MODULE FOR PUBLIC ACCOUNTING AND BUDGETING

WEEK 1

Listing of Students
Creating of Group Chat
Creating Google Classroom

WEEK 2

COURSE ORIENTATION

A. Course Overview
Public Accounting for national, government owned or
controlled corporations and local government units perform
accounting policies in accordance with the Philippine Public
Sector Accounting Standards (PPSAS) that are harmonized
with the International Public Sector Accounting Standards
(IPSAS).

It also contains guidelines and procedures to be adopted by

the accountants, budget officers, cashiers, property officers,
accountable officers and other finance personnel in recording
and reporting government financial transactions.

B. Distribution of Course Guide

WEEK 3

CHAPTER 1

DEVELOPMENT OF PUBLIC ACCOUNTING AND BUDGETING SYSTEM IN

THE PHILIPPINES FROM PRIOR YEARS UP TO PRESENT TIME

Effective January 1, 2002, the old system of government accounting

which has been in use since early 1960, was shifted to the New
Government Accounting System (NGAs). Former Chairman of
Commission on Audit (COA) Guillermo N. Carague issued COA Circular
No. 2001-004 on October 30, 2001 for the implementation of the NGAs.
This is in pursuance to Section 2, paragraph 2, Article IX-D of the 1987
Constitution, that the COA has the exclusive authority to promulgate
accounting and auditing rules and regulations.

The shift to the new accounting procedures was prompted by the need
to simplify the government accounting system in order to facilitate the
process of recording transaction and the preparation of financial
reports, and ultimately expand the numbering of users who can use
and understand the accounting system and the output it produces.

We are now in the age of power computers, globalization,

interconnectivity and the demand for real-time information, and more
analytical reports. It is time to adopt a new system and join the rest of
the world.

Recent developments brought about by the Philippine Public Finance

Management Reforms and significant changes in the field of accounting
prompted the harmonization of the existing accounting. The
Commission revised the New Government Accounting System (NGAs)
Manual prescribed under Commission on Audit (COA) Circular No.
2002-002 dated June 18, 2002 to make it responsive to dynamic
changes and modern technology.

The Government Accounting Manual (GAM) is prescribed by COA

pursuant to Article IX-D, Section 2, paragraph 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, as unconscionable expenditures,
uses of government funds and properties.”

1. DEVELOPMENT OF ACCOUNTING AND BUDGETING SYSTEM FOR

THE NATIONAL GOVERNMENT AGENCIES (NGAs) AND
GOVERNMENT OWNED OR CONTROLLED CORPORATIONS
(GOCCs)

The manual presents the basic accounting policies and principles for
national government in accordance with the Philippine Public Sector
Accounting Standards (PPSAS) adopted thru COA Resolution No. 2014-
003 dated January 24, 2014 and other pertinent laws, rules and
regulations.

It includes the Revised Chart of Accounts (RCA) prescribed under COA

Circular No. 2013-002 dated January 30, 2013 as amended the
accounting procedures, books, registries, records, forms, reports, and
financial statements; and illustrative accounting entries.
The PPSAS are harmonized with the International Public Sector
Accounting Standards (IPSAS).

2. DEVELOPMENT OF ACCOUNTING AND BUDGETING SYSTEM FOR

THE LOCAL GOVERNMENT UNITS (LGUs)

To internationally align the financial reporting framework of the

Philippine Government, the Commission on Audit under its exclusive
authority granted in the 1987 Constitution to promulgate accounting
rules and regulations adopted the International Public Sector
Accounting Standards. The Commission harmonize the International
Public Sector Accounting Standards to the Philippine setting and now
known as the International Public Sector Accounting Standards (IPSAS).

The Local Government Sector through the dynamic leadership of

Assistant Commissioner Divinia M. Alagon initiated the constitution of a
team to develop the accounting manual for the local governments
compliant to the IPSAS.

The Government Accounting Manual for Local Government Units will

serve as guide to local government finance officers, accountants,
bookkeepers, budget officers, general service officers, and other
officers in the actual implementation of the new accounting framework
which shall be the basis in preparing and presenting
the general purpose financial statements.
WEEK 4

CHAPTER 2

BASIC PRINCIPLES OF GOVERNMENT ACCOUNTING AND GENERALLY

ACCEPTED ACCOUNTNG PRINCIPLES

Public Accounting – encompasses the process of analyzing, recording,

classifying, summarizing and communicating all transactions involving
the receipt, disposition of government funds and property and
interpreting the results thereof. (Section 109, P.D. 1445)

What are the objectives of Government or Public Accounting?

1. To produce information concerning past operations and present

conditions;
2. To provide a basis for guidance for future operations;
3. To provide control of the acts of public bodies and offices in the
receipt and disposition and utilizing of funds and property;
4. To report on the financial position and the results of operations of
government agencies for the operations of government agencies
for the information and guidance of all persons concerned.

Information of past operations and present conditions will enable

the evaluation of the performance of an agency from one period to
the next. The results of the evaluation may guide the manager on
what course of action to follow in a future operation, or the fund
needed for a project.

Public officers are accountable for the resources entrusted to them.

The accounting data will show whether the agency is achieving the
 objectives that have been set. The financial report will show the
extent of the agency’s financial and non-financial resources, which
have useful lives. An evaluation of this will tell the users of the
information services potentials of these resources or when
additional resources will be needed.

The accounting data will also show the obligations of the agency and
how such obligations have been incurred. The information should
tell its user the sources of resources, which will meet these
obligations. The information should show an analysis of the inflows
and outflow of resources, especially of financial resources.

What are the general purposes of government accounting?

1. To establish accountability over receipt, property and

expenditures and;
2. To generate information that permits continuous review of
government programs and efficiency with which they are
implemented.

As a process, it consolidates all activities pertaining to the gathering of

data, which are to be used as the basis for fiscal management
decisions. It includes:

1. Bookkeeping, referred to as analysis and recording;

2. Posting, grouping or classifying or similar item (e.g. arrangement of
items according to account classifications, liquidity or nature);
3. Preparation of periodic financial reports such as the trial balance, the
financial statements and other supporting schedules;
4. Analysis of the financial reports to determine their accuracy and
adequacy as well as the efficiency and effectiveness of agency
operations.
WEEK 5

CHAPTER 3

A. ACCOUNTING CONCEPTS AND CONVENTIONS

Theory on Concepts of Public Accounting

1. The entity concept – All economic activity is carried as by an

entity of some sort, be it an individual, a large corporations, a
charitable organization or a government unit. That entity is
separate and distinct from its owners and any other business
units.
2. The money measurement concept – All transactions are assumed
to be measured and recorded in stable monetary units.
3. The modified accrual concept – For each accounting period
expenses are recognized when they are incurred not necessarily
TTwhen cash is paid and income will be recognized when earned
not necessarily when cash is received except for transactions
where accrual basis is impractical or when other basis may be
required by law.
4. The going concern concept – Accounting for the entity is based on
the assumption that the enterprise will operate indefinitely.

Theory on Conventions of Public Accounting

1. Consistency – Consistency should be maintained once a method

or policy is adopted. All transactions should be recorded using
the same accounting principle adopted: otherwise, all
subsequent changes should be explained fully in the footnotes of
the financial statements.
2. Materiality – All trivial matters should be ignored. Although
personal judgment and common sense determine whether an
item is trivial or not, policy adoption is essential.
3. Objectivity – Transactions should be recorded in as objective a
manner as possible.
4. Conservatism – Avoid overstating estimates. Whatever there is a
need to estimate assets and liabilities, use the more conservative
value.

