An NPO had the following cash flows during the year:

a. PS0,000 unrestricted contributions.

b. P600,000 from fundraising activities to support current operations.

c. Pl00,000 from a donor who stipulated that the money be spent in accordance with the wishes of the
NPO's governing board.

d. P200,000 cash dividends restricted for the purchase of equipment.

e. P200,000 on acquisition of equipment using the cash dividends above.

f. P300,000from a donor who stipulated that the contribution be invested indefinitely. Income from the·
contribution may be used in furtherance of the NPO’s mission.

`Requirements: Present the items above in a statement of cash flows

Solution:
Operating activities

Unrestricted contributions 50,000

Fundraising activities to support current operations 60,000

Unrestricted contributions – for board-designation 100,000

Net cash flows from operating activities 750,000

Investing activities

Acquisition of equipment (200,000)

Financing activities

Cash dividends restricted for acquisition of equipment 200,000

Permanently restricted contribution 300,000

Net cash flows from financing activities 500,000

Total net cash flows during the period 1,500,000

TOPIC: ACCOUNTING PROCEDURES PECULIAR TO SPECIFIC TYPE OF NPOs

In this section, we will discuss accounting procedures unique to a specific type of NPOs. For this
purpose, we will subdivide NPOs into the following.

1. Health Care Organization

2. Private, non-profit, Colleges and Universities

3. Voluntary Health and Welfare Organizations

4. Other non-profit organizations

HEALTH CARE ORGANIZATIONS

- Health Care organization includes hospitals, clinics, medical group practices, individual practice
associations, individual practitioners, emergency care facilities, laboratories surgery centers,
other ambulatory care organizations, continuing care retirement communities, health
 maintenance organizations, home health agencies, and nursing homes, and rehabilitation
centers.
- In accordance with the “AICPA Audit and Accounting Guide, Health Care Organization
- The following are the ACCOUNTING REQUIREMENTS unique to health care organizations:
a. Components of a complete set of financial statements
b. Presentation of revenues in the statement of operations
c. Presentation of contributions in the statement of operations
d. Disclosure of performance indicator.

a. Financial Statement of Health Care Organization

- Health Care organization shall prepare the ff. statements:
Aa. Statement of Financial Position
Ab. Statement of operations (in lieu of a statement of activities)
Ac. Statement of changes in net assets
Ad. Statement of cash flows, and
Ae. Notes to the financial statements
b. Presentation of Revenues in the Statement of Operations
- Revenues in the statement of operations are classified into the ff.
Ba. Net Patient Revenue-
- Gross patient services revenue LESS contractual adjustments, employee discount, and
billed charity care.
Bb. Premium Revenue
- Result from capitation agreements
Bc. Other Revenues
- all other revenues are not classifiable as net patient revenue or premium revenue.

Contractual adjustments

- A portion of a hospital’s revenue is collectible from third-party payors. Such as Phil health and
other health insurance providers. In this regard, a contractual adjustment may arise from the
reimbursement agreement.
- Contractual Adjustment - is the difference between what the hospital considers a fair price for a
service rendered versus an agreed-upon amount for the service with the insurance company.
- Example:
The hospital may consider P60,00 a fair price for a service but agrees with PhilHealth to accept
only P58,000.
The difference of P2,000 represents the contractual adjustment which is written off as a direct
reduction to patient service revenue.

Employee Discount

- These are special discounts available only to the NPO’s employees(and their immediate family
members) in the form of a reduction in the price of patient services.
- it is accounted for as a direct reduction to patient services revenue.

Charity Care
 - Pertains to free services rendered to patients.
- Is not recognized but rather disclosed only in the notes.

Illustration: Net Patient Service Revenue

ABC Hospital, an NPO, Bills P600,000 for services rendered to patients, P500,000 of which is charged to
Phil Health. It is estimated that only P530,000 will be collected. Of the P70,000 difference, P 35,000
represents contractual adjustment with Philhealth, P5,000 for employee discounts, P20,000 for charity
care, and P10,000 for uncollectible accounts.

Requirement: How much is the net patient service revenue?

Solution:

Gross patient service revenue P600,000

Less: Contractual adjustment (35,000)

Employee Discounts (5,000)

Charity Care (20,000)

Net Patient Service Revenue P540,000

The uncollectible accounts are recognized as expenses(i,e., bad debts expenses) rather than a
direct adjustment to revenue.
Capitation Agreements

- Are agreements with the third parties based on the no. of employees instead of services
rendered.
- SFAS No. 117 requires revenues from capitation agreement to be shown separately on the
statement of operations under the caption “ Premium Revenue”, which is a line item below net
patient revenue

Illustration: Capitation agreement

ABC Hospital, an NPO, agreed to provide medical services to XYZ’s 100 employees for P500 per month,
per employee. In April 20x1, Only 20 employees availed of the medical services.

Requirement: Provide the entry to recognize revenue from the capitation agreement.
Solution:

April 30, 20x1 Accounts Receivable (100x P500)

Premium Revenue

To accurate billing for the month of April 20x1 under the capitation agreement

Notice that even though only 20 employees availed of the services, the total amount due on the
contract is accrued.

Other Revenue

- It consists of revenues other than patient service revenues and premium revenues.
- Examples are the revenue from the hospital’s pharmacy, parking deck, flower and gift shop,
educational programs, donated materials, and services.

Illustration: Other Revenues

ABC Hospital, and NPO, had the following transaction during the period:

a. Sales of P 120,000 from gift shop and cafeteria.

b. Received P20,000 dividends from donated shares. The use of dividends is unrestricted.

c. A computer consultant upgraded ABC’s information system for free ABC would have paid
P50,000 for those services if they had not been donated.

d. Received donations of medicines worth P10,000 from a pharmaceutical company.

Requirement: Compute the total other revenues to be presented in ABC’s statement of operations for
the period.

Solution:

Sales from gift shop and cafeteria 120,000

Dividends received 20,000

 Professional services received 50,000

Donated Supplies 10,000

other revenues 200,000

C. Presentation of Contributions in the Statement of Operations

- Presentation of contributions in the statement of operations- unlike the NPOs, Health care
organizations do not present restricted contributions on the statement of operations as part of
revenues.
- The revenue discussed above (i.e., net patient service revenues, premium revenues, and other
revenues) pertain only to unrestricted revenues and may include revenues from unrestricted
contributions.
- Revenues from unrestricted contribution may be separately indicated as such or included in the
other revenues classification.
- Revenue from restricted contribution is presented separately at the bottom part of the
statement of operations, after unrestricted revenues and expenses.

Illustration: Restricted Contribution

ABC Hospital, and NPO, had the following receipts during the year:

Net patient revenues 1,000,000

Premium Revenue 200,000

Sales from canteen 300,000

Investment Income 50,000

Contributions to be used in renovating the Hospitals 400,000

 Requirement: How much is reported as total revenue in the revenues section of the statement of
operations?

Answer: P1,550,000( 1M + 200K + 300k + 50K). The restricted contribution is presented separately from
the revenues section of the statement of operations

D. Disclosure of performance indicator.

- According to the AICPA Guide, the statement of operations shall provide a performance
indicator, such as operating income, revenue over expenses, etc.
- The policy used in determining the performance indicator shall be disclosed in the notes.
- Unrealized gains and losses on investments in securities are not a part of performance indicator
- But shall be reported on the statement of operations after the performance indicator

Private, Non-profit, Colleges and Universities

a. Scholarships and fellowships granted freely are treated as direct reduction of revenues from
tuition and fees, e.g., academic scholarship.
b. Scholarships and fellowships granted as compensation for services rendered by the grantee
are treated as expenses, e.g., scholarships provided to student assistants and faculty members
or their dependents.
c. Refunds of tuition fees from class cancellations and other withdrawal of enrolment are
treated as direct reduction of revenues from tuition and fees.

Illustration: Net Revenues from Tuition and Fees

For the current semester, ABC University, an NPO, assessed its students P1,000,000 for tuition and fees.
Additional information follows.

Student scholarship granted to academic scholars 50,000

Student scholarship granted to student assistants 120,000
Refunds for class cancellations and withdrawals of enrollment 20,000
Estimated Uncollectible Accounts 80,000

Requirement: How much is the net revenue of tuition and fees?

Solution:

Total Assessment of Tuition and Fees 1,000,000

Student Scholarships granted to Academic Scholars (50000)

Refunds for Class Cancellations and Withdrawals of Enrollment (20,000)

Net Revenues from Tuition and Fees P930,000

Voluntary Health and Welfare Organizations

Voluntary Health and Welfare Organizations (VHWO) are non-profit entities that derive their
revenues primarily from donations from the general public to be used for purposes connected
with health, welfare, or community services.
The accounting requirement unique to VHWOs is the provision of a statement of functional
expenses that reports expenses by both functional (i.e., program and supporting) and natural
classifications (salaries expense, depreciation expense, etc.). According to SFAS No. 117, the
statement of functional expenses is useful in associating expenses with service efforts and
accomplishments of the organization.

Accounting for other assets held by NPOs

Use the accrual basis of accounting, in addition to the other ‘general features' provided under
PAS 1.
Apply PFRS 9 Financial Instruments (or PFRS for SMEs, as appropriate) for financial assets and
financial liabilities. Usually, NPOs account for marketable securities at fair value with changes in
fair values recognized in the statement of activities – similar to FVPL securities (the FVOCI
classification is not applicable to NPOs adopting the PFRS for SMEs). -

Under SFAS 124 Accounting for Certain Investments Held by Not-for-Profit Organizations, the
marketable securities of an NPO, consisting of either equity or debt instruments, are measured
at fair value. Changes in fair values are recognized in the statement of activities. Also,
marketable securities can be classified as either current or non-current assets. SFAS 124 does
not apply to investments which result to significant influence or control. Accounting Principles
Board (APB) Opinion No. 18, also a U.S. GAAP, requires the use of the equity method for
investments held by NPOs that result to significant influence.
• Depreciate its depreciable assets in accordance with PAS 16, Property, Plant and
Equipment.
• Recognize impairment loss in accordance with PAS 36 Impairment of Assets when an
asset's carrying amount exceeds its recoverable amount.
• Account for leases (other than those qualifying as contributions) in accordance with
PFRS 16 Leases.
NGO – Educational Institute

Objectives:
✓ The primary objective of a college or university is to provide educational services to its
constituents.
✓ The objective of accounting for colleges and universities are to show the sources from
which resources have been received and to demonstrate how those resources have been
utilized in meeting educational objectives.

Colleges and universities maintain account on an accrual basis

➢ They report income when earned and expenses when incurred.
➢ Expenses are reported by function.
➢ As with other NPOs, it is classified net assets, revenue, expenses, gains, and losses based
on the presence or absence of a donor-imposed restrictions – unrestricted, temporarily
restricted, and permanently restricted.

Accounting for Revenues

Using the following three (3) major groups of revenues, accounts are being established.
1. Educational and general revenues group with accounts for:
a) Student tuition and fees
b) Government appropriations
c) Government grants and contracts
d) Gifts and private grants
e) Endowment income
f) Other sources

2. Auxiliary enterprises revenue

3. Expired term endowment revenues

The most common classification of expenses in private colleges and universities is by function
1. Educational and general expenses
❖ This includes expense for instruction, research, public support (e.g. seminars and
conference), academic support, student services, institutional support, operations
and maintenance of plant and student aid.
 2. Auxiliary enterprises expenses

ACCOUNTING FOR REVENUES – PRIVATE COLLEGES AND UNIVERSITIES

▪ Contributions are defined as unconditionally transfer of cash and other assets to an
entity or a settlement or cancellation of liabilities in a voluntary nonreciprocal transfer
▪ Conditional Pledges depend on the occurrence of uncertain future events and are only
recognized as revenue when the conditions are substantially met (i.e., the pledge becomes
unconditional).
Receipt of unconditional pledge is recognized as follows:
Contributions Receivable xx
Revenue-Unrestricted Contributions xx
Doubtful accounts expense xx
Allowance for doubtful contributions xx
▪ Donor – imposed restriction and reclassification
Net assets are reclassified when:
▪ Donor’s stipulated time has elapsed
▪ Donor stipulated purpose has been fulfilled, or
▪ Over the useful life of a donated asset.
To illustrate:
A P9,000 contribution of restricted cash by a donor for a specific item when received is
recorded.
Cash xx
Revenue – Temporarily Restricted
Contributions xx
Expenses of P5,000 that are in compliance with donor restriction are funded by the restricted
resources. Temporarily restricted net assets are released with an entry to reclassify
Expenses xx
Cash xx
Reclassification out – Temporarily Restricted xx
Reclassification in – Unrestricted xx
FUNDS – PRIVATE COLLEGES AND UNIVERSITY
1. Current/operating funds
➢ Records the day-to-day activities of the university in two subfunds

• Current fund - unrestricted. Used on the day-to-day activity of the college/university

and available for current activities commensurate with the college/university objective
without restriction.
• Current fund - restricted. May be used in daily operations but only within the limits
imposed by the grantor/donor.

2. Loan Funds
➢ Used for making loans to students, faculty and staff. Generally consists of grants
from donor and income from endowments.

• Unrestricted loan funds - when the boards or trustees sets the policies of the loan funds.
• Restricted loan funds - when policies of the fund are set by the grantor or donor.

3. Endowment funds and Similar funds

3.1 Pure or Regular Endowment funds

Principal- held by donor in perpuity.
Income - permits expended for current operation
3.2 Term Endowment funds
Principal - expendable after a specified period or event
Income - permits to be expended for current operations
3.3 Quasi-endowment funds (Similar funds)
 ➢ Restrictions are made by college/university board of trustees making the fund
unrestricted for current use.
Both principal and expenses are expendable for the schools operations.

4. Annuity and Life Income fund

• Annuity fund. Accounts for resources acquired to make stipulated periodic payments to
individual as provided with the agreement with the donor.
• Life Income fund. Fund with the requirement of payment of funds income to a
designated beneficiary.

5. Plant funds
➢ Account to be used for capital assets, for resources to be used to acquire capital
assets, or to retire indebtedness related to capital assets

ILLUSTRATION- JOURNAL ENTRIES PER FUND CLASSIFICATION

• CURRENT FUND – UNRESTRICTED

• CURRENT FUND – RESTRICTED
CURRENT FUND – RESTRICTED
➢ Restriction must be from external part.
➢ Come primarily from government grants and contract, endowment income and private gifts

LOAN FUNDS
• To account for resources available primarily for loans to students, faculty, and non-
teaching staff.
• Principal and earning must be available for loan purposes to be part of the loan fund.
• If only income from a gift or grant maybe used for loan purposes, then the principal must
not be in the loan fund but in the endowment fund.
ENDOWMENT AND SIMILAR FUNDS
• Permanent
• Term
• Quasi-endowment (Board designated)

Transaction Entry
Cash 72,000
Common stock with FMV of P72,000 and Endownment Investment 72,000
cash for P72,000 are received as pure Revunue- Permanently
endowment restricted Contribution 144,000

Team endowment for P24,000 has Reclass. Out-Temp Rest 24,000

expired Reclass. In-Unrestricted 24,000

Endowment investment carried at Cash 360,000

P240,000 was sold for P312,000. Earnings Endowment Investment 240,000
from this investment is P48,000; P24,000 Revenue-Unrestricted-Gain
72,000
is restricted for research projects while on Sale of investment
the remaining is unrestricted Revenue-Temporarily Rest. 24,000
Revenue-Unrestricted 24,000

AGENCY FUNDS
Transaction Entry
Received P90,000 grant for Cash 90,000
students awards. The entire Payables- Students 90,000
amount was distributed to
Payables- Students 90,000
Cash 90,000
RELIGIOUS AND CHARITABLE INSTITUTIONS
Tahanan ng Pagmamahal
1. What your Mission, Vision, Goals or Objectives?
Tahanan ng Pagmamahal Children's Home, Inc. was founded by Mr. Reylindo and Mrs.
Myrna Ortega on December 2006. It is a non-government organization working for abandoned,
neglected, foundling and surrendered children.
Tahanan ng Pagmamahal Children’s Home, Inc. is duly registered with the Securities and
Exchange Commission (SEC) on July 11, 2007. Tahanan is also Registered, Licensed and
Accredited by the Department of Social Welfare and Development (DSWD).
Tahanan moved from different rented homes due to financial constraint. At present,
Tahanan is located at 45 Dr. Pilapil Street, Brgy. Sagad, Pasig City.
The Home is operated by its eleven (11) active Board of Trustees, an Executive Director,
Program Manager, two (2) Social Workers who acts as the Case Managers, a Nurse,
houseparent supervisor, six (6) Houseparents and eight (8) Caregivers who acts as the surrogate
parents of the children as well as providing them with love, care and discipline.

Mission
To serve God and bring Christ to the lives of the abandoned, neglected, surrendered and
foundling children by providing love, care, and basic needs.
To pursue active advocacy on the rights of the children.
To sustain partnership with churches, government agencies and NGO's through collaboration
and networking.
Vision
A sanctuary of God’s love and care for the abandoned, neglected, foundling and surrendered
children.
Goal
To provide safe and secured family environment to the children to help them attain holistic life
by providing shelter, spiritual formation, psycho - social and socio - cultural services.
Objectives
➢ To provide a therapeutic and healing environment for the children.
➢ To provide basic education, spiritual formation, and medical services.
> To sustain the organization for continuity of its programs and services.
2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• Dependent on monetary or in-kind contributions

• Submit proposals to government organizations such as the Philippine Charity
Sweepstakes Office (PCSO), Asian Development Bank (ADB), and other non-profit
organizations using cash raised from their staff community funds.
Mother Organization:

• Independent
3. What are your usual expenses?

• Food and milk – most of the funds are allocated here

• Medical expenses like vitamins
• Salaries and benefits of the staff
• Transportation expenses – social workers need to conduct home visit, lalamove or Lbc
• Utilities – water, electric, repair and maintenance, gas (5 gas every month)
• Communication expense – telephone, internet,

4. Are they taxable?

• All of the employees in Tahanan ng Pagmamahal are paying tax

• The organization itself does not subject to tax because they are accredited by PCSC.
• They are one of the organizations that are credited as low institution and at the same
time they pass good governance, leadership, transparency, and accountability

5. Do you maintain books of accounts? Who is in charge to record? Do you have a

bookkeeper?

• They do have books of accounts. Hard and digital copies of records.

• They keep all the receipts for all transactions.
• They have internal accountant and being audited annually by external auditors.

6. What are the challenges and issues that your organization usually experience?

• Tahanan ng Pagmamahal has several difficulties, particularly now that there is a

pandemic. In terms of medical care, they are having difficulty getting children to the
hospital when they get ill due to a lack of facilities. The next step is to raise funding to
continue operations. Lastly, staff multitasking in guiding children in their classes.
7. If yes, what are the interventions you conducted to address those challenges or issues?

• To raise more funds for the operations, they usually create posters or run a Facebook
campaign to reach out to more donors.

Sta. Clara De Montefalco

1. What your Mission, Vision, Goals or Objectives?
Background:
• The Santa Clara de Montefalco Parish is a massive church was only constructed in the
early years of 1990s when Pasig was still under the jurisdiction of the Archdiocese of Manila.
• STA. CLARA DE MONTEFALCO is one of the most well-known saints here in the
Philippines.
The church edifice is considered the tallest in the whole Philippine Islands.
• The finished church will have a dome rising to 53 meters, capped with a four-meter-
high cross, increasing the church’s overall height to 57 meters.
• The church will surpass the 52-meter high shrine of Our Lady of Perpetual Help, the
Redemptorist Church in Baclaran.

2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• Donations (mass collections)

• In-kind donations
Mother Organization

• Vatican

3. What are your usual expenses?

• Salaries and wages

• Maintenance and electricity
• The usual expenses. There is no difference in normal operation of a company

4. Are they taxable?

• The employees are taxable

 • The organization are exempt from tax

5. Do you maintain books of accounts? Who is in charge to record? Do you have a

bookkeeper? What is its responsibilities?

• They do have books of accounts, same as other companies.

• They do have internal and external auditors.
• Transactions, monitoring, preparation of checks, recording of deposits.

6. What are the challenges and issues that your organization usually experience?

• They are experiencing a lack of funding to meet the organization's goals, particularly
during current epidemic, due to a scarcity of donations.

7. What are the interventions you conducted to address challenges or issues?

• They have a reserve fund that they may use to keep the organization running.

The Sessionista's Charity

1. What your Mission, Vision, Goals or Objectives?

• The whole world is battling an unseen foe. And for many during this global crisis,
music has become not just a hobby — it has become nothing short of a necessity.
In the Philippines, a group of passionate musicians are using their very visible
musical talents to spread joy and entertainment in a time where people need it
most — and at the same time, help their fellowmen who are fighting enemies both
invisible and otherwise.

The Sessionista’s Charity is a local non-profit organization that aims to give aid to
street children and street dwellers. The group is spearheaded by Glogery
Aviguetero Tamesa, a musician and philanthropist.

The group’s first project was the “Share Your Talent To Help Program,” where
musicians volunteered to perform through busking, livestreaming, and even
“harana” or serenading services. From their gig earnings, they gave an amount of
their choosing to help fund the charity’s projects.

Aside from distributing packed goods to those who need them most, the
Sessionista’s Charity also helps the parents and guardians of street children by
 offering them free livelihood seminars. This allows them to learn skills that would
help them make a living.

Contact details:
Address: 49 A Carnation St Bautista Ville Subdivision, Pasig, 1604 Metro Manila
Contact number: +639392026828
Email: [email protected]

• Mission: To inspire less fortunate communities to have a positive outlook in life by

transforming poverty to prosperity.
• Vision: To see a world where everyone has a food on their table.

2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• They will receive virtual gifts that converted into money if they stream using other apps
such as Kumu, TikTok, and others. (These streaming provides 45 percent of the funds)
• Prior to the pandemic, they did local gigs and harana services in restobars, with the
majority of the money going to the organization's finances and the other half going to
the artist or themselves.
• Cash and in-kind donations from friends and families, as well as international sponsors
• T-shirts, hoodies, caps, and other personalized items are available at Sessionista's shop.

Mother Organization

• Independent

3. What are your usual expenses?

• Food packs
• Gifts – cellphone, musical instruments
• School supplies

4. Are they taxable?

• They are not yet part or not recognize by the SEC, so the organization is not exempted
from tax
5. Do you maintain books of accounts? Who is in charge to record? Do you have a
bookkeeper? What is its responsibilities?

• They do keep book of accounts for transparency.

• They have the Auditors that are also volunteers.
• Their auditors keep all the record, receipts, and written notes.
• They don't have external auditors.

6. What are the challenges and issues that your organization usually experience?

• Insufficient funds for the organization

• Some merchants, particularly small businesses that are not officially registered, do not
issue receipts for purchases, and hence cannot record them.
• Fewer volunteers to help with activities

7. What are the interventions you conducted to address challenges or issues?

• The founder and other staff members just donate from their own pockets to keep the
organization going.
• They just manually list all of the expenditures and inform the authorized personnel.
• They just increase their efforts in order for the events to be successful, even when there
aren't enough volunteers available.
 TOPIC: NGAS Bank Reconciliation
Bank Reconciliation - A bank reconciliation, which is the settlement of differences
contained in the bank statement and the cash account in the agency’s books, compares
the bank balance with the entity balance and explains the difference.
Reconciling the two accounts helps identify whether accounting changes are needed.
Bank reconciliations are completed at regular intervals to ensure that the company’s
cash records are correct. They also help to detect fraud and any cash manipulations.
Bank Reconciliation Statement - A bank reconciliation statement is a document that
compares the cash balance on a company’s balance sheet to the corresponding
amount on its bank statement.
The Bank Reconciliation Statement (BRS) shall be prepared in order to:
• Check correctness of both the bank’s and the agency’s records.
• Serve as a determent to fraud, and
• Enable the agency or bank to take up charges or credits recognized by the bank
or agency but noy yet known to the agency or bank
This shall be used in the reconciliation of bank and treasury accounts maintained with
Government Servicing Bank (GBS)\
The monthly BRS shall be prepared by the Chief Accountant or Designated Staff for
each of the bank accounts maintained by the agency using the Adjusted Balance
Method. Under this method, the book balance and the bank balance are brought to an
adjusted cash balance that must appear in the Statement of Financial Position.
Bank Reconciliation Procedure
The Chief Accountant/Designated Staff shall reconcile the monthly bank statement
together with the paid checks, debit memorandum, like bank service charge, and credit
memorandum, like interest earned, from Government Servicing Banks. In other words,
in reconciling the bank account, it is customary to reconcile the balance per books and
balance per bank to their adjusted cash balances.
The following items may cause the difference between the book balance and the bank
balance for:
1. Cash-Modified Disbursement System Accounts
Bank
• Notice of Cash Allocation (NCA) received by the entity but not yet recognized by
the bank
• Lapsed/unused NCA
 • Outstanding checks
• Outstanding Authority to Debit Accounts (ADA)
• Errors committed by the bank
Agency/Entity
• NCA received by the bank but not yet recognized by the agency/entity
• Cancelled checks
• Lapsed NCAs not yet adjusted by the agency/entity
• Bank charges
• Errors committed by the agency/entity
2. Authorized Government Depository Bank Accounts
Bank
• Unrecorded deposit/deposit in transit
• Outstanding checks
• Errors committed by the bank
Agency/Entity
• Deposit per bank statement but not yet recorded in the books.
• Cancelled checks
• Returned check deposit
• Bank charges
• Errors committed by the agency/entity .
Reasons for Difference Between Bank Statement and Company’s Accounting
Record
• When banks send companies a bank statement that contains the company’s
beginning cash balance, transactions during the period, and ending cash
balance, the bank’s ending cash balance and the company’s ending cash
balance are almost always different. Some reasons for the difference are:
• Deposits in transit: Cash and checks that have been received and recorded by
the company but have not yet been recorded on the bank statement.
• Outstanding checks: Checks that have been issued by the company to creditors
but the payments have not yet been processed.
 • Bank service fees: Banks deduct charges for services they provide to customers
but these amounts are usually relatively small.
• Interest income: Banks pay interest on some bank accounts.
• Not sufficient funds (NSF) checks: When a customer deposits a check into an
account but the account of the issuer of the check has an insufficient amount to
pay the check, the bank deducts from the customer’s account the check that was
previously credited. The check is then returned to the depositor as an NSF
check.
Who’s responsible for bank reconciliations?
Bookkeeper – the bookkeeper or any online bookkeeping service can handle it for you.
While on the other hand, if you do your bookkeeping yourself, you should be prepared
to reconcile your bank statements at regular intervals
• In huge companies with full-time accountants, there’s always someone checking
to make sure every number checks out, and that the books match reality.
• In a small business, that responsibility usually falls to the owner (or a
bookkeeper, if you hire one.
Method of Accounting to use for Bank Reconciliations
Accrual Method - This is to confirm that all uncleared bank transactions you recorded
actually went through.
Cash Basis Accounting - you record every transaction at the same time the bank
does; there should be no discrepancy between your balance sheet and your bank
statement.
Five compelling reasons why bank reconciliations matter
1. To see your business as it really is
2. To track cash flow
3. To detect fraud
4. To detect bank errors
5. To stay on top of accounts receivable
Five compelling reasons why bank reconciliations matter
1. To see your business as it really is
➢ If your bank account, credit card statements, and your bookkeeping don’t match
up, you could end up spending money you don’t really have—or holding on to the
money you could be investing in your business.
2. To track cash flow
➢ Reconciling your bank statements lets you see the relationship between when
money enters your business and when it enters your bank account, and plan how
you collect and spend money accordingly.
3. To detect fraud
➢ Reconciling your bank statements won’t stop fraud, but it will let you know when
it’s happened.
4. To detect bank errors
➢ If there’s a discrepancy between your accounts and the bank’s records that you
can’t explain any other way, it may be time to speak to someone at the bank.
5. To stay on top of accounts receivable
➢ Bank reconciliations are like a fail-safe for making sure your accounts receivable
never get out of control. And if you’re consistently seeing a discrepancy in
accounts receivable between your balance sheet and your bank, you know you
have a deeper issue to fix.
ILLUSTRATION #1
XYZ Company is closing its books and must prepare a bank reconciliation for the
following items:
• Bank statement contains an ending balance of $300,000 on February 28,
2022, whereas the company’s ledger shows an ending balance of
$260,900
• Bank statement contains a $100 service charge for operating the account
• Bank statement contains interest income of $20
• XYZ issued checks of $50,000 that have not yet been cleared by the bank
• XYZ deposited $20,000 but this did not appear on the bank statement
• A check for the amount of $470 issued to the office supplier was
misreported in the cash payments journal as $370.
• A note receivable of $9,800 was collected by the bank.
• A check of $520 deposited by the company has been charged back as
NSF.
ILLUSTRATION #2
The following data were taken from the accounting records of Agency X for the month of
July of the current year.
Cash – MDS Regular Account:
Unadjusted balance per book P 10, 800, 250
Unadjusted balance per bank 12, 422, 050
Additional Information:
1. NCA for regular account with Allotment Release Order (ARO) in the amount of 3,
000, 000 was not recognized by Agency X in its books.
2. MDS checks for regular account in the amount of P20, 850 was cancelled due to
expiration of validity.
3. 3. Check issued for MDS regular account was erroneously recorded as P87, 000
instead of P78, 000 by Agency X.
4. 4. NCA for regular account with ARO in the amount of P520, 150 lapsed, but
remained unadjusted in the books of Agency X.
5. 5. Check issued for MDS regular account was erroneously recorded as P40, 000
instead of P50, 000 by Agency X.
6. 6. Cash – MDS, Regular account was overstated by P100, 000 due to erroneous
recording of NCA received with ARO by Agency X.
 7. 7. The bank imposed charges in the amount of P3, 750 for various services
rendered.
8. 8. The bank erroneously recorded NCA for regular account understating it by
P900, 000.
9. 9. Outstanding checks for the month amounted to P125, 850.

Authorized Government Depository Bank (AGDB) Account:

Unadjusted balance per book P 3, 251, 750
Unadjusted balance per bank 3, 104, 285
Additional Information:
1. Deposit per bank statement but not yet recorded in the books of Agency X in the
amount of P23, 120.
2. Understatement of Cash in Bank – Local Currency, Current account due to
erroneous recording of the checks issued in the amount of P9,000.
3. Understatement of Cash in Bank – Local Currency, Current account due to
erroneous recording of deposits, P15,000.
4. The bank returned check due to error in the maker’s account deposited in the
account of Agency X, P12, 130.
5. Overstatement of the book balance due to erroneous recording of deposit in the
amount of P1, 100.
6. Bank charges, P2, 125.
REQUIRED:
1. Prepare Bank Reconciliation Statements for the MDS and AGDB accounts using
the Adjusted Balance Method.
2. Prepare adjusting journal entries in the books of Agency X.
Adjusting Journal Entries:
1. Unrecognized NCA for regular account with ARO.
Cash - MDS, Regular 3,000,000
Subsidy from National Government 3,000,000
2. Cancelled MDS check (without intention to replace).
Cash - MDS, Regular 20,850
Expenses or Other appropriate account 20,850
3. Understatement of Cash - MDS, Regular account due to checks issued.
Cash - MDS, Regular 9,000
Accounts Payable or Other Liabilities 9,000
4. Lapsed/ unused NCA for regular account with ARO at year-end.
 Subsidy from National Government 520,150
Cash -MDS, Regular 520,150
5. Overstatement of Cash - MDS, Regular account due to checks issued.
Expenses or Accounts Payable 10,000
Cash - MDS, Regular 10,000
6. Overstatement of Cash - MDS, Regular account due to NCA (with ARO) received.
Subsidy from National Government 100,000
Cash - MDS, Regular 100,000
7. Bank charges imposed by the bank.
Bank charges or Any appropriate account 3,750
Cash - MDS, Regular 3,750

Adjusting Journal Entries:

1. Deposit per bank statement not yet recorded by Agency X.
Cash in Bank — Local Currency, Current 23,120
Income or Other appropriate account 23,120
2. Understatement of cash in bank due to checks issued.
Cash in Bank — Local Currency, Current 9,000
Expenses or Other Liabilities 9,000
3. Understatement of cash in bank due to erroneous recording of deposits.
Cash in Bank — Local Currency, Current 15,000
Revenue or Other appropriate account 15,000
4. Checks deposited returned by the bank.
Revenue or Other appropriate account 12,130
Cash in Bank Local Currency, Current 12,130
5. Overstatement of book balance due to erroneous recording of deposits.
Revenue or Other payables 1,100
Cash in Bank — Local Currency, Current 1,100
6. Bank charges imposed by the bank.
Bank Charges or Any appropriate account 2,125
Cash in Bank Local Currency, Current 2,125

GROUP 1
Leader: Quilang, Christy C.
Members:
Ambe, Fritz Angie
Alavata, Sophia Bianca
Damasco, Danna Angel
Prado, Abegail Rose
Santos, Anne Margareth
Tullao, Mary Grace
NGO – Educational Institute

Objectives:
✓ The primary objective of a college or university is to provide educational services to its
constituents.
✓ The objective of accounting for colleges and universities are to show the sources from
which resources have been received and to demonstrate how those resources have been
utilized in meeting educational objectives.

Colleges and universities maintain account on an accrual basis

➢ They report income when earned and expenses when incurred.
➢ Expenses are reported by function.
➢ As with other NPOs, it is classified net assets, revenue, expenses, gains, and losses based
on the presence or absence of a donor-imposed restrictions – unrestricted, temporarily
restricted, and permanently restricted.

Accounting for Revenues

Using the following three (3) major groups of revenues, accounts are being established.
1. Educational and general revenues group with accounts for:
a) Student tuition and fees
b) Government appropriations
c) Government grants and contracts
d) Gifts and private grants
e) Endowment income
f) Other sources

2. Auxiliary enterprises revenue

3. Expired term endowment revenues

The most common classification of expenses in private colleges and universities is by function
1. Educational and general expenses
❖ This includes expense for instruction, research, public support (e.g. seminars and
conference), academic support, student services, institutional support, operations
and maintenance of plant and student aid.
 2. Auxiliary enterprises expenses

ACCOUNTING FOR REVENUES – PRIVATE COLLEGES AND UNIVERSITIES

▪ Contributions are defined as unconditionally transfer of cash and other assets to an
entity or a settlement or cancellation of liabilities in a voluntary nonreciprocal transfer
▪ Conditional Pledges depend on the occurrence of uncertain future events and are only
recognized as revenue when the conditions are substantially met (i.e., the pledge becomes
unconditional).
Receipt of unconditional pledge is recognized as follows:
Contributions Receivable xx
Revenue-Unrestricted Contributions xx
Doubtful accounts expense xx
Allowance for doubtful contributions xx
▪ Donor – imposed restriction and reclassification
Net assets are reclassified when:
▪ Donor’s stipulated time has elapsed
▪ Donor stipulated purpose has been fulfilled, or
▪ Over the useful life of a donated asset.
To illustrate:
A P9,000 contribution of restricted cash by a donor for a specific item when received is
recorded.
Cash xx
Revenue – Temporarily Restricted
Contributions xx
Expenses of P5,000 that are in compliance with donor restriction are funded by the restricted
resources. Temporarily restricted net assets are released with an entry to reclassify
Expenses xx
Cash xx
Reclassification out – Temporarily Restricted xx
Reclassification in – Unrestricted xx
FUNDS – PRIVATE COLLEGES AND UNIVERSITY
1. Current/operating funds
➢ Records the day-to-day activities of the university in two subfunds

• Current fund - unrestricted. Used on the day-to-day activity of the college/university

and available for current activities commensurate with the college/university objective
without restriction.
• Current fund - restricted. May be used in daily operations but only within the limits
imposed by the grantor/donor.