CHAPTER 4 Responsibility, Accountability and Liability over

Government Funds and Property

a. Responsibility over Government Funds and Property

1. 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. (Sec. 2, P.D. No. 1445)
2. 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. (Sec.
4(4), P.D. No. 1445)
3. The head of any agency of the government is immediately and
primarily responsible for all government funds and property
pertaining to his agency.
Persons entrusted with the possession or custody of the funds or
property under the agency head shall be immediately responsible
to him, without prejudice to the liability of either party to the
government. (Sec. 102, P.D. No. 1445)

b. Accountability over Government Funds and Property

1. Every officer of any government agency whose duties permit or
require the possession or custody of government funds or
property shall be accountable therefor and for the safekeeping
thereof in conformity with law. Every AO shall be properly bonded
in accordance with law. (Sec. 101, P.D. No. 1445; Section 50,
Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)
2. 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.
(Sec. 75, P.D. No. 14
3. When government funds or property are transferred from one
AO to another, or from an outgoing officer to his successor, it shall
be done upon properly itemized invoice and receipt which shall
invariably support the clearance to be issued to the relieved or
outgoing officer, subject to regulations of the Commission.
(Sec. 77, P.D. No. 1445)

c. Liability over Government Funds and Property

1. Expenditures 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 therefor. (Sec. 103, P.D. No. 1445)
2. 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. (Sec. 105(2), P.D. No. 1445)
3. No AO shall be relieved from liability by reason of his having
acted under the direction of a superior officer in paying out,
 applying, or disposing of the funds or property with which he is
chargeable, unless prior to that act, he notified the superior
officer in writing of the illegality of the payment, application, or
disposition. The officer directing any illegal payment or disposition
of the funds or property shall be primarily liable for the loss, while
the AO who fails to serve the required notice shall be secondarily
liable. (Sec. 106, P.D. No. 1445)

4. When a loss of government funds or property occurs while they

are in transit or the loss is caused by fire, theft, or other casualty
or force majeure, the officer accountable therefor or having
custody thereof shall immediately notify the Commission or the
auditor concerned and, within 30 days or such longer period as
the Commission or auditor may in the particular case allow, shall
present his application for relief, with the available supporting
evidence. Whenever warranted by the evidence, credit for the
loss shall be allowed. An officer who fails to comply with this
requirement shall not be relieved of liability or allowed credit for
any loss in the settlement of his accounts. (Sec. 73, P.D. No. 1445)

B. Responsibility Accounting

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.

1.Responsibility Center?
Responsibility center is a part, segment, unit or function of a
government agency, header by a manager, who is accountable for a
specified set of activities. Except for some, which derive most of their
income from collections of taxes and fees, national government
agencies are basically cost centers fees, national government agencies
ae 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.

2. Where does Accounting Responsibility emanate from?

Accounting responsibility emanates from the Constitution, laws,

policies, rules and regulations.

The Constitution of the Philippines, the fundamental law of the land,

mandated the keeping of the general accounts, promulgation of
accounting rules and the submission of reports covering the financial
condition and operation of the government.

WEEK 6

CHAPTER 5

GOVERNMENT AGENCIES THAT HAVE PRIMARY RESPONSIBILITY

OVER ACCOUNTING OPERATION OF THE NATIONAL GOVERNMENT
1. COMMISSION ON AUDIT – The Commission on Audit (COA) is an
independent constitutional commission mandated “to examine,
audit, and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government, or
any of its subdivisions, agencies, instrumentalities.” It has vital
role in the implementation of government accounting. The
Commission on Audit is mandated by the constitution to submit
to the President and the legislative body within the time fixed by
law, an annual financial report of the government, its subdivision,
agencies, and instrumentalities, including GOCCs; and recommend
measures necessary to improve efficiency and effectiveness
(Section 26, PD 1445)

What are the powers and functions of the Commission on Audit?

The powers and functions of the COA are provided under Article
IX-D, Section 2 of the 1986 Constitutions:

1. Examine, audit and settle in accordance with laws and

regulations, all accounts pertaining to the revenues, and
receipts of, and expenditures or uses of funds and property
owned or held in trust by, or pertaining to, the Government, or
an of its subdivisions, agencies, or instrumentalities, including
government owned or controlled corporations; keep the
general accounts of the government and for such period as
maybe provided by law, preserve the vouchers pertaining
thereto; and formulate accounting and auditing rules and
regulations including those for the prevention of irregular,
unnecessary, excessive or extravagant expenditures or uses of
funds and property.
2. Decide any case brought before it within sixty days from the
date of its submission for resolution unless, otherwise provided
 by law, any division, order or ruling of the commission may be
brought to the Supreme Court or certiorari by the aggrieved
party within thirty days from the receipt of a copy thereof.
3. Submit to the President within the time fixed by law, an annual
financial report of the government, its subdivision, agencies
and instrumentalities, including government owned and
controlled corporations, and recommend measures necessary
to improve their efficiency and effectiveness. It shall submit
such other reports as may be required by law.
4. Perform such other duties and functions as may be prescribed
by law.

2. THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM)

The DBM determines accounting and other items of information

needed to monitor budget performance and assess the
effectiveness of agency operations. It prescribes the forms,
schedule of submission and other components of reporting
systems needed to accomplish and submit the required
information. It issued the Statement of Allotment Release Order
(SARO) in accordance with the budget as well as Notice of Cash
Allocation

What are the powers and functions of the Dept of Budget and
Management?

P.D. 999 enumerates the powers and functions of the Dept of Budget
and Management

1. To prepare the budget and other appropriation proposals under

such policies as the President may adopt. To this end, the office
 shall have authority to assemble, correlate, revise, reduce or
increase the request for appropriations of the National
Government and to see how their respective programs are
related to each other and how they may be shaped into a
harmonious programs and fiscal policy for the National
government.
2. To exercise functional supervision over financial and
management staffs or agencies particularly budget officers and
management analysis, and provide technical assistance and
compensation, and position classification, management
evaluation and other related areas.
3. To study departments and agencies, including government
owned and/or controlled corporations and their subsidiaries for
the purpose or enabling the President to determine what
changes, with a view to securing greater economy and efficiency
in the conduct of public service, should be made in (1) existing
organization, activities, and methods of business of such
departments or agencies, (2) the appropriation therefore, (3)
THE assignment of particular services (4) the regrouping of
services, and (5) the evaluation of cost-benefit effectiveness of
government agencies.
4. To develop a reporting system which will allow the monitoring of
fund releases, including the design of report forms to be
accomplish and by agencies through their accounting, budgeting
and other units, and to issued rules and regulations applicable to
the accomplishment and submission of such forms.
5. To conduct training programs to be attended by personnel of
national and local government and private sector particularly for
financial and management staffs of government agencies, in
budgeting organization design, management reporting and
control compensation and position classification, management
evaluation and other related to the agencies, work acting under
 the guidelines as may be formulated by the Civil Service
Commission.

A. THE DEPARTMENT OF FINANCE

The Department of Finance is primarily responsible for the sound

and efficient management of the financial resources of the
government, its subdivisions, agencies and instrumentalities. It is
responsible for formulating policies on financial management and
for the generation and management of the financial resources of
government, ensuring that said resources are generated and
managed judiciously and in a manner supportive of development
objectives.

The Bureau of Treasury

The Bureau of Treasury headed by the National Treasurer is the

principal custodian of all national government funds. In addition
to its policy formulation functions, the BTr maintains accounts of
the financial transaction of all national departments, bureaus,
agencies and instrumentalities. It manages the cash resources of
the government and performs banking functions in relation to the
receipt and disbursements of national funds. It also manages
controls and services public debts from domestic or foreign
sources. Is authorized under the Revised Administrative Code to:
 a. Receive and keep government funds, manage and control the
disbursement thereof, and
b. Maintain accounts of financial transactions of all national
government agencies and instrumentalities.

WEEK 7

CHAPTER 6 THE GOVERNMENT AGENCIES

This consists of the various organizational units. i.e. National, local

and government owned/or controlled corporations. Each agency is
required to establish and maintain a system of accounting for its
financial resources and operations in accordance with pertinent rules
and regulations. Accounts should be kept in such details as necessary
to meet the needs of agency management to furnish information to
fiscal and control agencies, i.e. DBM, COA and BTr (Sec. III, P.D. 1445)

THE THREE GENERAL GROUPS OF AGENCIES:

A. National Government Agencies consisting of departments,

bureaus, commissions, boards, offices, tribunals, councils, authorities,
administrations, centers, state universities and colleges.
1. Congress of the Phillippines
Senate Electoral Tribunal
House of Representatives Electoral Tribunal
2. Office of the President
The President’s Offices
3. Department of Agrarian Reform
Office of the Secretary
4. Department of Agriculture
Office of the Secretary
Bureau of Fisheries
Fertilizer and Pesticide Authority
National Meat Inspection Service

NOTE: The preceding National Government Department and Agencies

are just part of the data which can be viewed in the following link.

www.dbm.gov.ph
then click Budget of Expenditures and Sources of Financing 2022
then click Table B1 or C1 for Nat. Gov. Expenditures or Revenues

B.Local Government Units – composed of provinces, chartered cities,

municipalities and barangays
NATIONAL CAPITAL REGION
Metro Manila Development Authority
Pateros
Caloocan City
Las Piñas City

NOTE: You can link to F1 after seeing the BESF from the
website of www.dbm.gov.ph

C. Government Owned or Controlled Corporations – which were

created by law to manage specific types of government business.
DEPT OF AGRICULTURE
 1. National Dairy Authority
2. National Food Authority
3. National Tobacco Administration

NOTE: YOU CAN OPEN LINK TABLE E.1 FOR CONTINUATION OF NAMES
OF GOCC
Fiscal responsibility rests directly with the chief or head of government
agency. As such, he is primarily responsible for the installation and
maintenance of the agency accounting system. The accounting unit,
division or department of agency is under his supervision and control.
(Sec. 2, P.D. 1445)

WEEK 8

CHAPTER 7 GOVERNMENT BUDGETING

Public Budgeting is a part of the process of assigning financial resources

to organization units so they can carry out their plans, and of
scheduling the use of these resources and the results to be achieved
outlined in the plan

WHAT ARE THE PURPOSES OF BUDGETING?

1. Tool of accountability – government agencies are responsible for
the management of programs for which the funds are
appropriated.
 2. Tool of management – it specifies either directly or indirectly or
implicitly, the cost, time and nature of expected results.
3. Instrument of economic policy
a. Indicates the direction of the economy since it expresses
intentions regarding the utilization of resources;
b. Leads to the determination of national growth and investment
goals;
c. Promotes macroeconomic balance in the economy;
d. Reduce inequalities;
e. Permit quick and meaningful measurement of its impact on the
national economy as a whole.

WHAT DOES A NATIONAL BUDGET MEAN?

The National Budget is the government’s estimate of its income and
expenditure, it is what the government plans to spend for its programs
and projects, and where the money will come from. It is based on what
the government thinks it will spend during the year are the sources of
what it hopes to have as funds, either from revenues or from
borrowing, with which to finance such expenditure.

THE NATIONAL BUDGET ARE ALLOCATED:

1. For the implementation of various programs and projects
2. For the operation of government offices
3. For payment of salaries of government employees
4. For payment of public debts.
Sec. 4. Classification of Expenditures. Expenditures of NGAs shall be
classified into categories as may be determined by the DBM including,
but not limited to the following:
a. Entity incurring the obligation;
b. Program, Activity and Project (PAP);
c. Object of expenditures, including personnel services (PS),
maintenance and other operating expenditures (MOOE), financial
expenses (FE), and capital outlays (CO);
THIS EXPENDITURE MAY BE LOOKED UP IN TERMS OF:
1. EXPENSE CLASS
1. Personnel Services – P1, 456.1 B for CY 2022.
*Salaries and other compensation of civil servants
*Implementation of the third tranche of the Salary
Standardization Law V
*Hiring of additional health care workers and teaching/non-
teaching personnel under the Dept of Health and Dept of
Education, respectively.
2. Maintenance and Other Operating Expenses (MOOE) – P2,072.6
B for CY 2022
*Day-to-day operations of national government agencies,
covering expenses for basic utilities and maintenance among
others
*Funding for government programs and services, such as the
Pantawid Pamilyang Pilipino Program, National Health Program,
and Universal Access to Quality Tertiary Education among others
*Subsidies to Government-Owned and/or Controlled Corporations
*Allotment to Local government units (LGUs)
3. Capital Outlays (CO) – P981.1 B for CY 2022
*Infrastructure programs and projects of various national
government agencies, such as the Dept of Public Works and
Highways and the Dept of Transportation, among others
4. Financial Expenses (FinEx) – P513.8B for CY 2022
*Management supervision/trusteeship fees, interest
expenses, guarantee fees, bank charges incurred when owning or
borrowing an asset or property

2.SECTOR
A. General Public Services - will receive this year 2022 P862.7
billion to ensure public order and safety, as well as the sufficient
management of government funds, among others.
B. Economic Services – will receive this year 2022 29.% of the
National Budget or P1.474 trillion, an increase of 14.4% over its
2021 allocation. It will primarily fund efforts to revitalize the
economy, such as the Build, Build, Build Program and
agricultural development.
C. Public Order and Safety – P176.0 B, Police services, P33.2 B, Law
courts, P23.7 B Fire protection services
D. Health - P80.B Health insurance, P70.7BPublic health services,
P67.8 B, Hospital services
E. Recreation, Culture and Religion – P1.5 B Cultural services,P647
M Broadcasting and publishing services, P571 M Recreational
and sporting services
 F. Education – P292.8B Pre-primary and primary education, P:248.0
B Secondary education, P114.1B Tertiary education
G. Social Protection – P115.7B Pantawid Pamilya Program, P76.1 B
Survivors(Gender and Development, Internall Displaced Persons,
and Relief Assistance)
H. Defense – P224.4 B to safeguard national security amid the
pandemic
I. Environmental Protection – P10.4 B Protection of biodiversity
and landscape, P3.9 B Wast management, P2.8 B Pollution
abatement
J. Housing and Community Amenities – P21.6 B Water supply, P2.1
B Community development, P1.5 B Housing development

3.REGIONS
A. CAR, Region I-III, NCR, Region IV-A , MIMAROPA, Region V-XII,
CARAGA and ARMM

HOW DOES THE NATIONAL BUDGET AFFECT THE ACCOUNTING LIFE?

The National budget is the financial translation of the programs and
projects, the government can put into action its plans and policies.
A. Programs – is a major purpose for which a government entity is
established and includes all functions and activities devoted to the
accomplishment of this purpose.
B. Project – is a subdivision of a program covering a homogeneous
group of activities and describes the work to be done.
C. Activity – is a definable segment of a project
 WEEK 9 MIDTERM EXAMINATION

WEEK 10

CHAPTER 8
SOURCES OF NATIONAL GOVERNMENT FUNDS
TAX PRINCIPLES, THEORIES AND POLICIES
A. Sources of Government Revenues
Tax Revenues – Compulsory charges or levies imposed by government
on good, services, transactions, individuals, entities, and others, arising
from the sovereign power of state.
Non-Tax Revenues – Revenues collected from sources other than
compulsory tax levies. Includes those collected in exchange for direct
services rendered by government agencies to the public, e.g. fees and
charges, or those arising from the government’s regulatory and
investment activities.