2. Loan Funds
➢ Used for making loans to students, faculty and staff. Generally consists of grants
from donor and income from endowments.

• Unrestricted loan funds - when the boards or trustees sets the policies of the loan funds.
• Restricted loan funds - when policies of the fund are set by the grantor or donor.

3. Endowment funds and Similar funds

3.1 Pure or Regular Endowment funds

Principal- held by donor in perpuity.
Income - permits expended for current operation
3.2 Term Endowment funds
Principal - expendable after a specified period or event
Income - permits to be expended for current operations
3.3 Quasi-endowment funds (Similar funds)
 ➢ Restrictions are made by college/university board of trustees making the fund
unrestricted for current use.
Both principal and expenses are expendable for the schools operations.

4. Annuity and Life Income fund

• Annuity fund. Accounts for resources acquired to make stipulated periodic payments to
individual as provided with the agreement with the donor.
• Life Income fund. Fund with the requirement of payment of funds income to a
designated beneficiary.

5. Plant funds
➢ Account to be used for capital assets, for resources to be used to acquire capital
assets, or to retire indebtedness related to capital assets

ILLUSTRATION- JOURNAL ENTRIES PER FUND CLASSIFICATION

• CURRENT FUND – UNRESTRICTED

• CURRENT FUND – RESTRICTED
CURRENT FUND – RESTRICTED
➢ Restriction must be from external part.
➢ Come primarily from government grants and contract, endowment income and private gifts

LOAN FUNDS
• To account for resources available primarily for loans to students, faculty, and non-
teaching staff.
• Principal and earning must be available for loan purposes to be part of the loan fund.
• If only income from a gift or grant maybe used for loan purposes, then the principal must
not be in the loan fund but in the endowment fund.
ENDOWMENT AND SIMILAR FUNDS
• Permanent
• Term
• Quasi-endowment (Board designated)

Transaction Entry
Cash 72,000
Common stock with FMV of P72,000 and Endownment Investment 72,000
cash for P72,000 are received as pure Revunue- Permanently
endowment restricted Contribution 144,000

Team endowment for P24,000 has Reclass. Out-Temp Rest 24,000

expired Reclass. In-Unrestricted 24,000

Endowment investment carried at Cash 360,000

P240,000 was sold for P312,000. Earnings Endowment Investment 240,000
from this investment is P48,000; P24,000 Revenue-Unrestricted-Gain
72,000
is restricted for research projects while on Sale of investment
the remaining is unrestricted Revenue-Temporarily Rest. 24,000
Revenue-Unrestricted 24,000

AGENCY FUNDS
Transaction Entry
Received P90,000 grant for Cash 90,000
students awards. The entire Payables- Students 90,000
amount was distributed to
Payables- Students 90,000
Cash 90,000
RELIGIOUS AND CHARITABLE INSTITUTIONS
Tahanan ng Pagmamahal
1. What your Mission, Vision, Goals or Objectives?
Tahanan ng Pagmamahal Children's Home, Inc. was founded by Mr. Reylindo and Mrs.
Myrna Ortega on December 2006. It is a non-government organization working for abandoned,
neglected, foundling and surrendered children.
Tahanan ng Pagmamahal Children’s Home, Inc. is duly registered with the Securities and
Exchange Commission (SEC) on July 11, 2007. Tahanan is also Registered, Licensed and
Accredited by the Department of Social Welfare and Development (DSWD).
Tahanan moved from different rented homes due to financial constraint. At present,
Tahanan is located at 45 Dr. Pilapil Street, Brgy. Sagad, Pasig City.
The Home is operated by its eleven (11) active Board of Trustees, an Executive Director,
Program Manager, two (2) Social Workers who acts as the Case Managers, a Nurse,
houseparent supervisor, six (6) Houseparents and eight (8) Caregivers who acts as the surrogate
parents of the children as well as providing them with love, care and discipline.

Mission
To serve God and bring Christ to the lives of the abandoned, neglected, surrendered and
foundling children by providing love, care, and basic needs.
To pursue active advocacy on the rights of the children.
To sustain partnership with churches, government agencies and NGO's through collaboration
and networking.
Vision
A sanctuary of God’s love and care for the abandoned, neglected, foundling and surrendered
children.
Goal
To provide safe and secured family environment to the children to help them attain holistic life
by providing shelter, spiritual formation, psycho - social and socio - cultural services.
Objectives
➢ To provide a therapeutic and healing environment for the children.
➢ To provide basic education, spiritual formation, and medical services.
> To sustain the organization for continuity of its programs and services.
2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• Dependent on monetary or in-kind contributions

• Submit proposals to government organizations such as the Philippine Charity
Sweepstakes Office (PCSO), Asian Development Bank (ADB), and other non-profit
organizations using cash raised from their staff community funds.
Mother Organization:

• Independent
3. What are your usual expenses?

• Food and milk – most of the funds are allocated here

• Medical expenses like vitamins
• Salaries and benefits of the staff
• Transportation expenses – social workers need to conduct home visit, lalamove or Lbc
• Utilities – water, electric, repair and maintenance, gas (5 gas every month)
• Communication expense – telephone, internet,

4. Are they taxable?

• All of the employees in Tahanan ng Pagmamahal are paying tax

• The organization itself does not subject to tax because they are accredited by PCSC.
• They are one of the organizations that are credited as low institution and at the same
time they pass good governance, leadership, transparency, and accountability

5. Do you maintain books of accounts? Who is in charge to record? Do you have a

bookkeeper?

• They do have books of accounts. Hard and digital copies of records.

• They keep all the receipts for all transactions.
• They have internal accountant and being audited annually by external auditors.

6. What are the challenges and issues that your organization usually experience?

• Tahanan ng Pagmamahal has several difficulties, particularly now that there is a

pandemic. In terms of medical care, they are having difficulty getting children to the
hospital when they get ill due to a lack of facilities. The next step is to raise funding to
continue operations. Lastly, staff multitasking in guiding children in their classes.
7. If yes, what are the interventions you conducted to address those challenges or issues?

• To raise more funds for the operations, they usually create posters or run a Facebook
campaign to reach out to more donors.

Sta. Clara De Montefalco

1. What your Mission, Vision, Goals or Objectives?
Background:
• The Santa Clara de Montefalco Parish is a massive church was only constructed in the
early years of 1990s when Pasig was still under the jurisdiction of the Archdiocese of Manila.
• STA. CLARA DE MONTEFALCO is one of the most well-known saints here in the
Philippines.
The church edifice is considered the tallest in the whole Philippine Islands.
• The finished church will have a dome rising to 53 meters, capped with a four-meter-
high cross, increasing the church’s overall height to 57 meters.
• The church will surpass the 52-meter high shrine of Our Lady of Perpetual Help, the
Redemptorist Church in Baclaran.

2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• Donations (mass collections)

• In-kind donations
Mother Organization

• Vatican

3. What are your usual expenses?

• Salaries and wages

• Maintenance and electricity
• The usual expenses. There is no difference in normal operation of a company

4. Are they taxable?

• The employees are taxable

 • The organization are exempt from tax

5. Do you maintain books of accounts? Who is in charge to record? Do you have a

bookkeeper? What is its responsibilities?

• They do have books of accounts, same as other companies.

• They do have internal and external auditors.
• Transactions, monitoring, preparation of checks, recording of deposits.

6. What are the challenges and issues that your organization usually experience?

• They are experiencing a lack of funding to meet the organization's goals, particularly
during current epidemic, due to a scarcity of donations.

7. What are the interventions you conducted to address challenges or issues?

• They have a reserve fund that they may use to keep the organization running.

The Sessionista's Charity

1. What your Mission, Vision, Goals or Objectives?

• The whole world is battling an unseen foe. And for many during this global crisis,
music has become not just a hobby — it has become nothing short of a necessity.
In the Philippines, a group of passionate musicians are using their very visible
musical talents to spread joy and entertainment in a time where people need it
most — and at the same time, help their fellowmen who are fighting enemies both
invisible and otherwise.

The Sessionista’s Charity is a local non-profit organization that aims to give aid to
street children and street dwellers. The group is spearheaded by Glogery
Aviguetero Tamesa, a musician and philanthropist.

The group’s first project was the “Share Your Talent To Help Program,” where
musicians volunteered to perform through busking, livestreaming, and even
“harana” or serenading services. From their gig earnings, they gave an amount of
their choosing to help fund the charity’s projects.

Aside from distributing packed goods to those who need them most, the
Sessionista’s Charity also helps the parents and guardians of street children by
 offering them free livelihood seminars. This allows them to learn skills that would
help them make a living.

Contact details:
Address: 49 A Carnation St Bautista Ville Subdivision, Pasig, 1604 Metro Manila
Contact number: +639392026828
Email: [email protected]

• Mission: To inspire less fortunate communities to have a positive outlook in life by

transforming poverty to prosperity.
• Vision: To see a world where everyone has a food on their table.

2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?

• They will receive virtual gifts that converted into money if they stream using other apps
such as Kumu, TikTok, and others. (These streaming provides 45 percent of the funds)
• Prior to the pandemic, they did local gigs and harana services in restobars, with the
majority of the money going to the organization's finances and the other half going to
the artist or themselves.
• Cash and in-kind donations from friends and families, as well as international sponsors
• T-shirts, hoodies, caps, and other personalized items are available at Sessionista's shop.

Mother Organization

• Independent

3. What are your usual expenses?

• Food packs
• Gifts – cellphone, musical instruments
• School supplies

4. Are they taxable?

• They are not yet part or not recognize by the SEC, so the organization is not exempted
from tax
5. Do you maintain books of accounts? Who is in charge to record? Do you have a
bookkeeper? What is its responsibilities?

• They do keep book of accounts for transparency.

• They have the Auditors that are also volunteers.
• Their auditors keep all the record, receipts, and written notes.
• They don't have external auditors.

6. What are the challenges and issues that your organization usually experience?

• Insufficient funds for the organization

• Some merchants, particularly small businesses that are not officially registered, do not
issue receipts for purchases, and hence cannot record them.
• Fewer volunteers to help with activities

7. What are the interventions you conducted to address challenges or issues?

• The founder and other staff members just donate from their own pockets to keep the
organization going.
• They just manually list all of the expenditures and inform the authorized personnel.
• They just increase their efforts in order for the events to be successful, even when there
aren't enough volunteers available.
 TOPIC: NGAS Bank Reconciliation
Bank Reconciliation - A bank reconciliation, which is the settlement of differences
contained in the bank statement and the cash account in the agency’s books, compares
the bank balance with the entity balance and explains the difference.
Reconciling the two accounts helps identify whether accounting changes are needed.
Bank reconciliations are completed at regular intervals to ensure that the company’s
cash records are correct. They also help to detect fraud and any cash manipulations.
Bank Reconciliation Statement - A bank reconciliation statement is a document that
compares the cash balance on a company’s balance sheet to the corresponding
amount on its bank statement.
The Bank Reconciliation Statement (BRS) shall be prepared in order to:
• Check correctness of both the bank’s and the agency’s records.
• Serve as a determent to fraud, and
• Enable the agency or bank to take up charges or credits recognized by the bank
or agency but noy yet known to the agency or bank
This shall be used in the reconciliation of bank and treasury accounts maintained with
Government Servicing Bank (GBS)\
The monthly BRS shall be prepared by the Chief Accountant or Designated Staff for
each of the bank accounts maintained by the agency using the Adjusted Balance
Method. Under this method, the book balance and the bank balance are brought to an
adjusted cash balance that must appear in the Statement of Financial Position.
Bank Reconciliation Procedure
The Chief Accountant/Designated Staff shall reconcile the monthly bank statement
together with the paid checks, debit memorandum, like bank service charge, and credit
memorandum, like interest earned, from Government Servicing Banks. In other words,
in reconciling the bank account, it is customary to reconcile the balance per books and
balance per bank to their adjusted cash balances.
The following items may cause the difference between the book balance and the bank
balance for:
1. Cash-Modified Disbursement System Accounts
Bank
• Notice of Cash Allocation (NCA) received by the entity but not yet recognized by
the bank
• Lapsed/unused NCA
 • Outstanding checks
• Outstanding Authority to Debit Accounts (ADA)
• Errors committed by the bank
Agency/Entity
• NCA received by the bank but not yet recognized by the agency/entity
• Cancelled checks
• Lapsed NCAs not yet adjusted by the agency/entity
• Bank charges
• Errors committed by the agency/entity
2. Authorized Government Depository Bank Accounts
Bank
• Unrecorded deposit/deposit in transit
• Outstanding checks
• Errors committed by the bank
Agency/Entity
• Deposit per bank statement but not yet recorded in the books.
• Cancelled checks
• Returned check deposit
• Bank charges
• Errors committed by the agency/entity .
Reasons for Difference Between Bank Statement and Company’s Accounting
Record
• When banks send companies a bank statement that contains the company’s
beginning cash balance, transactions during the period, and ending cash
balance, the bank’s ending cash balance and the company’s ending cash
balance are almost always different. Some reasons for the difference are:
• Deposits in transit: Cash and checks that have been received and recorded by
the company but have not yet been recorded on the bank statement.
• Outstanding checks: Checks that have been issued by the company to creditors
but the payments have not yet been processed.
 • Bank service fees: Banks deduct charges for services they provide to customers
but these amounts are usually relatively small.
• Interest income: Banks pay interest on some bank accounts.
• Not sufficient funds (NSF) checks: When a customer deposits a check into an
account but the account of the issuer of the check has an insufficient amount to
pay the check, the bank deducts from the customer’s account the check that was
previously credited. The check is then returned to the depositor as an NSF
check.
Who’s responsible for bank reconciliations?
Bookkeeper – the bookkeeper or any online bookkeeping service can handle it for you.
While on the other hand, if you do your bookkeeping yourself, you should be prepared
to reconcile your bank statements at regular intervals
• In huge companies with full-time accountants, there’s always someone checking
to make sure every number checks out, and that the books match reality.
• In a small business, that responsibility usually falls to the owner (or a
bookkeeper, if you hire one.
Method of Accounting to use for Bank Reconciliations
Accrual Method - This is to confirm that all uncleared bank transactions you recorded
actually went through.
Cash Basis Accounting - you record every transaction at the same time the bank
does; there should be no discrepancy between your balance sheet and your bank
statement.
Five compelling reasons why bank reconciliations matter
1. To see your business as it really is
2. To track cash flow
3. To detect fraud
4. To detect bank errors
5. To stay on top of accounts receivable
Five compelling reasons why bank reconciliations matter
1. To see your business as it really is
➢ If your bank account, credit card statements, and your bookkeeping don’t match
up, you could end up spending money you don’t really have—or holding on to the
money you could be investing in your business.
2. To track cash flow
➢ Reconciling your bank statements lets you see the relationship between when
money enters your business and when it enters your bank account, and plan how
you collect and spend money accordingly.
3. To detect fraud
➢ Reconciling your bank statements won’t stop fraud, but it will let you know when
it’s happened.
4. To detect bank errors
➢ If there’s a discrepancy between your accounts and the bank’s records that you
can’t explain any other way, it may be time to speak to someone at the bank.
5. To stay on top of accounts receivable
➢ Bank reconciliations are like a fail-safe for making sure your accounts receivable
never get out of control. And if you’re consistently seeing a discrepancy in
accounts receivable between your balance sheet and your bank, you know you
have a deeper issue to fix.
ILLUSTRATION #1
XYZ Company is closing its books and must prepare a bank reconciliation for the
following items:
• Bank statement contains an ending balance of $300,000 on February 28,
2022, whereas the company’s ledger shows an ending balance of
$260,900
• Bank statement contains a $100 service charge for operating the account
• Bank statement contains interest income of $20
• XYZ issued checks of $50,000 that have not yet been cleared by the bank
• XYZ deposited $20,000 but this did not appear on the bank statement
• A check for the amount of $470 issued to the office supplier was
misreported in the cash payments journal as $370.
• A note receivable of $9,800 was collected by the bank.
• A check of $520 deposited by the company has been charged back as
NSF.
ILLUSTRATION #2
The following data were taken from the accounting records of Agency X for the month of
July of the current year.
Cash – MDS Regular Account:
Unadjusted balance per book P 10, 800, 250
Unadjusted balance per bank 12, 422, 050
Additional Information:
1. NCA for regular account with Allotment Release Order (ARO) in the amount of 3,
000, 000 was not recognized by Agency X in its books.
2. MDS checks for regular account in the amount of P20, 850 was cancelled due to
expiration of validity.
3. 3. Check issued for MDS regular account was erroneously recorded as P87, 000
instead of P78, 000 by Agency X.
4. 4. NCA for regular account with ARO in the amount of P520, 150 lapsed, but
remained unadjusted in the books of Agency X.
5. 5. Check issued for MDS regular account was erroneously recorded as P40, 000
instead of P50, 000 by Agency X.
6. 6. Cash – MDS, Regular account was overstated by P100, 000 due to erroneous
recording of NCA received with ARO by Agency X.
 7. 7. The bank imposed charges in the amount of P3, 750 for various services
rendered.
8. 8. The bank erroneously recorded NCA for regular account understating it by
P900, 000.
9. 9. Outstanding checks for the month amounted to P125, 850.

Authorized Government Depository Bank (AGDB) Account:

Unadjusted balance per book P 3, 251, 750
Unadjusted balance per bank 3, 104, 285
Additional Information:
1. Deposit per bank statement but not yet recorded in the books of Agency X in the
amount of P23, 120.
2. Understatement of Cash in Bank – Local Currency, Current account due to
erroneous recording of the checks issued in the amount of P9,000.
3. Understatement of Cash in Bank – Local Currency, Current account due to
erroneous recording of deposits, P15,000.
4. The bank returned check due to error in the maker’s account deposited in the
account of Agency X, P12, 130.
5. Overstatement of the book balance due to erroneous recording of deposit in the
amount of P1, 100.
6. Bank charges, P2, 125.
REQUIRED:
1. Prepare Bank Reconciliation Statements for the MDS and AGDB accounts using
the Adjusted Balance Method.
2. Prepare adjusting journal entries in the books of Agency X.
Adjusting Journal Entries:
1. Unrecognized NCA for regular account with ARO.
Cash - MDS, Regular 3,000,000
Subsidy from National Government 3,000,000
2. Cancelled MDS check (without intention to replace).
Cash - MDS, Regular 20,850
Expenses or Other appropriate account 20,850
3. Understatement of Cash - MDS, Regular account due to checks issued.
Cash - MDS, Regular 9,000
Accounts Payable or Other Liabilities 9,000
4. Lapsed/ unused NCA for regular account with ARO at year-end.
 Subsidy from National Government 520,150
Cash -MDS, Regular 520,150
5. Overstatement of Cash - MDS, Regular account due to checks issued.
Expenses or Accounts Payable 10,000
Cash - MDS, Regular 10,000
6. Overstatement of Cash - MDS, Regular account due to NCA (with ARO) received.
Subsidy from National Government 100,000
Cash - MDS, Regular 100,000
7. Bank charges imposed by the bank.
Bank charges or Any appropriate account 3,750
Cash - MDS, Regular 3,750

Adjusting Journal Entries:

1. Deposit per bank statement not yet recorded by Agency X.
Cash in Bank — Local Currency, Current 23,120
Income or Other appropriate account 23,120
2. Understatement of cash in bank due to checks issued.
Cash in Bank — Local Currency, Current 9,000
Expenses or Other Liabilities 9,000
3. Understatement of cash in bank due to erroneous recording of deposits.
Cash in Bank — Local Currency, Current 15,000
Revenue or Other appropriate account 15,000
4. Checks deposited returned by the bank.
Revenue or Other appropriate account 12,130
Cash in Bank Local Currency, Current 12,130
5. Overstatement of book balance due to erroneous recording of deposits.
Revenue or Other payables 1,100
Cash in Bank — Local Currency, Current 1,100
6. Bank charges imposed by the bank.
Bank Charges or Any appropriate account 2,125
Cash in Bank Local Currency, Current 2,125

GROUP 1
Leader: Quilang, Christy C.
Members:
Ambe, Fritz Angie
Alavata, Sophia Bianca
Damasco, Danna Angel
Prado, Abegail Rose
Santos, Anne Margareth
Tullao, Mary Grace
ACCOUNTING
FOR BUDGETARY
ACCOUNTS

SLIDESMANIA.COM
Section 29 (1), Article VI of the
1987 Constitution provides, “No
money shall be paid out of the
Treasury except in pursuance of
an appropriation by law.”

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Accounting Systems
The General Accounting Plan (GAP) shows the overall accounting
system of a government agency/unit. It includes the source documents,
the flow of transactions z its accumulation in the books of accounts and
finally the conversion into financial information/data presented in the
financial reports. The following accounting systems are:

1. Budgetary Accounts System

2. Receipt/Income and Deposit System
3. Disbursement System
4. Financial Reporting System

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National Budget
Budgeting is basically planning and control.
Planning involves the development of future
objectives and the preparation of various budgets
to achieve these objectives. Control involves the
steps taken by management to ensure that the
objectives set down at the planning stage are
attained, and to ensure that all parts of the
organization function are in a manner consistent
with organizational policies.

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• A government budget is a plan for financing the government activities for a fiscal year
prepared and submitted by responsible executive to a representative body whose
approval and authorization are necessary before the plan can be executed.

• It is a definite proposal of estimate or statement of receipts and expenditures that may be

approved or rejected. As such, it should present a detailed demonstration of the revenues
and expenditures of the government for the past and ensuing years and should furnish
not only definite information regarding the general character, purpose and amount of
government expenditures, but also detailed data regarding the cost entailed in
maintaining particular units of organization and in performing particular units of
organization and in performing particular activities.

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Forms and Contents of the National
Budget
• The budget proposal of the President shall include current
operating expenditures and capital outlays. It shall
comprise of such funds as may be necessary for the
operation of the programs, projects and activities of the
various departments and agencies. Section 22, Article VII
of the Constitution of the Philippines provides that “The
President of the Philippines shall submit to Congress
within 30 days from the opening of every regular session,
as the basis of the general appropriation bill, a budget of
expenditures and sources of financing, including receipts
from existing and proposed revenue measures.”

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The budget shall be presented to Congress in such form and content as may be approved by the President
and may include the following:
1. A budget message setting forth in brief the government’s budgetary thrust for the budget year,
including their impact on development goals, monetary and fiscal objectives, and generally on the
implications of the revenue, expenditure and debt proposals; and
2. Summary financial statements setting forth:
a. Estimated expenditures and proposed appropriations necessary for the support of the government
for the ensuing fiscal year, including those financed from operating revenues and from domestic
and foreign borrowings;
b. Estimated receipts during the ensuing fiscal year under the laws existing at the time the budget is
transmitted and under the revenue proposals, if any, forming part of the year’s financing program;
c. Actual appropriations, expenditures and receipts during the last completed fiscal year;
d. Estimated expenditures and receipts and actual or proposed appropriations during the fiscal year in
progress; and
e. Statements of the condition of the National Treasury at the end of the last completed fiscal year,
the estimated condition of the Treasury at the end of the fiscal year in progress and the estimated
condition of the Treasury at the end of ensuing fiscal year.

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Fundamental Principles of Fiscal
Operations
Budget activities are governed by legal provisions/fundamental principles relating to financial
transactions and operations of the government. The principles, as provided for by the law, are:
1. No money shall be paid out of the public treasury or depository except in pursuance of an
appropriation law or other specific statutory authority;
2. Government funds or property shall be spent or used solely for public purposes;
3. Trust funds shall be available and may be spent only for the specific purpose for which the
trust was created;
4. 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;
5. Disbursements or disposition of government funds or property shall invariably bear the
approval of the proper officials;
6. Claims against government funds shall be supported with complete documentation;
7. All laws and regulations applicable to financial transaction shall be faithfully adhered to; and
8. Generally accepted principles and practices of accounting, as well as, of sound management
and fiscal administration shall be observed, provided they do not contravene existing laws and
regulations.

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KINDS OF
BUDGET

• As to Nature

a. Annual Budget
b. Supplemental Budget
c. Special Budget

• As to Basis

a. Performance Budget
b. Line-Item Budget

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Balanced Budget

It is a budget where the proposed expenditures are equal

to the estimated revenues.
Currently, the government is operating with a budget
deficiency. As such, it is serving government priorities to
achieve a balanced budget by increasing revenues and
cutting on expenditures.

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THE BUDGET PROCESS

1. Budget Preparation
This covers estimation of government revenues, the determination of budgetary priorities and
activities within the constraints imposed by available revenues and by borrowing limits, and the
translation of approved priorities and activities into expenditure levels. Estimates are prepared
by the various government agencies, reviewed, and finalized by the President of the Philippines,
and then submitted to the Legislative Department as basis for the preparation of the annual
Appropriation Act.
The budget proposals shall be reviewed on the basis of their own merits and not on the basis of:
1. A given percentage or peso increase or decrease from a prior year’s budget level;
2. A given percentage of the aggregate budget level; or
3. A similar rule of thumb that is not based on specific justification.

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The main agency involved is the Development Budget Coordination
Committee (DBCC) composed of the following agencies is as follows:

1. The Department of Budget and Management

2. The Department of Finance
3. The National Economic and Development Authority (NEDA)
4. The Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
5. The Office of the President of the Philippines

The Department of Budget and Management summarizes the proposals

and submits an analysis and recommendation on the agencies’ budget
proposals, which are submitted to the President of the Philippines before
finalization and submission to Congress.

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2. Legislative Authorization

It is the second phase of the budget process relative to the enactment of the General
Appropriation Bills based on the budget of receipts and expenditures submitted by the
President of the Philippines within 30 days from the opening- of its regular session, as the basis
of the general appropriation bill.
The General Appropriation Bill presents the proposals of the President of the Philippines for
new general appropriations in the coming year. The proposals are listed by agency or lump sum
fund and are detailed by budgetary function activities/projects. Each function is briefly
described in “appropriation language”. Any conditions governing agency expenditures are
presented as Special Provisions applicable to the agency, which also identify the amount
intended for the most significant activities of the agency. General provisions are also provided
in the Bill, representing the expenditure rules and conditions applicable to all agencies or to
groups of agencies. Budget briefing is conducted whereby the various heads of agencies would
explain to the Congress the details of their respective budgets.

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Appropriations are approved by the legislative body in the form of:
1. A General Appropriation Law which covers most of the
expenditures of government;
2. Supplemental Appropriations laws that are passed from time to time,
to augment or correct an already existing appropriation; and
3. Certain automatic appropriations intended for fixed and specific
purposes.
4. Continuing appropriations pertain to authorized amounts for MOOE
and Capital Outlays (CO), the validity of which extend to one year
following the year in which they were appropriated, hence, the term
continuing appropriation.

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3. Budget Execution and Operation

The third phase of the budget process covers the various operational aspects of
budgeting, thus making budgeting as one of the principal tools of management control
to ensure that public funds are spent only for the specific purposes for which they are
intended. It includes the development of the operating budget, which indicates the
program of work to be done or undertaken, the time within which it should be done, the
manpower and other resources needed to carry out the work, and finally, the peso
amounts required to accomplish the proposed programs.

Budget execution and operation is comprised, among others, of the following:

• the establishment of authority ceilings on obligations, the evaluation of work and
financial plans for individual activities,
• the continuing review of government fiscal position, the regulation of fund releases,
• the implementation of cash payment schedules and
• other related activities such as updating of planning and scheduling of activities.

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Budget execution and operation is concerned with
the release of funds in the form of allotments and
corresponding cash allocations, the continuing review
of the budget program in the light of revenue and
borrowings, prevailing economic conditions, as well
as, the review of proposed uses of agency savings and
other related activities.

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4. Budget Accountability
The last phase of budget process consists of the following:
1. Periodic reporting by the government agencies of performances under their approved budget;
2. Top management review of government activities and the fiscal policy implementations
thereof; and
3. The actions of Commission on Audit in assuring the fidelity of officials and employees by
carrying out the intent of the legislative regarding the handling of receipts and expenditures.

Data on uses of funds evidences the implementation of the legislative and appropriation
intention and is a major basis of next year’s budget preparation and evaluation. Under Sec. 63,
P. D. 1177, agency officials are held liable for failure to submit reports (i.e. trial balances, work
and financial plans, special budgets, reports of operations and income, and other reports as may
be necessary and required by the Department of Budget and Management) and shall
automatically cause the suspension of payment of their salaries until they have complied with
the information requirements

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Budgetary Accounts
Budgetary accounts consist of the following:

1. Appropriation - an authorization made by law or other

legislative enactment, directing payment of goods and services out
of government funds under specific conditions or for special
purpose.
 New General Appropriation
 Automatic Appropriation
 Continuing Appropriation

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2. Allotment - an authorization issued by the Department of
Budget and Management to the government agency, which
allows it to incur obligations, for specified amounts, within the
legislative appropriation.
 Personnel Services
 Maintenance and Other Operating Expenses
 Financial Expenses
 Capital Outlays
3. Obligation - a commitment by a government agency arising
from an act of duly authorized official which binds the
government to the immediate or eventual payment of a sum of

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money.
BUDGETARY ACCOUNTS SYSTEM
The budgetary accounts system encompasses the processes of preparing the Agency
Budget Matrix (ABM), monitoring and recording of allotments received by the agency
from the Department of Budget and Management, releasing of Sub- Allotment Advices
(SAAs) to Regional Offices (RO) by the Central Office (CO), issuance of SAAs/LAAs to
Operating Units (OU) by the Regional Office, and recording and monitoring of
obligations.

The Allotment Release Order (ARO) is a formal document issued by the Department of
Budget and Management to the agency containing the authorization, conditions and
amount of an agency allocation. The document may be the Agency Budget Matrix, which
effectively releases the amount indicated as not needing clearance, or the Special
Allotment Release Order (SARO), which is issued subject to compliance with specific
laws or regulations or is subject to separate approval or clearance by competent authority.
In case of agencies with decentralized accounting procedures, Sub-allotment
Advices/Letters of Advice of Allotments are issued or released.

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REPORTING
REQUIREMENTS
Per National Budget Circular No. 507, dated January 31,
2007, the Department of Budget and Management requires
national government agencies to submit, on a regular basis,
Budget Execution Documents (BEDs), which contain the
agencies’ targets and plans for the current year, and Budget
Accountability Reports (BARs), which contain information
on the agencies’ actual accomplishments and performance
for a given period. Data from these reports are used for
monitoring and providing the necessary information to the
President and fiscal agencies for the purpose of crafting
sound policy decisions.

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 Using the prescribed Budget Execution Documents, government agencies shall
submit their plans, programs and targets for the year to the Department of
Budget and Management on or before April 15 of the current year. The
Budget Execution Documents include the following:

1. Physical and Financial Plan (PFP)

2. Monthly Cash Program (MCP)

3. Estimate of Monthly Income

4. List of Not Yet Due and Demandable Obligations

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The Budgetary Accountability
Reports include the following:

1.Quarterly Physical Report of Operations

2.Quarterly Financial Report of Operations

3.Quarterly Report of Actual Income

4.Statement of Allotment, Obligations and Balances

5.Monthly Report of Disbursements

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The national government agencies shall directly submit, physically or electronically, their BEDs
and BARs to the concerned DBM offices. All heads of the national government agencies shall be
responsible for the timely submission of the prescribed documents/reports. Failure to submit the
required BEDs/BARs on the set deadline, the DBM shall send call up letters by applying the
following procedures:

1. First call up letter signed by the DBM director concerned shall be addressed to the head of the
national government agency to remind them of non-compliance.
2. Second call up letter to be signed by the DBM Assistant Secretary/Undersecretary shall be
addressed to the official of equivalent rank of the department where the agency is attached
citing the “non-action” to date despite the first call up letter, which shall also be cited.
3. Third call up letter to be signed by the DBM Secretary shall be sent to the Secretary of the
department where the agency is attached citing the two previous call up letters sent.
4. In case of non-compliance with the reporting requirements despite the three call up letters, the
DBM shall strictly enforce the “no-report, no-release” policy, and include in the report on the
status of fund utilization to be submitted to the President, the list of erring agencies

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General Guidelines on
the Release of Funds
 Pending the effective date of the new
General Appropriation Act (GAA),
national government agencies are
authorized to incur overdraft in allotment
for obligations corresponding to the
actual requirement of their regular
operations chargeable against the GAA,
as re-enacted.

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What is re-enacted?

A re-enacted budget pertains to the

budget of the preceding year which, by
operation of laws, becomes re-enacted and
shall remain in force in effect until the
general appropriation bill for the current
year is passed by Congress.

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The Allotment Release Program (ARP), which determines the level of
allotment releases for a given fiscal year, is composed of the following:

1. Obligations incurred,
2. Obligations authorized as overdraft,
3. Special allotment release order (SAROs) issued from the beginning of
current fiscal year to the effectivity date of the current General
Appropriation Act, and
4. Releases from the unprogrammed fund (UF). Allotment releases from
the multi-user Special Purpose Funds (SPFs) such as: Calamity Fund,
Contingent Fund, EGovernment Fund, International Commitment Fund,
Miscellaneous Personnel Benefit Fund, National Unification Fund,
Priority Development Assistance Fund, and Pension and Gratuity Fund
shall be over and above the agency Allotment Release Program.

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Agency Budget
Matrix (ABM)
 Disaggregation of the agency
budget showing the needing and
not needing clearance to determine
the items to be issued special
allotment release orders (SAROs)
as well as the amount to be
released comprehensively.

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The Agency Budget Matrix shall contain the following:

1. Withheld Portion
2. Net Program
1) Needing Clearance (NC), and
2) Not Needing Clearance (NNC).
 This must include requirements for Retirement and Life
Insurance Premium (RLIP), and shall further include: This
release and For later release.

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The following built-in appropriation items can only be obligated by the agency subject
to compliance with the required clearance/approval/documentation:

1. Computers and other information technology equipment, which need clearance from
National Computer Center;
2. Communication equipment, which require clearance the National Telecommunication
Commission;
3. Firearms, which need the prior approval of the Philippine National Police;
4. Research and development in the natural, agricultural, technological and engineering
sciences, which are subject to the approval of the Department of Science and
Technology and/or the department of Agriculture;
5. Books to be procured by agencies other than schools and the National Library
exceeding the authorized five copies per title, which need prior approval from DBM;
6. On-going foreign-assisted projects (FAPs), which require the attainment of certain
conditions; and
7. Grants, subsidies and contributions, which must be supported by details indicating
among others, the purpose, amount intended for each beneficiary and the list of

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recipients.
Per National Budget Circular No. 519 dated March
27, 2009, allotments to be comprehensively
released to the agencies under the “This Release”
portion of the Agency Budget Matrix shall be
equivalent to 100% of Personal Services. For
Maintenance and Other Operating Expenses, and
Capital Outlay, at least 50% of the Not Needing
Clearance portion of the ABM shall be categorized
under the “This Release” portion, unless the
projects under Capital Outlays are indivisible, in

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which case the release therefore shall be 100%.
The following budgetary policies are still in effect:

 Continuing appropriation for Maintenance and Other

Operating Expenses (MOOE) and capital outlay (CO) shall
be valid until December 31 of the 2nd year of validity.

 Appropriations under the current year’s GAA shall be

valid for two years with the exception of personal service,
which shall lapse at the end of the current year.