B. Nature of Tax and Non Tax Revenue

Tax revenues are classified as follows:
a. Excise taxes are taxes applicable to goods manufactured or
produced in the Philippines for domestic sale or consumption or for any
other disposition and to things imported. Such as: specific taxes and
compensating taxes on alcohol, cigar, playing cards, etc. license fees on
exported goods except wharfage fees; taxes imposed on products
manufactured, produced or assembled in the Philippines; mining taxes
and taxes on agricultural products except charges on forest products;
and taxes imposed by the government on the sale of foreign exchange.
b. License and business taxes which include taxes on business such
as privilege taxes, fixed taxes, percentage tax; taxes on occupation and
the practice of profession of accountancy, medicines, etc.
c. Income taxes which include taxes imposed on income from trades
or businesses and personal income taxes on salaries, dividends, capital
gains, short sales, rental and royalties, agricultural crops, etc. including
fines and penalties in relation to the collection of income taxes.
d. Import duties which includes all taxes on foreign goods levied in
accordance with the tariff laws, rules and regulations, and fines and
penalties in relation to the collection of import duties.
e. Other taxes and duties includes documentary stamps, wharfage
fees, estate, gift, residence, franchise, immigration taxes and fines and
penalties imposed.

Non-tax revenues are classified as follows:

a. Operating and service income (government service) which include
all income derived from government services such as registration fees,
survey fees, certification fees, etc., income derived from government
business operations such as rentals, hospital fees, arrastre and custom
charges, postal and communication charges etc. fines and penalties.
b. Miscellaneous income which include income derived from
reparations, income from refunds of prior year payments and proceeds
of supplies and stocks already charged to prior year operations,
miscellaneous contributions, etc.
c. Sale of assets includes money derived from the sale of public
lands, sale of buildings, structures, equipment, furniture, etc.
d. Income from public enterprises includes dividends from
government investments, interest earned on securities, deposits and
loans to public enterprises, etc.
e. Capital revenues are income derived from the sale of fixed capital
assets, stocks and intangible assets.
f. Grants are financial assistance from abroad that requires
monetary commitments on the part of the recipient.
g. Borrowings are loans, foreign or domestic for the development of
infrastructure or capital investment projects.
WHAT ARE THE SOURCES OF GOVERNMENT BORROWINGS?
Domestically, government borrows from:
Central Bank and Deposit Money Banks (commercial banks and rural
banks accepting demand deposits) and the non-monetary system such
as the thrift banks, non-bank financial intermediaries, non-bank thrift
institutions and private individuals.
Foreign sources:
1. International Monetary Fund
2. World Bank
TABLE C 1. REVENUE PROGRAM BY SOURCE
(IN MILLION PESOS)
2021 2022
ACTUAL ESTIMATE

TAX REVENUES 3,754,806 4,217,954

Taxes on Net Income and Profits 1,511,615 1,687,689
Taxes on Property 19,242 24,271

Taxes on Domestic Goods and Services 1,410,508 1,605.640

Taxes on International Trade
and Transactions 813,441 900,354

NON-TAX REVENUES 196,976 196,179

Fees and Charges 54,327 54,870
Income from Treasury Operations 23,346 20,474
NG Income Collected by the Btr 53,262 53,461
Other Non-Tax Revenues 66,041 67,374
Malampaya Royalties 23,462 22,928
Other Non-Tax Revenues 42,579 44,446
PRIVATIZATION 2,000 2,000
TOTAL REVENUES 3,953,781 4,416,132
 Reference: www.dbm.gov.ph,
Budget documents
DBM Publication
Budget of Expenditures and Sources of
Financing 2022 Table C.1, C.2, C.3 and C.4

TO KNOW THE BREAKDOWN OF TABLE C1, OPEN TABLE C3 AND TABLE 4 FOR
INFORMATION OF EACH DEPARTMENT AND AGENCIES

WEEK 11
CHAPTER 9 THE BUDGET PROCESS OF THE NATIONAL GOVERNMENT

How was 2021 budget crafted?

1. The government determines how much it can spend next year,
(The national government budget and the Central Economic Plan
of the country are both forecasts and contain elements of task-setting,
target objectives, as well as elements of planning. At the helm of
coordinating the various structures/agencies involved in national
budgeting is the Development Budget Coordination Committee (DBCC).
The Committee composed of the following:
1. Chairman - Budget Secretary
2. Members:
a. NEDA Director-General
b. Finance Secretary
c. Governor of Central Bank
d. Two representatives from the Office of the President)
2. The government forecasts growth and other macroeconomic
factors for the medium term.
3. Based on the forecast, it sets its revenue collection targets
4. It considers the deficit path it would take over the medium term.
For the medium term, a deficit of 2 percent of the GDP is
maintained. Thus the Budget was determined.

1. BUDGET PREPARATION – refers to the preparation of budget

estimates

1.1 Issuance of budget call (December of Previous Year)

(Budget Call – is a budget document issued by the DBM at the
start of the budget preparation phase. This document contains
the following:
a. Budget Priorities Framework, which sets budget priorities,
macroeconomic assumptions, and fiscal parameters for the
proposed budget; and
b. Guidelines, procedures, and prescribed forms in formulating
budget proposals. A separate Corporate Budget Call is
issued for government corporations and Local Budget
Memorandum for LGUs.)

1.2 Citizen Engagement/Regional Devt Council (RDC) Consultations

(January – February of Current Year)
(Government agencies engage citizens as they prepare their
proposed budgets, with civil society organizations)

1.3 Conduct of budget hearings and review of Tier 1 - February

(During first-tier budgeting, the DBM assesses agencies for the
following:
A. How much does an agency need to operate daily?
B. How did the agency spend its budget and deliver on
previous targets?
 C. How much does the agency need to keep a program
running?)

1.4 Program convergence (April of Current Year)

(For the preparation of income and expenditures, Chief
Accountant prepares the past (CY 2020), present (CY 2021)
while the Budget Officer prepares the estimate (CY 2022)

1.5 Submission of Tier II budget proposals for Budget Year

(April – May of Current Year)
( During second-tier budgeting, the DBM asks agencies the
following:
A Do their proposals fall under the Budget Priorities
Framework?
B. Does it have an implementation plan? Are beneficiaries
targeted and identified? For roads (e.g. farm-to-market
roads), is it supported by a network plan?
C. Do these proposals have a measurable impact to citizens?)

1.6 Conduct of budget hearings and review of Tier II for

Budget Year (May – June of Current Year)
(National Government agencies defend their proposal during
Technical Budget Hearing. After evaluating the proposals, the
DBM technical bureaus present their recommendations to the
Executive Review Board, which composed of DBM Secretary and
senior officials.)
(The DBM, the Dept of Finance, and the NEDA present the
proposed Budget before the President and the Cabinet for
discussion and approval.)

1.7 Consolidation, validation, and confirmation (June of Current

Year)
 ( The DBM validates the approved agency budgets and
consolidates these into Budget of Expenditures and other
budget documents.)

1.8 Approval of the proposed National Budget for Budget

Year (July of Current Year)
(The Budget of Expenditures and Sources of Financing and
other budget documents will be printed.)

1.9 Submission of the Proposed National Budget to the

Congress (July – August of Current Year)
(The President has consistently submitted the proposed Budget a
day after his State of the Nation address, much earlier than the
deadline set by the 1987 Constitution.)

2. BUDGET LEGISLATION – refers to the legislative consideration

of the budget
2.1 Budget deliberations in the House of Representatives
and Senate (August-October of Current Year)

(House Deliberation – The House Committee on

Appropriations holds public hearings on the proposed
Budget. Afterward, it sponsors its recommended General
Appropriations Bill (GAB) before the plenary. Once
approved, the House transmit the GAB to the Senate.)
September to November
(Senate Deliberation - The Senate conducts its own
committee hearings and plenary deliberations on the GAB.
To expedite the process, the Senate Committee on Finance
 usually start hearings well before the House formally
submits the GAB.)

November to December
(Bicameral Deliberation – After the House and Senate
approve their versions of the GAB, they constitute a panel to
the Bicameral Conference Committee, which discusses and
harmonizes conflicting provisions.

2.2 House and Senate ratifications on the General

Appropriations Bill (August-November of Current Year)
(The harmonized or “Bicam” version of the GAB is then sub
mitted back to both houses which they vote to ratify the
final GAB. Both houses then submit or “enrol” the ratified
GAB to the President.)

2.3 Enactment of the General Appropriations Act (GAA)

(December of Current Year)

(Budget legislation ends when the President signs the

General Appropriations Act (GAA) into law. Prior to this, the
President may veto or set conditions for implementation for
certain items in the GAA, which are contained in the
President’s Veto Message.)

3. BUDGET EXECUTION – it refers to the releasing of the allotments

to the different agencies
3.1 Early procurement activities (through out the year)
 (Monies are paid out from the Bureau of Treasury (Btr) to settle
government obligations.)
3.2 Submission of Monthly Disbursement Program (January and
through out the year)
(The DBM issues disbursement authorities such as the Notice of
Cash Allocation (NCA) to authorize an agency to pay the
obligations it incurs.)
3.3 Submission of Budget Execution Documents based on the
National Expenditure Program (November -December of Prior
Year)

(Agencies submit Budget Execution Documents to outline their

financial plans and performance targets for the year. The DBM
consolidates these plans into the budget program, which breaks
down the allotment and cash releases for each month of the
year.)

3.4 Awarding of Contracts (January of Current Year)

(Agencies incur liabilities which the national government will
pay for, as they implement programs, activities and projects.)
3.5 Submission of adjusted Budget Documents based on General
Appropriations Act (January of Current Year)
3.6Release of Notices of Cash Allocation (NCAs) for the 1st semester
3.7Release of NCAs for the 2nd semester (July of Current Year)

4. BUDGET ACCOUNTABILITY
4.1 Submission of quarterly Budget and Financial Accountability
Reports (Every quarter of the Current Year)
4.2 Posting of Disbursement Assessment Reports (Every month of the
Current Year)
4.3 Publication of Mid-Year Report for Current Year and Year-End
Report for Prior Year (August – September)
4.4 Conduct of audit (Within the following year)

ILLUSTRATIVE TRANSACTIONS WITH COMPUTATIONS FOR NATIONAL

GOVERNMENT BUDGET EXECUTION CYCLE

SAMPLE PROBLEM
1) Receipt of General Appropriations Act
One of the elementary schools in Caloocan received P2,400,000 for
one year based on the General Appropriations for CY 2022.
Special Allotment Release Order (SARO) shows the following:
Personnel Services (PS) P650,000
Maintenance and Other Operating Expenses (MOOE) 750,000
Capital Outlay (CO) 1,000,000
TOTAL P2,400,000
=========

No journal entry: Posting to the appropriate Registry of Appropriations

and Allotment (RAPAL) only
2) Receipt of Allotment from the DBM for Jan., 2022
Personnel Services P 54,000
Maintenance and Other Operating Expenses 60,000
Capital Outlay 84,000
Total P198,000
========

No journal entry: Posting to the appropriate Registry of Appropriations and

Allotment (RAPAL) and Registry of Allotments, Obligations and
Disbursements (RAOD) only

3) Incurrence of Obligation for Jan. 2022

Personnel Services P 50,000
Maintenance and Other Operating Expenses 55,000
Capital Outlay 78,000
Total P183,000
=======
No journal entry: Posting of Obligation Request and Status (ORS) to the
appropriate Registry of Allotments, Obligations and Disbursements (RAOD)
only

4) Receipt of Notice of Cash Allocation (NCA)

from the Dept of Budget and Management (DBM) P153,000

=======
Journal Entry:

Cash-Modified Disbursement System

(MDS) Regular 10104040 120,000
Subsidy from National Government 40301010 120,000
 To recognize receipt of NCA from the DBM

5) Current year’s purchases and delivery

Office Equipment 10605020 50,000
Accounts Payable 20101010 50,000
To recognize delivery of Office Equipment based on
Delivery Receipt (DR) and Inspection and Acceptance
Report (IAR)
Posting to the payable column of Section C of the Obligation Request and Status
(ORS)

6) Payment of Personnel Benefits

Set up of payable to Officers and Employees upon approval of
payroll
Salaries and Wages-Regular 50101010 50,000
Personnel Economic Relief Allowance
(PERA) 50102010 5,000
Due to BIR 20201010
2,250
Due to GSIS 20202020 3,600
Due to PAG IBIG 20202030 2,000
Due to Philhealth 20202040 300
Due to Officers and Employees 20101020 41,850

To recognize liabilities to officers and

Employees upon approval of payroll

Posting to the payable column of Section C of the Obligation Request

and Status (ORS)

7) Grant of Cash Advance to payroll

 Advances for Payroll 19901010 41,850
Cash-Modified Disbursement
System (MDS) Regular 10104040 41,850

To recognize grant of cash advance for

Payroll

Posting to the payments column of Section C of the Obligation Request

and Status (ORS). Posting to the disbursements column of the RAOD
based on the report of disbursements

8) Liquidation of Payroll Fund

Due to Officers and Employees 20101020 41,850

Advances to Payroll 19901010 41,850
To recognize liquidation of Payroll Fund
based on the Report of Disbursements
and supporting documents submitted by
the cashier

9) Payments of MOOE

Payment of Expenses
Traveling Expenses – Local 50201010 5,000
Training Expenses 50200010 8,000
Water Expenses 50204010 1,000
Electricity Expenses 50204020 2,000
Telephone Expenses 50205020 800
Janitorial Services 50212020 2,500
Security Services 50212030 3,000
Rent Expenses
Due to BIR (WITHHOLDING TAX) 20201010 1,635
Cash-Modified Disbursement System
(MDS) – Regular 10104040 20,665
 To recognize issuance of MDS checks based
on the Report of Checks Issued (RCI)

10) Payment of Accounts Payable

Purchase of Office Equipment worth P50,000
Accounts Payable 20101010 50,000
Due to BIR 20201010 2,500
Cash-Modified Disbursement
System (MDS) Regular 10104040 47,500

To recognize payment of accounts payable

11) Grant of cash advance for traveling expenses

Advances to Officers and Employees 19901040 2,000

Cash-Modified Disbursement
System (MDS) Regular 10104040 2,000
To recognize grant of cash advance
for travel – foreign

12) Liquidation of cash advance for

traveling expenses - foreign

Traveling Expenses – Foreign 50201020 1,900

Advances to Officers and Employees 19901040 1,900
To recognize liquidation of cash advance for
Foreign travel

13) Receipt and deposit of refund

of excess cash advance for
traveling expenses

Cash-Collecting Officers 10101010 100

Advances to Officers and Employees 19901040 100
To recognize refund of excess cash
advance for travel
 Cash-Treasury/Agency Deposit, Regular 10104010 100
Cash-Collecting Officers 10101010 100
To recognize remittance of the refund
of excess cash advance for travel