 All Special Allotment Release Orders (SAROs)

chargeable against the re-enacted GAA shall be valid while

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the new GAA is not yet in effect.
Guidelines on the Release of Disbursement Authorities
1. Release of Notice of Cash Allocation (NCA)

 The amount for Personal Service should fully provide for all filled positions inclusive of fixed
expenditures; and must take into consideration the timing of the grant of year-end benefits and
other similar items of expenditures, including pensions for uniformed personnel and veterans.
 For seasonal periods or peak and slack times in the provision of Maintenance and Other
Operating Expenses adjustments should always be taken into consideration.
 Capital Outlay must likewise be programmed in accordance with scheduled work targets.
Initial construction activities will only entail fifteen percent (15%) mobilization costs and the
balance shall be in accordance with the work program. Likewise, equipment will require
payment only on the expected delivery date and not at the bidding and procurement stages.
 For Foreign Assisted Projects, the release of the peso counterpart and loan proceeds shall be
synchronized. Moreover, the cash portion of the loan proceeds component shall be released
only upon receipt of the Bureau of Treasury certification regarding availability of loan
proceeds from the foreign lending institution.

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2. Release of Non-Cash Availment Authority (NCAA)

Agencies availing of foreign loan proceeds through direct payment chargeable against availment
allotment, shall submit a request for the issuance of NCA A prior to submission of availment
application to Foreign Lending Institutions.

Request of NCAA shall be supported by the following: Photocopy of application for withdrawal
or equivalent document; certified list of obligation allotments; and Details of disbursements.

3. Release of Cash Disbursement Ceiling (CDC)

CDC is an authority issued by DBM to Department of Foreign Affairs (DFA) and Department of
Labor and Employment (DOLE) to utilize their income collected and retained by their Foreign
Service posts to cover its operating requirements but not to exceed the released allotment for the
purpose.

Release of CDC shall be supported by the following accountability reports as consolidated by

DFA and DOLE home office: Monthly Report of Income, Status of Working Fund, and Annual

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Report of Income.
Conduct of the Agency
Performance Review
Analysis of agency performance, in terms of physical and financial outputs,
shall be undertaken by DBM on a regular basis based on the Budget
Accountability Report (BARs). The information on the agencies
accomplishments contained in the BARs shall be used and evaluated against
the targets they presented in their BEDs. The result of the agency
performance review will be used as one of the basis for deciding the
following:

1. Release of the balance of the “For Later Release of the Not Needing
Clearance” portion of the approved Agency Budget Matrix;
2. Additional release from Special Purpose Fund;
3. Withdrawal of released allotment;
4. Approval of request for realignment;
5. Revision of cash Program; and

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6. Revision of targets.
Common Fund System
The common fund system policy (for use of personal
services, maintenance and other operating expenses, capital
outlays, and financial expenses without realignment) shall
continue to be used. However, the Common Fund Scheme
will not apply to current year A/Ps to external creditors of
the five departments (i.e., DPWH, DepEd, DOH, CHED,
and State Universities and Colleges (SUCs) covered by the
Direct Payment Scheme. In such cases, specific NCAs shall
be issued for the purpose through their special MDS
accounts, consistent with Circular Letter 2005- 2

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SLIDESMANIA.COM
Books of the Department of
Budget and Management

Appropriations and allotments are to be controlled and

monitored by the Department of Management through the
registries it maintains such as: Registry of Appropriations and
Allotments (RAPAL), for the general appropriations; and
Registry of Special Purpose Fund Appropriation (RESPFA),
special purpose funds. In addition, the Department of Budget and
Management shall also maintain the Registry of Allotments and
Notice of Cash Allocations (RANCA) for its control and
monitoring of the Notice of Cash Allocations (NCA) releases.

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The Registry of Appropriation and Allotments shall be maintained
by the Department of Budget and Management for each department of
the National Government in order to control approved appropriations
and allotments released.

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The Registry of Special Purpose Fund Appropriation shall contain funds
appropriated for purposes other than those provided in the regular funds of
government agencies, like, Miscellaneous Personnel Benefits (Personal Services);
Calamity Fund (Capital Outlay); and Organizational Adjustment Fund (Maintenance
and Other Operating Expenses and Financial Expenses).

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The Registry of Allotments and NCA shall be maintained by the DBM to control the
funding of allotments. Columns are provided for each allotment class and NCA released
to the department/agency. A column for the unfunded allotment is provided to determine
the balance of allotment without corresponding NCA.

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Books of Bureau of Treasury

The Bureau of Treasury shall maintain the Registry of Notice of Cash Allocations and
Replenishments (RENREP) for the same purpose and for the monitoring of bank transfers it
makes in replenishing its Modified Disbursements Scheme (MDS) accounts.

The Registry of NCA and Replenishment shall be used by the Bureau of

Treasury to record the NCA releases and the bank replenishments made to cover
MDS checks issued by the agencies.

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Books of the Agency
The government agency shall maintain different Registry of Allocations and
Obligations for the control and monitoring of the allotments it receives and the
obligations it incurs. It should be noted that the agency will not journalize the receipt
of its appropriation and allotments, but instead simply post it in the respective
registry, as shown below.

Accordingly, when the obligation is incurred, as evidenced by the approved

Allotments and Obligation Slips (ALOBS), the obligation is recognized and will be
entered in the appropriate Registry of Allotment and Obligations’ obligation incurred
column.

The following are the registries in the books of the agency:

1. Registry of Allotments and Obligations - Personal Services (RAOPS)
2. Registry of Allotments and Obligations - Maintenance and Other Operating
Expenses (RAOMO)
3. Registry of Allotments and Obligations - Capital Outlay (RAOCO)

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4. Registry of Allotments and Obligations - Financial Expenses (RAOFE)
The Registry of Allotments and Obligations - Personal Services shall be
used to record allotments received and obligations incurred for expenses
classified under Personal Services, such as: basic pay, all authorized
allowances, bonuses, cash gifts, etc.

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The Registry of Allotments and Obligations - Maintenance and Other
Operating Expenses shall be used to record allotments received and
obligations incurred for expenses classified under Maintenance and Other
Operating Expenses, such as: travelling expenses, supplies and materials,
repairs and maintenance of property, plant and equipment, representation
expenses, training and seminar expenses, etc.

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The Registry of Allotments and Obligations - Capital Outlay shall be used
to obligations incurred for Capital Outlay, such as: purchase and
construction of proper record allotments received and ty, plant and
equipment.

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The Registry of Allotments and Obligation - Financial Expenses
shall be used to record allotments received and obligations
incurred for Financial Expenses, such as, commitment fees, bank
charges, interest expenses, documentary stamps expenses, etc., to
distinguish them from the regular maintenance and other operating
expenses.

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Upon receipt of Notice of Cash Allocation (NCA), the agency shall journalize the NCA it receives as a
debit to “Cash - National Treasury, Modified Disbursement Scheme” and a credit to “Subsidy Income
from National Government” in the Regular Books of the Agency, as shown below. This journal entry will
show that the NCA received is the share of the agency in the income of the National Government and a
proof that there is cash allocated for the agency by the National Treasurer. The amount of NCA received
by the agency may be net of the amount of taxes to be withheld by the agency under the Tax Remittance
Advice (TRA) System, which will be discussed in the later part of this chapter.

The agency shall credit “Cash - National Treasury, MDS” each time a payment is made charged against
the NCA and debit the specific account being paid for, either asset or expense account. The NCA may be
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 (e.g. building and structures, land, land improvement,
equipment, etc., charged against the capital outlay.)
5. Miscellaneous Transactions (e.g. Cash to another agency to implement a project of the agency,

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Guaranty Deposit, Cash Advances, etc.)
 THANK YOU !!!!

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 Chapter 5- Accounting for Disbursements and Related Transactions
Group 3
Leader: Angelo Miguel P. Bernabe
Members: Claire Anne Caranguian
Archael Fernandez
Kharen Joy Rea
Jamel Saman
Sittie Haynah Yusoph

Fundamental Principles for Disbursement of Public Funds

1. No money shall be paid out of any public treasury or depository except in pursuance of
an appropriation law or other specific statutory authority.
2. Government funds or property shall be spent or used solely for public purposes.
3. Trust funds shall be available and may be spent only for the specific purpose for which
the trust was created or the funds received.
4. 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.
5. Disbursement or disposition of government funds or property shall invariably bear the
approval of the proper officials.
6. Claims against government funds shall be supported with complete documentation.
7. All laws and regulations applicable to financial transactions shall be faithfully adhered to.
8. 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.

Basic Requirements for Disbursements and the Required Certifications

1. Availability of allotment/budget for obligation/utilization certified by the Budget
Officer/Head of Budget Unit
2. Obligations/Utilizations properly charged against available allotment/budget by the Chief
Accountant/Head of Accounting Unit
3. 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;
 4. 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.
5. 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;
6. 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.
7. 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;
8. 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.

Disbursement Authorities
1. Notice of Cash Allocation

• The Notice of Cash Allocation shall be the authority, issued by the DBM to
central, regional and operating units of an agency, to pay operating expenses,
purchases, supplies and materials, acquisition of PPE, accounts payable, and other
authorized Disbursements through the issue of Modified Disbursement System
(MDS) checks, Authority to Debit Account, or other modes of disbursements.

• No MDS check/ADA shall be issued without covering the NCA. Hence, the total
MDS checks/ADA issued shall not exceed the total NCA received.

• 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) by the Accounting
Division/Unit.
 • 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.

• 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.

Illustrations:
Agency X of National Government received the following NCA from DBM for the first quarter
of the current year:

Regular Agency Fund 500,000

Special Account in the General Fund 300,000

Trust Receipt Fund 200,000

Regular Agency Fund

Account Title Account Code Debit Credit

Cash Modified Disbursement System, Regular 10104040 500,000

Subsidy from National Government 40301010 500,000
Receipt of NCA for Regular Agency Fund

Special Account in the General Fund

Account Title Account Code Debit Credit
Cash Modified Disbursement System, Special 10104050 300,000
Cash Treasury/Agency Deposit, Special Account 10104020 300,000
Receipt of NCA for Special Account in the General Fund

Trust Receipt Fund

Account Title Account Code Debit Credit
Cash Modified Disbursement System, Trust 10104060 200,000
Cash Treasury/Agency Deposit, Trust 10104030 200,000
Receipt of NCA for Trust Receipt Fund

2. Notice of Transfer Allocation

• 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.

• No MDS check/ADA shall be issued by the ROs/OUs without the covering NTA.
Hence, the total MDS checks issued shall not exceed the total NTA received.
NTA issued and credited to the Regular MDS Accounts of ROs/OUs for their
regular operations which are programmed for a specific month shall be valid
within the period prescribed under existing rules and regulations. To maximize
the available NTAs 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.

• NTA issued by the Central Office and credited to the Special MDS Accounts of
ROs/OUs 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 NTA shall be monitored through the
maintenance of the Registry of Allotment and Notice of Transfer of
Allocation(RANTA) by the ROs/OUs.

3. Non-Cash Availment

• Authority issued by the 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.

4. Cash Disbursement Ceiling

• Authority issued by DBM to the Department of Foreign Affairs (DFA) and

Department of Labor and Employment (DOLE) to utilize their income
 collected/retained by their Foreign Service Posts (FSPs) to cover their operating
requirements, but not to exceed the released allotment to the said post.

ACCOUNTING FOR INVENTORY

Learning Objectives:
1. Account for Inventories by a government entity.
2. Describe the procedures in the receipt and disposition of inventories by a government
entity.
Introduction
Inventories are assets:
a. Held for sale or distribution in the ordinary course of operation (Finish goods)
b. In the process of production for sale or distribution (Work in process)
c. In the form of material or supplies to be consumed in the production process or distributed
in the rendering of services (Raw material and supplies)
The inventories of a government entity consist of the following:
a. Inventory Held for Sale (e.g. medicine for sale in government pharmacies)
b. Inventory Held for Distribution (Rice and other welfare goods held for distribution)
c. Inventory Held for Manufacturing (E.g. raw materials, work in process)
d. Inventory Held for consumption- Government Accounting Manual(GAM) provides that
tangible items below that capitalization threshold of 15,00 shall be accounted as semi-
expendable property.
e. Semi-Expendable Property- consist of machinery equipment, furniture and fixtures, and
similar items that are not capitalized as PPE because their costs are below the P15,000
capitalization threshold for PPE.
 - which were recognized as ppe shall be classified to the affected accounts. This tangible
asset shall be recognized as expenses upon issue to the end-users.
- ICS (Inventory Custodian Slip) shall be issued to end-users of Semi-expandable
property.
- To establish accountability ICS (Inventory Custodian Slip) shall be issued to end-users
of Semi- expandable property. The accountability will extinguish upon return of the items
to the property and supply Division/Unit or in case of loss, upon approval of the relief from
property accountability.

Measurement
- The primary issue in accounting for inventories is the amount of cost to be recognized as
an asset and carried forward until sold or consumes.
- Inventories are initially measured at cost and subsequently me as follows:
Goods held for Sale Goods held for distribution
- Lower cost and net Realizable Value Lower cost and current replacement cost
Cost comprises the ff:
a. Purchase cost/purchase price - The cost of inventories includes purchase cost excluding
trade discounts, rebates, and other similar deductions in the purchase price.
b. Direct cost- incurred in bringing the assets to its intended location and condition (freight
cost, conversion cost- such as a cost of labor and production overhead for manufacturing
item and taxes except those subsequently recovered from the taxing authorities.
Cost excludes the following:
a. Abnormal amount of waste materials, labor, and production overhead
b. Selling costs
c. Administrative overheads
EXCEPTIONS:
a. Inventories received from the non-exchange transaction are initially measured as
acquisition-date fair value. (Inventories received from the non-exchange transaction (e.g
donation) are initially measured as acquisition-date fair value.)
b. Agriculture produce is initially measured ad fair value less cost to sell at the point of
harvest. (For these items, their initial measurement is deemed their cost for purpose of
subsequent measurement at the lower of cost or NRV/Current replacement cost.)
NRV- is estimated selling price less estimated cost of completion and estimated selling/ disposal
costs
Current replacement cost- is the cost the entity would incur to acquire the asset on the reporting
date.
Cost formulas:
Cost of goods sold and cost of inventories on hand is determined using the ff cost formulas
a. Specific Identification- this shall be used for items that are not ordinarily interchangeable
(i.e unique) and those that are segregated for specific projects.
- Under this formula, specific costs are attributed to identified inventory. Accordingly cost
of sales represents the actual cost of the specific item sold while ending inventory
represents the actual cost of the specific items on hand.
b. Weight average cost- this shall be used for large numbers of items of inventory that are
ordinarily interchangeable. This shall be applied under the perpetual inventory system.
- This method is commonly referred to in traditional accounting by business entities as the
moving average cost formula.
- Under this formula, a new weighted average unit cost is computed after every purchase,
the computed average cost is used to determine the cost of goods sold and inventory on
hand.
- Cost of sales and ending inventory are stated at average costs rather than the actual cost o
the inventories sold or on hand. This method is commonly referred to in traditional
accounting by business entities as the moving average cost formula.
Perpetual inventory system

• Government entities shall use a perpetual inventory system.

• Under this system, the purchase of supplies and material for stock, sales, and
other transactions affecting inventory are recorded in the inventory account and
cost of sales account, as appropriate.
• Moreover, stock cards and stock ledger are maintained. These enable the
retrieval of information on costs and quantities of inventories on hand at any
given point in time

• In addition to the usual ledger accounts are maintained for each inventory item and an
inventory control account is maintained in the general ledger on a current basis,
• Perpetual record for each item must provide information for receipts, issues,
and balance on hand, usually both in units and peso amount

• Regular purchases shall be recorded through inventory account and issues thereof shall be
recorded as they take place except for supplies and materials purchased out of petty cash
fund for immediate use of emergency cases are charged directly as expenses.
• Please take note that FIFO cost formula and the periodic inventory system are
not used bu government entities.
Recognition as an Expenses
The carrying amount of an inventory is recognized as an expense in the period it is sold, distributed,
exchanged, or consumed. The write-down of inventory to its NRV or Current replacement cost, as
appropriate, is also recognized as an expense.
- Illustration:
Entity A acquires inventory for P1,000, on account.

Inventory Held for Sale Inventory Held for distribution

Merchandise Inventory 1k Welfare Goods for Distribution 1k

Accounts Payable 1k Accounts Payable 1K

Inventory Held for Manufacturing Inventory Held for Consumption

Raw Materials Inventory 1K Office Supplies Inventory 1K

Accounts Payable 1K Account Payable 1K

Semi- Expandable Property

Semi-Expandable Machinery 1K
Accounts Payable 1k

- Entity A recognize the cost of inventory of P800 as expenses

Inventory Held for Sale Inventory Held for distribution

Cost of Sales 800 Welfare Goods Expenses 800

Merchandise Inventory 800 Welfare Goods for Distribution 800

Inventory Held for Manufacturing Inventory Held for Consumption

(see separate entries below Office Supplies Expenses 800

Office Supplies Inventory 800

Semi- Expandable Property

Semi-Expandable Machinery
 and equipment expenses 800
Semi-Expandable Machinery 800

• Inventories costing P200 are found to have a net realizable value of P150 and current
replacement cost of P180.

Inventory Held for Sale Inventory Held for Distribution

Impairment Loss- Inventories 50 Impairment Loss- Inventories 20

Merchandise Inventory 50 Welfare Goods for Distribution 20

Inventory Accounting System

• According to Section 13, Chapter8 – Inventories GAM, the inventory
accounting system consists of the system of monitoring, controlling, and
recording of acquisition and disposal of inventory.
• Inventory accounting system starts with the receipt of the purchased inventory
items.
• When the needed inventory is not available in stock, a purchase request shall
be prepared by the requesting office and have this approved.
After accomplishing, all the required procedures of procurement, a duly approved
purchase order (PO) shall be issued by the agency.
 • The sub-system for inventory accounting includes:
1. Receipt, inspection, acceptance, and recording deliveries of inventory items
2. Requisition and issue of inventory items
3. Transfer and/or disposal of inventory items.
Receipt and Disposition of Inventories
• RECEIPT
1. End users prepare the Purchase Request (PR) form to request the purchase of
items not available in stock. The PR is the basis for preparing the Purchase
Order.
- End-user refers to the individual who will be using the items.
- an internal control only the appropriate end-users are allowed to make
purchase requests for the items they need. It would be inappropriate for the
office clerk to make a purchase request for cleaning materials

Example:
the end-user of office supplies is those who are working in the office; the end-
user for cleaning materials is the janitors.

2. End-user refers to the individual who will be using the items.

- The PO is a document issued to the supplier when making a purchase. It
indicates the specifications, quantities, and agreed price of the item being
purchased. The PO serves as the contract between the entity and the suppliers

3. an internal control only the appropriate end-users are allowed to make a

purchase request for the items they need. It would be inappropriate for the
office clerk to make a purchase request for cleaning materials
- IAR will be used by the property inspector in inspecting and accepting the
delivered items. The Property/ Supply Division forwards the DR, IAR and PO
to the Property Inspector.

4. The property inspector inspects the conformance of the delivery items with
the specification in both the PO and DR and indicates the result of the
inspection in the IAR.
- i.e acceptance or rejection. Rejected deliveries will be returned to the supplier.
 - Accepted- the property inspector forwards the copies of DR, IAR, and PO to
both The property/supply Division and the Accounting Division for recording

5. the property/supply Division, through the stock Card Keeper, records the
accepted deliveries in the Stock Card (SC)
- Stock Card shows the quantities of all receipts and issuances of inventory. As
well as the available balance at any given point in time.

6. . The accounting Division records the accepted deliveries in the books of

accounts and in the Supplies Ledger Card (SLC).
- SLC shows both the quantities and monetary amount of all receipts and
issuances of inventory, as well as the available balance at any given point of
time.

7. The property/Supply Division prepares the Disbursement Voucher (DV) then

forward it, together with supporting documents, to the accounting Division
for processing of payment
- Internal control, SC (maintained be the property/ supply Division) and SLC
(maintained by the accounting Division) are periodically reconciled.

DISPOSITION
8. End-users prepare the Requisition and Issue Slip (RIS) to request for the
issuance of items available on stock.
- The Head of the requesting individual shall approve the RIS. The approved
RIS is then forwarded to the Property/Supply Division.
9. The Property/Supply Division prepares the Report of Supplies and Materials
Issued (RSMI).
- The RSMI will be used by the Stock Card Keeper in updating the SC and the
Accounting Division in journalizing the items issued.
10.The accounting Division records the items issued in the books of accounts and
updates the SLC.
11.The ff. are other documents used in the disposition of inventories:
a. Waste Materials- prepared by the property of supply custodian to report
wasted materials, such as destroyed spare parts and other spoilages
 b. Report on the Physical Count of Inventories- used in reporting the results
of physical counts. It shows the balance inventory, as well as any shortage
or overages.
c. Report of Accountability for Accountable forms- used to report the
movement and status of accountable forms in the possession of an officer.
d. Inventory Custodian Slip- prepared when issuing semi-expendable
property
ILLUSTRATION
At the beginning of the first quarter, Agency ABC received its P2,000,000 allotment for
Maintenance and Other Operating Expenses (MOOE) and the corresponding Notice of Cash
Allocation (NCA). This Transaction was appropriately posted in the Registry of Appropriations
and Allotments (RAPAL) and Registry of Allotment and Notice of Cash Allocation (RANCA) and
the corresponding journal entry to record the receipt of NCA.
Agency ABC then issued an Obligation Request and Status (ORS) for the purchase of office
supplies to be used in its research and development project in the amount of P30,000. Accordingly,
the said amount was obligated.
Upon delivery by the supplier, the agency paid the purchase order, net of P1,800 withholding tax.
Eventually, Office supplies amounting to P10,000 were issued based on the Requisition and Issue
Slip.

• Request obligation for the purchase of office supplies

OBLIGATION REQUEST AND STATUS

Agency ABC Serial No. XX-XXX-XXX-X
Entity Name Date: XX-XX-XXXX
Fund Cluster: Regular Agency Fund
Payee Office Supplies Co.
Office
Address
Responsibility Center Particular MFO/PAP UACS Amount
Object Code
MOOE- Office 103-00-2-1311-XXXX 1040401000 P30,000
Supplies P30,000
Total
A. Certified: Charges to appropriation/ allotment are necessary, B. Certified: Allotment available and
lawful and under my direct supervision and supporting obligated for the purpose/ adjustment
documents valid, proper and legal. necessary as indicatd above:
Signature: Jcruz Signature: JJuan
Printed Name: Juan dela Cruz Printed Name: Juana Juan
Position: Head, Requesting Office/ Authorized Representative Position: Head, Budget Division/ Unit/
Date: XX-XX-XXXX Authorized Representative
Date: XX-XX-XXXX
C. STATUS OF OBLIGATION
Reference Amount
Date Particulars ORS/JEV/Check/ADA/TRA No. obligation Payable Payment Balance
Not Due &
yet Demandable
due
(a) (b) © (a-b) (b-c)
XX- MOOE- P30,000 P30,000 P30,000
XX- Office
XXXX Supplies

• Post obligation incurred in RAOD-MODE for the purchase of office

supplies.
REGISTRY OF ALLOTMENT, OBLIGATION AND DISBURSEMENTS
MAINTENANCE AND OTHER OPERATING EXPENSES
For the year 20XX
Entity Name: Agency ABC
Fund Cluster: Regular Agency Fund MFO/PAP: 103-00-2-1311-XXXXX

Legal Basis: General Appropriation Act Sheet No. 001

Reference UACS Unpaid Obligations

Unobligated
Date Allotment Obligations Disbursements
Allotment Not yet due
Serial Object Code Due &
Date &
No. Expenditure Demandable
Demandable
x/x/20xx x/x/20xx xxxxx 1040401000 2,000,000 30,000 1,970,000 0 30,000 0
 REGULAR AGENCY FUND

Account Title Account Code Debit Credit

Office supplies Inventory 100404010 P30,000

Due to BIR 20201010 P1,800

Cash- MDS, Regular 10104040 P28,200

Payment of duly approved purchase order for office supplies

• Post Disbursement for the purchase of office supplies

UACS

Unobligated Not yet due

Date Serial Object Code Allotment Obligations Disbursements Due &
Date Allotment &
No. Expenditure Demandable
Demandable

x/x/20xx x/x/20xx xxxxx 1040401000 2,000,000 30,000 1,970,000 0 30,000 0

• Post payment of obligation in ORS

OBLIGATION REQUEST AND STATUS

Agency ABC Serial No. XX-XXX-XXX-X
Entity Name Date: XX-XX-XXXX
Fund Cluster: Regular Agency Fund

Payee Office Supplies Co.

Office

Address

Responsibility Center Particular MFO/PAP UACS Amount

Object Code

MOOE- Office Supplies 103-00-2-1311-XXXX 1040401000 P30,000

Total P30,000
 Certified: Allotment available and
Certified: Charges to appropriation/ allotment are
obligated for the purpose/
necessary, lawful and under my direct supervision and
adjustment necessary as indicatd
supporting documents valid, proper and legal.
above:
A. Signature: Jcruz B. Signature: JJuan
Printed Name: Juan dela Cruz Printed Name: Juana Juan
Position: Head, Requesting Office/ Authorized Position: Head, Budget Division/
Representative Unit/ Authorized Representative
Date: XX-XX-XXXX Date: XX-XX-XXXX
C. STATUS OF OBLIGATION
Reference Amount
Balance
Not
obligation Payable Payment Due &
ORS/JEV/Check/ADA/TRA yet
Date Particulars Demandable
No. due
(a-
(a) (b) © (b-c)
b)
MOOE-
XX-XX-
Office P30,000 P30,000 P30,000 0 0
XXXX
Supplies

• Post utilized Notice of Cash Allocation.

REGISTRY OF ALLOTMENT AND NOTICE OF CASH ALLOCATION

For the period 1st Quarter 20XX
Entity Name: Agency ABC Fund Cluster: Regular Agency Fund
Sheet No. 001
AMOUNT

Notice of Cash Allocation Balance

Reference Allotment
Received
Unfunded
Received Utilized Unutilized NCA
Allotment
(a) (b) © (b-c) (a-b)
GARO-MOOE 2,000,000 2,000,000 30,000 1,970,000 0

Account Title Account Code Debit Credit

Office supplies expenses 50203010 P10,000
Office supplies inventory 10404010 P10,000
Issuance of office supplies based on the Requisition and Issue Slip
PROPERTY, PLANT & EQUIPMENT
Introduction
Property, Plant, and equipment are:
• IPSAS/ PPSAS 17 applies to property, plant and Equipment (PPE), Including
Special Military equipment and infrastructure assets.
• Tangible assets
• Held for use in the production or supply of goods, services, or program
outputs, for rental to others, of for administrative purpose and not intended for
resale in the ordinary course of operation; and
• Expected to be used for more than one reporting period
Heritage Assets
• Heritage Assets are those which have historical, cultural, and environmental
significance, and are intended to be preserved for future generations.
• Example: Historical buildings and monuments, statues, museum and gallery
collections, archeological sites, national archives, ruins, conversation areas,
nature reserves, and works of art.
Characteristics of Heritage Assets
a. Their value in culture, environmental, educational, and historical terms is
unlikely to be fully reflected in a financial value based purely on the market
price.
b. The law may impose restrictions on their disposal by sale.
c. They are often irreplaceable, and their value may increase over time, even if
their physical condition deteriorates; and
d. It may be difficult to estimate their useful lives, which is some cases could be
several hundred years. (GAM for NGAs, Chapter 10, Sec.30)
Heritage Asset
- It is measured at cost. If acquired through the non-exchange transaction, the
cost is the fair value at the acquisition date.
- Not depreciated. But subject to impairment. If determinable, a heritage asset’s
fair value is disclosed.
 - Have future economic benefits or service potential other than their heritage
value are depreciated like the other items of PPE, e.g., a historic building
being used as office
- Not recognized in the book of account. Are recorded in the registry of heritage
asset

Infrastructure Assets
According to IPSAS 17, the ownership of infrastructure asset is not confined for entities in the
public sector, however significant infrastructure assets are frequently found in the public sector.
To identify these assets as infrastructure, the following characteristics may be useful:
1. They are part of the system or network
2. They are specialized in nature and do not have alternative uses
3. They are immovable
4. They are subject to constraints on disposal

Recognition Principle
Section 3, Chapter 10 Property Plant and Equipment, GAM provides that the cost of an item of
PPE shall be recognized as an asset if and only if:
a) It is probable that future economic benefits or service potential associated with the items
will flow to the entity and
b) The cost or fair value can be measured reliably
c) Beneficial ownership and control clearly rest with the government
d) The asset is used to achieve government objectives
e) It meets the capitalization threshold of P15,000
The capitalization threshold of 15,000, as initially discussed in the preceding section, represents
the minimum cost of an individual asset recognized as PPE on the Statement of Financial
Position. Some items may have individual values below the threshold, but which work together
as a group of network assets whose total value exceeds the threshold shall be recognized as part
of the primary, PPE (e.g., computer network, etc.) these thresholds shall be applied on an
individual asset or per item basis. Each item within the bulk acquisition with total value of PPE
will need to meet the capitalization threshold to be recognized as PPE.
Major spare parts and standby equipment qualify as PPE when an entity expects to use them for
more than one period. Similarly, if the spare parts and servicing equipment can be used only in
connection with an item of PPE, they may be accounted as PPE. An entity evaluates all its PPE
cost at the time they are incurred. These costs include those incurred initially to acquire or
construct an item of PPE and subsequent costs incurred to add, to replace part of, or service it.
Some PPE may not directly increase the future economic benefits or service potential of any
existing items of PPE but may be necessary to obtain the future economic benefits or service
potential from its other assets like those items that may be required for safety or environmental
reasons. For example, fire regulation safety may require building new sprinkler system. These
enhancements are recognized as asset because without them the entity may not operate the
building in accordance with the regulations.
In case of regular major inspection performed on some items of PPE, the cost of this inspection
may be recognized as PPE regardless of whether parts of the item or replaced. Any carrying
amount of the cost of previous inspection ( as distinct from physical parts) derecognized.

Property Accounting System

The property accounting system consists of the following procedures:
1. recording of receipt, inspection and acceptance PPE
2. recording of acquisition and issue of PPE
3. construction of PPE by administration
4. construction of PPE by contract
When an item of PPE being requested is not available in stock, a or Purchase Request (PR) shall
be prepared for approval then a duly approved contract/ purchase order shall be
issued. procedures relative to the obligations of allotment and payment of the inspected and
accepted deliveries are thoroughly discussed from preceding chapter to this chapter. physical
count which is required annually is an indispensable procedure for checking the integrity of
property custodianship.

MODES OF ACQUISITION
`Property, Plant and Equipment acquired through purchase, construction, exchange transaction,
non-exchange transaction, transfer, and finance lease.

Purchase
PPE can be purchased on cash basis, on account, on installment basis, with promotional
items, and at a lump sum price.
1. When acquired on cash basis, it 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
(e.g., delivery, installation costs, etc.).
2. When an asset is acquired on account subject to a cash discount, the cost is equal to the
purchase price, including import duties and non-refundable purchase taxes, after deducting trade
discounts and rebates. Discounts are deducted whether take or not, because they are reduction of
cost and not as income. If not taken, it shall be recognized as Other Losses.
3. The cost of an item of PPE is the cash price equivalent or its fair value at the date of
acquisition. However, if acquired on installment basis, 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.
4. If promotional items are received upon purchase of PPE and it is the satin as the PPE
purchased, the total purchase price shall be allocated to the total units purchased plus the
promotional item. However, if the promotional item received is different from the PPE
purchased, the fair value of the promotional item is deducted from the total cost of the units
purchased and the balance shall be allocated to the total units purchased.
5. In case of lump sum price acquisition, the total cost paid shall be allocated to the asset
acquired based on the relative fair value of the asset acquired.

Construction
A project may be constructed by administration or by contractor. The Government
Accounting Manual (GAM) provides that 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 closed to the proper asset account. Likewise, all
expenses, such as: interests, license fees, etc. during the construction period shall be capitalized.
The benchmark treatment of borrowing costs as provided by PPSAS 5 is to expense such
borrowing costs in the period in which they are incurred, regardless of how they are applied.
However, in the, allowed alternative, borrowing costs should be capitalized as part of the cost of
that asset when they are directly attributable to the acquisition, construction, or production of a
qualifying asset. Where loans intended for the construction of PPE was contracted by the
National Government (NG) and recorded in the books of the Bureau of Treasury (BTr), the
related borrowing cast shall be expensed in the NG books of the BTr. However, for loans
borrowed directly by the National Government Agency, the allowed alternative treatment shall
be used.
At the end of the construction, any PPE acquired and used in the construction shall be
classified to the appropriate PPE account based on the depreciated cost. Such cost shall be
deducted from the cost of completed/constructed PPE.

Exchange Transaction
Exchange transaction may be exchange, with commercial substance or exchange without
commercial substance. Where the exchange transaction is with commercial substance, an item of
PPE is measured at its fair value. However, if the exchange transaction lacks commercial
substance or the fair value of the asset given or the fair value of the asset received is not reliably
measured, the exchange is recognized at carrying amount. Consequently, no gain or loss shall be
recognized.

Non-exchange Transaction
PPE acquired through a non-exchange transaction, such as: donation, presidential
proclamation, taxes, transfer and grants, its cost shall be measured at its fair value at the date of
acquisition. 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).
Donation may be with or without condition. If there is no condition, the cost of PPE
acquired through donation shall be recorded 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 amount recognized as asset, The PPE at its fair value shall be recognized
as "Income from Grants and Donations in Kind." However, if a PPE is acquired through
donation with conditions, a liability account shall be recognized until the conditions have been
fulfilled.
Transfer of PPE maybe Intra-agency (from Central Office to Regional Office/Staff/Bureau or
vice versa) or Inter-agency (from one government entity to another). In an Intra-agency transfer,
the receiving unit shall recognize the asset at its original historical cost less accumulated
depreciation and accumulated impairment loss. However, in an Inter-agency transfer, the
recipient entity shall recognize the asset at net carrying amount.
Grants, with or without conditions, may be in cash or in kind. These grants shall be recognized
as income over the periods necessary to match them with the related costs which they are
intended to compensate on a systematic basis. Grants shall be measured at its fair value as at the
date of acquisition and shall be recognized when there is reasonable assurance that: I.) the entity
will comply with the conditions attached: and 2.) the grants will be received.

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, the lessee shalt recognize the
lease assert as asset and the related lease obligation as liability. The depreciable 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 for depreciable assets
that are owned. If there is a 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 useful life, whichever is shorter.

Measurement After Recognition

 Subsequent to recognition, an entity shall choose either the cost model or the revaluation
model as its accounting policy and shall apply that policy to the entire class of PPE.
Under the cost model, an item of PPE shall be carried at its cost less any accumulated
depreciation and any accumulated impairment losses.
Under the revaluation model, an item of -PPE, whose fair value can be measured reliably
shall be carried at revalued amount less any subsequent accumulated depreciation and
subsequent accumulated impairment losses. The fair value of the asset is usually determined
from market-based evidence by appraisal. If there is no available evidence to determine the
market value in an active and liquid market of an item of property, the fair value may be
established by reference to other items with similar characteristics in similar circumstances and
location. If, however, there is no market-based evidence of fair value due to the specialized
nature of the item, an entity may estimate the fair value using the: reproduction cost, depreciated
replacement cost, restoration cost or service unit approaches. Revaluation shall be carried out
regularly to all items of a given class. Revaluation increases shall be credited directly to
revaluation surplus. However, the increase shall be recognized as revenue in surplus or deficit to
the extent that it reverses a revaluation decrease of the same class of asset previously recognized
as an expense in surplus or deficit. Revaluation decreases are debited against the revaluation
surplus related to the same class of assets, and any excess against surplus or deficit. Upon
disposal of the revalued asset, the revaluation surplus is transferred directly to accumulated
surpluses or deficits. The revaluation increases and decreases relating to individual assets within
the same class of PPE must be in e offset against one another within that class and must not be
offset in respect of assets in different classes.