WEEK 12

CHAPTER 10 ACCOUNTING FOR BUDGETARY ACCOUNTS

Sec. 34. Use of Appropriated Funds. All moneys appropriated for
functions, activities, projects and programs shall be available solely for
the specific purposes for which these are appropriated.
Sec. 35. Appropriation for Loan Proceeds. Expenditures funded by
foreign and domestic borrowings shall be included within the
expenditure program of the entity concerned.
Loan proceeds, whether in cash or in kind, shall not be used without
the corresponding release of funds through a Special Budget.
TERMS IN PUBLIC ACCOUNTING
a. Allotment – is an authorization issued by the DBM to NGAs to incur
obligations for specified amounts contained in a legislative
appropriation in the form of budget release documents. It is also
referred to as Obligational Authority.
b. Appropriation – is the authorization made by a legislative body to
allocate funds for purposes specified by the legislative or similar
authority.
c. Approved Budget – is the expenditure authority derived from
appropriation laws, government ordinances, and other decisions
related to the anticipated revenue or receipts for the budgetary period
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
d. Automatic Appropriations – are the authorizations programmed
annually or for some other period prescribed by law, by virtue of
outstanding legislation which does not require periodic action by
Congress.
e. Budget Information – the budgetary information consists of, among
others, data on appropriations or the approved budget, allotments,
obligations, revenues and other receipts, and disbursements.
f. Continuing Appropriations – are the authorizations to support
obligations for a specific purpose or project, such as multi-year
construction projects which require the incurrence of obligations
even beyond the budget year.
h. Final Budget – is the original budget adjusted for all reserves, carry-
over amounts, transfers, allocations and other authorized legislative or
similar authority changes applicable to the budget period.
i. New General Appropriations – are annual authorizations for incurring
obligations during a specified budget year, as listed in the GAA.
a. Receipt of NCA. The NCA specifies the maximum amount of
withdrawal that an entity can make from a government bank for the
period indicated. The Collecting Officer shall not issue an OR for the
receipt of NCA. The accounting entries to recognize receipt of NCA are
as follows:
Account Title Account Code Debit Credit

Regular

Cash-Modified Disbursement
System (MDS), Regular 10104040 P100,000
Subsidy from National Government 40301010 P100,000
To recognize receipt of NCA for Regular Agency Fund

Special Account

Cash-Modified Disbursement
System (MDS), Special Account 10104050 P100,000
Cash-Treasury/Agency Deposit,
Special Account 10104020 P100,000
To recognize receipt of NCA for Special Account in the General Fund

Cash-Modified Disbursement
System (MDS), Trust 10104060 P100,000
Cash-Treasury/Agency Deposit,
Trust 10104030 P100,000
To recognize the receipt of NCA for Trust Receipts Fund

c. Cash Disbursement Ceiling. The accounting entries for the collection

of revenue of, and the constructive receipt of disbursement authority
to, Foreign Service Posts (FSPs) of DFA and DOLE are as follows:
1. DFA and DOLE’s Books
Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P100,000

Passport and Visa Fees 40201120 P100,000
To recognize collection of revenue of FSPs

Cash in Bank-Foreign Currency,

Current Account 10103020 P100,000
Cash-Collecting Officers 10101010 P100,000
To recognize deposit of collections to authorized servicing bank of the
FSP

2. BTr Books:

Account Title Account Code Debit Credit

Subsidy to NGAs 50214010 P80,000

Cash-Constructive Income
Remittance 10104080 P80,000
To recognize constructive receipt of remitted collections by FSPs and
disbursements charged to the issued CDCs to FSPs

j. Obligation – is an act of a duly authorized official which binds the

government to the immediate or eventual payment of a sum of money.
Obligation maybe referred to as a commitment that encompasses
possible future liabilities based on current contractual agreement and
legality of SDs.
The Head of the Budget Division/Unit shall certify to the availability of
allotment and such is duly obligated by signing in Section B of the ORS
Sec. 11. Obligation Request and Status. The incurrence of obligations
shall be made through the issuance of Obligation Request and Status
(ORS) (Appendix 11). The ORS shall be prepared by the
Requesting/Originating Office supported by valid claim documents like
DVs, payrolls, purchase/job orders, itinerary of travel, etc.
The Head of the Requesting/Originating Office or his/her authorized
representative shall certify in the Section A of the ORS as to the
necessity and legality of charges to the budget under his/her
supervision, and validity, propriety
Sec. 12. Subsidiary Record for Obligation. A subsidiary record to
monitor a particular obligation shall be maintained by the Budget
Division/Unit in Section C of the ORS. It shall contain the original
amount of obligation, payable (goods delivered and services rendered)
and the actual amount paid
Sec. 13. Adjustment of Obligation. Adjustment of obligation incurred
after the processing of the claim by the Accounting Division/Unit shall
be made through the use of Notice of Obligation Request and Status
Adjustment (NORSA) (Appendix 12). The adjustment shall be effected
through a positive entry (if additional obligation is necessary) or a
negative entry (if reduction is necessary) in the ‘Obligation’ column of
the ORS and RAOD.
Sec. 14. Notice of Obligation Request and Status Adjustment. The
NORSA shall be prepared by the Accounting Division/Unit after the
processing of the claim which shall be used in adjusting the original
amount obligated to the actual obligations incurred in the RAOD. It
shall be forwarded by the Accounting Division/Unit to the Budget
Division/Unit to take up the adjustments of obligation in the RAOD. The
following transactions shall also need adjustments of obligations:
k. Original Budget – is the initial approved budget for the budget
period usually the General Appropriations Act (GAA). The original
budget may include residual appropriated amounts automatically
carried over from prior years by law such as prior year commitments or
possible future liabilities based on a current contractual agreement.
m. Supplemental Appropriations – are additional appropriations
authorized by law to augment the original appropriations which proved
to be insufficient for their intended purpose due to economic, political
or social conditions supported by a Certification of Availability of Funds
(CAF) from the BTr.

Sec. 3. Fund Release Documents. With the adoption of the

UACS and the Performance-Informed Budgeting (PIB), the following are
the fund release documents: a. Obligational Authority or Allotment –
the following are the documents which authorize the entity to incur
obligations:
1. General Appropriations Act Release Document (GAARD) – serves as
the obligational authority for the comprehensive release of budgetary
items appropriated in the GAA, categorized as For Comprehensive
Release (FCR).
2. Special Allotment Release Order (SARO) – covers budgetary items
under For Later Release (FLR) (negative list) in the entity submitted
Budget Execution Documents (BEDs), subject to compliance of required
documents/clearances.
Releases of allotments for Special Purpose Funds (SPFs) (e.g., Calamity
Fund, Contingent Fund, E-Government Fund, Feasibility Studies Fund,
International Commitments Fund, Miscellaneous Personnel Benefits
Fund and Pension and Gratuity Fund) are also covered by SAROs .
3. General Allotment Release Order (GARO) – is a comprehensive
authority issued to all national government agencies, in general, to
incur obligations not exceeding an authorized amount during a
specified period for the purpose indicated therein.
It covers automatically appropriated expenditures common to most, if
not all, agencies without need of special clearance or approval from
competent authority, i.e. Retirement and Life Insurance Premium.
b. Disbursement Authority – the following documents authorize the
entity to pay obligations and payables:
1. Notice of Cash Allocation (NCA) – authority issued by the DBM to
central, regional and provincial offices and operating units to cover the
cash requirements of the agencies;
2. Non-Cash Availment Authority (NCAA) – 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;

Week 13

CHAPTER 11

ACCOUNTING FOR INCOME AND RECEIPTS

REVENUE AND OTHER RECEIPTS

l. Revenues – are increases in economic benefits or service potential
during the accounting period in the form of inflows or increases of
assets or decreases of liabilities that result in increases in net
assets/equity, other than those relating to contributions from owners.
Sec. 1. Scope. This Chapter provides the standards, policies, guidelines
and procedures in accounting for revenue and other receipts including
those collections through authorized agent banks, remittance of
collections to the NT through AGDB and deposits with the AGDB in
accordance with PPSAS 9-Revenue from Exchange Transactions and
PPSAS 23-Revenue from Non-exchange Transactions.
Sec. 4. Fundamental Principles for Revenue. All revenues accruing to
the 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 NG. (Sec. 65(1), P.D. No. 1445)
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. (Sec. 42, Chapter 7,
Title I(B), Book V, E.O. No. 292)
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. (Sec. 65(2), P.D. No. 1445
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. (Sec. 66, P.D. No. 1445)
e. No payment of any nature shall be received by a collecting officer
without immediately issuing an official receipt 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. (Sec. 68(1), P.D. No. 1445)
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. (Sec. 68 (2), P.D. No.
1445)
g. At no instance shall temporary receipts be issued to acknowledge the
receipt of public funds. (Sec. 72, GAAM Volume I)
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. (Sec. 73, GAAM Volume I)
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. (Sec. 67(1) and (3), P.D. No. 1445)
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. (Sec. 70,
P.D. No. 1445)
Sec. 6. Registries of Revenue and Other Receipts. The Registries of
Revenue and Other Receipts (Appendices 7, 7A, 7B, 7C and 7D) shall be
maintained by the Budget Division/Unit of NGAs to monitor the
revenue and other receipts estimated/budgeted, collected and
remitted/deposited.
Sec. 33. Accounting Standards for Revenue. 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. (PPSAS 9 received and receivable by the entity in its own
account. (PPSAS 9)
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.
(PPSAS 23)
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. (PPSAS 23)
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 government. Taxes
do not include fines or other penalties imposed for breaches of the law.
(PPSAS 23)
g. Transfers are inflows of future economic benefits or service potential
from nonexchange transactions, other than taxes. (PPSAS 23)