Depreciation
Depreciation is charged systematically over the useful life of the depreciable asset.
Depreciation begins when it is available for use and even it is idle or retired from active use and
held for disposal because depreciation ceases when derecognized or fully depreciated. However,
under the usage method of depreciation, no depreciation is recognized when there is no
production. The depreciation charge for each period shall be recognized in surplus or deficit
unless it is included in the carrying amount of another asset where the future economic benefits
or service potential embodied in an asset is absorbed in producing other assets; in which case,
depreciation charge constitute part of the cost of the other asset and is included in its carrying
amount. For example, the depreciation of manufacturing plant and equipment included in the
conversion cost of inventory. Depreciation is recognized even if the fair value of the asset
exceeds its carrying amount, as long as the assets residual value does not exceed its carrying
amount. The depreciable amount of an asset is determined after deducting its residual value. The
residual value may increase to an amount equal to or greater than its carrying amount, if so, no
depreciation is recorded unless and until its residual value subsequently decreases to an amount
below its carrying amount.
 The useful life of an asset is the asset's expected utility to the entity. The useful life may
be shorter than its economic life due to asset management policy involving the disposal of asset
after a specified time or after consumption of a specified proportion of the future economic
benefits or service potential of the asset.
The estimation of the useful life of the asset is a matter of judgment based on the
experience of the entity with similar assets. As a guideline, the GAM provides the following
lifespan of PPE:
The estimation of the useful life of the asset is a matter of judgment based on the
experience of the entity with similar assets. As a guideline, the GAM provides the following
lifespan of PPE:

Property, Plant and Equipment Estimated Useful life

Land Improvements Useful life of the asset or the improvement
whichever is shorter.
Infrastructure Assets 20-50 years
Building and Other Structures 30-50 years
Machinery and Equipment 5-15 years
Motor vehicles 5-15 years
Motor vehicles (Military vehicles) 3-20 years
Trains 10-20 years
Aircrafts and Aircrafts ground equipment 10-20 years
Watercrafts 10-25 years
Furniture, Fixtures and Books 2-15 years
Leased Assets, excluding Land Useful life of the leased asset or the lease
term, including any renewal option,
whichever is shorter.
Leased Assets Improvements Useful life of the improvement or the lease
term, including any renewal option,
whichever is shorter.
Service Concession Assets Useful life of the service concession asset or
the term of the service concession
arrangement, including any renewal option,
whichever is shorter
Other Property, Plant and Equipment 2-15 years

A residual value equivalent to at least five percent (5%) of the cost shall be adopted
unless a more appropriate percentage is determined by the entity based on its operations subject
to the approval of COA. Generally, infrastructure assets have no residual value. In case, residual
value of parts of the infrastructure assets can be determined, the policy of at least five percent
(5%) of the cost of that part shall be applied.
 The residual value and useful life of an asset shall be reviewed at least at each annual
reporting date and, if expectations differ from previous estimate, the change shall be accounted
for as a change in accounting estimate.
Each part of an item of PPE with a cost that is significant in relation to the total cost of
the item shall be depreciated separately. Examples include pavements, formations, curbs and
channels, footpaths, bridges, and lightings within a road system. To the extent that an entity
depreciates some parts of an item of PPE separately, it also depreciates separately the remainder
of the item that are insignificant. And if an entity has varying expectations for these parts,
approximation techniques maybe necessary to depreciate the remainder in a manner that
faithfully represents the consumption pattern and/or useful life of its parts.
The depreciation method shall reflect the pattern in which the asset's future economic
benefits or service potential is expected to be consumed by the entity. A variety of depreciation
methods can be used to allocate the depreciable amount of an asset on an systematic basis over
its useful life. These methods include the straight-line method, the diminishing balance method,
and the units of production method. The entity shall select the method that most closely reflects
the expected pattern of consumption of the future economic benefits or service potential
embodied in the asset. The selected method is then applied consistently from period to period
unless them is a change in the said pattern of consumption; in which case, the change shall be
accounted for as a change in accounting estimate in accordance with IPSAS 3, Accounting
Policies, Change in Accounting Estimates and Errors.
Land and building that are acquired together at a lumpsum amount are accounted
separately. Land is normally had an unlimited useful life; thus, not depreciated.

Disbursements by 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). The cash advances may be granted to the cashiers/disbursing officers/officials
and employees to cover the following: salaries and wages, travels, special time-hound
undertakings, and petty operating expenses. The granting, utilization and liquidation of cash
advances shall be governed by the following existing rules and regulation, per COA Circular No
97-002 dated February 10, 1997, as amended by COA Circular No 2006-005 dated July 13,
2006.
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.

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. The Disbursing Officer shall maintain the Cash
Disbursements Record (CDRec) to monitor the cash advances/payroll, current operating
expenses, and special purpose/time-bound undertakings and prepare the Report of Cash
Disbursements (RCDisb) to report its utilization.

ILLUSTRATION:
Assume the following data from the accounting records of Agency ABC:
 Salaries and wages P50 000
PERA 20,000
Total 70,000
Less Salary deductions:
Withholding tax 9,000
Life and Retirement Premiums (GSIS) 8,500
GSIS salary loan 700
Pag-IBIG premiums 1,400
PhilHealth premiums 3,800
Employees' Association 200 23,600
Net Amount P46,400

The following journal entries shall be prepared to record the above transactions:
Account Title Account Code Debit Credit
Salaries and Wages-Regular 50101010 P50,000
PERA 50102010 20,000
Due to BIR 20201010 P 9,000
Due to GSIS 20201020 9,200-
Due to Pag-IBIG 20201030 1,400
Due to PhilHealth 20201040 3,800
Other Payables 29999990 200
Due to Officers and Employees 20101020 46,400
Set-up of Due to Officers and Employees and Salary Deductions.

Account Title Account Code Debit Credit

Advances for Payroll 19901020 P46,400
Cash - MDS, Regular 10104040 P46,400
Granting of Advances for Payroll

Account Title Account Code Debit Credit

Due to Officers and Employees 20101020 P46,400
Advances for Payroll 19901020 P46,400
Liquidation of Payroll Fund

Accounting for Overpayments

Sometimes overpayments or even double payment of expenditures do happen in agencies. These
could be avoided with the institution of proper internal control, but some could not be avoided
because of built-in procedures. One example is the payment of payrolls. Payrolls are prepared in
advance and some agencies pay their employees through the banking system. All these are done
before reports of attendance are submitted, making it impossible to know the exact amount to be
paid in case there are absences without pay during the pay periods. In case of overpayments,
refunds shall be demanded of the employees concerned.
IILLUSTRATION:
Using the data from the preceding illustration, that after payments were made to those
employees, the agency discovered overpayments in the amount of P5,000 due to the preparation
of payroll before reports of attendance are submitted making it impossible to know the exact
amount to be paid in case there are absences without pay during the pay periods. Accordingly,
the resulting overpayment was refunded by the concerned employees.
The following journal entries shall be prepared to record the above transactions:
• Overpayment taken up as receivable
Account Title Account Code Debit Credit
Due From officers and Employees 10305020 5,000
Salaries and Wages-Regular 50101010 5,000
Overpayment of salaries

Cash-Collecting Officers 10101010 5,000

Due From officers and Employees 10305020 5,000
Receipt of Refund

Cash-Treasury/Agency Deposit, Regular 10104010 5,000

Cash-Collecting Officers 10101010 5,000
Deposit of Collection

• Refund of Overpayment not taken up as receivable

Cash-Collecting Officers 10101010 5,000
Salaries and Wages-Regular 50101010 5,000
Receipt of Refund of Salaries and Wages-Regular during the current year.

Cash-Treasury/Agency Deposit, Regular 10104010 5,000

Cash-Collecting Officers 10101010 5,000
Deposit of Collection

Cash-Collecting Officers 10101010 5,000

 Accumulated Surplus/(Deficit) 30101010 5,000
Receipt of Refund of overpayment in the ensuing year

Cash-Treasury/Agency Deposit, Regular 10104010 5,000

Cash-Collecting Officers 10101010 5,000
Deposit of Collection

Cash advances for Operating Expenses of Government Units without

Complete set of Books of Accounts.
• Field/extensions/satellite offices are some of the government units under the
central/regional/district offices without complete set of books of accounts.
• Those offices maybe granted cash advances covering two months for MOOE/authorized
expenses to finance their operations. Cash advance shall be granted to the duly designated
or appointed Disbursing Officers.
• A cash Disbursement Register (CDReg) shall be maintained to record, monitor and report
transactions involving the gran, utilization and liquidation of the cash advance.
• Disbursing officer shall submit within five days after month end the certified copy of the
CDReg with supporting paid DV’s and other documents to the accounting units to their
respective central/regional/division offices and operating units for JEV preparation or
whenever a request for replenishment is made.

Illustration:
Assume the ff. data from the Accounting. Record of agency x
Office supplies expenses 22000
Traveling expenses 13000
Water expenses 6000
Telephone expenses 3000
Electricity expense 15000
Total 59000
Books of Central/Regional/Division office or OU

ACCOUNT TITLE ACCOUNT CODE DEBIT CREDIT

ADVANCE FOR 19901010 59,000

OPERATING EXPENSE

CASH-MDS, Regular 10104040 59,000

Granting of cash advance to field units without books of accounts.

Office supplies expense 50203010 22000

Traveling expenses-local 50201010 13000

Water expenses 6000

Electricity expenses 3000

Telephone expenses 15000

Advance for operating 59000

expense

Liquidation of cash advance

Cash advance for Travel

• Section 2 Executive Order no. 248 dated May 29,1995, as amended by EO no. 248 dated
august 14,1995 and March 23,2004 respectively provide that travel shall cover only those
that are urgent and extremely necessary, will involve the minimum expenditure and are
beneficial to agency concerned and/or the country.
• 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 travel necessitated by international commitments;
provided that no official or employee, including uniformed personnel of the Dept. of
National Defense(DND) will be sent to 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 2012 GAA or pertinent provisions of the GAA for the year.
• Under the memorandum circular 52 dated October 2,2003 of the office of the president,
the grant of the clothing allowance in all categories of trips is suspended indefinitely.

Illustration
An employee of Agency A was granted cash advance for local travel in the amount of 5k. Within
a week upon return to the personnel’s workstation, the employee prepared the liquidation report
and submitted it to Accounting Division with appropriate supporting documents.
Local travel

Account title Account code Debit Credit

Advances to officers and 19901040 5000

employees

Cash – MDS, Regular 120104040 5000

Granting of cash advance for local travel to officers and employees

Traveling expenses local 5201010 5000

Advances to officers and 19901040 5000

employees

Liquidation of cash advance for local travel.

Illustration: Foreign Travel

Uniform Personnel of DILG was granted cash advance for foreign travel in the amount of 250k
to attend foreign training. Training expense was allowed in the amount of 50k. Within a week
upon return to the personnel’s workstation, the employee prepared the liquidation report and
submitted it to the accounting division with appropriate documents.

Cash Advances for Specific Purpose/ Time-Bound Undertaking

 • Shall be granted to duly authorized accountable officer/special disbursing officer. Shall
be accounted in the books oof accounts as “Advances to special disbursing officer”. Shall
be liquidated by the accountable officer within a specified period. Any unutilized cash
advance shall be refunded, and an OR shall be issued to acknowledge collection thereof.
The accountable officer/special disbursing officer shall prepare the RCDisb and maintain
the cash disbursement records (CDRec) to monitor and control the granting and
utilization of the cash advance. The RCDisb shall be the basis in the 1 preparation of the
journal entry which shall be recorded by the designated staff in the cash disbursement
journal. The subsidiary ledger and index of payment shall also be maintained by the
accounting division /unit.
Illustration
• Office supplies expense 15000
• Traveling expense 3000
• Printing and publications 2000
• Total 20000

Cash Advance for Petty Operating Expenses

The petty cash fund (PCF) to be set up shall be sufficient for the recurring petty operating
expenses of the agency for one month. It shall be maintained using the Imprest System. All
replenishment shall be directly always charge to the expense account and, the PCF shall be equal
to the total cash on hand and the unreplenished expenses. The PCF shall be replenished as soon
as disbursement reach at least 75% or as needed.
• The ff. are the accounting policies regarding advance for PCF.
A) The fund shall be kept separately from the reg. cash advances//collections and shall not
be used for payment of regular expenses such as rentals, subscription, light and water
bills, purchase of supplies and materials for stock purposes and the like.
B) 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; and
C) At the end of the year, the PCFC shall submit to the accounting division/unit all
unreplenished petty cash vouchers for recording the books of accounts.
Illustration
• Traveling expenses 5000
• Office supplies expense 2000
• Postage and courier expenses 1500
• Fuel, oil and lubricants expense 2500
• Other MOOE 4000
• TOTAL 15000
In the event of retirement, resignation, separation and termination of the petty cash custodian, the
unused PCF shall be returned.

Disbursement Through the List of Due and Demandable Accounts Payable ADVICE to
DEBIT ACCOUNT (LDDAP-ADA)
FF. Are excluded from the implementation of ExMDPS:
1. Payment of terminal leave and retirement gratuity (TL/RG) benefits which is governed by
republic act no. 10154 as implemented by CSC Resolutions No. 1300237 and Budget
circular No. 2013-1.
2. Remittance of social insurance premium contributions to government corporations, such
as GSIS, PHILHEALTH, AND HDMF.
3. Payment of Accounts Payables to utility companies, such as supplier of petroleum oil and
lubricants, water, illumination and power services, telephone, internet and other
communication services; and
4. Other payables which cannot be conveniently or practicably paid using the ADA

• All LDDAP-ADA prepared/issued during the day shall be recorded chronologically in

the CkADADRec maintained by the Cash/Treasury unit, which also shall monitor the
receipt of the validated LDDAP-ADA from the MDS-GSB and the issue of official
Receipt or other acceptable evidence of receipt of payments by the creditors/payees.
• Sometimes, due to inconsistency of information between the bank records and LDDAP-
ADA or errors stated in DBM circular letter 2013-16 dated December 23,2014 LDDAP-
ADA may be invalidated. Along this line new LDDAP-ADA may be issued for the
replacement of the invalidated upon submission of the validated LDDAP-ADAP
indicating nonpayment to creditor/payees due to inconsistency of information.
• For creditors without existing accounts with the agency’s MDS-GSB, the payments of
their claims shall be through bank transfer. Payments through the issuance of a
Manager’s Check by the MDS-GSB of an agency shall be discontinued to minimized
cases of late payments.
 • Illustration:
1. Set up of payables and payment to suppliers and contractors (700k)

2.GRANTING OF PAYROLL FUND

• Assumptions:
salaries and wages 50000
PERA 20000
Total 70000
less: Salary deductions
withholding tax 9000
life and retirement premiums 8500
pag ibig premiums 1400
philhealth premiums 3800
GSIS salary loans 700
Employees’ Association 200 23600
Net Amount 46000
3. Payment of salaries through ATM

4. Payment for delivery of supplies and materials for consumption (5,000)

5. Payment of rent (6k)

6. Advance to Contractors (105000)

7. Payment of Accounts Payables

DISBURSEMENTS THROUGH ELECTRONIC MODIFIED DISBURSEMENT SYSTEM

AS PART OF THE MODIFIED DISBURSEMENT SCHEME
Sec. 58. Disbursements Through electronic Modified Disbursement System as part of the
Modified Disbursement Scheme. As part of the implementation of the Treasury Single Account
(TSA) system for government disbursement, the electronic Modified Disbursement System
(eMDS) has been adopted as one of the modes of disbursement under Joint Administrative Order
(JAO) No. 2015-1 dated March 12, 2015 of the DBM and DOF. This is to facilitate an efficient
and prompt reconciliation of spending agencies' disbursements vis-à-vis the accounts of the BTr
maintained at the LBP as Authorized Government Servicing Bank (AGSB).
This JAO shall apply to all spending agencies, offices and instrumentalities under the Executive
Branch, including SUCs, together with other Executive Offices using LBP as GSB. The Judicial
Branch, the Legislative Branch, Constitutional Offices, and all other Agencies, Offices and
Instrumentalities banking with LBP and therefore maintaining MDS sub-accounts with said bank
are likewise covered by the JAO for NG to have a holistic view of the budgetary transactions of
all spending agencies.

The policy guidelines are as follows:

 a) Heads of Departments, Bureaus, Offices and other instrumentalities under the Executive
Branch, maintaining MDS sub-accounts with LBP, including SUCs, together with other
Executive Offices, are enjoined to enroll and subscribe to the eMDS to perform selected
MDS transactions online; and to monitor disbursements and generate MDS reports under
the Government's MDS;
b) Enrolment in the eMDS shall be free of charge; and
c) All other spending agencies, offices, and instrumentalities of government maintaining
MDS sub-accounts with GSBs other than LBP shall continue to observe the current
procedure of the MDS System, unless they voluntarily transfer their accounts with LBP to
avail of the latter's eMDS facility or until after enrolment and subscription to the eMDS
upon amendment or repeal of Memorandum Order Nos. 276 (s. 1990) and/or (s. 1994).

DISBURSEMENTS THROUGH CASHLESS PURCHASE CARD (CPC) SYSTEM

Sec. 59. Disbursements throughCashless Purchase Card System. The Cashless Purchase Card
System (CPCS) was prescribed as an alternative mode of payment for goods and services under
Joint Memorandum Circular (JMC) No. 2014-1 dated May 15, 2014 of the Department of National
Defense (DND), Armed Forces of the Philippines (AFP) and the DBM.
The general guidelines on the implementation of the CPCS are as follows:

1) The CPCS to be implemented by participating agencies is a mode to procure specific

eligible items through the use of an electronic card. The CPC functions similarly to a credit
card and shall only be used for pre-identified items within body limits mutually agreed
upon by members of the Steering Committee. It shall also be used only with specific
merchant groups already enumerated under agreement with the credit card company.
2) Only individuals recommended by the Program Administrator (PAd) and authorized by the
Steering Committee shall be allowed to use the CPC and pre-identified items within
monthly limits set at levels mutually agreed upon by members of the Steering Committee.
The CPC shall likewise be used only with specific merchant groups already enumerated
under agreement with the credit card company.
3) Only individuals recommended by the Program Administrator and authorized by the
Steering Committee shall be allowed to use the CPC at predetermined monthly purchase
limits. Authorized individuals shall be permanent employees of the participating agencies
PA and shall, as much as possible be involved in the procurement of goods and services of
their unit/office.
I. Individual credit limits which have been approved by the Steering Committee may
only be increased and/or amended by the Steering Committee.
II. Approvals or increased individual credit limits as well as additional personnel of
participating agencies to be entitled to the CPC shall only be granted after three (3)
months pilot testing of implementation of the CPC System.
 III. In the event the participating agencies determine that additional personnel should
be entitled to the CPC or in case its existing cardholders need to be replaced, the
Program Administrator shall inform the Steering Committee in the writing about
the changes proposed. The Program Administrator must support these changes with
a written explanation on why the changes are being sought.

4) Chief of Offices of the Participating Agencies who approved CPC are jointly accountable
with their Special Disbursing Officers.
5) The CPC System shall not, in any way, supplant, replace or revise the procurement policies
and procedures prescribed under RA No. 9184 otherwise known as the Procurement Law.
6) The total amount authorized to be covered by the CPC shall form part of the cash advance
levels of the participating agencies. The CPC shall not be used nor intended to allow or
justify the increase in cash advance levels for the participating agencies.
7) The CPC shall initially be used for purchase of small value non-common use items which
are not available with the Procurement Service.
8) The cost of purchasing unauthorized items using the CPC shall be for the personal account
of the individual who undertook the transaction. This is without prejudice to the suspension
of the cardholder's privilege to use the issued CPC and other penalties which the
participating agencies may impose.
9) In case the participating agencies find specific items which it disputes as having been
procures (based on the receipts the individual CPC holder has), they shall immediately
inform Credit Card Company of this discrepancy.
10) The participating agencies shall ensure the timely payment of the CPC billing received
from the Credit Card Company. In the event that delays in payment of the CPC billings
occur, any additional charges such as late payment charges/penalties shall be charged
against the personal account of the employee directly responsible for the cause of such
delays. In no case shall the NCA issued be used to settle late payment charges.
11) The existing disbursement policies and procedures on the use of NCA and the Common
Fund System shall continue to apply where the CPC System is concerned.
12) Payment to the Credit Card Company for legitimate purchases made out of the CPC shall
be consistent with the existing MDS disbursement procedures pursuant to DMB Circular
Letter No. 2013-16.
The specific guidelines on the implementation of the CPCS are provided under Item 5.0 of DND-
AFP-DBM JMC No. 2014-1 dated May 15, 2014, are as follows:
a) Once the allotment is made available to the PAs, the latter shall obligate an amount under
supplies, materials and other services corresponding to the amount allocated for the CPC
system.
b) The CPC holder shall be entitled to purchase goods from accredited merchants once the
obligation for the CPC has been made.
c) The CPC holder shall secure the charge slips/receipts issued by the accredited merchant
and file the same for the purposes of submission to the agency accounting units. These
documents shall also be used for inspection of actual goods purchased and payments to the
CCC.
 d) Inspection and acceptance of the procured items shall comply with the existing procedures
adopted by the agency for the purpose.
e) The accounting office’s/units shall ensure that procured items are within the items
enumerated in Annex A of the above-mentioned JMC and consistent with the limitations
under Annex B of the same JMC.
f) Upon receipt of the CCC billing statement, the agency accounting units shall compare the
totals of the charge slips against the amounts reflected in the billing statement and confirm
the correctness of the same.
g) The Finance Service Unit of the agency concerned shall ensure that payments are made on
or before the dates specified in the CCC billing statement.
h) The cost of items being disputed shall likewise be included in the payment to be made.
Adjustments in payments, if required, shall be made in the subsequent billing cycle.
i) In the event the CPC is lost or stolen the cardholder must immediately notify the Pad. He
must likewise be responsible in reporting to the CCC via phone or electronic modes, the
loss of the card to prevent unauthorized utilization of the same.
1) The privilege of the CPC holder to procure goods through a CPC shall temporarily
be suspended in case his card is stolen or lost.
2) The Pad shall determine whether the CPC holder was negligent and/or culpable in
the loss of his CPC. He shall recommend remedial steps in case of notes procedural
gaps, permanent suspension of the privilege or restoration of the same. In all
instances, the Pad shall inform the Steering Committee on the measures taken.
3) The CPC person shall be held accountable in terms of payment for the purchases
made against the card during the period it was lost or stolen.

DISBURSEMENTS THROUGH TAX REMITTANCE ADVICE

Sec. 60. Disbursements Through Tax Remittance Advice. The Tax Remittance Advice (TRA)
is an accountable document issued by NGA and approved by the Agency Head to record the
remittance of all taxes withheld to the BIR. TRA System was originally introduced in New
Government Accounting System (NGAS) through Joint Circular No. 1-2000 dated January 3, 2000
and amended by Joint Circular No. 1-2MOA dated July 31, 2001 of the Department of Finance
(DOF), the Department of Budget and Management (DBM), and the Commission on Audit (COA),
providing that the Notice of Cash Allocation (NCA) released to the government agency through
TRA. In other words, the Notice of Cash Allocation received by the government agency from the
DBM is net of the applicable percentage of TRA based on the Notice of Cash Allocation received.
Estimated taxes are computed based on the following percentages: Personal Services – 8%;
Maintenance and Other Operating Expenses – 5%; and Capital Outlay – 5%.
Based on the foregoing, the journal entry to recognize the receipt of NCA, net of TRA is a debit
to: Cash – MDS, Regular; and a credit to: Subsidy from National Government. Note that no TRA
was recognized in that journal entry because the amount of NCA received is net of TRA. The
subsequent remittance of TRA to Bureau of Internal Revenue (BIR) is recorded by a debit to: Due
to BIR; and a credit to: Subsidy from National Government. It is noteworthy that the total subsidy
from national government now represents the total amount of NCA plus he TRA; and no amount
of cash was recorded in the remittance of withholding tax to BIR.
However, due to recent developments brought about by the Philippine Public Management and
Reforms and significant charges in the field of government accounting that prompted the
harmonization of the existing accounting with the international accounting standards, the
Commission on Audit revised the NGAS Manual prescribed under COA Circular No. 2002-002
dated June 18, 2002. Pursuant to Article IX-D, Sec. 2(2) of the 1987 Constitution of the Republic
of the Philippines, the COA prescribed the Government Accounting Manual (GAM).
With the inclusion of all NGAs among taxpayers who are mandated to use the Electronic Filing
and Payment System under the Bureau of Internal Revenue Regulations No. 1-2013, the TRA is
accomplished on-line which is called the Electronic TRA (eTRA). The TRA 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 based on the withholding tax
returns. The Accounting Division/Unit shall maintain SL to monitor remittances of taxes withheld
from individual employees, suppliers and contractors. The same document shall be the basis for
the BIR and Bureau of Treasury to draw a Journal Entry Voucher to record the tax collection and
deposit in their respective books of account.
Specifically, in the books of National Government Agencies, the TRA is recognized for the
constructive receipt of NCA for taxes and custom duties, and for the eventual remittance to BIR
and Bureau of Customs (BOC) of taxes and custom duties withheld. In the books of the BIR and
BOC, it is recognized for the constructive receipt of the remitted tax revenue and custom duties.
And in the books of the Bureau of Treasury (BTr), the same is recognized for the constructive
receipt of the taxes and custom duties remitted by the BIR and BOC.
ILLUSTRATION 1:
Part of its total Notice of Cash Allocation for the first quarter of the current year, Agency X
received P50,000 NCA for the purchase of office equipment, including P3,000 for TRA. The
corresponding withholding tax was later remitted to BIR through TRA, and eventually remitted by
BIR to Bureau of Treasury (BTr).
JOURNAL ENTRIES:
Books of Agency X

Account Title Account Code Debit Credit

Cash – MDS, Regular 10104040 P47,000

Cash – TRA 10104070 3,000

Subsidy from NG 40301010 P50,000

 Receipt of NCA including TRA.

Account Title Account Code Debit Credit

Office equipment 10605020 P50,000

Accounts payable 20101010 P50,000

Purchase of office equipment.

Account Title Account Code Debit Credit

Accounts payable 20101010 P50,000

Cash – MDS, Regular 10104040 P47,000

Due to BIR 20101010 3,000

Payment of accounts payable.

Account Title Account Code Debit Credit

Due to BIR 20101010 P3,000

Cash – TRA 10104070 P3,000

Remittance of withholding tax to BIR.

Books of BIR

Account Title Account Code Debit Credit

Cash – TRA 10104070 P3,000

 Business tax 40103030 P3,000

Receipt of withholding tax remitted by agency through TRA.

Books of BTr

Account Title Account Code Debit Credit

Subsidy to NG 50214010 P3,000

Cash – TRA 10104070 P3,000

Receipt of remittance of withholding tax through TRA.

ILLUSTRATION 2:
Agency X received NCA for custom duties charged against Tax Expenditure Fund (TEF) in
relation to the purchase of military equipment, as follows:

Cost P880,000

Custom duties 20,000

Total P990,000

The amount due to BOC representing custom duties was remitted by Agency X and appropriately
recognized in the books of BOC and BTr.
To reflect the above transactions, the following journal entries shall be prepared:
Books of Agency X (withholding agency)

Account Title Account Code Debit Credit

Military, Police and Security 10605100 P900,000

Equipment

Cash – MDS, Regular 10104040 P880,000

 Due to NGAs 20201050 20,000

Purchase of military equipment.

Account Title Account Code Debit Credit

Cash - TRA 10104070 P20,000

Subsidy from National Government 40301010 20,000

Constructive receipt of NCA for customs duties charged against Tax Expenditure Fund.

Account Title Account Code Debit Credit

Due to NGAs 20201050 P20,000

Cash – TRA 10104070 20,000

Constructive remittance to BOC of custom duties through TRA.

Books of BOC

Account Title Account Code Debit Credit

Cash – TRA 10104070 P20,000

Income Tax 40101010 P20,000

Constructive receipt of taxes remitted by NGAs through TRA.

Books of BTr

Account Title Account Code Debit Credit

 Subsidy to NGAs 50214010 P20,000

Cash - TRA 10104070 P20,000

Constructive receipt remittance of taxes by NGAs through TRA

DISBURSEMENTS BY FOREIGN-BASED GOVERNMENT AGENCIES

Sec. 64. Disbursements by Foreign-based Government Agencies. CDC is an authorization
issued by the DBM to DFA and other agencies with foreign posts to utilize their collections
retained by their Foreign Service Posts (FSPs) to cover operating requirements, but not to exceed
the released allotment to the said post. (National Budget Circular No. 535 dated December 29,
2011).
The following are the accounting policies regarding disbursements by Foreign-based Government
Agencies (FBGAs):
a) Based on the proposed budget of FSP/Foreign Attaché, a Working Fund shall be
established to cover payment of PS and MOOE. The Finance Officer shall be required to
maintain Cash in Bank Register (CBReg) and Cash Disbursements Register (CDReg) to
monitor and control the Working Fund.
b) All disbursements from the Working Fund shall be covered by duly approved DV/Payroll
with the required supporting documents. At the end of the month, the Finance Officer of
FSPs/Foreign Attachés shall prepare and submit Report of Cash Disbursements (RCD) is
together with the supporting documents to the Central Office concerned for preparation of
JEV to record the liquidation made by the accountable officer. The JEV shall be recorded
in the Check Disbursements Journal (CkDJ) and Cash Disbursements Journal (CDJ) based
on the Cash in Bank Register (CBReg) and Cash Disbursements Register (CDReg),
respectively.
ILLUSTRATION 1:
Assume the following data:

Passport and visa fee collected P200,000

Cash Disbursement Ceiling (CDC)

150,000
received

Expenses paid:

Allowances – Civilian employees 80,000

 Rent 20,000 100,000

The accounting entries for the collection of revenue and the constructive receipt of disbursement
authority to, Foreign Service Posts (FSPs) of DFA and DOLE are as follows:
DFA and DOLE’s Books

Account Title Account Code Debit Credit

Cash – Collecting Officers 10101010 P200,000

Passport and Visa Fees 40201120 P200,000

Collection of revenue of FSPs.

Account Title Account Code Debit Credit

CIB – Foreign Currency, Current 10103020 P200,000

Account

Cash – Collecting Officers 10101010 P200,000

Deposit of collections to authorized servicing bank of the FSPs.

Account Title Account Code Debit Credit

Cash – Constructive Income 10104080 P150,000

Remittance

Cash – Collecting Officers 40301010 P150,000

Receipt of CDC from DBM.

 Account Title Account Debit Credit
Code

Quarter Allowance – Civilian 50102070 P80,000

Rents – Buildings and Structures 50299050 20,000

Cash in Bank – Foreign Currency, Current 10103020 P100,000

Account

Payment of expenses charged to CDC.

BTr Books:

Account Title Account Code Debit Credit

Subsidy to NGAs 50214010 P100,000

Cash – Constructive Income 10104080 P100,000

Remittance

Constructive receipt of remitted collections.

DISBURSEMENTS THROUGH DIRECT PAYMENT METHOD

This type of disbursement should be covered by a Non-Cash Availment Authority (NCAA). This
mode of disbursement is made through the JEV issued by the BTr to the availing/implementing
agency to record payment of goods and services made directly by the lending institution to the
supplier or contractor. The JEV shall be recorded in the General Journal (GJ).

ILLUSTRATION 1:
Agency AB purchased communication equipment in the amount of P500,000 through Direct
Payment Scheme of Foreign Loan Availment. A liability was set-up. The corresponding NCAA
was received and payment through Direct Payment Scheme was made. The BTr recognized the
above transactions in its books.
The following journal entries shall be prepared to record the above transactions:
Books of Agency AB:

Particulars Account Code Debit Credit

Communication Equipment 10605070 P500,000

Accounts Payable 20101010 P500,000

Receipt of PPE procured through the direct payment scheme.

Particulars Account Code Debit Credit

Accounts Payable 20101010 P500,000

Subsidy from National Government 40301010 P5000,000

Receipt of NCAA and payment of payables.

Books of BTr:

Particulars Account Code Debit Credit

Subsidy to NGAs 10605070 P500,000

Loans Payable - Foreign 20101010 P500,000

Replenishments made to Authorized Government Servicing Bank (AGSB) negotiated MDS-

checks and payments on account of the NGA
GROUP 1
TOPIC: The Unified Account Code Structure and The Revised Chart of Accounts

Leader: Quilang, Christy C.

Members: Ambe, Fritz Angie
Alavata, Sophia Bianca
Damasco, Danna Angel
Prado, Abegail Rose
Santos, Anne Margareth
Tullao, Mary Grace

The Unified Account Code Structure

Joint Circular No. 2013-1 dated August 6, 2013
 Developers
• Department of Budget and Management (DBM)
• Department of Finance (DOF)
• Bureau of Treasury (BTr)
 Unified Account Code Structure
• Government-wide coding framework
• Provide harmonized Budgetary and Accounting Code classification
• Facilitate efficient and accurate financial reporting
• Fiscal Year (FY) 2014

WHAT?
 UACS is a government-wide harmonized budgetary, treasury, and accounting
code classification framework to facilitate reporting of all financial transactions of
agencies.

WHY?
 UACS is used to simplify and consolidate format for financial reports. It enables
reporting of actual revenues and actual expenditures compared to what was
projected to be collected and expended in the budget. It also enables the
comparison of disbursement for activities with their approved appropriations.

WHERE?
UACS is used on the following:
• Budget Cycle
• Reporting Appropriation
• Allotment and Disbursement
• Cash Management
• Payrolls and Budgets
• Performance Measurement
The Unified Account Code Structure Five Key Elements

Funding Source (8 Digits)

• Fund Cluster (2-digit code)
• Financing Source (1-digit code)
• Authorization Code (2-digit code)
• Fund Category (3-digit code)
Organization Code (12 Digits)
• Department Code (2-digit code)
• Agency Code (3-digit code)
• Operating Unit Classification (2-digit code)
• Lower-Level Operating Unit (5-digit code)
Location Code (9 Digits)
• Region (2-digit code)
• Province (2-digit code)
• City/Municipality (2-digit code)
• Barangay (3-digit code)
MFO/Program, Activity, and Project (15 Digits)
• Sector/Horizontal Outcomes (5-digit code)
• Program/Project (1-digit code)
• MFO/Project Category (2-digit code)
• Activity Level 1/Project Sub-Category (2-digit code)
• Activity Level 2/Project Title (5-digit code)
Object Code (10 Digits)
• Revised Chart of Accounts (8-digit code)
• Sub-Object Code (2-digit code)

KEY ELEMENTS OF UACS

The key elements of UACS are as follow:
1. Funding Source Codes
It is a six-digit code to reflect the Financial Source, Authorization and Fund Category.
However, per Joint Circular no. 2014-1 dated November 7, 2014, the six-digit Funding
Source Code was enhanced by adding another two digits code for the Fund Cluster for
purposes of accounting, banking, and reporting: thus, it becomes eight digits.
a. Fund cluster code values
The Fund Cluster code values as provided by joint circular number 2014-1, were as
follows:
Fund Cluster Fund Cluster Description
Code
01 Regular Agency Fund
02 Foreign Assisted Project Fund
03 Special Accounts – Locally Fund/Domestic Grants Fund
04 Special Accounts – Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
 06 Business Related Funds
07 Trus Receipts

b. Financial Source Code:

PARTICULARS UACS
General Funds 1
Off-Budgetary Fund 2
Custodian Funds 3

General funds are funds available for any purpose that Congress may choose to apply
and compose of all receipts or revenues that do not otherwise accrue to other funds.
Off-Budgetary funds refer to receipts for expenditure items that are not part of the
National Expenditure Program, and which are authorized for depositing in government
financial institutions. These are categories into:
1.) Retained income/receipt, and
2.) Revolving funds
Custodial Funds refer to receipt of cash received by any government agency, whether
from a private source or another government agency, to fulfill a specific purpose.
Custodial receipts include receipts collected as an agent for another entity. These
include trust receipts, both from an individual or corporation, that are required to be held
by government until the outcome of a court's case or procurement activity is
determined, as well as a department or agency acted as a trustee for the fulfillment of
some obligations.

c. Authorization Code

PARTICULARS UACS
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

New General Appropriations are annual authorizations for incurring obligations, in

terms of specific amounts for:
1.) Personnel Services (PS)
2.) Maintenance and Other Operating Expenses (MODE)
3.) Financial Expenses (FinEX), and
4.) Capital Outlays (CO) during a specified budget year, as listed in the General
Appropriation Act (GAA).
Continuing Appropriations are authorizations to support obligations for a specified
purpose or project, even when these obligations are incurred beyond the budget year.
Because Maintenance and Other Operating Expenses and Capital Outlays
appropriations are valid for two (2) years, unobligated and unreleased appropriations for
these budget items are valid until the end of their second year and are classified as
Continuing Appropriations.

Supplemental Appropriations are additional appropriations enacted by Congress to

augment original appropriations that have proven insufficient for their intended purpose
because of economic, political or social conditions. It must also be supported by a
certification of availability of funds by the BTr.

Automatic Appropriations are authorization made annually or for some other periods
prescribed by law, by virtue of standing legislation, which do not require periodic action
by the Congress. These are automatically and annually included in the National
Expenditure Program of the National Government, (e.g., Retirement and Life Insurance
Premiums; Pension under R.A. No. 2087, as amended by P.D. No. 1625 and R.A. No.
5059; Domestic Grant Proceeds; Custom duties and Taxes, including tax expenditures;
Internal Revenue Allotment; etc.)

Unprogrammed Funds are standby appropriations for priority program or project of the
government. The utilization of these funds may be approved if any of the following
conditions are met:
• Revenue collections for the year exceed targets;
• New revenues not included in the original revenue targets are successfully
generated; or
• Foreign loan proceeds are generated for newly approved projects covered by
perfected loan agreements.

Retained Income/Funds are collections that are authorized by law to be used directly
by agencies for their operation or specific purpose. These include but are not limited to
receipts from following:
• State Universities and College - tuition and matriculation fees and other internally
generated receipts.
• Department of Health - hospital income.
•
Revolving Funds are receipts derived from business-type activities of
departments/agencies as authorized by law, and which are deposited in an authorized
government depository bank. These funds shall be self-liquidating. All obligations and
expenditures incurred, due to these business-type activities, shall be charged against
the Revolving Funds.
Trust Receipts are receipts that are officially in the possession of government agencies
or a public officer as trustee, agent, or administrator, or which have been received for
the fulfillment of a particular obligation.

d. Fund Category Code

PARTICULARS UACS
Specific Budgets of National Government Agencies 101 to 150
GoP Counterpart Funds and Loans/Grants from Development Partners 151 to 250
Allocations to Local Government Units 251 to 275
Budgetary Support to Government Corporations 276 to 300
Financial Assistance to MMDA 301 to 320
Special Accounts in the General Fund 321 to 400
Special Purpose Funds 401 to 420
Unprogrammed Funds 421 to 440
Funds Retained Income/Funds 441 to 500
Revolving Funds 501 to 600
Trust Funds 601 to 610
Others (Specify) 611 to 999

Specific Budget of National Government Agencies refers to the budget appropriated

for a specific department or agency of the National Government.

GoP Counterpart Funds and Loans/Grants from Development Partners refer to the
Multilateral/Bilateral Assistance. The fund category for counterpart funds, loan proceeds
and grants proceeds will be selected according to the name of the institution providing
funds from the list provided by UACS manual. Furthermore, the preceding authorization
code will vary depending on whether funds were loans or grants, as well as if they were
unprogrammed or included in the regular budget. Appropriated loan proceeds will use
authorization Code 01, grant proceeds will use authorization Code 04 and
unprogrammed loan proceeds will use authorization Code 05.

Allocation to Local Government Unit LGU (ALGU) refers to the share of LGU from
the revenue collections of the National Government. The total ALGU is based on a
sharing scheme computed for each LGU, as provided for under the Local Government
Code and other special laws.

Budgetary Support to Government Corporations refers to either subsidies for

operations or projects, equity contributions, and net lending and/or advances to GOCC
for loan repayments.

Financial Assistance to MMDA refers to national government subsidy in the form of

regular appropriation as provided in the General Appropriation Act (GAA) which shall
only be used to augment any deficiency in the consolidated funds of the MMDA to cover
valid and authorized expenditures.
Special Accounts in the General Fund (SAGF) is a fund where proceeds from
specific revenue measures and grants earmarked by law for priority projects are
recorded and are automatically appropriated.

Special Purpose Funds are lump-sum funds included in the GAA which are not within
the approved appropriations of departments/agencies/lower-level operating units, and
which are available for allocation to any department/agency/lower operating unit or
LGU for a specific purpose level, as may be duly approved in accordance with special
provisions on the use of these fund

(NOTE: For the Unprogrammed Funds, Retained Income/Funds, and Trust Funds, see
the preceding Authorization Code topic.)

The first digit of the Funding Source indicates whether the expenditure is sourced
inside or outside the general fund, which is the case for all budgeted spending and
continuing or automatic appropriation. The next two digits (2nd and 3rd) are for
Authorization. And the last three digits (4th to 6th) are for the Fund Category, which
identifies specific fund maintained by the agency for accounting purposes, as well as for
recording and reporting financial transactions.

Organization Codes
A. Department Codes
DEPARTMENTS UACS
Congress of the Philippines 1
Office of the President 2
Office of the Vice-President 3
Department of Agrarian Reform 4
Department of Agriculture 5
Department of Budget and Management 6
Department of Education 7
State Universities and Colleges 8
Department of Energy 9
Department of Environment and Natural Resources 10
Department of Finance 11
Department of Foreign Affairs 12
Department of Health 13
Department of the Interior and Local Government 14
Department of Justice 15
Department of Labor and Employment 16
Department of National Defense 17
Department of Public Works and Highways 18
Department of Science and Technology 19
Department of Social Welfare and Development 20
Department of Tourism 21
Department of Trade and Industry 22
Department of Transportation and Communication 23
National Economic and Development Authority 24
Presidential Communications Operations Office 25
Other Executive Offices 26
Autonomous Region in Muslim Mindanao 27
Joint Legislative-Executive Councils 28
The Judiciary 29
Civil Service Commission 30
Commission on Audit 31
Commission on Election 32
Office of the Ombudsman 33
Commission of Human Rights 34
Budgetary Support to Government Corporations 35
Financial Assistance to MMDA 36
Joint Legislative-Executive Councils 28
The Judiciary 29
Civil Service Commission 30
Commission on Audit 31
 Commission on Election 32
Office of the Ombudsman 33
Commission of Human Rights 34
Budgetary Support to Government Corporations 35
Financial Assistance to MMDA 36
b. Agency Codes
It refers to any of the various unit if the government, including an office, instrumentality
or GOCC that may not approximate the size of a department, but which nevertheless
performs tasks that equally important and whose area of concern is nationwide in
scope.

c. Operating Unit Classification Codes

Operating Units are organizational entities charged with carrying out specific substantive
functions or with directly implementing programs / projects of a department or agency,
such as line bureaus and filled units.

OPERATING UNITS UACS

Central Office 1
Staff Bureaus 2
Department / Agency Regional Offices Centers for Health Development /
3
Regional Field Units - DA
State Universities and Colleges - Campuses 4
Provincial Offices - DAR and DENR 5
National Irrigation Administration Regional Offices - DA 6
Extension or Filled Offices - CDA-DOF / Penal Colonies-BUCOR 7
Schools Division / District Offices - DepEd 8
Secondary Scools - DepEd / Campuses - PSHS 9
Collection Districts** - BOC 10
Revenue Regional Offices* - BIR 11
Revenue District Offices** - BIR 12
Embassies - Consulates General / Manila and Regional Consular Offices -
13
DFA
Special - Retained Hospitals - DOH 14
Treatment and Rehabilitation Centers - DOH 15
Technical / Vocational Schools - TESDA 16
Key Budgetary Units - DND 17
District Engineering Offices and Sub-District Engineering Offices - DPWH 18
Land Transportation Offices - DOTC 19
Land Transportation Franchising and Regulatory Board - DOTC 20
Regional Developments Councils - NEDA 21
Autonomous Region in Muslim Mindanao 22
Land Transportation Offices - DOTC 19
Land Transportation Franchising and Regulatory Board - DOTC 20
 Regional Developments Councils - NEDA 21
Autonomous Region in Muslim Mindanao 22
Land Transportation Offices - DOTC 19

Staff Bureau
• is a principal subdivision of a department which primarily performs policy, program
development, and advisory functions.
Regional Office (RO)
• is an organizational subdivision, headed by a regional director, who is responsible
for the performance of an entity’s functions within a region.
CDA Extension Office
● is a unit established in each of the country’s regions or as may be necessary, as
well as financially viable for implementing integrated and comprehensive plans
and programs on cooperative development.
Schools Division (DepEd)
● is a unit established in each province or city with at least 750 public elementary
and secondary school teachers, including Head Teachers and Principals.
DepEd Secondary School
● is a learning institution that offers a six-year secondary course and is supervised
by either, a Teacher-in-Charge a Head Teacher or a Principal.
Technical Education and Skills Development Authority (TESDA)
● Technical Vocational School Is a unit that offers non-degree program at the
postsecondary education level leading to skill proficiency-oriented courses DFA
Consular Offices
● are units established locally and abroad, and which are responsible for delivering
front-line foreign affairs services, including those related to passports, visas and
the legalization of documents.
Customs Collections Districts (BOC)
● are units headed by a district collector of customs and are composed of one
principal port of entry. Shall have as many sub-ports as necessary to maximize
revenue collections and prevent smuggling and other forms of customs fraud.
Revenue Regional Offices (RROs)
● administer and enforce internal revenue laws in a region, including the
assessment and collection of all internal revenue taxes, charges and fees from
taxpayers within the region's jurisdiction. Revenue District Offices (RDOs)
● is a revenue regional office implementing units that directly serves taxpayers
within its prescribed area of jurisdiction.
Treatment and Rehabilitation Centers (TRCs)
● are centers which undertake the treatment, after-care and follow-up treatment of
drug dependents.
District Engineering Offices (DEOs)
● are responsible for all highways, flood-control and water resource development
system and other public works within the district and is headed by a District
Engineer.
Key Budgetary Units
● are organization units under the armed forces of the Philippines with distinct and
separate budgetary allocations in the General Appropriation Act.

Lower Level Operating Units

As a general rule, the last five digits of the Lower Level Operating Unit Code refer to
the assigned food for the individual operating units without reference to the Region
Code.
If an agency has been moved from one department to another or refund operating
unit has been moved from one agency to another, all new coding numbers that apply
shall be used.
The old codes shall never be assigned to any new agency/operating unit so as to
preserve the transaction history of each agency.

Location Codes
To facilitate central agency analysis across the National Government, local coding
should first enable the analysis of data by region, and then by province, municipality/city
and barangay. The coding structure relies upon the codes used by the National
Statistical Coordination Board (NSCB) only. Location code is a nine-digit code
composed of Region, Province, City/ Municipality, and Barangay.

A. Region
It is a sub-national administrative unit composed off several provinces having more or
less homogenous characteristics, such as ethnic origin of inhabitants, dialect spoken,
agricultural produce, etc.
 • Region code is a two-digits code (1st and 2nd) that identifies a specific region. It
ranges from 01 to 99 and generally corresponds to the region number

Province
It is a Political corporate unit of government which consists of a cluster of municipalities,
Or municipalities in component cities. It serves as a dynamic mechanism for
developmental processes effective governance of local government units within its
territorial jurisdiction.

Provice Codes

PROVINCE UACS
CAR – Cordillera Administrative Region
Abra 01
Apayao 81
Bengeut 11
Ifugao 27
Kalinga 32
Mountain Province 44
Region I – Ilocos Region
Ilocos Norte 28
Ilocos Sur 29
La Union 33
Pangasinan 55
Region II – Cagayan Valley
Batanes 09
Cagayan 15
Isabela 31
Quirino 57
Nueva Vizcaya 50
Region III – Central Luzon
Aurora 77
Bataan 08
Bulacan 14
Nueva Ecija 49
Pampanga 54
Tarlac 69
Zambales 71
Region IV-A - CALABARZON
Batangas 10
Cavite 21
Laguna 34
Quezon 56
Rizal 58
Region IV-B - MIMAROPA
Marinduque 40
Occidental Mindoro 51
Oriental Mindoro 52
Palawan 53
Romblon 59
Region IV-B - MIMAROPA
Marinduque 40
Occidental Mindoro 51
Oriental Mindoro 52

Palawan 53
Romblon 59
Region VI – Western Visayas
Aklan 04
Antique 06
Capiz 19
Guimaras 79
Iloilo 30
Negros Occidental 45
Region VII – Central Visayas

Bohol 12

Cebu 22

Negros Oriental 46

Siquijor 61

Region VIII – Eastern Visayas

Biliran 78

Eastern Visayas 26

Leyte 37

Northern Samar 48

Southern Leyte 64

Samar (Western Samar) 60

 Region IX – Zamboanga Peninsula

Zamboanga del Norte 72

Zamboanga del Sur 73

Zamboanga Sibugay 83

Region X – Nothern Mindanao

Bukidnon 13

Camiguin 18

Lanao del Norte 35

Misamis Occidental 42

Misamis Oriental 43

Region X – Nothern Mindanao

Bukidnon 13

Camiguin 18

Lanao del Norte 35

Misamis Occidental 42

Misamis Oriental 43

Region XII - SOCCKSARGEN

North Cotabato 47

Sarangani 80

South Cotabato 63

Sultan Kudarat 65

Region XIII – CARAGA

Agusan del Norte 02

Agusan del Sur 03

Surigao del Sur 67

Surigao del Norte 68

Dinagat Islands 85
 Region XIII – CARAGA

Agusan del Norte 02

Agusan del Sur 03

Surigao del Sur 67

Surigao del Norte 68

Dinagat Islands 85

Province code is a two-digit code (3rd and 4th) that identifies the province. It ranges
from 01 to 99 and generally defining the relative alphabetic sequence of all provinces in
the Philippines, except those created after 1977, which are added to the list following
the updating procedures. A Province Code is independent of the Region Code, which
means that even if a province is transferred to another region, its Province Code
remains the same.
Municipality
It is a political corporate unit of government which consists of a group of barangays. It
serves primarily as a general-purpose government for the coordination and delivery of
basic, regular and direct services and effective governance of the inhabitants within its
territorial jurisdictions.
Municipality code is a two-digit code (5th and 6th) that generally defines the relative
alphabetical sequence of municipalities within the province. It ranges from 01 to 99;
therefore, the first code (01) is assigned to the first municipality in the alphabetical
sequence within that province.

d. Barangay

It is the basic political unit of government. It serves as the primary planning and
implementing unit of government policies, plans, programs, projects and activities in the
community, and also as o forum where the collective views of its constituents may be
expressed, crystallized and considered, and where disputes may be amicably settled.
Barangay code is a three-digit code (7th to 9th) which generally defines the relative
alphabetical sequence of the barangays within the municipality. It ranges from 001 to
099; therefore, like the Municipality Code, the first code (001) is assigned to the first
barangay in the alphabetical sequence within that municipality. The Barangay Code is
dependent upon the Municipality Identifier to fully establish the identity of a given
barangay.

Municipality Identifier
The Municipality Identifier is a four-digit number that defines the identity of the
municipality. It is the core of the national standard geographic system, and is composed
of the Province Code, followed by Municipality Code.
Illustration 1:
Assume that Municipality Identifier is 7310.
The first two-digits (73) is the Province Code for the province of Zamboanga del Sur The
last two-digits (10) is the Municipality Code, which is Kabasalan, the 10 municipality in
the province of Zamboanga del Sur.
Therefore, the Municipality Identifier 7310 is Kabasalan, Zamboanga del Sur.

Illustration 2:
Assume that Barangay Identifier 7310001.
As shown in Illustration 1, the first four-digits (7310) represents the Municipality Identifier
(Kabasalan, Zamboanga del Sur). The last three-digits in Illustration 2 (001) is the
Barangay Code, which refers to the first barangay within the municipality with
Municipality Identifier 7310, in this case, refers to Barangay Balongis. Therefore, the
Barangay Identifier 7310001 is Barangay Balongis in Kabasalan, Zamboanga del Sur

4. Major Final Output (MFO)/Program, Activity & Project (PAP) Codes A Major
Final Output (MFO) is a good or service that a department or agency in mandated to
deliver to external clients through the implementation of program, activities and projects.
should be within the department or agency's control and be measurable, manageable
and auditable
include regulatory services, health services, education services and agricultural support
services
A Program is an integrated group of activities that contributes to an agency or
department's continuing objective include General Administration and
Support, Support to Operations, etc.
An Activity is a work process that contributes to the fulfillment of a program or project.
A Project is considered an investment toward expanding the capacity of a
department/agency to deliver MFOs
As provided by Joint Circular No. 2014-1, dated November 7, 2014, MFO/PAP
Codes is now a 15-digit code comprised of the following:
a. Sector/Horizontal Outcomes a 3-digit code for the Sector Outcomes was
added as a prefix of the MFO/PAP Codes, as shown below:
Sector Values:

Code Values Descriptions Type

100 General Public Services Sector

120 Defense Sector

140 Public Order and Safety Sector
160 Economic Affairs Sector
180 Environmental Protection Sector
 Housing and Community
200 Sector
Amenities
220 Health Sector
240 Recreation, Culture and Religion Sector
260 Education Sector
280 Social Protection Sector

Sub-Sector Values:

Code Values Descriptions Type

100 General Public Services Sector
101 Executive and legislative organs Sub-Sector
financial and fiscal affairs, external
affairs
102 Foreign economic aid Sub-Sector
103 General services Sub-Sector
104 Basic research Sub-Sector
105 R&D General public services Sub-Sector
106 General public services n.e.c. Sub-Sector
107 Public debt transactions Sub-Sector
108 Transfers of a general character Sub-Sector
between different levels of
government
109 Governance/Government Institutions Sub-Sector
and Regulatory Regime
110-119 Not yet assigned Sub-Sector
120 Defense Sector
121 Military Defense Sub-Sector
122 Civil Defense Sub-Sector
123 Foreign Military Aid Sub-Sector
124 R&D Defense Sub-Sector
125 Territorial Integrity Sub-Sector
126 Defense Against Cybercrimes Sub-Sector
127 Defense n.e.c. Sub-Sector
128-139 Not yet assigned Sub-Sector

To provide the tagging of the horizontal outcomes, another 2-digit code was added, for
Horizontal Outcomes, next to Sector Outcomes, as shown below:
Code Values Descriptions
01 Disaster Related
02 Climate Change - Mitigation
 03 Climate Change - Adaptation

6. Program/Project/Purpose
Programs, Projects or Purpose UACS
General Administration and Support (GAS) 1
Support to Operations (STO) 2
Operations (O) 3
Locally Funded Projects 4
Foreign -Assisted Projects 5
Purpose (for Special Purpose Funds only) 6

c. MFO/Project Category Codes

PARTICULARS UACS

Physical Infrastructure:
Buildings and Other Structures 01
Flood Control and Drainage 02
Non-Road Transport Infrastructure 03

Power and Communication Infrastructure 04

Roads and Bridges 05
Water Management 06
Non-Physical Infrastructure Projects:
Economic Development 07
Education 08
Environmental Protection 09
Governance 10
Health 11
Recreation, Sports and Culture 12
Research and Development 13
Social Protection 14
Buildings and Other Structures
School Building 0100
Health Facilities 0101
Multi-Purpose Facilities 0102
Agricultural Facilities 0103
Government Buildings 0104
Housing 0105
Flood Control and Drainage 0200
Flood Control Structures/Facilities 0201
 Drainage/Protection 0202
Non-Road Transport Infrastructure 0300
Aviation 0301
Railways 0302
Ports, Lighthouses and Harbors 0303
Accessibility Facilities 0304
Multi-Purpose Pavement 0305
Power and Communication Infrastructure 0400
Electrification 0401
Energy Resource Development 0402
Energy Efficiency and Conservation 0403
Energy Investment/Promotion/Innovation 0404
Communication 0405
Non-Road Transport Infrastructure 0300
Aviation 0301
Railways 0302
Ports, Lighthouses and Harbors 0303
Accessibility Facilities 0304
Multi-Purpose Pavement 0305
Power and Communication Infrastructure 0400
Electrification 0401
Energy Resource Development 0402
Energy Efficiency and Conservation 0403
Energy Investment/Promotion/Innovation 0404

Communication 0405
Economic Development 0700
Economic Affairs 0701
Agriculture and Fisheries 0702
Asset Reform 0703
Mining and Manufacturing 0704
Trade and Industry 0705
Enterprise Development 0706
Micro-Enterprise Development 0707
Credit Facility Development 0708
Tourism Development 0709
Industry Manpower Development 0710
Education 0800
Basic Education 0801
Technical and Vocational Education 0802
Tertiary Education 0803
Education Not Definable by Level 0804
Environmental Protection 0900
Waste Management 0901
Pollution Abatement 0902
Protection of Biodiversity and Landscape 0903
Reforestation 0904
Governance 1000
General Public Services 1001
Defense 1002
Public Order and Safety 1003
Systems Development 1004
Capacity Development 1005
Governance and Accountability Improvement 1006
Health 1100
Public Health Services 1101
Improved Parenting 1102
Improved Women's Health 1103
Recreation Sports and Culture 1200
Recreation and Sports 1201
Culture 1202
Broadcasting and Publishing Services 1203
Research and Development 1300
Agriculture and Food 1301
Environment and Natural Resources 1302
Disaster Mitigation and Management 1303
Energy 1304
Health 1305
Information and Communication Technology 1306
Biotechnology 1307
Nanotechnology 1308
Genomics 1309
Technology Transfer 1310
Science and Technology 1311
Defense 1312
Social Protection 1400
Sickness and Disability 1401
Senior Citizens 1402
Survivors 1403
Family and Children 1404
Unemployment 1405
Food Programs 1406
Social Security Welfare and Employment 1407
Poverty Reduction 1408
 Housing 1409
Livelihood 1410
Peace and Development 1411
Trafficked Persons 1412
Youth Development 1413

d. Project Title
The list of projects by title is shown in the NEP/GAA.

Object Codes
It is a ten – digit code composed of the first eight digits (1st to 8th ) are for COA Chart of
Accounts Object, and the next two digits (9th and 10th ) are for Sub- Object. This
particular key element of UACS provides information on the object code classification
for Assets, Liabilities, Equity, Income and Expense accounts. The object classification
covers all financial transactions of the government, such as , but not limited to, goods
or services acquired, payments made, the source of revenue or the cause of increases
or decreases in assets and liabilities.
The sources of account descriptions and codes in the UACS object coding elements
includes the following:
1. The codes from the COA Revised Chart of Accounts prepared for accrual basis
financial reporting.
2. The addition of some sub-objects codes; and
3. Additional expenditure accounts designed for cash basis budgeting such as those
capital outlays.
The basis for coding the object classification in the COA Revised Chart of Accounts is
accrual accounting, which requires transactions to be recorded in the period when they
occur. The elements recognized under accrual accounting are Assets, Liabilities, Equity,
Income and Expenses.

As provided by COA in the Revised Chart of Accounts, the classification coding

framework for Object Coding is as follows:
PARTICULARS UACS
Assets 1
Liabilities 2
Equity 3
Income 4
Expenses 5

Assets refer to the economic resources of an agency that recognized and measured in
conformity with generally accepted accounting principles. As assets is any owned
physical object (tangible) or rights (intangibles) with economic value that is expressed in
terms of its cost or some other value.

Liabilities refer to the economic obligations of an agency that are recognized and
measured in conformity with generally accepted accounting principles. Liabilities may
include certain deferred credits that are not actual obligations, but are nonetheless
recognized and measured according to accounting principles as outlined in the
Philippine Public Sector Accounting Standards (PPSAS)

Equity refers to the residual interest of the government in an agency, which is the
excess of the agency assets over liabilities.

Income refers to the gross inflow of economic benefits or service potential during the
reporting period, when those inflows result in an increase in net assets/ equity, other
than increase relating to contributions from the government. The term “income” is
broader than revenue and includes gains in addition to revenue.

Expenses refer to decrease in economic benefits or service potential during the

reporting period in the form of outflows or consumption of assets or incurrence of
liabilities that result in decrease in net assets/equity, other than those relating to
distribution to owners. (PPSAS 1 – Presentation of Financial Statements)

The categorization of expense description and codes in the UACS involves an

amalgamation of all of the expenditure codes from the COA Revised Chart of Accounts
prepared for accrual basis financial reporting, the addition of some sub-object codes
and the addition of expenditure accounts designed for cash basis budgeting, such as all
of the accounts for capital outlays. Collectively, these provide the harmonized budgetary
and accounting expenditure classification codes.

For object coding, descriptions and codes are drawn from the COA Revised Chart of
Accounts. If disaggregation is necessary, sub-object codes shall be used to show the
breakdown of selected assets, income and expenses. Otherwise, two zeros will be
used. Some examples of object codes for Personnel Expenses(PS)and Maintenance
and Other Operating Expenses(MOOE) are as follows:

Personal Expenses:
PARTICULARS COA UACS
Salaries and Wages – Regular 50101010 50101010 00
Basic Salary – Civilian 50101010 01

Base Pay – Military / Uniformed Personnel

 Salaries and Wages – Casual/ 50101020 50101020 00
Contractual

Maintenance and Other Operating Expenses

PARTICULARS COA UACS
Rent / Lease Expenses 50299050 50299050 00
Rent – Building and Structures 50299050 01
Rent – Land 50299050 02
Rent – Motor Vehicles 50299050 03
Rent – Equipment 50299050 04
Rent – Living Quarters 50299050 05
Operating Lease 50299050 06

Harmonization of Coding for Capital Outlays

From the time budget is appropriated until funds are disbursed, relevant amounts of
allotment, cash release and obligations should be processed in capital outlay accounts,
such as one of the accounts for Infrastructure Capital Outlays. According to accrual
accounting principles, the expenditure should be recognized as an asset in the form of
Infrastructure Construction in Progress at the point of disbursement. This process would
most likely be automated in Government Integrated Financial Management Information
System (GIFMIS) so that the spending is shown as capital outlays in DBM management
reports, and as capital outlays in the Cash Flow Statement, but as an asset in the
Statement of Financial Position and not disclosed in the Income and Expense
Statement.
Once the project is completed, the Infrastructure Construction in Progress account
would be credited and a Public Infrastructure Asset is recognized, as an example, an
asset account like Road Networks account is debited.

Transitory Measure
According to National Budget Circular No. 554 dated March 14,2014,“Conversion of
Codes to Conform to the UACS,” as a transition measure to allow Government
Agencies/Operating Units sufficient time in the familiarization of the UACS codes, the
DBM shall still reflect the previous codes alongside the UACS codes in the release
documents. However, all National Government Agencies and Operating Units are
authorized to make the necessary conversion of the appropriate codes, particularly on
the funding source and organization codes, to conform to the prescribed UACS codes.
In case of any discrepancy noted in the indicated UACS codes per SARO/NCA vis-à-vis
the UACS Manual, the codes per UACS Manual shall be adopted by the agency
concern.

The Revised Chart of Accounts

The International Public Sector Accounting Standards board (IPSASB) of the
International Federation of Accountants acknowledges the right of governments and
national standard setters to establish their respective accounting standards and
guidelines for financial reporting in their jurisdictions. And to provide new accounts for
the adoption if the Philippine Public Sector Accounting Standards (PPSAS) which were
harmonized with IPSAS to enhance the accountability and transparency of the financial
reports and ensure compatibility of financial information.

The COA recognizes the need to revise the existing NGAS Chart of Accounts
prescribed in COA Cir. No. 2004-008 dated September 20, 2004

As per Government Accounting Manual Volume III, The Chart of Accounts as Object
Code in the Unified Accounts Code Structure (UACS) is based, primarily, on the
following:
• COA Circular No 2013-002 dated January 30, 2013 precribing the adoption of
the Revised Chart of Accounts (RCA) for National Government Agencies (NGAs)
effective January 1, 2014
• COA Resolution No. 2014-003 dated January 24, 2014 prescribing the adoption
of Philippine Public Sector Accounting Standards (PPSAS)
• COA Cir No. 2014-003 dated April 15, 2014 providing the implementing rules and
guidelines on the COnversion from the Philippine Government Chart of Accounts
under the NGAS per COA Cir. No. 2004-008 dated September 20, 2004, as
amended, to the Revised Chart of Accounts for NGAs;
• COA-DBM-DOF Joint Circular No. 2013-1 dated August 6, 2013 prescribing the
IACS, and
• COA-DBM-DOF Joint Circular No. 2014-1 dated November 7, 2014 providing the
enhancement of UACS prescribed under COA-DBM-DOF Joint Cir. No 2013-1
These revisions will enable the agencies to properly recognize and present their
financial transactions. This Chart of Account as Object Code in the UACS,
Volume III of the GAM for NGAs, includes additional and modified accounts

Elements of Financial Statement

The basis for coding the object classification in the COA Revised Chart of Accounts is
accrual accounting.
Elements directly related to the measurement of financial position as shown in the
Balance Sheet are assets, liabilities and equity. The elements directly related to the
measurement of performance are shown in the Statement of Income and Expenses as
revenue/income and expenses. The codes, per COA Cir. No 2013-002 dated January
30, 2013, and definitions of the different element are as follows:
Code Account Groups

Assets refer to the economic resources of an agency that recognized and

1 measured in conformity with generally accepted accounting principles. As

assets is any owned physical object (tangible) or rights (intangibles) with

economic value that is expressed in terms of its cost or some other value
 Liabilities refer to the economic obligations of an agency that are recognized
and measured in conformity with generally accepted accounting principles.
Liabilities may include certain deferred credits that are not actual obligations,
2
but are nonetheless recognized and measured according to accounting
principles as outlined in the Philippine Public Sector Accounting Standards
(PPSAS)
Equity refers to the residual interest of the government in an agency, which is
3 the excess of the agency assets over liabilities.

Income refers to the gross inflow of economic benefits or service potential

during the reporting period, when those inflows result in an increase in net
4 assets/ equity, other than increase relating to contributions from the
government. The term “income” is broader than revenue and includes gains in
addition to revenue.
Expenses refer to decrease in economic benefits or service potential during
the reporting period in the form of outflows or consumption of assets or
5 incurrence of liabilities that result in decrease in net assets/equity, other than
those relating to distribution to owners. (PPSAS 1 – Presentation of Financial
Statements)

COA Cir. No. 2013-002 further provides that the account code structure consists of eight
(8) mandatory digits as follows:

distinguish the coding of assets with and without contra accounts, the following shall be
observed:
Asset with Contra Account

Asset with Contra Account

Asset without Contra Account

GROUP 4
LEADER: MIGUEL, Rey-Ann Grace S.
MEMBERS: ABING, Liame R.
ALABAT, Jane
ALVEZ, Ronalyn Q.
ANDAL, Geraldine G.
DESTRIZA, Glenda A.

CHAPTER 6
ACCOUNTING FOR REVENUE AND OTHER RECEIPTS
Section 44 of Book VI of the 1987 Administrative Code provides for the accrual of revenue
collected by the National Government to the unappropriated surplus of the general fund
such that "unless otherwise specifically provided by law, all income accruing to the
departments, offices and agencies, by virtue of the provisions of existing laws, orders and
regulations shall be deposited in the National Treasury or in the duly authorized
depository bank of the government."
Accounting standards, policies, guidelines and procedures for revenue and other receipts
are in accordance with PPSAS 9, Revenue from Exchange Transactions, and PPSAS 23,
Revenue from Non-exchange Transactions

Fundamental Principles for Revenue

Revenue is the gross inflow of economic benefits or service potential during the reporting
period when those inflows result in an increase in net assets/equity, other than increases
relating to contributions from 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.
All revenues accruing to the National Government Agencies (NGAs) shall be governed
by the following fundamental principles:
a. Unless otherwise specifically provided by law, all revenues accruing to an entity by
virtue of the provisions of existing law, orders and regulations shall be
deposited/remitted in the National Treasury (NT) or in any duly authorized
government depository and shall accrue to the General Fund (GF) of the National
Government (NG).
b. Except as may otherwise be specifically provided by law or competent authority, all
moneys and property officially received by a public officer in any capacity or upon
any occasion must be accounted for as government funds and government property.

c. Amounts received in trust and from business-type activities of government may be

separately recorded and disbursed in accordance with such rules and regulations
as may be determined by a Permanent Committee composed of the Secretary of
Finance as Chairman, and the Secretary of Budget and Management and the
Chairman, COA, as members.

d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds

other than the GF, only when authorized by law as implemented by rules and
regulations issued by the Permanent Committee.

e. No payment of any nature shall be received by a Collecting Officer (CO) without

immediately issuing an official receipt (OR) in acknowledgement thereof. The receipt
may be in the form of postage, internal revenue or documentary stamps and the like,
officially numbered receipts, subject to proper custody, accountability, and audit.

f. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge
cash receipts, the COA may approve, upon request, exemption from the use of
accountable forms.

g. At no instance shall temporary receipts be issued to acknowledge the receipt of

public funds.

h. Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each
receipt shall be exact copies or carbon reproduction in all respects of the original.

i. An officer charged with the collection of revenue or the receiving of moneys payable
to the government shall accept payment for taxes, dues or other indebtedness to the
government in the form of checks issued in payment of government obligations,
upon proper endorsement and identification of the payee or endorsee. Checks
drawn in favor of the government in payment of any such indebtedness shall likewise
be accepted by the officer concerned. At no instance should money in the hands of
the CO be utilized for the purpose of cashing private checks.

j. Under such rules and regulations as the COA and the Department of Finance (DOF)
may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge
receipt of all funds received by them, the acknowledgement bearing the date of
 actual remittance or deposit and indicating from whom and on what account it was
received.

ACCOUNTING STANDARDS FOR REVENUE

According to PPSAS 9, Revenue from Exchange Transactions; and PPSAS 23, Revenue
from Non-Exchange Transactions, the following accounting standards shall apply for
revenue and receipts of government entities:

a) Revenue includes only the gross inflows of economic benefits or service potential
received and receivable by the entity in its own account.

b) Receipts/Collections shall refer to all cash actually received from all sources during
a given accounting period.

c) Fines shall include economic benefits or service potential received or receivable

by a public sector agency, as determined by a court or other law enforcement body,
as a consequence of the breach of laws or regulations. Fines and penalties, either
on tax revenue or other specific income account, shall be recognized as income of
the year these were collected.

d) Gifts and donations shall consist of voluntary transfers of assets including cash or
other monetary assets, goods in-kind and services in-kind that one agency makes
to another, normally free from stipulations.

e) Goods in-kind are tangible assets transferred to an agency in a non-exchange

transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind.

f) Taxes are economic benefits or service potentials compulsory paid or payable to

public sector agencies, in accordance with laws and or regulations, established to
provide revenue to the govemment. Taxes do not include fines or other penalties
imposed for breaches of the law.

g) Transfers are inflows of future economic benefits or service potential from non-
exchange transactions, other than taxes.
ACCRUAL OF REVENUE TO THE GENERAL FUND
Unless otherwise specifically provided by law, all revenue (income) accruing to the
department, offices and agencies by virtue of the provisions of existing laws, orders and
regulations shall be deposited in the National Treasury (NT) or in the duly authorized
depository of the Government and shall accrue to the General Fund (GF) of the
Government: Provided, that amounts received in trust and from business-type activities
of government may be separately recorded and disbursed in accordance with such rules
and regulations as may be determined by the Permanent Committee consisting of the
Secretary of Finance as Chairman, and the Secretary of the Budget and the Chairman,
Commission on Audit, as members.