ILLUSTRATIVE TRANSACTIONS AND JOURNAL ENTRIES:

Account Title Account Code Debit Credit
Collection of Permit Fees
Cash – Collecting Officer 10101010 10,000
Permit Fees 40201010 10,000
To recognize collection of income
Collection of prior year’s billed income
Cash – Collecting Officer 10101010 20,000
Accounts Receivable 10301010 20,000
To recognize collection of billed income

For remittance to Bureau of the Treasury

Cash-Treasury/Agency Deposit-Regula r 10104010 10,000
Cash – Collecting Officer 10101010 10,000
To recognize remittance of income to BTr
For collection of unbilled tax revenue
Cash – Collecting Officer 10101010 30,000
Travel Tax 40101030 10,000
Immigration Tax 40101040 20,000
To recognize collection of unbilled income

WEEK 14

CHAPTER 12 ACCOUNTING FOR DISBURSEMENTS AND

RELATED TRANSACTIONS

Sec. 5. Fundamental Principles for Disbursement of Public Funds.

Section 4 of P.D. No. 1445, the Government Auditing Code of the
Philippines, provides that all financial transactions and operations of
any government entity shall be governed by the following fundamental
principles:
a. No money shall be paid out of any public treasury or depository
except in pursuance of an appropriation law or other specific statutory
authority.
b. Government funds or property shall be spent or used solely for
public purposes.
c. Trust funds shall be available and may be spent only for the specific
purpose for which the trust was created or the funds received.
d. Fiscal responsibility shall, to the greatest extent, be shared by all
those exercising authority over the financial affairs, transactions, and
operations of the government agency.
e. Disbursement or disposition of government funds or property shall
invariably bear the approval of the proper officials.
f. Claims against government funds shall be supported with complete
documentation.
g. All laws and regulations applicable to financial transactions shall be
faithfully adhered to.
h. Generally accepted principles and practices of accounting as well as
of sound management and fiscal administration shall be observed,
provided that they do not contravene existing laws and regulations.
Sec. 36. Basic Requirements for Disbursements and the Required
Certifications.
Disbursements of government funds shall comply with the following
basic requirements and certifications:
Disbursements – are the actual amounts spent or paid out of the
budgeted amounts.
b. Disbursement Authority – the following documents authorize the
entity to pay obligations and payables:
j. Obligation – is an act of a duly authorized official which binds the
government to the immediate or eventual payment of a sum of money.
Obligation maybe referred to as a commitment that encompasses
possible future liabilities based on current contractual agreement.
a. Availability of allotment/budget for obligation/utilization certified by
the Budget Officer/Head of Budget Unit;
b. Obligations/Utilizations properly charged against available
allotment/budget by the Chief Accountant/Head of Accounting Unit;
c. Availability of funds certified by the Chief Accountant. The Head of
the Accounting Unit shall certify the availability of funds before an
Agency Head or his duly authorized representative enter into any
contract that involves the expenditure of public funds based on the
copy of budget release documents;
d. Availability of cash certified by the Chief Accountant. The Head of the
Accounting Unit shall certify the availability of cash and completeness
of the supporting documents in the disbursement voucher and payroll
based on the Registry of Allotments and Notice of Cash
Allocation/Registry of Allotment and Notice of Transfer of Allocation;
e. Legality of the transactions and conformity with existing rules and
regulations. The requesting and approving officials shall ensure that the
disbursements of government funds are legal and in conformity with
applicable rules and regulations;
f. Submission of proper evidence to establish validity of the claim. The
Head of the Requesting Unit shall certify on the necessity and legality of
charges to allotments under his/her supervision as well as the validity,
propriety and legality of supporting documents. All payments of
government obligations and payables shall be covered by Disbursement
Vouchers (DV)/Payrolls together with the original copy of the
supporting documents which will serve as basis in the evaluation of
authenticity and authority of the claim. It should be cleared, however,
that the submission of the supporting documents does not preclude
reasonable questions on the funding, legality, regularity, necessity
and/or economy of the expenditures or transactions; and
g. Approval of the disbursement by the Head of Agency or by his duly
authorized representative. Disbursement or disposition of government
funds or property shall invariably bear the approval of the proper
officials. The DVs/Payrolls shall be signed and approved by the head of
the agencies or his duly authorized representatives.
Sec. 37. Certification of Availability of Funds. No funds shall be
disbursed, and no expenditures or obligations chargeable against any
authorized allotment shall be incurred or authorized in any
department, office or agency without first securing the certification of
its Chief Accountant or head of accounting unit as to the availability of
funds and the allotment to which the expenditure or obligation may be
properly charged.
No obligation shall be certified to accounts payable unless the
obligation is founded on a valid claim that is properly supported by
sufficient evidence and unless there is proper authority for its
incurrence. Any certification for a non-existent or fictitious obligation
and/or creditor shall be considered void. The certifying official shall be
dismissed from the service, without prejudice to criminal prosecution
under the provisions of the Revised Penal Code. Any payment made
under such certification shall be illegal and every official authorizing or
making such payment, or taking part therein or receiving such payment,
shall be jointly and severally liable to the government for the full
amount so paid or received. (Book VI, Section 41 of EO No. 292)
Sec. 38. Prohibition against the Incurrence of Overdraft. Heads of
departments, bureaus, offices and agencies shall not incur nor
authorize the incurrence of expenditures or obligations in excess of
allotments released by the DBM Secretary for their respective
departments, offices and agencies. Parties responsible for the
incurrence of overdrafts shall be held personally liable therefor. (Book
VI, Chapter 5, Section 41 of EO No. 292)
Sec. 39. Mode of Disbursements. Payments/Disbursements by NGAs
may be effected through the Treasury Single Account (TSA), by issuing
Modified Disbursements System (MDS) check or commercial check,
cash through cash advance, Advice to Debit Account (ADA), or Non-
Cash Availment Authority (NCAA).
Sec. 40. Authority to Disburse/Pay. NGAs are authorized to
disburse/pay based on the Notice of Cash Allocation (NCA), Notice of
Transfer of Allocation (NTA), Cash Disbursement Ceiling (CDC) or other
authority that may be provided by law.
Sec. 41. Disbursement Voucher/Payroll. Checks/ADA shall be drawn
based on duly approved disbursement voucher or payroll.
Sec. 42. Maintenance of Records. All checks/ADA drawn during the
day, whether released or unreleased including cancelled checks shall be
recognized chronologically in the Checks/ADA Disbursement Record
maintained by the Cash/Treasury Unit.
Sec. 43. Reporting of Disbursements. All payments/disbursements shall
be reported using the prescribed forms for recording in the books of
accounts.
DISBURSEMENT
Sec. 1. Scope. This Chapter covers the rules and regulations to be
followed in the disbursement of public funds, the monitoring of receipt
and utilization of NCA/NTA, preparation and processing of DV/Payroll;
preparation and issue of checks; payment by cash; granting, utilization
and liquidation/replenishment of cash advances; payment through
ADA; remittance of taxes withheld through TRA; availment of foreign
loans through suppliers credit/constructive cash; and payment of
operating requirements on FSPs through CDC.
Sec. 2. Definition of Terms. For the purpose of this Manual, the terms
used shall be construed to mean as follows:
a. Accounts Payable – refers to valid and legal obligations of
NGAs/OUs, for which, goods/services/projects have been
delivered/rendered/completed and accepted, regardless of the year
when these obligations were incurred.