SPECIAL, FIDUCIARY AND TRUST FUNDS

Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds (TF) or Funds
other than the General Fund, only when authorized by law and following such rules and
regulations as may be issued by the Permanent Committee. The same Committee shall
likewise monitor and evaluate the activities and balances of all Funds of the National
Government other than the General Fund and may recommend for the consideration and
approval of the President, the reversion to the General Fund of such amounts as are:
1) no longer necessary for the attainment of the purposes for which said Funds were
established,
2) needed by the GF in times of emergency, or
3) violative of the rules and regulations adopted by the Committee: provided, that the
conditions originally agreed upon at the time the funds were received shall be
observed in case of gifts or donations or other payments made by private parties
for specific purposes.

SOURCES OF REVENUE AND OTHER RECEIPTS

PPSAS 9 provides that revenues received by NGAs may arise from:
1) Exchange Transactions – are transaction in which one entity receives assets or
services and sacrifices something of approximate equal value.

2) Non-exchange Transactions.- one in which one party receives something of

value without directly giving value in exchange.
Revenue and other receipts are monitored through the Registry of Revenue and Other
Receipts (RROR) per fund cluster.
EXCHANGE TRANSACTIONS
Exchange transactions are transactions in which one entity receives assets or services,
or has liabilities extinguished, and directly gives approximately equal value (primarily in
the form of cash, goods, services, or use of assets) to another entity in exchange.

RECOGNITION AND MEASUREMENT OF REVENUE FROM EXCHANGE

TRANSACTIONS
PPSAS 23. par. 10, provides that in a transaction where the entity may provide some
considerations directly in return for the resources received, but that consideration does
not approximate the fair value of the resources received, the entity determines whether
there is a combination of exchange and non-exchange transactions. Each component of
which is recognized separately.
However, there are transactions where it is not immediately clear whether they are an
exchange or a non-exchange transaction. In these cases, an examination of the
substance of the transaction will determine if they are on exchange or non-exchange.
transactions.
For example, the sale of goods is normally classified as an exchange transaction. If,
however, the transaction is conducted at a subsidized price, that is, a price that is not
approximately equal to the fair value of the goods sold, that transaction falls within the
definition of a non-exchange transaction.

RECOGNITION OF REVENUE - EXCHANGE TRANSACTIONS

Generally, revenue shall be recognized when it is probable that future economic benefits
or service potential will flow to the entity and these benefits can be measure reliably
1. Sale of Goods
Revenue from the sale of goods shall be recognized when all the following conditions
have been satisfied:
• The entity has transferred to the purchaser the significant risks and rewards of
ownership of the goods:
• The entity retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
• The amount of revenue can be measured reliably; .
• It is probable that the economic benefits or service potential associated with
the transaction will flow to the entity; and
 • The costs incurred or to be incurred in respect of the transaction can be
measured reliably.

2. Supply of Services
Revenue from the supply of services shall be recognized on a straight-line basis over
the specified period of the services unless an alternative method better represents the
stage of completion of the transaction. The recognition of revenue by reference to the
stage of completion of a transaction is often referred to as the Percentage of Completion
method. Under this method, revenue is recognized in the reporting periods in which the
services are rendered.
When the outcome of a transaction involving the rendering of services can be estimated
reliably, revenue associated with the transaction shall be recognized by reference to the
stage of completion of the transaction at the reporting date. The outcome of a transaction
can be estimated reliably when all the following conditions are satisfied:

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits or service potential associated with the
transaction will flow to the entity:
• The stage of completion of the transaction at the reporting date can be measured
reliably; and
• The costs incurred for the transaction and the costs to complete the transaction
can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be
estimated reliably, revenue should be recognized ONLY to the extent of the expenses
recognized that are recoverable. During the early stages of a transaction, it is often that
the outcome of the transaction cannot be estimated reliably, although it may be probable
that the entity will recover the costs incurred. Thus, revenue is recognized only to the
extent of costs incurred that are expected to be recoverable. As the outcome of the
transaction cannot be estimated reliably, no surplus (profit) is recognized.

3. Use by Others of Entity Assets

Revenue arising from the use by others of entity assets yielding interest, royalties and
dividends or similar distributions shall be recognized when it is probable that the economic
benefits or service potential associated with the transaction will flow to the entity; and the
amount of the revenue can be measured reliably.
 • Interest
It shall be recognized on a time proportion basis that takes into account the effective yield
on the asset. PPSAS 9, par. 35 states that the effective yield on an asset is the rate of
interest required to discount the stream of future cash receipts expected over the life of
the asset to equate to the initial carrying amount of the asset. Interest revenue includes
the amount of amortization of any discount, premium or other difference between the
initial carrying amount of a debt security and its amount at maturity. Any accrued interest
before the acquisition of an interest-bearing investment, the subsequent receipt of interest
is allocated between pre-acquisition and post-acquisition periods where only the post-
acquisition portion is recognized as revenue.

• Royalties
It shall be recognized as they are earned in accordance with the substance of the relevant
agreement. Accrued royalties, such as petroleum royalties, are recognized in accordance
with the terms of the relevant agreement, unless, having regard to the substance of the
agreement, it is more appropriate to recognize revenue on some other systematic and
rational basis.

• Dividends or similar distributions

It shall be recognized when the shareholder's or the entity's right to receive payment is
established. When dividends on equity securities are declared from pre-acquisition net
surplus, those dividends are deducted from the cost of the securities. If it is difficult to
make such an allocation except on an arbitrary ratio, dividends are recognized as revenue
unless they clearly represent a recovery of part of the cost of the equity securities.

The following revenue (service income and business income) may be recognized at a
certain point as shown below:

Legal Fees, Verification and Authentication When filing fees are billed or, if not
Fees practicable, when fees are collected.

Passport and Visa Fees When fees are billed upon issuance of the
passport and visa or, if not practicable, when
fees are collected.
Processing Fees When fees are billed or collected for the
processing of documents for securing
permits/applications.

Other Service Income When fees are billed or, if not practicable,
when fees are collected.

Business Income
Revenue Revenue Recognition Point
School Fees, Affiliation Fees, When fees are billed or, if not practicable,
Examination Fees, Seminar/Training Fees when fees are collected.

Rent/Lease Income, Communication When fees are billed for earned revenue
Network Fees, Transportation System Fees, from use of government property/facilities or,
Road Network Fees, Waterworks System if not practicable, when fees are collected.
Fees, Power Supply System Fees, Seaport
System Fees, Landing and Parking Fees,
Income from Hostels/Dormitories and Other
Like Facilities, Slaughterhouse, and Other
Service Income
Sales Revenue When the significant risks and rewards of
ownership have been transferred to the
buyer as indicated in the sales invoice.
Hospital Fees When fees are billed for hospital and related
services rendered or, if not practicable, when
fees are collected.

Share in the Profit of Joint Venture When share in the profit is earned

Other Business Income When earned or, if not practicable, when

fees are collected.
MEASUREMENT OF REVENUE – EXCHANGE TRANSACTIONS

Revenue from exchange transactions shall be measured at fair value of the

consideration received or receivable. Fair value is the amount for which an
asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction.

PPSAS 23, par. 11 provides that agencies may receive trade discounts,
quantity discounts or other reductions in the quoted prices of assets for a
variety of reasons.
These reductions in price do not necessarily mean that the transaction is a
non-exchange transaction.

Illustration – 1:

Entity XYZ is authorized to print accounting manuals for sale to other NGAs. Assume
that on July 16, 20XX, Entity XYZ sold accounting manuals on account with a list
price of P500,000 less trade discounts of 10%, 10% and 5%. The invoice price of
the merchandise is computed as follows:
The journal entry shall be as follows:

Account Title Account Code Debit Credit

Accounts Receivable 10301010 P384,750
Sales Revenue 40202160 P384,750
Sale of the accounting
materials

According to IPSAS 9, par. 16 when the inflow of cash or cash equivalent received or
receivable is deferred, the fair value of the consideration may be less than the nominal
account of cash received or receivable. The fair value of the consideration is determined
by discounting all future receipts using an imputed rate of interest. The difference between
the fair value and the nominal amount of the consideration as interest revenue.

Illustration – 2:

Assume that on August 5, 20XX, Entity XYZ received a 90-day, 6%, P50,000 promissory
note from entity ABC for accounting manuals sold. On October 4, 20XX, entity ABC paid
cash in settlement of this note.

The accounting entries shall be as follows:

August 5

October 4
Exchanges Of Goods Or Services For Similar/Dissimilar Good Or Services

When goods or services are exchanged or swapped for goods or services which are of
a similar nature and value, the exchange is not regarded as a transaction which
generates revenue. However, when goods are sold or services are rendered in
exchange for dissimilar goods or services, the exchange is regarded as a transaction
which generates revenue. The revenue is measured at the fair value of the goods or
services received, adjusted by the amount of any cash or cash equivalents transferred.
When the fair value of the goods or services received cannot be measured reliably. the
revenue is measured at the fair value of the goods given up, adjusted by the amount of
any cash or cash equivalents transferred. (Par. 17, PPSAS 9)

Impairment Losses and Allowance for Impairment Losses

When an uncertainty arises about the collectability of an amount already included in
revenue, the uncollectible amount, or the amount in respect of which recovery has ceased
to be probable, is recognized as an expense (impairment losses), rather than as an
adjustment of the amount of revenue originally recognized.
Entities shall evaluate the collectability of accounts receivable on an ongoing basis based
on historical bad debts, customer/recipient credit-worthiness, current economic trends
and changes in payment activity. An allowance is provided for known and estimated bad
debts.
DISCLOSURE
An entity shall disclose:

a) The accounting policies adopted for the recognition of revenue, including the
methods adopted to determine the stage of completion of transactions involving
the rendering of services.
b) The amount of cash significant category of revenue recognized during the period,
including revenue arising from:

• Rendering of services;
• Sale of goods;
• Interest;
• Royalties:
• Dividends or similar distributions; and
• Amount of revenue arising from exchanges of goods or services
included in each significant category of revenue.
NON-EXCHANGE TRANSACTIONS
Non-exchange transactions are transactions in which an entity either receives value from
another entity without directly giving approximately equal value in exchange or gives
value to another entity without directly receiving approximately equal value in exchange.

Recognition and Measurement of Revenue from Non-Exchange Transactions

In some transactions, it is clear that there is an exchange of approximately equal value
and these are addressed in other PPSASS.
According to PPSAS 23, Revenue of the NGAS from non-exchange transactions are
derived mostly from taxes, gifts and donations, goods in kind and fines and penalties.

• Gifts, Donations and Goods In-kind

These are voluntary transfers of assets, including cash or other monetary assets, goods
in-kind and services in kind that one entity makes to another, normally free from
stipulations. The transferor may be an entity or an individual. For gifts and donations of
cash or other monetary assets and goods in-kind, the past event giving rise to the control
of resources embodying future economic benefits or service potential is normally the
receipt of the gift or donation. (Par. 93)

• Services in-kind

These are services provided by individuals to public sector agencies in a non-exchange

transaction

• Fines
These are economic benefits or service potential received or receivable by NGAs, from
an individual or other entity, as determined by a court or other law enforcement body, as
a consequence the individual or other entity breaching the requirements of laws or
regulations. (Par. 88)

Most NGAS derive revenues from transactions where they receive resources and
provide no or nominal consideration directly in return. These are as follows:

a. Tax Revenue
• Tax Revenue-Individual and Corporation
• Tax Revenue-Property
• Tax Revenue-Goods and Services
 • Tax Revenue-Others

b. Fines and Penalties

• Tax Revenue
• Service Income
• Business Income

c. Shares, Grants and Donations

• Share from National Wealth
• Amount of revenue arising from exchanges of goods or services
included in each significant category of revenue.
• Share from Earnings of GOCCs
• Income from Grants and Donations in Cash
• Income from Grants and Donations in Kind

d. Revenue from non-exchange transactions may also arise when, in respect

of an inflow of resources from a non-exchange transaction, the entity satisfies
a present obligation recognized as a liability which may be as follows:

• Trust Liabilities Customers' Deposits Guaranty/Security Deposits Payable

• Deferred Credits - Deferred Finance Lease Revenue and Other Payable and
Deferred Credits
• Unearned Revenue - Investment Property and Other Unearned Revenue

Measurement of Revenue from Non-Exchange Transactions

An entity will recognize an asset arising from a non-exchange transaction when it
gains control of that resource and satisfy the recognition criteria. The inflow of resources
from non-exchange transactions should be carefully analyze to determine which elements
of general purpose financial statements will be recognized as a result of the transactions.
The timing of revenue recognition is determined by the nature of the conditions and their
settlement.
According to PPSAS 23, par. 48-49, revenue from non-exchange transactions
shall be measured at the amount of the increase in net assets recognized by the entity,
unless it is also required to recognize a liability. Where a liability is recognized and
subsequently reduced, because the taxable event occurs, or a condition is satisfied, the
amount of the reduction in the liability will be recognized as revenue.
Measurement of Assets and Liability on Initial Recognition
Consistent with IPSAS 12, Inventories, IPSAS 16, Investment Property, IPSAS 17,
Property, Plant and Equipment, asset acquired through a non-exchange transaction shall
initially be measured at its fair value as at the date of acquisition.
As to liability, the amount of which on initial recognition shall be the best estimate
of the amount required to settle the present obligation at the reporting date. The estimate
considers the risks and uncertainties that surround the event causing the liability to be
recognized. Where the time value of money is material, the liability will be measured at
the present value of the amount expected to be required to settle the obligation.

Tax Revenue
Taxes are economic benefits or service potential compulsory paid or payable to
public sector agencies, in accordance with laws and or regulations, established to provide
revenue to the government. Taxes do not include fines or other penalties imposed for
breaches of the law. Unless otherwise specified in laws and regulations, the taxable event
for:
a. Income tax is the earning of assessable income during the taxation period
by the taxpayer,
b. Value added tax is the undertaking of taxable activity during the taxation
period by the taxpayer,
c. Goods and services tax is the purchase or sale of taxable goods and
services during the taxation period;
d. Customs duty is the movement of dutiable goods or services across the
customs boundary;
e. Death duty is the death of a person owning taxable property. and
f. Property tax is the passing of the date on which the tax is levied, or the
period for which the tax is levied, if the tax is levied on a periodic basis.

Transfer of Internal Revenue Allotment

Where an NG imposes a tax, the entire proceeds of which is collected by NGAs
and transferred to LGUs through an appropriation, the NGAs recognize assets and
revenue for the tax, and a decrease in assets and an expense for the transfer to LGUs.
The LGUs will recognize the assets and revenue for the transfer.
 The following is the accounting entry at the books of accounts of the

Expenses Paid Through the Tax System and Tax Expenditures

PPSAS 23, par. 71 states that taxation revenue shall be determined at gross
amount. It shall not be reduced for expenses paid through the tax system. Expenses of
the government paid through the tax system or as reduction from tax revenue received
should not be offset or deducted from that tax revenue. Therefore, taxation revenue shall
be recognized at the gross amount and the expenses deducted shall be recognized and
shall form part of the statement of financial performance. Expenses paid through the tax
system are those expenses which should be paid irrespective of whether the taxpayer
pay taxes, or use a particular mechanism to pay taxes.
For example, the government may pay part of residents' health insurance
premiums to encourage the update of such insurance, either by reducing the individual's
tax liability. making a payment by check or by paying an amount directly to the insurance
company. In these cases, the amount is payable irrespective of whether the individual
pays taxes. Consequently, this amount is an expense of the government and should be
recognized separately in the Statement of Financial Performance. Tax revenue should be
increased for the amount of any of these expenses paid through the tax system.

Taxation Revenue Shall Not Be Grossed Up for the Amount of Tax Expenditures
IPSAS 23, par. 73-74 states that tax expenditures are preferential provisions of the
tax law that provide certain taxpayers with concessions that are not available to others.
Tax expenditures are foregone revenue, not expenses, and do not give rise to inflows or
outflows of resources that is, they do not give rise to assets, liabilities, revenue, or
expenses of the government.
Examples are the tax expenditure fund, which is a subsidy released by the DBM
to government-owned or controlled corporations and government financial institutions to
settle customs duties and other taxes arising from the importation of goods; and benefits
granted to taxpayers like the tax credits.
 Note that the key distinction between expenses paid through the tax system and
tax expenditures is that for expenses paid through tax system, the amount is available to
recipients irrespective of whether they pay taxes. IPSAS 1, Presentation of Financial
Statements, prohibits the offsetting of items of revenue and expense unless permitted by
another standard. The offsetting of tax revenue and expense paid through the tax system
is not permitted.

Recognition of Asset through Transfers

As discussed in the preceding sections, an entity shall recognize an asset in
respect of transfers when the transferred resources meet the definition of an asset and
satisfy the criteria for recognition as an asset.
Transfers include grants, debt forgiveness, fines, bequests, gifts, donations and
goods and services in-kind. Transfer satisfy the definition of "non-exchange transactions"
because the transferor provides resources to the recipient entity without approximate
equal value in exchange and are not taxes but some are with conditions.
However, if an agreement stipulates that the recipient entity is to provide
approximately equal value in exchange, the agreement is not a transfer agreement, but
a contract for an exchange transaction that should be accounted for under IPSAS 9,
Revenue from Exchange Transactions. Therefore, it is important to note that an entity
should analyze all stipulations contained in transfer agreements to determine if it incurs
a liability when it accepts transferred resources.

Recognition and Measurement - Debt Forgiveness and Assumption of Liabilities

In some circumstances, lenders will sometimes waive their right to collect a debt
owed by a public sector entity, effectively cancelling the debt. For example, an NGA may
cancel a loan owed by an LGU. In such circumstance, the LGU concerned recognizes an
increase in net assets because a liability it previously recognized is extinguished.
Entities recognize revenue in respect of debt forgiveness when the former debt no
longer meets the definition of a liability or satisfies the criteria for recognition as a liability,
provided that the debt forgiveness does not satisfy the definition of a contribution from
owners. Where a controlling entity forgives debt owed by a wholly owned controlled entity,
or assumes its liabilities, the transaction may be a contribution from owners. According to
PPSAS 23, par. 87, revenue arising from debt forgiveness is measured at the carrying
amount of the debt forgiven.
Recognition and Measurement of Fines
Fines are economic benefits or services potential received or receivable by a public
sector entity, from an individual or other entity, as determined by a court or other law
enforcement body, as a consequence of the individual or other entity breaching the
requirements of laws or regulations. Fines normally require an entity to transfer a fixed
amount of cash to the government and do not impose on the government any obligations
which be recognized as a liability.
PPSAS 23, par. 89 provides that fines are recognized as revenue when the
receivable meets the definition of an asset and satisfies the criteria for recognition as an
asset. Where an entity collects fines in the capacity of an agent, the fine will not be
recognized as revenue of the collecting entity. Assets arising from fines are measured at
the best estimate of the inflow of resources to the entity.

Recognition and Measurement of Bequests

A bequest is a transfer made according to the provisions of a deceased person's
will. The past event giving rise to the control of resources embodying future economic
benefits or service potential for a bequest occurs when the entity has an enforceable
claim, for example on the death of the testator, or the granting of probate, depending on
the laws of the jurisdiction.
According to PPSAS 23, bequests which satisfy the definition of an asset are
recognized as assets and revenue when it is probable that the future economic benefits
or service potential will flow to the entity and the fair value of the assets can be measured
reliably. Determining the probability of an inflow of future economic benefits or service
potential may be problematic if a period of time elapses between the death of the testator
and the entity receiving any asset. The entity will need to determine if the deceased
person's estate is sufficient to meet all claims on it, and satisfy all bequests. If the will is
disputed, this will also affect the probability of assets flowing to the entity.
PPSAS 23 further provides that the fair value of bequeathed assets is determined
in the same manner as for gifts and donations. Where deceased estates are subject to
taxation, the tax authority may already have determined the fair value of the asset
bequeathed to the entity, and this amount may be available to the entity. Bequests are
measured at the fair value of the resources received or receivable.
Recognition and Measurement of Gifts, Donations and Goods In-kind
According to PPSAS 23, gifts and donations are voluntary transfers of assets
including cash or other monetary assets, good in-kind and services in-kind that one entity
makes to another, normally free from stipulations. The transferor may be an entity or an
individual. For gifts and donations of cash or other monetary assets and goods in-kind,
the receipt of the gift or donation normally gives rise to the control of resources embodying
future economic benefits or service potential.
Gifts and donations (other than services in-kind) are recognized as assets and
revenue when it is probable that the future economic benefits or service potential will flow
to the entity and the fair value of the assets can be measured reliably. With gifts and
donations, the making of the gift or donation and the transfer of legal title are often
simultaneous, in such circumstances, there is no doubt as to the future economic benefits
flowing to the entity.
Goods in-kind are tangible assets transferred to an entity in a non-exchange
transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind. Goods in-kind are recognized as assets when the goods are
received, or there is a binding arrangement to receive the goods. If goods in-kind are
received without conditions attached. revenue is recognized immediately If conditions are
attached, a liability is recognized, which is reduced and revenue recognized as the
conditions are satisfied.
On initial recognition, gifts and donations including goods in-kind are measured at
their fair value as at the date of acquisition, which may be ascertained by reference to an
active market, or by appraisal. An appraisal of the value of an asset is normally
undertaken by a member of the valuation profession who holds a recognized and relevant
professional qualification. For many assets, the fair value will be readily ascertainable by
reference to quoted prices in an active and liquid market. For example, current market
prices can usually be obtained for land, non-specialized buildings, motor vehicles and
many types of plant and equipment.

Recognition and Measurement of Services In-kind

Services in-kind are services provided by individual to public sector entities in a
non exchange transaction. These services meet the definition of an asset because the
entity controls a resource from which future economic benefits or service potential is
expected to flow to the entity. These assets are, however, immediately consumed and a
transaction of equal value is also recognized to reflect the consumption of these services
in-kind.
 Some services in-kind do not meet the definition of an asset because the entity
has insufficient control over the services provided. In other circumstances, the entity may
have control over the services in-kind, but may not be able to measure them reliably; thus,
they fail to satisfy the criteria for recognition as an asset. Entities may, however, be able
to measure the fair value of certain services in-kind. Such as professional or other
services in-kind which are otherwise readily available in the national or international
market.
Public sector entities may be recipients of services in-kind under voluntary or
involuntary schemes operated in the public interest. For example:
1. Technical assistance from other governments or international
organizations;
2. Persons convicted of offenses may be required to perform
community service for public sector entity;
3. Public hospitals may receive the services of volunteers; and
4. Public schools may receive voluntary services from parents as
teachers' aides or as board members.
PPSAS 23, par. 102 provides that due to the many uncertainties surrounding
services in-kind, including the ability to exercise control over the services, and measuring
the fair value of the services, the entity is not required to recognize services in-kind as
revenue and as an asset but is encouraged to disclose the nature and type of services
in-kind received during the reporting period. Disclosures relating to services in-kind are
only made if they are material. For some public sector entities, the services provided by
volunteers are not material in amount, but may be material in nature.

Recognition and Disclosure of Pledges

Pledges are unenforceable undertakings to transfer assets to the recipient entity.
Pledges do not meet the definition of an asset because the recipient entity is unable to
control the access of the transferor to the future economic benefits or service potential
embodied in the item pledged. Agencies do not recognize pledged items as assets or
revenue. If the pledged item is subsequently transferred to the recipient entity, it is
recognized as a gift or donation. Pledges may warrant disclosure as contingent assets

Advance Receipts of Revenue

PPSAS 23, par. 105 provides that when an entity receives resources before a
transfer arrangement becomes binding, the resources are recognized as an asset when
they meet the definition and satisfy the criteria for recognition as an asset and recognized
as a liability until the event that makes the transfer arrangement binding occurs, and all
other conditions under the agreement are fulfilled. When that event occurs and all other
conditions under the agreement are fulfilled, the liability is discharged, and revenue is
recognized.

Recognition and Measurement of Concessionary Loans

Concessionary loans are loans received by an entity at below market terms. Sec
31 of the Government Accounting Manual states that the portion of the loan that is
repayable, along with any interest payments, is an exchange transaction and is accounted
for in accordance with PPSAS 29, Financial Instruments.
According to PPSAS 23, par. 105, an entity considers whether any difference
between the transaction price (loan proceeds) and the fair value of the loan on initial
recognition is non-exchange transaction. When an entity determines that the difference
between the transaction price (loan proceeds) and the fair value of the loan on initial
recognition is non-exchange revenue, an entity recognizes the difference as revenue,
except if a present obligation exists, e.g., where specific conditions imposed on the
transferred assets by the recipient result in a present obligation. Where a present
obligation exists, it is recognized as a liability. As the entity satisfies the present obligation,
the liability is reduced, and an equal amount of revenue is recognized.

Grant with Condition

If conditions are attached to a grant, a liability is recognized, which is reduced, and
revenue recognized as the conditions are satisfied. If the government is required to
recognize a liability in respect of any conditions relating to assets recognized because of
specific purposes, it does not recognize revenue until the condition is satisfied and the
liability is reduced. As an entity satisfies a present obligation recognized as a liability in
respect of an inflow of resources from a non-exchange recognized as an asset, it shall
reduce the carrying amount of the liability recognized and recognize an amount of
revenue equal to that reduction.

ILLUSTRATION:
The NG received a foreign grant amounting to P5 million for the construction of a
railroad system. Under the terms of the grant, the construction project shall be completed
within a period of two years from the receipt of the grant, otherwise, the money shall be
returned to the grantor. The money can only be used as stipulated, and the NG is required
to include a note in the financial statement detailing how the money was spent. The
Department of Public Works and Highways (DPWH) will be the implementing entity.
The transactions shall be recognized as follows:

• Receipt of the Grant

Books of the NG – BTr

Account Title Account Code Debit Credit

Cash in Bank-Local Currency, 10102010
P5,000,000
Bangko Sentral ng Pilipinas
Other Deferred Credits 20501990 P5,000,000
Receipt of grant directly credited to the account of the National Government Agency
(NGA) maintained by the Bangko Sentral ng Pilipinas.

Books of the Implementing NGA – DPWH

Account Title Account Code Debit Credit

Cash- MDS, Special Account 10104050 P5,000,000
Subsidy from NG 40301010 P5,000,000
Receipt of the NCA for the construction of railroad system.

• Purchase of construction materials and payment for labor for the

construction of a railroad system amounting to P5,000,000
•

Books of the Implementing NGA – DPWH

Account Title Account Code Debit Credit

Construction in Progress-
10699020 P5,000,000
Infrastructure Assets
Cash – MDS, Special P5,000,000
10104050
Account
Payment for the materials and labor for the construction of railroad system.

Books of the NG - BTr

Account Title Account Code Debit Credit

Subsidy from National
40301010 P5,000,000
Government
 Cash in Bank-Local
Currency, Bangko
10102010 P5,000,000
Sentral
Ng Pilipinas
Replenishment of MDS checks issued for payment of the materials and labor for the
construction of a railroad system.

• Receipt of the report from DPWH for the completion of the construction of a railroad
system amounting to P5,000,000.
Books of the NG – BTr

Account Title Account Code Debit Credit

Other Deferred Credits 20501990 P5,000,000
Income from Grants and P5,000,000
40402010
Donations in Cash
Income from grants and donations representing payment for expenses in connection with
the grant agreement.

• Turnover and acceptance of completed Infrastructure Asset

Books of the Implementing NGA - DPWH

Account Title Account Code Debit Credit

Railway Systems 10603100 P5,000,000
Construction in Progress P5,000,000
10699020
Infrastructure Assets
Turnover and acceptance of completed railway system.

Dishonored Checks
RA 2031, Negotiable Instruments provides that a check is dishonored either by non-
payment or non-acceptance.
Dishonor by non-payment occurs when
(a) the check is duly presented for payment and payment is refused or cannot be
obtained; or
(b) excused, and the check is overdue and unpaid.
Dishonor by non-acceptance happens when
(a) the check is duly presented for acceptance, and such an acceptance as is prescribed
by law is refused or cannot be obtained; or
(b) presentment for acceptance is excused and the check is not accepted.
A dishonored check may also be defined as a check paid to the agency that was
dishonored by the AGDB due to "Drawn Against Insufficient Fund (DAIF)" or "Drawn
Against Uncleared Deposits (DAUD).
When a check drawn in favor of the government is not accepted by the drawee for
any reason, the drawer shall continue to be liable for the sum due and all penalties
resulting from delayed payments. Where the reason for non-acceptance by the drawee
bank is insufficiency of funds, the drawer shall be criminally liable, therefore. A dishonored
check shall be settled by tendering payment in cash or by certified check to the Collecting
Officer concerned. No other mode of payment shall be accepted. Upon settlement of the
dishonored check in the manner here in prescribed, the Collecting Officer shall not return
the check to the payor concerned unless the latter first surrenders the previous OR
therefor. If the previous receipt is no longer available, sworn statement to the effect that
it has been lost or misplaced should be submitted by the payor. Dishonored checks shall
remain in the custody of the Collecting Officer, pending their redemption, unless the
agency head or the court shall direct otherwise, in which case appropriate receipts should
be secured from the officer authorized to take custody of the checks. The Collecting
Officer shall immediately advise the transfer of custody of the check.

ILLUSTRATION:
At a seminar conducted by Agency A, several participants issued personal checks
representing registration fees. When deposited in the bank, one of the checks in the
amount of P3,000 was dishonored. Accordingly, the official receipt was cancelled. After
several days, the dishonored check was replaced and remitted to Bureau of Treasury.
The following journal entries shall be prepared for the above transactions:

• Cancellation of OR due to Dishonored Checks

Account Title Account Code Debit Credit

Other Receivables 10305990 3,000
Cash-Treasury/ Agency
Deposit, Regular 10104010 3,000

Cancellation of current year’s deposited collections due to dishonored checks.

Note: If the dishonored checks pertain to prior year’s deposited collection, the journal
entry would be:

Account Title Account Code Debit Credit

Other Receivables 10305990 3,000

Accum.Surplus/(Deposit) 30101010 3,000

Cancellation of current year’s deposited collections due to dishonored checks.

• Redemption of Dishonored Checks

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 3,000
Other Receivables 10305990 3,000
Replacement of dishonored check.

Cash-Treasury/Agency
Deposit, 10104010 3,000
Regular
Cash-Collecting Officers 10101010 3,000
Remittance of the replacement of dishonored check.

Accounting for Cash Overage/Shortage of Collecting Officer/Disbursing Officer

Cash overage discovered by the Auditor that cannot be satisfactorily explained by
the Collecting Officer/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 Collecting Officer/Disbursing Officer
despite demand in writing by the Auditor shall be taken up as receivable from the
Collecting Officer/Disbursing Officer
ILLUSTRATION - 1:
During cash examination by the resident auditor, cash overage in the amount of P500
was discovered in the possession of the Collecting Officer. Said amount was forfeited and
deposited in Bureau of Treasury.
The following journal entries shall be prepared to record the above transactions:

• Cash Overage

• Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 500
Miscellaneous Income 40609990 500
Forfeiture of cash overage of the Collecting Officer

Cash-Treasury/Agency
Deposit, 10104010 500
Regular
Cash-Collecting Officers 10101010 500
Remittance of forfeited cash overage to the BTr.

ILLUSTRATION-2:
The resident auditor of Agency AB discovered cash shortages of the following officers:
Collecting Officer P 7,000
Disbursing Officer 3,000
Total P10,000
The accounting division was furnished with the auditor's memorandum pertaining to cash
shortages. Eventually, the accountable officers settled their shortages and the same were
remitted to Bureau of Treasury.
The following journal entries shall be prepared to record the above transactions:
• Cash Shortage

Account Title Account Code Debit Credit

Due from Officers and 10305020 10,000
Employees
Cash-Collecting Officers 10101010 7,000
 Advances for Payroll 19901020 3,000
Cash shortage of Collecting Officer/Disbursing Officer.

Note from the above journal entry. Advances for Operating Expenses or Advances
for Payroll, whichever is appropriate, was credited for the cash shortage of
Disbursing Officer. This is because cash advances were granted to Disbursing
Officers.

• Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 10,000
Due from Officers and
10305020 10,000
Employees
Restitution of cash shortage

Cash-Treasury/Agency
Deposit, 10104010 10,000
Regular
Cash-Collecting Officers 10101010 10,000
Remittance of restituted cash shortage to the BTr.

Other Receipt

• Other receipts of NGAs shall be composed of, but not limited to, the following:
Refund of excess cash advances granted to officers and employees.
Cash advances may be classified into:
1. Advances to Officers and Employees - for official travels;
2. Advances for Operating Expenses - granted to regular disbursing
officer for operating expenses of operating/field units and foreign
post not maintaining complete set of books;
3. Advances for Payroll for payment of salaries, wages and other
personnel benefits; and
4. Advances to Special Disbursing Officer (SDO) - for special
purpose/time-bound undertakings to be liquidated within specific
period. It includes labor payroll for projects undertaken by
administration. The same is credited upon liquidation.
Illustration:

Miscellaneous Transactions
(Responsibility, Accountability and Liability over Government Funds and
Property)
▪ Responsibility over Government Funds and Property
It is the declared policy of the State that all resources of the government shall be
managed, expended or utilized in accordance with laws and regulations, and safeguarded
against loss or wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government. The responsibility
to take care that such policy is faithfully adhered to rests directly with the chief or head of
the government agency concerned.
 ▪ Accountability over Government Funds and Property
Every officer of any government agency whose duties permit or require the possession
or custody of government funds or property shall be accountable therefore and for the
safekeeping thereof in conformity with law. Every Accountable Officer (AO) shall be
properly bonded in accordance with law.
Transfer of government funds from one officer to another shall, except as allowed by law
or regulation, be made only upon prior direction or authorization of the Commission or its
representative.
▪ Liability over Government Funds and Property
Expenditure of government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found to be directly
responsible therefore.
Every officer accountable for government funds shall be liable for all losses resulting from
the unlawful deposit, use, or application thereof and for all losses attributable to
negligence in the keeping of the funds.

Receipt of Subsidy/Assistance from other NGAs, LGUs, GOCCs and Other Funds
Performance bond/security deposits
▪ Receipts of performance bond posted by contractor/supplier to guaranty full and
faithful performance of their contract may be in the form of cash or certified checks.

Refund of overpayment of expenses

• Receipts of refunds from officers, employees and suppliers/creditors resulting from

overpayment of expenses
Collections made on behalf of another entity or non-government/private
▪ These are receipts of income, receivables or trust funds for the account of other
NGAS, LGUS, GOCCs or non-government/private organizations. These
collections are later remitted to the government agencies or non-
government/private organizations concerned.
INTRA-AGENCY AND INTER-AGENCY FUND TRANSFER
▪ Intra-agency Fund Transfer
These are cash received from central office regional office/operating units of an entity for
the purpose of implementing specific projects.
Inter-agency Fund Transfer

• These are the cash received from another entity for the purpose of implementing
specific projects.
• Example: Agrarian Reform Fund to Cover FMR to be implemented by DPWH.

Under this fund transfer, the following policies shall be observed:

1. A Memorandum of Agreement (MOA) shall be entered into by the Source Agency
(SA) and the Implementing Agency (IA) for the undertaking by the latter of the
project of the former. The Memorandum of Agreement (MOA) shall provide for the
requirements for project implementation and reporting.
2. The fund to be transferred or sub-allotted to the IA shall be a) in an amount
sufficient for three months operation subject to replenishment upon submission of
the reports of disbursements by the IA, or b) the total project cost, as may be
determined by the Heads of the two agencies in either case.
3. The check shall be issued in the name of the IA for deposit to its trust account in
its authorized government depository bank. The IA shall issue its official receipt in
acknowledgment.
4. Depending on the MOA, the fund transfers may be treated as a) If the MOA
provides a condition that the fund shall be spent as specified and any excess shall
be returned to the SA, the IA shall recognize the receipt of the fund as asset at its
fair value with a corresponding liability, while the SA shall recognize a receivable
corresponding to the fund transfer; or b) If the MOA provides stipulations or no
condition, the IA shall recognize the receipt of the fund as asset at its fair value
with a corresponding revenue, while the SA shall recognize an expense
corresponding to the fund transfer.
5. A separate subsidiary record for each account shall be maintained by the IA
whether or not a separate bank account is opened.
6. Within ten (10) days after the end of each month/end of the agreed period for the
Project, the IA shall submit the Report of Checks Issued (RCI) and the RCDisb to
report the utilization of the funds. Only actual project expenses shall be reported.
The reports shall be approved by the Head of the IA.
7. The IA shall return to the SA any unused balance upon completion of the project,
if stipulated in the MOA.
8. The SA shall draw a JEV to take up the reports. The amount to take up the
liquidation in the RCI shall be net of the cash advances granted by the IA to its
accountable officers.
9. The IA Auditor shall audit the disbursements out of the trust accounts in
accordance with existing COA Regulations
10. The Chief Accountant/Head of the Accounting Division/Unit of the IA shall, on the
basis of the Notice of Finality of Decision (NFD), record in the books of accounts
any audit disallowance as receivable.
11. When the IA is a Bureau/Regional Office of the SA, the procedures for centrally
managed projects shall be followed in accordance with entries herein provided.

Illustration:
Based on the Memorandum of Agreement for a land beautification project, Agency -
"Source" of a national government made an inter-agency transfer of fund to Agency -
"Implement" by issuing check in the amount of P700,000, which was already obligated
by Agency - "Source" for that purpose. Upon receipt of the check, Agency -
"Implement" remitted this to Bureau of Treasury.
The following journal entries shall be prepared to record the above transactions:
 • Inter-agency Fund Transfer

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. 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 Registry of
Check Issued (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.

Illustration:
An MDS check issued by Agency Z of the national government in the amount of P20,000,
for payment of a professional services, becomes stale. Accordingly, the stale check,
which is still in the possession of the payee, was cancelled and a new check is issued for
replacement.
The following journal entries shall be prepared to record the above transactions:

• Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in

the current year
 Note: If the MDS Check was issued in prior year, the journal entry would be:

• Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in the

prior year

Note: If the commercial check was issued instead of MDS Check, the journal entry
would be:
 • Cancellation and Replacement of Stale/Voided/Spoiled commercial check
issued in the current and prior year

Accounting for Disallowances

In view of the lifting of pre-audit, there are payments made by Disbursing Officers by cash
or checks, which at post audit are suspended/disallowed by the resident auditor.
Disallowances shall be taken up in the books of accounts only when they become final
and executory. The accountant shall prepare the JEV to take up the Receivable
Disallowances/Charges and credit the appropriate account for the current year or
Accumulated Surplus/(Deficit) account if pertaining to expenses of previous years.
Cash settlement of disallowances shall be acknowledged through the issue of an official
receipt and reported by the Cashier in the Report of Collections and Deposit (RCD).

Illustrations:
Assume that the entity incurred overpayment of office supplies:
Amount Paid ₱100,000

Should be 90,000

Overpayment ₱10,000
The following journal entries shall be prepared to record the above transactions:
• Recording of disallowances for current year’s transaction

• Recording of disallowances for prior year’s transaction

Reporting of Collections and Deposits
Receipts and deposits shall be reported as follows:

• At the close of the business day, the Collecting Officers shall prepare the
Report of Collections and Deposits (RCD) for submission to Accounting
Office/Unit. The report lists all the ORs issued in numerical sequence including
cancelled ones.

• The RCD shall be supported by documentary evidence such as duplicate

copies of ORs and validated deposit slips.

• The Collecting government entity issuing electronic Official Receipt (OR)

should generate and submit daily to the Auditor a copy of the RCD. In case the
collection system is not integrated with the accounting system, the Accounting
Division/Unit shall recognize the collections and deposits based on the
generated reports duly certified by the Collecting Officer/Cashier/Head of
Cash/Treasury Unit.

• Field Offices (FOs)/Operating Units (OUs) without complete set of books shall
record their collections of income chronologically in the Cash Receipts Register
(CRReg). The certified copy of the CRReg together with the required
supporting documents, duplicate copies of ORs and Deposit Slip (DSs) shall
be submitted within five (5) days after the end of each month to the concerned
mother unit (central/regional/division office) by the FOs (a unit under the
central/regional/ division office) for review and recording of the transactions in
the CRJ by the Chief Accountant.
Non Governmental Organizations -
Introduction to the Non-Profit Sector

The decades starting with the 1990s witnessed the proliferation of a new kind of sector among
the various agencies and governmental departments engaged in public service. This sector was
the Non-Profit or the NGO (Non Governmental Organizations) that mushroomed all over the
world to fill the gap between the governmental agencies and the public.

The intention behind the creation of the NGO’s was that in places where the government
was either doing a bad job of service delivery or the government could not reach for
whatever reason, the NGO’s could step in and act as the medium between the official sector
or the governmental sector and the people. Hence, the term Non Governmental Organizations
was coined to describe these entities. Further, the fact that the increasing complexity and the
multiplicity of problems that confronted the world meant that there was need for a quasi-official
entity to step in and help both the government and the society.

The rise of the NGO’s coincided with the awareness among governmental and multilateral
bodies like the United Nations that the problems of the 21st century were too complex and too
diverse for the government to handle them alone. Hence, there was a need for an intermediary,
which would be focused on a specific aspect of the gamut of issues and hence would be able to
concentrate its energies solely on the issue rather than being general like the government. The
point here is that the NGO’s comprise of experts in particular fields and hence, they can devote
their expertise and energies to solve the intractable problems, which the government cannot
because of the red tape as well as the fact that many government officials are administrators first,
and experts next. This was the reason for the NGO’s attaining a prominent place in the pantheon
of agencies that were tasked with solving the problems of the world.

Further, the NGO sector is useful to act as a watchdog to oversee the governmental
programs and assess how much the government is effective in addressing them. Moreover,
the NGO’s can also be focus groups who do not venture into on the groundwork but are advisory
in nature. These are the public think tanks and advisory councils that routinely come up with
policy suggestions and whitepapers that are used by the government and other agencies as inputs
to their policymaking apparatus. Apart from this, the NGO’s can also check the leakage that is
inherent in governmental programs because of bribery and corruption and hence can be the
conscience of the people who would report any irregularities in the delivery of public services.

Finally, the NGO sector also comprises of volunteers who are committed and dedicated and can
to the rescue of victims of natural disasters like Earthquakes and Tsunamis where the
governmental and other agencies are overwhelmed and understaffed to deal with the situation
adequately. These are some of the ways in which the NGO sector acts as the bridge between the
government and the people. In subsequent articles, we would explore the many facets and details
of the NGO phenomenon in detail and would analyze the positive as well as the negative aspects
of the rise of the NGO’s.

Emergence of the Non-Profit Sector and the

Implications for Governance

With the increase in the numbers of NGO’s, there has been a perception that the government
should be kept on its toes because of the watchdog like function that the NGO’s are supposed to
perform. Indeed, many governmental schemes like the MNREGA (Mahatma Gandhi National
Rural Employment Guarantee Act) are subject to social audits and vetting by the NGO’s which
is a positive development. These social audits are useful to assess the efficacy of the schemes
launched by the government and hence act as deterrents against corrupt practices and leakages of
funds.

However, before people jump to the conclusion that the governmental efficiency has been
increased because of NGO pressure, there is a note of caution here. Many governmental schemes
are outside of the purview of NGO watchfulness and hence, the NGO sector is relatively helpless
to guard against corruption and leakage of funds.

Of course, the RTI act or the Right to Information Act is one stellar example of how NGO
pressure has forced the government to not only pass the act but also divulge information
regarding various schemes. As the examples of thousands of RTI applications and their
responses show, the act has been effective in curbing the extravagant behavior and the disclosure
of corrupt practices to some extent. Apart from this, the NGO sector has had another positive
impact on governance and this relates to the passage of many legislations like the
decriminalization of various behaviors that were existing since the time of the British. One
example relates to the declassification of alternate sexualities as an offence and indeed, it can be
said that NGO sector took the lead in forcing the government to do this. Hence, the emergence
of a strong and powerful NGO sector is necessary for democracy to flourish.

Having said that, it must be remembered that many NGO’s themselves are being questioned as to
the source of their funding especially when take up causes that hurt the government’s pet
schemes. For instance, the government resorted to launching a probe into the sources of funding
of the protestors in Kundankulam who were agitating against the Nuclear Plant there. This was
criticized by many as an attempt to sidetrack from the main issue. The point here is that the NGO
sector has to take these setbacks in its stride and continue to focus on the governance and public
welfare duties of the government. Considering that these aspects are very poorly managed in
many countries including India, the presence of an active NGO sector is vital to safeguard the
democratic institutions.

Finally, in matters related to governance, the NGO sector can play both an activist and an
advisory role apart from an agitator’s role. Each of these roles comes with specific focus
areas and for effective governance, the NGO’s must be prepared to don all the roles so that when
advice fails, then can act, and when action fails, they can agitate. It all boils down to how much
pressure is brought on the government to improve governance and strive for public welfare.
NON PROFIT ORGANIZATION

Article 1: Management of Nonprofit Organizations

Management of Nonprofits:

By definition, the nonprofit sector operates in the humanitarian goals and objectives space. This
means that many nonprofits are loosely structured and are often volunteer driven without formal
hierarchies and patterns of management. However, this does not mean that nonprofits need not
have formal boards, management structures, and financial control. The point here is that though
nonprofits are made up of committed individuals working for a cause, there is still a need
for a corporate type structure and management. This is especially the case with those
nonprofits that receive large amounts of money and handle multiple projects across the breadth
of the country. Further, the fact that the government monitors the performance of the nonprofits
means that there needs to be accountability and financial due diligence done periodically. Hence,
there is a need for proper management and structure of the nonprofits and means of control and
process driven internal environment as well.

Need for Management Structures

The first and foremost requirement for a nonprofit is to have a board of directors who provide the
high level monitoring and control. The board members can be drawn from all walks of life and
must have enough experience in the social sector. Further, the members of the nonprofits should
be on the board as executive members. Apart from this, the nonprofits must have internal
financial controls through auditing and monitoring of the inflows and outflows of funds. This is
needed both from an internal Processual perspective as well as to satisfy the requirements from
the government regarding compliance with all regulatory requirements. For instance, in India,
the government monitors the inflow of foreign funds into the nonprofits and hence, appropriate
permissions must be taken according to the laws for nonprofits to receive money from abroad.

Accountability and Regulatory Requirements

The third aspect as far as the management of nonprofits is concerned relates to the need for them
to have people who can be held accountable for the actions of the nonprofits. This means that
there needs to be a chain of command in case owning up to the decisions taken up the nonprofits
are concerned. This is especially the case with nonprofits that are engaged in providing relief and
service to the underprivileged, as the chances of wrong decisions boomeranging on them are
high and where the implications include human life and health. The government is an important
part of this, as the bureaucrats need structured responses from the nonprofits and clear patterns of
organizational accountability.
Final Thoughts

Finally, the nonprofits need to have management structures that can be advertised to the external
world as the single point of contact between the nonprofits and society lends itself to easy access
to the nonprofits and helps in recruiting more volunteers for the cause. In conclusion, while it is
certainly not the case that nonprofits must be corporatized in their means of functioning, there
are good reasons as discussed in this article for the nonprofits to follow due diligence and proper
management principles.

Article 2: The Non Profit Sector in a Time of Unprecedented Change

The ongoing global recession has taken a toll on non-profits as they are both in demand for
their services and at the same time, there has been a drop in funding for them. This has
happened because the humanitarian disasters and the need for non profits to step in where the
state has failed because of the recession and a general decline in authority of the state has meant
that they are being called upon to perform many roles that they otherwise were hesitant to do
earlier.

However, the drying up of funding means that non-profits cannot hope to fulfill all the demands
on their time and hence, have to make do with whatever limited resources they have. Apart from
this, there are changes in the external environment that are to do with increasing numbers of new
entrants that offer the same or more services as the existing non profits. This means that the
existing non-profits have to diversify and expand their offerings if they are to remain viable and
relevant.

The third trend that has manifested in recent times is the aspect of rapid technological change,
which means that the attendant consequences have to be addressed by the non-profits. For
instance, non-profits can no longer ignore the technical component of their services and hence,
have to adapt to technology and make it an integral part of their programs. Further, with rapid
technological change, the non-profits are faced with a situation where they have to log in (to use
a metaphor) into the virtual world and bridge it with the real world to ensure that they remain
relevant to the contemporary times.

The fourth trend relates to increased expectations from the client populations because of
globalization and increased awareness among the populace. For instance, many beneficiaries and
intended recipients of the non-profits endeavors are more aware and more well informed and
hence, are demanding the same accountability and transparency that the non-profits demand
from the governments and public authorities. This means that the non-profits themselves are
under watch and hence, have to ramp up on their activities to ensure that they appeal to the
populace at large.

The fifth trend is in the realm of the funders tightening the funding norms and requirements,
which places extra emphasis on the performance of the non-profits. This means that non-profits
are hit by a “double whammy” wherein they have to be accountable to their donors and
responsive to a heightened awareness among their recipients. All these trends taken together
indicate that the non-profit sector has to innovate, reorganize, and reorient them not to mention
be proactive instead of being reactive.
Finally, these aspects discussed here would persist even if the economic conditions improve as
the world is heading down a path of uncertainty and upheaval going by the current state of the
planet. Hence, like any other sector, the non-profits are beset with the challenges of surviving
and thriving in a hyperactive environment where everything is in a state of flux. Whether the
non-profit sector can innovate to evolve to the next level remains to be seen. The subsequent
articles in this module look at some of the ways in which the non-profits can devise strategies to
beat the “global odds”.
 Ethics and Professionalism for NGOs
While the NGO or the Non Profit sector is founded on the premise that they would propagate
sustainable and equitable forms of development, the concept of internal accountability and
internal structures of governance needs to be discussed as well. The point here is that NGO’s
need to evolve mechanism for the practice of ethics and professionalism within to actualize
change without. In other words, before they preach these terms to the external world, they need
to practice them internally. Hence, it becomes imperative for NGOs to be ethical and
professional in their dealings and to observe strict codes of conduct within themselves. Of late,
there have been many instances of wrongdoing within the NGO sector and hence, the time for
accountability and transparency within has arrived.

Any discussion of NGOs often begs the question as to what they are doing internally. In other
words, as the saying goes, Caesar’s wife must be above suspicion and hence, the NGOs must be
squeaky-clean first. In India, there have been several cases of financial wrongdoings by the
NGOs and there have been cases where misappropriation and embezzlement of funds have been
reported.

In this context, it is useful to highlight what happened to the United Nations wherein several of
its bodies were found to be mired in corruption. Right from the food for oil scam to the
misappropriation of funds by organizations like UNICEF and UNESCO, the UN has had to
suffer reputational losses because of these cases. The point here is that the NGO sector is
especially watched for any wrongdoing since it proclaims lofty notions of justice and equity.
Apart from this, the fact that the NGO sector does not have the scale or the size of the operations
to have rigorous internal controls needs to be discussed. While the organizations mentioned
above failed despite internal controls, many of the NGOs are simply functioning without any
internal democracy or internal code of conduct. Indeed, it has been proved that dubious funding
and acting as a conduit for black money and supporting money laundering are rampant among
NGOs. Hence, there cannot be a better case for scrutinizing the activities of the NGOs and
ensuring that they are above board in all respects.
Recently, the protests against the Kundankulam Nuclear Plant were alleged to have been
motivated by Western governments using the Indian NGOs as a conduit. This kind of behavior
must be avoided and a robust control system that does not abuse the goodwill that NGOs have
must be put in place. The point here is that for society, the NGO sector is a beacon of hope and
hence, the NGOs must not take society for granted. Neither should they hoodwink the
government by hiding their sources of funding and operational measures.
Finally, in these times, when unethical behavior among all sectors of society is rampant, the
temptation to follow the herd is strong and hard to resist. This applies to the NGO sector as well
and given the large amounts of money that is flowing into the sector, the stakes are indeed high.
In conclusion, one must practice what one preaches and hence, the NGO sector should have
stringent codes of conduct that are ethical and professional in nature.
 Advocacy and Volunteerism
Difference between Advocacy and Volunteerism

Non-profits across the world are divided into those that are advocacy oriented and those that
volunteer their services for the public good. Advocacy groups often promote views and opinions
of likeminded citizens regarding public policy and suggest specific courses of action that can be
actualized. On the other hand, the non-profits that are volunteerism oriented actually get their
hands dirty by participating in ground level work and grassroots mobilization. The difference
between advocacy and volunteerism is that whereas the former is theoretical in approach
and concentrates on pressure as a means of goading the policymakers to adopt specific
courses of action, the latter is more grassroots based with practical actions aimed at
changing or influencing the public discourse. In other words, whereas advocacy groups are
urban based and are largely content with meetings, conferences, publishing reports, and focusing
on measures that work with the policymakers, the volunteer based nonprofits are spread across
the countryside and involve taking actionable steps to influence the public discourse.

Commonalities between Advocacy and Volunteerism

Having said that, there are some commonalities between the advocacy groups and the
volunteerism groups as both seek to influence the public discourse towards the realization of
goals that promote social justice and public welfare. Moreover, the lines between advocacy and
volunteerism are blurred often since advocacy groups also have volunteers and rely on grassroots
activists for inputs and the volunteerism groups also play advocacy roles. The point here is that
in the nonprofits sector, the organizations working for the public good have an umbrella of
activities that comprise of both advocacy and volunteerism and they cannot draw a hard and fast
line between these activities. The net result is that many nonprofits end up doing both advocacy
and grassroots campaigns.

Define the Base Objectives

As mentioned above, the nonprofits often have a mix of strategies to promote public welfare.
However, it needs to be mentioned that nonprofits have to define the objectives and goals for
which they are in existence or to use a phrase, raison d’être of existence, wherein they formulate
their bottom line goals. There is no point in nonprofits spreading themselves too thin because
they are doing everything at once. Further, there is also no gain in espousing too many causes
and ending up not doing justice to any of them. Hence, the nonprofits have to first draw up a
charter of what they would do and what they would not do and even though they might cross the
line sometimes, it helps if they define their core principles clearly.

Closing Thoughts

The complex world that we live in needs non-linear thinking to solve problems and hence, the
nonprofits too have to work within uncertainty and chaos. For this reason alone, the nonprofits
have to ensure that whether they are advocating a particular stance or mobilizing volunteers at
the grassroots, they do not stray too far from their stated objectives and remain true to their basic
goals and objectives.

Non-Profits: Program Evaluation and Monitoring

The need for program evaluation and monitoring

Though the non-profits sector is not a sector where each pie of money spent needs to be
accounted for under the law, nonetheless, since donor funds are involved, there is a need to
evaluate the programs and monitor them for leakages and fraud or even for the simple sake of
ensuring that the intended beneficiaries are receiving the money that has been earmarked for
them.

Moreover, in recent years, the government is also formulating laws and regulations that
deem it necessary to evaluate and monitor the programs since the number of complaints
about misuse of money and fraud has been increasing. Towards this end, the government has
empowered the district level governmental authorities to keep a tab on the activities of the non-
profits. Because of these factors, it is important that the programs undertaken by the non-profits
are evaluated and monitored on a regular basis.

Internal and External Audits

The program evaluation and monitoring can be done through internal and external audit.
Internal audits are typically done by the members of the non-profits themselves whereas external
audits are done by consultants and funders who send their representatives to perform an audit of
how well the non-profit is doing. The need for external audits arises as the objectivity and
balanced approach to the audit can only be done by external parties who do not have a conflict of
interest. Indeed, in many non-profits, there is an annual visit by the representatives of the funders
who perform site visits and see for themselves how well the non-profit is utilizing the funds.
Moreover, there are also periodic reports and progress sheets sent to the funders by the non-
profits so that they are apprised of the situation on the ground. Finally, in these recessionary
times when donors are few and the requests for assistance are more, there is a need for
monitoring of the programs more than earlier.

Some Best Practices

Non-profits can follow some best practices like keeping trek of all the money spent on the
projects, maintaining a head count registry where they record the details of the members who are
paid to do work and the members who are given part time consultation fees. Apart from this, the
non-profits must also ensure that they record the money spent on beneficiaries diligently and
accurately. Further, the best practices would also include getting an audit done by third parties
meaning consultants who are not members of the non-profits or the donors. The key aspect here
is that it is better to monitor progress and evaluate the performance of the non-profits regularly
and reliably.
Closing Thoughts

The non-profits sector is also becoming corporatized because of the rising professionalism both
among the members of the non-profits sector as well as the donors. Further, there have been
more instances of fraud and hence, it is imperative that non-profits get audits done internally as
well as by third parties apart from the donor audits that anyway are done in case of funding from
external parties.

Government, Social Welfare and NGOs

A Failure of Governance

The phenomenon of the NGOs or the Non Governmental Organizations entering the field
of social welfare accelerated in the 1990s. In earlier decades, though there were several
charitable trusts and organizations like Red Cross, Medicine Sans Frontiers, and Doctors without
Borders, the explosion in the number of NGOs and the concomitant rise in their profile were
relatively muted. This aspect of the NGOs taking center stage has been attributed to the failure of
the various governments across the world to deliver development and actualize the principles of
social justice and social welfare. Hence, the reasoning goes that the NGOs had to step in and
deliver where the governments had failed. This trend became more noticeable in the first decade
of this millennium wherein the NGOs were seen by many as the real votaries of social welfare
with the rise in the failed states of Africa and other parts of the world where governance simply
collapsed.

The Government is Still Relevant

Having said that, it needs to be mentioned that even now the government is the best bet to
actualize social welfare because it has the size and the scale to reach out to large
populations. No matter how much the NGOs try, they simply cannot match the power of the
governments in actualizing social welfare simply because the governments are the agencies
tasked with the purpose of social welfare and because the amount of money that is at the disposal
of the governments is something that even the biggest NGOs cannot match. Hence, the
implications of this are that the government and the NGOs are in a seesaw battle with each of
them trying to outdo the other where social justice and social welfare are concerned. This is the
reason why the governments and the NGOs exist in a state of tension with each other.

A Model of Cooperation

The ideal model for actualizing social welfare would be one where the government is directly in
charge but where the NGOs are tasked with the objective of ensuring smooth delivery of social
services and where they are called upon to monitor the delivery mechanisms and provide
objective feedback. This means that the external audits of the programs undertaken by the
government have to be done by the NGOs no matter how much the governments resist such
efforts. Further, this model of development is being practiced in India where the National
Advisory Council or the NAC advises the government on schemes like the Employment
Guarantee Scheme, the Food Security Bill and performs external audits of these schemes to
ensure that the benefits are reaching the intended recipients.

Closing Thoughts

Finally, both the government and the NGOs have to realize that each cannot do without the other
and hence, instead of a tense relationship, a creative tension wherein each complements and
supplements the other would be preferred. After all, social welfare is a topic that is of paramount
importance and something that should not be marred by personality clashes or overlapping areas
of interest.
Group 2
Leader: Suratos, Jhon Kenneth Q.
Members:
Brillantes, Luis Hussein
Galit, Vyron G.
Parilla, Charish Hazel
Pontigon, John Darwin
Socha, Michael Christian

Accounting for Barangays

FUNDAMENTAL PRINCIPLES
The financial transactions and operations of the barangay shall be in accordance with the
following legal provisions/fundamental principles:
1. No money shall be paid out of the local treasury except in pursuance of an
appropriation ordinance or law (Section 29, par 1 of the Constitution).
2. Local government funds and monies shall be spent solely for public purposes.
3. No public money or property shall be appropriated or applied for religious or private
purposes.
4. Disbursement or disposition of government funds or property shall invariably bear
the approval of the proper officials.
5. All claims against government funds shall be supported with complete
documentation.
6. Local revenues are generated only from sources expressly authorized by law or
ordinance and collection thereof shall at all times be acknowledged properly.
7. All monies officially received by a local government officer in any capacity or on
any occasion shall be accounted for a local funds, unless otherwise provided by
law.
8. All collections shall be deposited intact with government depository bank or other
authorized depository bank for the account of the barangay, except those
collections to be remitted to the City/Municipal (CM) Treasurer.
9. Trust funds in the local treasury shall be paid out only for the purpose for which the
trust was created or the funds received.
 10. Fiscal responsibility shall be shared by all those exercising authority over the
financial affairs, transactions, and operations of the barangays.
11. Every officer of the barangay whose duties permit or require possession or custody
of local funds shall be bonded, and such officer shall be accountable and
responsible for the said funds and for the safekeeping thereof in conformity with
the provisions of the law.

GENERAL ACCOUNTING POLICIES

Accounting and related procedures to be observed for barangay financial transactions
shall be in accordance with the following policies and guidelines:
1. Accounting Method
Modified accrual accounting is adopted. Under this method, income shall be
recognized when earned except when use of accrual basis is impractical or when
other methods are required by law. And expenses shall be recognized when
incurred irrespective of time of payment. Income and expenses shall be reported
in the financial statements in the period in which they relate.
2. Books of Accounts

Barangay Books of Accounts shall consist of General Journal, General Ledgers,

and Subsidiary Ledgers. Theses shall be kept in the Office of the City/Municipal
Accountant.

3. Processing and Recording of Transactions

Processing of barangay transactions shall be done at the barangay level. When

the funds of the barangay permit, a Barangay Record Keeper (BRK) shall be hired;
otherwise, the Barangay Treasurer (BT) shall perform the duties and
responsibilities of the Barangay Record Keeper while the Chairman, Committee
on Appropriations (CCA) shall maintain the Registry of Appropriations and
Commitments.

Based on the reports and documents submitted by the Barangay

Treasurer/Barangay Record Keeper, recording of barangay transactions shall be
done by the City/Municipal Accountant using the double entry bookkeeping
method, The Journal Entry Voucher (JEV) shall be used to record the transactions
in the General Journal (GJ) by the City/Municipal Accountant. All financial records
of the barangays, such as, copies of registers, registries, summaries, reports, and
supporting documents like original paid Disbursement Vouchers (DVs). Payrolls,
duplicate copies of Official Receipts (ORs) issued, validated Deposit Slips, General
 Appropriations Ordinance (GAO), etc. shall be kept by Barangay Record Keeper
and shall be made available to Commission on Audit (COA) anytime for
examination.

4. Barangay Chart of Accounts

The COA Circular 2013-002 dated January 30, 2013 provides the Revised Chart
of Accounts for National Government Agencies Only; thus, pending the new
circulars and chart of accounts for barangays, the New Government Accounting
System (NGAS) Chart of Accounts shall be adopted.

5. Financial Expenses

Financial expenses, such as, Interest Expenses, Bank Charges, etc. shall be
separately classified from Maintenance and Other Operating Expenses (MOOE).

6. Petty Cash Fund

The Petty Cash Fund (PCF) shall be maintained under the Imprest System and
shall not be used for payment of regular expenses. The balance of the PCF shall
not be closed at the end of the year. The amount of PCF shall be PCF shall not be
closed at the end of the year. The amount of PCF shall be determined by
Sangguniang Barangay (SB) but not to exceed twenty percent (20%) of the funds
available and to the credit of the Barangay Treasurer.

7. Cash Advances

Cash advances for payment of Personal Services (PS) shall be accounted for as
“Payroll Fund”: while cash advance granted for travel and other special time-bound
undertaking shall be accounted for as “Advances to Officers and Employees”.

8. Liabilities

Liabilities shall be taken up only for goods actually delivered and accepted or
services rendered or upon receipt of bills from suppliers/creditors. Cash received
to guaranty faithful performance of an activity shall be recorded as a liability. Surety
bonds shall not be recorded in the books. All borrowings and secured loans shall
be recorded using the appropriate liability account.

9. Supplies and Materials

Purchase of supplies and materials and small tangible items with serviceable life
of more than one year shall be directly charged to expenses.
10. Property, Plant and Equipment, Public Infrastructure/ Reforestation Projects

The Property, Plant and Equipment (PPE) used in operation shall be subject to
depreciation using the straight-line method. A residual value equivalent to ten
percent (10%) of the cost of PPE shall be provided. Depreciation shall start on the
following month after the date of purchase/completion of the project. The estimated
useful life of PPE as prescribed by COA shall be used in computing the rate of
depreciation. All PPE which are not being used in operations, including those for
disposal shall be reclassified as “Other Assets” and shall not be depreciated.

11. Loss of Cash and Property

Accounts pertaining to assets lost through theft, force majeure and other causes
shall be adjusted to the extent of the loss incurred for fair presentation of the
financial statements. A receivable account shall be set up against the accountable
personnel pending receipt of the COA decision on the Request for Relief of
Cash/Property Accountability.

12. Audit Disallowances

Audit disallowances shall be recorded only when they become final and executory.

13. Dishonored Checks

The cash account shall be adjusted for the dishonored check and the receivable
account shall be set up against the payor for the amount.

14. Status of Appropriations. Commitments and Balances

The Status of Appropriations, Commitments and Balances (SACB) of each

barangay under the city/municipal shall be consolidated by the City/Municipal
Budget Officer.

15. Trial Balance

The two-money column trial balance shall be used.

16. Financial Statements

The Barangay Accounting System requires the preparation of the following

financial statements:

a) Balance Sheet (Detailed and Condensed)

 b) Statement of Income and Expenses (Detailed and Condensed)
c) Statement of Cash Flows (Direct Method)
d) Statement of Changes in Government Equity

The City/Municipal Accountant shall furnish the Sangguniang Barangay and The
Auditor/ Audit Team Leader with financial statements within thirty (30) days after
the close of each month.

17. Schedules Supporting the Financial Statements

The following schedules supporting the financial statements prepared by barangay

shall be used

a) Schedule of Public Infrastructures and Reforestation Projects (if

applicable)
b) Schedule of Accounts Payable
c) Schedule of Accounts Receivable

18. Consolidated Financial Statements and Schedules

Consolidated financial statements and schedules of all barangays under the

city/municipality and the accompanying Statement of Management’s
Responsibility for Financial Statements shall be submitted in printed and digital
copy by the City/Municipal Accountant to the Government Accountancy and
Financial Management Information System (GAFMIS) Sector. Commission on
Audit within sixty (60) days after the 31st day of December each year, copy
furnished the Auditor/Audit Team Leader, together with the financial statements of
the City/Municipality.

19. E-NGAS

Whenever possible, the use of the Electronic New Government Accounting System
(E-NGAS) at the City/Municipality level is encouraged to facilitate the recording of
barangay transactions and to hasten the consolidation of all barangay financial
statements and reports.
BARANGAY ACCOUNTING SYSTEM PLAN
The Barangay Accounting System Plan shows the accounting flow of barangay
transactions in the books maintained by the City/Municipal Accountant. It starts with the
receipt of the certified registers/reports from the Barangay Record Keeper on or before
the 5th day of the following month: the recording of the barangay financial transactions in
the books of the original and final entry and the ultimate conversion into financial
information as presented in the financial statements.
The Barangay Accounting Plan consists the following major types of transactions:
1.Appropriation and Commitments
2.Collections and Deposits
3.Disbursements
4.Supplies and Materials; Property, Plant and Equipment, Public Infrastructures
and Reforestation Projects

Appropriations and Commitments

Section 29, par 1 of the Constitution provides that: No money shall be paid out of the
treasury except in pursuance of an appropriation made by law. Laws, rules and
regulations of the government provide that all disbursements of public funds, except those
received for specific purposes, shall be covered by an approved General Appropriation
Ordinance (GAO) authorizing appropriation for the annual budget, the expenditures items
of which shall be in accordance with the Philippine Government Chart of Accounts under
NGAS. Unless authorized by the DBM and covered by subsequent Sangguniang
Barangay Resolution approving the appropriation, in no case shall commitments exceed
the approved appropriation.
Appropriations are amounts in the annual or supplemental budget that are authorized by
the Sanggunian or legislative body to be obligated or spent for the undertaking of a
particular function, program, activity or project, for which services have been rendered or
goods delivered.
Commitments, synonymous with obligations, are amounts earmarked by the barangay,
arising from an act of a duly authorized official, which binds the barangay to the immediate
or eventual payment of a sum of money. Charges (deductions) against the appropriated
funds shall be based on the commitments made by the Barangay as shown in the
Disbursement Vouchers. Payroll for personal services, Contracts or Purchase Orders,
and Purchase Requests.
The Kagawad, designated as Chairman of Committee on Appropriations shall be
responsible in monitoring the approved appropriations and the charges against the
following funds:
1. General Fund
2. 20% Development Fund
 3. Calamity Fund (5%)
4. Sangguniang Kabataan Fund (10%)
5. Gender and Development Fund

The Committee on Appropriations shall monitor the use of appropriated funds through the
Registry of Appropriations and commitments (RAC), which shall be maintained by fund
class, such as: RACPS, for personal services (PS); RACMOOE, for maintenance and
other operating expenses (MOOE) RACCO, for capital outlay (CO); and RACFE, for
financial expenses (FE). Commitments/Charges for Personal Services, Maintenance and
Other Operating Expenses, Capital Outlay, and Financial Expenses shall be recorded in
their respective Registry of Appropriation and Commitments for the General Fund (GF).
Commitments/Charges against the Calamity Fund (CF), 20% Development Fund (DF),
Sangguniang Kabataan Fund (SKF), and Gender and Development Fund (GDF) shall be
recorded in their respective Registry and Appropriations Commitments with detailed
breakdown of expenditures.

Expenses for personal services, maintenance and other operating expenses, and
financial expenses shall be charged against respective appropriation; while investments,
purchase of property, plant and equipment, and construction of public infrastructures and
reforestation projects shall be charged against appropriation for capital outlay.

The balance of appropriations for Capital Outlay, 20% Development Fund, and
Sangguniang Kabataan Fund shall be valid until fully spent or until the planned activity is
completed. Balances at year-end of other appropriations, such as, PS, MOOE, FE, and
CF, shall revert to unappropriated status.

To check on the utilization of the appropriated funds of the barangays, the Barangay
Record Keeper shall prepare the yearly Status of Appropriations, Commitments and
Balances, based on the Registries of Appropriations and commitments of different fund
classes, to be submitted by the Chairman of Committee on Appropriations to the
City/Municipal Budget Officer on the 5 day of January of the ensuing year. The Status of
Appropriations. Commitments and Balances of each Barangay shall be consolidated by
the City/Municipal Budget Officer, who will submit the said report, within sixty (60) days
after the 31" of December, to Government Accountancy and Financial Management
Information System (GAFMIS) - COA through auditor, to DBM through its Regional
Offices, and to City/Municipal Budget Officer.
ILLUSTRATION:
On January 2, 2019, the Barangay Jose Rizal, Dinalupihan, Bataan receives of copies of
General Appropriation Ordinance (GAO) for the following approved appropriations for the
fiscal year 2019:

Journal entry/Memo entry:

• To record approved appropriations in the respective Registry of Appropriations and
Commitments
ILLUSTRATION:
On January 15, 2019, the Barangay Jose Rizal, Dinalupihan, Bataan incurred the
following commitments/charges:

Journal entry/Memo entry;

• To record commitments/charges incurred.
Receipts and Deposits

Receipts represent all collections in form of cash and checks received by the Barangay
for a given period such as: share in national taxes and revenues, Barangay fees and
taxes (e.g. clearance / certification fees, taxes imposed on stores within the barangay,
etc.), other fees and charges (e.g. fund raising activities, fees from cockpits operations,
etc.) and other sources (e.g. subsidies from National Government, Provinces, Cities, and
Municipalities, grants and donations, etc.)
Deposits represent money or its equivalent received by the bank for safekeeping and for
credit to a checking, savings, or time deposit account of an agency.
The Barangay Treasurer shall be responsible in handling collections of income and other
receipts of the Barangay and the deposit of the same with Authorized Government
Depository Bank (AGDB), such as: Development Bank of the Philippines, Land Bank of
the Philippines, and Veterans Bank of the Philippines. In the absence of an AGDB,
deposits may be made in any nearest bank authorized by the Monetary Board of the
Bangko Sentral ng Pilipinas (BSP). Deposits with AGDB shall be made intact daily or not
later than the following banking day. In case where travel time to the depository bank is
more than a day, deposits shall be made at least once a week or as soon as the
collections reach 10,000.
All collections, in cash or in check, shall be acknowledged by the issuance of a pre-
numbered Official Receipt or its equivalent like Real Property Tax. Receipt and
Community Tax Certificate subject to proper custody, accountability, and audit, which
shall be secured from the City/Municipal Treasurer. No temporary or provisional receipts
shall be issued to acknowledge collections. All collections by the Barangay Treasurer for
barangay shall be reported in the Summary of Collections and Deposits (SCD).
The Barangay Treasurer, as deputized by the City/Municipal Treasurer, is authorized to
collect Real Property Tax, Community Tax, etc. Collections made on behalf of the
City/Municipal Treasurer shall be remitted intact daily to the City/Municipal Treasurer.
Where travel time to the Treasurer's office is more than a day, remittances shall be made
at least once a week or as soon as the collections reach 5,000. Remittances shall be
supported by a Summary of Collections and Remittances (SCR).
The Barangay Collector, as deputized by Sangguniang Barangay (SB), is authorized to
collect market fees, parking fees, etc. on behalf of the Barangay Treasurer. Collections
of this Deputized Barangay Collector (DBC) shall remitted daily to Barangay Treasurer.
The Barangay Treasurer (BT) shall be the custodian of all accountable forms. The BT
and DBC shall render their Report of Accountability for Accountable Forms and there shall
be no transfer of accountable forms between/among DBC. The BT, as well as the Punong
Barangay (PB) and all accountable officers (AOs) shall be bonded in accordance with
DILG (department of interior and local government) Memo Circular No. 99-186, Section
305(f), RA 7160. The corresponding premium shall be paid out of the barangay funds.

ILLUSTRATION:
During January of the current year, the Barangay Jose Rizal, Dinalupihan, Bataan made
the following collections and remitted/deposited the same to city treasurer and AGDB,
respectively.

Community tax certificate (as deputized by city treasurer) 2,000

Barangay:
Permit fees 5,000
Clearance and certificate fees 8,000
Garbage fees 10,000
Financial assistance from the office of the municipal mayor 20,000
Financial assistance from the development assistance fund –
Congresswoman of Bataan 200,000
Motor vehicle from the development assistance fund –
Congresswoman of Bataan 300,000

Journal Entries:
Cash in Bank – LCCA 111 220,000
Subsidy from other LGUs 20,000
Subsidy from other NGAs 200,000
Receipt of development assistance

Motor Vehicle 241 300,000

Income from grants and donations 662 300,000
Receipt of development assistance

Disbursement
Disbursements refer to all cash/check paid out during a given period of settlement of
government expenditures/payables. It also represents the movement of cash from an
Authorized Government Depository Bank (AGDB) or from the Barangay
Treasurer/authorized disbursing officer to the final recipient. Existing rules and regulations
require that all disbursements of public funds be supported by documents necessary to
prove their validity, propriety, and legality.
Basic requirements applicable to all classes of barangay disbursements are:

1. Existence of appropriation is sufficient to cover the expenses.

2. Legality of the expenses and in conformity with rules and regulations.
3. Approval of the expenses by the Punong Barangay.
4. Submission of documentary evidence to establish the validity of the expenses.
The following registers shall be maintained for barangay disbursements:

1. Check Disbursements Register

2. Petty Cash Fund Register
3. Cash Disbursements Register
4. Cash on Hand and in Bank Register

Mode of Disbursements

Modes of Disbursements may be classified into two, namely: 1.) By Cash, and 2.) By
Check. Disbursements by checks and in cash shall be recorded in the books through a
Journal Entry Voucher (JEV) based on certified Check Disbursements Register and Cash
Disbursements Register. It is submitted by the Barangay Record Keeper to the
City/Municipal Accountant on or before the 5th day of the following month.
1. By Check
Commercial check for disbursements is covered by deposit with Authorized Government
Depository Bank. The check shall be signed by the Barangay Treasurer and
countersigned Punong Barangay. All check issued, including cancelled ones, shall be
recorded on a daily basis by the Barangay Treasurer in correct numerical sequence in
the Summary of Checks Issued and Cash on Hand and in Bank Register. The Summary
of Checks Issued shall be submitted to the Barangay Record Keeper weekly.
2. By Cash
A). Cash Advances for Salaries, Honoraria and Allowances
Cash advance was given to Barangay Treasurer/Accountable Officer and shall be used
solely for payment of salaries, honoraria, and other allowances due the barangay officials
and employees. The Barangay Record Keeper shall record the cash advance in the Cash
Disbursements Register based on the Summary of Checks Issued submitted by Barangay
Treasurer. The Barangay Treasurer / Accountable Officer shall record all payments out
of cash advances for payroll in the Summary of Cash Payments. The cash advance shall
not be used for encashment of checks or for liquidation of previous cash advances.
Succeeding cash advance shall be granted only after full liquidation of the previous cash
advance.
ILLUSTRATION:

The Barangay Jose Rizal, Dinalupihan, Bataan received a dully approved journal entry
voucher from municipal accountant representing payroll of barangay officials for the
period January 1 – 15, 2019. The amount of 10,000 including withholding tax of 1,000
was paid. Said payroll was previously recorded in the Registry of Appropriation and
Commitments – Personal Services.
Journal Entries:
Salaries and wages – Regular 701 10,000
Payroll fund 106 9,000
Due to BIR 412 1,000
Payment of payroll

Due to BIR 412 1,000

Cash in Bank – LCCA 111 1,000
Remittance of withholding tax to BIR

B.) Cash advance for Travel and Special Purpose/Time bound undertakings
The grant of cash advance, whether local or foreign travel shall be covered by COA
Circular No. 96-004 and EO No. 298, as amended. Local travel must be supported by
travel order approved in accordance with Section 3, EO No. 298; duly approved Itinerary
of Travel; and Certification from the Accountant that the previous cash advance has been
liquidated and accounted for in the books. Liquidation of cash advance for local travel
shall be done within 30 days (60 days for foreign travel) upon return to the official station;
and supported by approved Travel Order and Itinerary of Travel, plane/bus tickets or its
equivalent, other official receipts, Certificate of Appearance, and Liquidation Report. In
case of foreign travel, this is covered by Section. 1 and 2, EO No. 459. However, foreign
travels could be rarely be applied to barangays. Most of the time, barangay officials travel
locally.
ILLUSTRATION:
On January 5, 2019, the Barangay Jose Rizal granted cash advance for travel to Punong
Barangay to follow up barangay matters at the regional office of Department of Interior
and Local Government in the amount of P1,000. Actual travel expenses incurred
amounted to P900 and the excess amount was appropriately refunded.
Journal Entries:
Advances to officers and employees 148 1,000
Cash in Bank – LCCA 111 1,000
Grant of cash advance for travel
 Travel expenses – local 751 900
Cash in vault 101 100
Advances to officers and employees 148 1,000
Refund of cash advance for travel

Cash advance for special purpose/time-bound undertakings, e.g. barangay general

assembly, public information drive/hearing, etc., shall be granted only to duly authorized
accountable officer/Special Disbursing Officer (SDO). Liquidation of cash advances for
this purpose shall be supported by Liquidation Report and pertinent documents; to be
submitted to the City/Municipal Accountant, through the Barangay Treasurer/Barangay
Record Keeper, together with any unexpended balance of cash advance, upon the
accomplishment of the purpose for which it was granted.

ILLUSTRATION:
On January 15, 2019, the Barangay Jose Rizal, Dinalupihan, Bataan granted P5,000 cash
advance to be used in Tokhang training program in its area. No unexpended amount
remains after the training. Upon accomplishment of the training program, the cash
advance was liquidated and the corresponding documents were submitted to the
Municipal Accountant.
Journal Entries:
Advances to officers and employees 148 5,000
Cash in Bank – LCCA 111 5,000
Grant of cash advance for training program

Training expenses 753 5,000

Advances to officers and employees 148 5,000
Liquidation of cash advance for training program

C.) Cash Advance for Petty Cash

The Barangay Treasurer/Petty Cash Fund Custodian may be authorized by the
Sangguniang Barangay to hold a petty cash amount that is sufficient to cover the recurring
petty expenses of the barangay but not to exceed 20% of the funds available and to the
credit of the Barangay Treasurer provided that such accountable officer shall be subject
to the bonding requirements. The Petty Cash Fund (PCF) shall be maintained using the
imprest system, and shall be replenished as soon as disbursements reach 75% or as
needed. All paid petty cash vouchers shall be reported in the Summary of Paid Petty Cash
Vouchers to be certified by the PCF Custodian. At year-end, any unreplenished expenses
shall be reported to the Barangay Record Keeper for submission to the City/Municipal
Accountant for recording in the books on or before the 5th day of January of the following
year.
In case the PCF Custodian resigns or ceases as custodian of the fund, full
accounting/liquidation of the fund shall be made. Any remaining cash shall be refunded
to close the account. In no case shall the remaining cash of the former PCF Custodian
be transferred to the incoming PCF Custodian. For complete accounting, the account of
the former PCF Custodian shall be closed and a new account shall be opened for the
incoming PCF Custodian.

ILLUSTRATION:
On December 1,,2019, the Sangguniang Barangay of Barangay Jose Rizal, Dinalupihan,
Bataan authorized its Barangay Treasurer to set up Petty Cash Fund in the amount of
1,000. On December 22, the PCF was replenished with the following expenses incurred
and paid.
Office supplies expenses 320
Postage and deliveries 50
Telephone expenses – Mobile 500

At year-end, the following expenses were recognized. The PCF was not replenished.
Office supplies expenses 100
Postage and deliveries 20
Telephone expenses – Mobile 200

Journal Entries:
Petty cash fund 104 1,000
Cash in Bank- LCCA 111 1,000
Set up petty cash fund

Officer supplies expenses 755 320

Postage and deliveries 771 50
Telephone expenses – Mobile 773 500
Cash in Bank – LCCA 111 870
Replenish the petty cash fund

Officer supplies expenses 755 100

Postage and deliveries 771 20
Telephone expenses – Mobile 773 200
Petty cash fund 104 320
Unreplenished expenses at year-end
Supplies and Materials
Requisition, procurement, issuance, physical inventory and loss of supplies and materials
are governed by existing government rules and regulation. Except in emergency cases,
all procurement shall be covered by Approved Procurement Program as required in RA
9184. Procurement of supplies shall be charged directly to Maintenance and Other
Operating Expenses in an appropriate expense account as provided in the chart of
accounts. Supplies, inspected by Inspection Committee, shall be accepted by Barangay
Treasurer, who will act as the Property Officer of the barangay, and shall maintain a
Supplies Logbook to record the receipts and issuance of the items. The cost of supplies
and materials acquired through purchase shall be based on the invoice cost. Smal! items
with a life of more than one year, but small enough to be considered as Property, Plant
and Equipment, like stapler, puncher, ruler, mechanical tools and other barangay
supplies, shall be accounted for as expense upon purchase. The cost of transporting
supplies and materials to the barangay shall be charged to Transportation and Delivery
Expense account.
Issuance of supplies and materials shall be covered by an approved Requisition and
Issue Slip. For accountability purposes, the recipient of small tangible items with
serviceable life of more than a year shall be issued an Inventory Custodian Slip (ICS).
The recipient shall be responsible for the upkeep of these items issued and accountable
thereto during its estimated useful life as determined by COA.
All obsolete supplies and materials and unserviceable small tangible items which could
no longer be used shall be turned over to the Barangay Treasurer for disposal. The
disposal shall be covered by Inventory and Inspection Report of Unserviceable Property
(IIRUP) and the corresponding Inventory Custodian Slip (ICS) shall be cancelled to
relieve the user from accountability.
Loss of supplies and materials shall be recorded in the Supplies Logbook as a reduction
from the stock.

ILLUSTRATION:
In January of the current year, the Barangay Jose Rizal, Dinalupihan, Bataan purchased
on account 300 packs of multi-vitamins in the amount of P30,000. After several days, the
above purchase, which was covered by Inspection and Acceptance Report, was paid, net
of 10% withholding tax. The 200 packs of these multi vitamins amounting to P20,000 were
distributed to its constituents.
Journal Entries:
Drugs and medicines expenses 759 30,000
Accounts payable 401 30,000
Purchase of multi-vitamins on account
 Accounts payable 401 30,000
Cash in Bank – LCCA 111 27,000
Due to BIR 412 3,000
Payment of accounts payable

Due to BIR 412 3,000

Cash in Bank – LCCA 111 3,000
Remittance of withholding tax to BIR

Again, note that it was assumed that no Tax Remittance Advice involved in this
transaction.
• To record receipt and issuance of multi vitamins in the Supplies Logbook.
SUPPLIES LOGBOOK
Date Ref. Description Qty Rec’d Issuance Balance
Qty Rec’d by
Jan. Multi Vitamins packs 300 300
Multi Vitamins packs 200 xxx 100

Note: Purchase of supplies and materials is charged to appropriate expense account.

Receipts and subsequent issuance shall be recorded in Supplies Logbook.
Property, Plant and Equipment, Public Infrastructure/ Reforestation project
Similar with supplies and materials, all procurement of property, plant and equipment shall
be in accordance with the requirements of RA 9184, and shall be insured with GSIS. All
deliveries shall be inspected by the Inspection committee headed by Barangay treasurer
with designated kagawad as member, and shall be accepted by the Barangay Treasurer,
who shall act as the property officer of the barangay. Procurement of property, plant and
equipment, construction of public infrastructures, and reforestation projects shall be
charged against appropriation of capital outlay and shall be recorded in appropriate
registry (i.e., Property, Plant and Equipment Registry) for control and monitoring
purposes.
The cost of property, plant and equipment acquired through purchase shall include the
purchase cost and all incidental costs incurred in bringing the asset to its intended location
and make it operational, such costs include transportation costs, insurance while in
transit, freight charges, handling cost, installation costs, trial nun costs, taxes and custom
duties, etc. These items shall be recorded as part of the total cost of the purchased asset.
Minor repairs and maintenance of property, plant and equipment shall be charged to
Repairs and Maintenance expenses of the specific property, plant and equipment, while
major repairs which resulted to increase in economic benefits or service potential shall be
capitalized.
Assets, under this category, acquired by contract shall be recorded at contract price plus
the cost of advertising the bidding, consultancy fee as supervision cost and other related
costs.
In case it is acquired by administration, the capitalizable cost include, but not limited to,
materials, labor and overhead expenses (indirect costs) incurred during construction,
supervision fee. rental of equipment, etc. All projects under construction shall be recorded
as Construction in Progress - Agency Assets. Upon completion and acceptance, this
account shall be closed to appropriate property, plant and equipment account.
Grants and donations in kind shall be recorded at appraised cost, in the absence of any
cost at the time of receipt; while transfer of property, plant and equipment from other
government agencies shall be recorded at net book value.
The property, plant and equipment shall be subject to depreciation using the straight line
method. A residual value of ten percent (10%) of the cost shall be provided. The estimated
useful life of the PPE as prescribed in COA Circular No. 2003-2007 dated December 11,
2003 shall be used in computing the rate of depreciation.
Recipient of PPE shall be covered by Property Acknowledgement Receipt. A physical
inventory count of all barangay property, plant and equipment shall be conducted by a
committee headed by the Barangay Treasurer or his authorized representative. Any
property, plant and equipment that are discovered unrecorded shall be booked up at
appraised cost and any unaccounted for shall be verified and in case of loss, the
accountable officer shall be held accountable.
Any unserviceable PPE shall be returned to the Barangay Treasurer for the cancellation
of the Property Acknowledgement Receipt and shall be reported in the Inventory and
Inspection Report of Unserviceable Property.
In case of property lost through force majeure, the, robbery or negligence, a Notice of
Loss shall be immediately rendered by the accountable officer to the Punong Barangay
through the Barangay Treasurer. Upon discovery of loss, police authorities and auditor
shall be notified by the accountable officer. Accountability for the lost property shall be
computed at sound value (replacement cost less accumulated depreciation on
replacement cost) Fully depreciated property, plant and equipment, which are still used
in operation, shall remain in the books for balance sheet presentation purposes, while
property, plant and equipment, which are not being used in operation, including those for
disposal, shall be reclassified as Other Assets and shall not be subject to depreciation.
Infrastructure projects, which are constructed for public use and not for the exclusive use
of the barangay, such as: roads, parks, plazas, bridges, monument, etc. shall be classified
as Public Infrastructure Projects, while marshland or swampland shall be classified as
Reforestation Projects.
The cost of the projects and cumulative cost of repairs and maintenance shall be recorded
separately in the appropriate Registries, such as Registry of Public Infrastructures-Roads,
Highways, and Bridges: Registry of Public Infrastructures - Parks, Plazas, and
Monuments; Registry of Reforestation Projects.
All projects under construction shall be recorded under the Construction in Progress -
Public Infrastructures and Reforestation Projects accounts. Upon completion, projects
shall be transferred to the specific Public Infrastructures and Reforestation Projects
accounts. Completed Public Infrastructure and Reforestation Projects during the year
shall be transferred to the appropriate Registry of Public Infrastructures and Reforestation
Projects at year end, where its cost and cumulative costs of repairs and maintenance
shall be monitored Repairs and maintenance shall be charged to the appropriate repairs
and maintenance expense account of the specific project. All Public Infrastructures and
Reforestation Projects shall now subject to depreciation under the Philippine Public
Sector and Accounting Standards (PPSAS). The total cost of each Public Infrastructures
and Reforestation Projects shall be disclosed in the Notes to Financial Statements.
Trial Balance and Adjusting/ Closing Entries
The trial balance is a list of all the accounts with balances in the General Ledger. The
accounts shall be listed following the sequence in charts of accounts. The trial balance is
prepared to check the equality of the debit and credit balances of all General Ledger
accounts as of a given period and to serve as basis for the preparation of financial
statements.
Types of Trial Balance
1. Pre- Closing Trial Balance
It is prepared after all the adjusting entries have been recorded in the General
Journal and the accounts are posted to the General Ledger and respective
Subsidiary Ledger.
2. Post- Closing Trial Balance
It is prepared at year-end after all the closing journal entries have been recorded
in the General Journal and the accounts are posted to the General Ledger.
Adjusting Journal Entries
Prior to the preparation of the Pre-Closing trial balance, adjusting journal entries shall be
prepared to recognize all revenues and expenses earned and incurred during the period
but not yet recorded. Depreciation shall be taken up monthly.
Closing Journal Entries
These journals entries shall be prepared to close the balances of all nominal/intermediate
accounts at the end of the year prior to the preparation of the Post-Closing trial balance
and generation of the financial statements.
Financial Statements and Supporting Schedules
The following barangay financial statements and supporting schedules shall be prepared
annually:
Financial Statements
• Balance Sheet
It is a formal statement showing financial condition of the barangay as of a particular
date. It shows information on the three elements of financial position namely: assets,
liabilities and government equity. It shall be prepared based on information taken from
the year-end Post Closing Trial balance.
• Statement of Income and Expenses
It is a statement showing the results of operations of the barangay for a particular
period. This statement shall be prepared based on the information taken from the Pre-
Closing Trial Balance.
• Statement of Cash Flow
It is a statement of summarizing all cash transactions of the barangay. It shall be
prepared using the Direct Method. It shows the amount of cash received and
disbursed for the operating, investing, financial activities and the net cash provided by
each activity as of given period. The ending balance of this statement should tally with
the cash balance per balance sheet.
• Statement of Changes in Government Equity
It is a statement showing the result or changes in Government Equity account as of a
given period.
• Notes to Financial Statements
It is an integral part of the financial statements. The disclosures pertain to additional
information to enhance the value of financial data in the financial statements. These
may explain information that cannot be expressed in money terms and description of
present accounting policies.
Supporting Schedules
• Schedule of Public Infrastructures
• Schedule of Reforestation Projects
• Schedule of Accounts Receivable
• Schedule of Accounts Payable

Statement of Management Responsibility

The financial statements shall be supported with the Statement of Management
Responsibility.
Duties & Responsibilities of the City/ Municipal Account and Budget Officer
The City/ Municipal Accountant and Budget Officer shall perform the following duties and
responsibilities for the barangay financial transactions:
City/ Municipal Accountant
1. Maintain the General Journal, General Ledger, Subsidiary Ledger and Registries
of Public Infrastructures/ Reforestation Projects for each of the barangay under the
city/ municipality.
2. Prepare Journal Entry Voucher
3. Record the Journal Entry in the General Journal and Post Journal entries to the
General Ledger and Subsidiary Ledgers.
4. Prepare the required monthly and year-end Trial Balances, Financial Statement
and reports/ schedules for each of the barangay.
5. Prepare and submit the Bank Reconciliation Statement to COA auditor/ audit team
leader concerned.
6. Consolidate the year- end trial balance and financial statement and
reports/schedules of the barangays.
7. Submit monthly and year-end barangay individual financial report to the
Sangguniang Barangay, and the printed and digital copies of the consolidated
year-end trial balances, financial statements and reports/schedules of the
barangay together with those of the city/municipality to GAFMIS-COA and to the
auditor/audit team leader concerned.

Budget Officer
1. Consolidate the Statement of Appropriations, Commitments and Balances of each
barangay for the five funds.
2. Submit the Consolidated Statement of Appropriations, Commitments and Balances of
all barangay under the city/ municipality to GAFMIS-COA through the auditor/audit team
leader and to DBM.
 PAMANTASAN NG LUNGSOD NG PASIG

GROUP
REPORT
IN
AUDITING FOR GOVERNMENT AND
NON-PROFIT ORGANIZATIONS
BSA 3B
GROUP 5

Prepared and submitted by:

Busaing, Ma. Christina A.

Dela Costa, Lorraine Jane T.

Galam, Marlyn P.

Hernandez, Flowny M.

Lazatin, Rose Ann E.

Villanueva, Alleah G.

Submitted to:

Prof. Rolando Robledo

 PAMANTASAN NG LUNGSOD NG PASIG

Hospital Foundations
Voluntary Health and Welfare Organizations

MA. CHRISTINA BUSAING

Healthcare Organization - Presentation of revenues

Health Care Organizations

Health care organizations include hospitals, clinics, medical group practices, individual practice
associations, individual practitioners, emergency care facilities, laboratories, surgery centers, other
ambulatory care organizations, continuing care retirement communities, health maintenance
organizations, home health agencies, nursing homes, and rehabilitation centers.

In accordance with the "AICPA Audit and Accounting Guide, Health Care Organizations," the
following are the accounting requirements unique to healthcare organizations:
1. Components of a complete set of financial statements
2. Presentation of revenues in the statement of operations
3. Presentation of contributions in the statement of operations
4. Disclosure of performance indicator

Financial statements of a healthcare organization

According to the "AICPA Audit and Accounting Guide, Health Care Organizations,” health care
organizations shall prepare the following statements:
a. Statement of financial position
b. Statement of operations (in lieu of a statement of activities)
c. Statement of changes in net assets
d. Statement of cash flows, and
e. Notes to the financial statements.

Presentation of revenues in the statement of operations

Revenues in the statement of operations are classified into the following:
a. Net patient revenue - gross patient service revenue less contractual adjustments, employee
discounts and billed charity care.

b. Premium revenue – results from capitation agreements

c. Other revenues - all other revenues not classifiable as " patient revenue or premium revenue
 PAMANTASAN NG LUNGSOD NG PASIG

LORRAINE JANE DELA COSTA

Contractual Adjustments

A portion of a hospital's revenues is collectible from third-party payors, such as the

Philippine Health Insurance Corporation (PhilHealth) and other health insurance providers. In this
regard, a contractual adjustment may arise from the reimburse agreement.

For example, the hospital may consider P60,000 a fair price for a service but agrees with
PhilHealth to accept only ₱58,000. The difference of ₱2,000 represents the contractual adjustment
written off as a direct reduction to patient service.

Employee discounts

● Special discounts only for NPOs employees

● Employee discounts are accounted for as a direct reduction.

Charity care

● Free services for patients

● Not recognized, but rather disclosed in the notes.

Illustration: Net patient service revenue

ABC Hospital, an NPO, bills ₱600,000 for services rendered to patients, ₱500,000 of which
is charged to PhilHealth. It is estimated that only ₱530,000 will be collected. Of the ₱70,000
difference, ₱35,000 represent contractual adjustments with PhilHealth, ₱ 5,000 for employee
discounts, ₱ 20,000 for charity care, and ₱ 10,000 for uncollectible accounts.

Requirement: How much is the net patient service revenue?

Solution:

Gross patient service revenue ₱600,000

Less: Contractual adjustments (35,000)

 PAMANTASAN NG LUNGSOD NG PASIG

Employee discounts (5,000)

Charity care (20,000)

Net patient service revenue ₱540,000

Journal entries:

(date) Accounts receivable – patients 100,000

Accounts receivable – PhilHealth 500,000

Patients service revenue 600,000

to accrue patient service revenue.

Patients service revenue 35,000

Accounts receivable – PhilHealth 35,000

to recognize the contractual

adjustments representing amounts not
expected to be collected from PhilHealth.

Patients service revenue 5,000

Accounts receivable – patients 5,000

to reduce patients' service revenue

for special discounts allowed to employees.
 PAMANTASAN NG LUNGSOD NG PASIG

Patients service revenue 20,000

Accounts receivable – patients 20,000

to reduce patients' service revenue

for charity care.

Bad debt expense 10,000

Allowance for doubtful accounts 10,000

to accrue uncollectible accounts.

MARLYN GALAM
Capitation Agreements - Illustrations Other Revenues

Capitation agreements are agreements with third parties based on the number of employees
instead of services rendered. SFAS No. 117 requires revenues from capitation agreements to be
shown separately on the statement of operations under the caption “Premium Revenue”, which is
a line item below net patient revenue.

Illustration: Capitation Agreement

ABC Hospital, an NPO, agreed to provide medical services to XYZ’s 100 employees for Php 500
per month, per employee. In April 20x1, only 20 employees availed of medical services.

Requirement:
Provide the entry to recognize revenue from the capitation agreement.

Solution:

April 30, 20x1 Accounts Receivable (Php 500 x 100) 50,000

Premium Revenue 50,000

To accrue billings for the month of April 20x1 under the capitation
 PAMANTASAN NG LUNGSOD NG PASIG

agreement.

Notice that even though only 20 employees availed of the services, the total amount due on the
contract is accrued.

Other Revenues
Other Revenues consist of revenues other than patient service revenues and premium revenues.
Examples are the revenues from the hospital’s pharmacy, parking deck, flower and gift shop,
educational programs, donated materials and services.

Illustration: Other Revenues

ABC Hospital, an NPO, had the following transactions during the period:
a. Sales of Php 120,000 from gift shop and cafeteria.
b. Received Php 20,000 dividends from donated shares. The use of dividends is unrestricted.
c. A computer consultant upgraded ABC’s information system for free, ABC would have
paid Php 50,000 for those services if they had not been donated.
d. Received donations of medicines worth Php 10,000 from a pharmaceutical company.

Requirement:
Compute for the total other revenues to be presented in ABC’s statement of operations for the
period.

Solution
Sales from gift shop and cafeteria 120,000
Dividends received 20,000
Professional services received 50,000
Donated supplies 10,000
Other Revenues 200,000

FLOWNY HERNANDEZ
Presentation of contribution in the statement of operations

Unlike for other NPOs, health care organizations do not present restricted contributions on the
statement of operations as part of revenues. The revenues discussed above (i.e., net patient service
revenues, premium revenues, and other revenues) pertain only to unrestricted revenues and may
 PAMANTASAN NG LUNGSOD NG PASIG

include revenues from unrestricted contributions. Revenues from unrestricted contributions may
be separately indicated as such or included in the other revenues classification.

Revenues from restricted contributions are presented separately at the bottom part of the
statement of operations, after unrestricted revenues and expenses.

Illustration: Restricted contributions

ABC Hospital, an NPO, had the following receipts during the year:

Net patient revenues 1,000,000

Premium revenue 200,000

Sales from canteen 300,000

Investment income 50,000

Contributions to be used in renovating the Hospital 400,000

Requirement: How much is reported as total revenue in the revenues section of the statement of
operations?

Answer: ₱1,550,000 (1M + 200K + 300K + 50K). The restricted contribution is presented
separately from the revenues section of the statement of operations.

Disclosure of performance indicator

According to the AICPA Guide, the statement of operations shall provide a performance
indicator, such as operating income, revenue over expenses, etc. The policy used in determining
the performance indicator shall be disclosed in the notes.
Unrealized gains and losses on investments in securities part of the performance indicator, but
shall be reported on the statement of operations after the performance indicator.
are not a part of and the statement

ROSE ANN LAZATIN

Voluntary Health and Welfare Organizations
Voluntary Health and Welfare Organizations (VHWO) are nonprofit entities that derive their
revenues primarily from donations from the general public to be used for purposes connected with
health, welfare, or community services. Examples include: women and children's health and
welfare societies, human rights advocates, environmental protection organizations, religious
 PAMANTASAN NG LUNGSOD NG PASIG

organizations, museums and other cultural and arts societies, libraries, research and scientific
foundations, professional associations, private elementary schools, social clubs, and
fraternal organizations.

What distinguishes a VHWO providing health care services from a HealthCare Organization is the
source of revenue rather than the type of services provided. A VHWO derives its
revenues from donations from the general public while a HealthCare Organization derives its
revenues from patients.

The accounting requirement unique to VHWOs is the provision of a statement of functional

expenses that reports expenses by both functional (i.e., program and supporting) and
natural classifications (salaries expense, depreciation expense, etc.). According to SFAS No. 117,
the statement of functional expenses is useful in associating expenses with service efforts and
accomplishments of the organization.

Other nonprofit organizations

The general accounting requirements for NIOs apply to other non profit organizations. Thus, there
are actually no accounting spirements peculiar to these organizations

ALLEAH VILLANUEVA

Accounting for others assets held by NPOs

As mentioned earlier, the general principles of PFRSS apply to NPOS. Accordingly, an NPO shall:

● Use the accrual basis of accounting, in addition to the other 'general features' provided
under PAS 1.
● Apply PFRS 9 Financial Instruments (or PFRS for SMEs, as appropriate) for financial
assets and financial liabilities. Usually, NPOs account for marketable securities at fair
value with changes in fair values recognized in the statement of activities-similar to FVPL
securities (the FVOCI classification is not applicable to NPOS adopting the PFRS for
SMEs).

Under SFAS 124 Accounting for Certain Investments Held by Not-for-Profit

Organizations, the marketable securities of an NPO, consisting of either equity or debt
instruments, are measured at fair value. Changes in fair values are recognized in the statement of
activities. Also, marketable securities can be classified as either current or non-current assets.
 PAMANTASAN NG LUNGSOD NG PASIG

SFAS 124 does not apply to investments which result in significant influence or control.
Accounting Principles Board (APB) Opinion No. 18, also a U.S. GAAP, requires the use of the
equity method for investments held by NPOs that result in significant influence.

● Depreciate its depreciable assets in accordance with PAS 16, Property, Plant and
Equipment.
● Recognize impairment loss in accordance with PAS 36 Impairment of Assets when an
asset's carrying amount exceeds its recoverable amount.
● Account for leases (other than those qualifying as contributions) in accordance with PFRS
16 Leases.

The Actual Example under the “Voluntary Health and Welfare Organizations”

We chose to gather information in the Philippine Red Cross Rizal Chapter Pasig-Pateros
Branch located at 2nd Floor Old Philippine Red Cross Building, 611 Shaw Boulevard Barangay
Kapitolyo, Pasig City.
 PAMANTASAN NG LUNGSOD NG PASIG

Here are the various questions regarding the Non-Profit Organization “Philippine Red Cross Rizal
Chapter Pasig-Pateros”. It is a non-profit, donor-funded, volunteer, humanitarian organization
headquartered in Pasig City wherein as of the moment they have 109 members. As we conduct an
interview with Ms. Lyn Tumagan, 27 years old, the branch bookkeeper for 7 years.

1. What is your Mission, Vision, Goals or Objectives?

Mission: The Philippine Red Cross will provide a sustained and effective humanitarian
service committed to build resilient communities, ran by well-trained and dedicated staff
and volunteers imbued with integrity, equipped with the necessary logistics and the
maximum usage of information technology. We will continue to expand our volunteer
network in every part of the country to ensure swift delivery of our services.

Vision: To be the foremost humanitarian organization ready to meet the challenges and
capable of rapid delivery of humanitarian services in order to prevent and alleviate human
suffering and uplift the dignity of the most vulnerable.
 PAMANTASAN NG LUNGSOD NG PASIG

Goals or Objectives: We take pride in urging all Filipinos to take part in the heroism of
the Philippine Red Cross by becoming a full-fledged member, volunteer, or donor.

2. What are your sources of revenue or funds? (Local or foreign). Do you have a mother
organization?
The Local Revenue or Funds are coming from the Donations of Company or based
on the Training Fee that the volunteer paid in the organization. Also, they have a mother
organization in which they refer to as the main branch of Philippine Red Cross Located in
the Radial Road 10, Port Area, Manila, 1000 Metro Manila.

3. What are your usual expenses?

The usual expenses they allocated are the transportation cost and the volunteer
allowance.

4. Are they taxable?

No, because they are a Non-Profit Organization.

5. Do you maintain books of accounts? Who is in charge of recording? Do you have a

bookkeeper?
They maintain books of accounts in which Ms. Lyn Tumagan is in charge of
recording it mainly as the bookkeeper branch of the Philippine Red Cross Rizal Chapter
Pasig-Pateros.

6. What are the challenges and issues that your organization usually experiences?
They experience a minimal donation since many business operations that support
the Red Cross are having a crucial financial effect due to the COVID-19 Pandemic. Also,
due to the government protocol and restrictions of lockdown and social distancing, it
lessens the number of trainees in which if there is no training meaning they will not receive
a training fee wherein part of their revenue or fund in the organization.

7. If yes, what are the interventions you conducted to address those challenges or issues?
Despite how difficult they experience nowadays, they are still following the
protocol of the Philippine Government which leads them to wait for the right time to
conduct a training activity.

References:
Philippine Red Cross | Humanitarian Organization in the Philippines. (n.d.).
https://redcross.org.ph/about-us/
PAMANTASAN NG LUNGSOD NG PASIG