c. Agency – refers to any department, bureau or office of the national

government, or any of its branches and instrumentalities, or any
political subdivision, as well as any GOCCs, including its subsidiaries, or
other self-governing board or commission of the government.

f. Credit Card Company – refers to Citibank as the authorized credit

card service provider for the Cashless Purchase Card (CPC) System.

g. Commercial Check – refers to a check issued by government agencies

chargeable against the agency’s checking account with AGDBs. These
are covered by income/receipts authorized to be deposited with
AGDBs; and funding checks received by Operating Units from
Central/Regional/Division Offices, respectively.

i. Disbursements – constitute all cash paid out during a given period in

currency (cash) or by check/ADA. It may also mean the settlement of
government payables/obligations by cash, check or ADA. It shall be
covered by DV/Petty Cash Voucher (PCV)/Payroll
k. Implementing Agency – refers to the agency to which the funds are
transferred for the purpose of prosecuting/implementing the project.
l. Inter-Agency Transferred Fund – refers to cash or money transferred
to an Implementing Agency (IA) for the undertaking of a project by a
Source Agency (SA) in which the allotment was released.
m. Letter of Introduction – refers to a letter addressed to the MDS-GSB,
issued by the NGA/OU to its creditors/payees for the purpose of
opening an account or validation of an existing account.
n. List of Due and Demandable Accounts Payable-Advice to Debit
Account – refers to an accountable form integrating the Advice to Debit
Account (ADA) with the LDDAP, which is a list reflecting the names of
creditors/payees to be paid by the NGA/OU and the corresponding
amounts of the unpaid claims.
o. Merchants – refers to those authorized by the CCC to be the
sellers/suppliers under the CPC System.
p. Modified Disbursement System (MDS) Check – refers to a check
issued by government agencies chargeable against the account of the
Treasurer of the Philippines, which are maintained with different MDS
AGDBs. MDS checks are covered by NCA.
q. Modified Disbursement System, Government Servicing Banks –
refers to the authorized government servicing banks, such as Land Bank
of the Philippines (LBP), Development Bank of the Philippines (DBP),
and Philippine Veterans Bank (PVB), to which DBM issues the NCAs for
crediting to the MDS sub-accounts of NGAs.
r. Petty Cash Fund – refers to the amount granted to duly designated
Petty Cash Fund Custodian for payment of authorized petty or
miscellaneous expenses which cannot be conveniently paid through
checks/LDDAP-ADA.
s. Program Administrator – refers to the designated by the head of the
agency who are tasked to implement and administer the Cashless
Purchase Card System
t. Project – refers to the undertaking, whether construction work,
research or training program, computer engagement or other
authorized activities which an agency shall prosecute or implement in
favor or in behalf of another agency
v. Regular Cash Advance – refers to the amount granted to cashiers,
disbursing officers, paymasters, and/or other accountable officers for
the payment of expenses such as salaries and wages, commutable
allowances, honoraria and other similar payments to officials and
employees.
w. Steering Committee – refers to the advisory committee composed of
representatives from DND and the DBM which shall provide the
guidance on key issues such as policy and objectives, control,
procedures, individual card limits, individuals authorized to use the
cards, amendments, and decisions involving large expenditures.
Sec. 18. 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 DBM:
y. Source Agency – refers to the agency to which the allotment has
been originally released and in whose behalf or benefit the project will
be prosecuted/implemented.
z. Tax Remittance Advice – refers to a serially-numbered document
prescribed by the DBM that should be used by the NGAs in the
remittance of withheld taxes on funds coming from DBM. This form is
being distributed by the BIR to be accomplished by the NGAs. The same
shall be duly certified by the Chief Accountant and approved by the
Head of the concerned NGA or his duly authorized representative, and
attached to every withholding tax return filed as payment for taxes
withheld. This shall be the basis for the BIR and the Bureau of the
Treasury (BTr) to record the tax collection in their respective books of
accounts. (BIR RR No. 1-2013).
aa. Withdrawal Application – is a written request from the borrower to
the development partner to pay funds against to borrower’s loan
account.

Sec. 3. Notice of Cash Allocation. The NCA shall be the authority of an

agency to pay operating expenses, purchases of supplies and materials,
acquisition of PPE, accounts payable, and other authorized
disbursements through the issue of MDS checks, ADA or other modes
of disbursements
a. No MDS check/ADA shall be issued without the covering NCA.
Hence, the total MDS checks/ADA issued shall not exceed the total NCA
received. To maximize the available NCAs of the agency, the Common
Fund System policy shall be adopted whereby cash allocation balances
of agencies under the Regular MDS Account may be used to cover
payment of current year’s accounts payable i.e., goods and services
which have been delivered and accepted during the year charged
against appropriations of prior year/s, after satisfying their regular
operating requirements as reflected in their Monthly Cash Program.
b. NCA issued and credited to the Special MDS Accounts of agencies
for payment of retirement gratuity/terminal leave benefits as well as
prior years’ accounts payable shall be valid within the period prescribed
under existing rules and regulations. The NCA shall be monitored
through the maintenance of the Registry of Allotments and Notice of
Cash Allocation (RANCA) (Appendix 30) by the Accounting Division/Unit.
c. NCA issued and credited to the Special MDS Accounts for Trust to
cover payments of authorized claims shall be valid within the period
prescribed under existing regulations.
d. For NCA issued for foreign assisted projects such as grants from
foreign
country with a separate MDS account maintained by the spending
agency with Government Servicing Banks (GSBs), MDS check/ADA shall
be issued only for specific purpose until full implementation of the
project, subject to pertinent DBM issuances prescribing the validity of
the NCA
Sec. 4. Notice of Transfer of 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.
a. 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.
b. 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) (Appendix 31)
by the ROs/OUs
Sec. 5. Recording of the Receipt of NCA/NTA. The CO/ROs/OUs shall
record in the RANCA/RANTA all NCAs/NTAs received and the amount
disbursed to control and monitor unfunded allotments and the balance
of disbursement authorities.

Sec. 13. Illustrative Accounting Entries for Disbursements By Check

Account Title Account Code Debit Credit

1. Payment of the following utility bills:
Meralco Bill P1,200
PLDT Bill 500
Maynilad Bill 200
Total P1,900
 Water Expenses 50204010 P 200
Electricity Expenses 50204020 1,200
Telephone Expenses 50205020 500
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 1,900
To recognize payment of bills from utility companies based on individual
checks issued

2. Grant of cash advance for travel

Advances to Officers and
Employees 19901040 P 1,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 1,000
To recognize granting of travel allowance to employees
3. Advance payment to Procurement Service
Due from NGAs 10303010 P 2,500
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 2,500
To recognize advance payment to Procurement Service for the purchase
of Office Equipment

4. Establishment of Petty Cash Fund (PCF) – P 20,000

Petty Cash Fund 10101020 P 20,000
Cash-Modified Disbursement
System (MDS), Regular 10104040 P 20,000
To recognize establishment of PCF to cover petty expense

5. Replenishment of PCF
Expenses charged to the PCF:
Bond paper P 14,000
Postage stamps 2,000
Total P 16,000

Office Supplies Expenses 50203010 P 14,000

Postage and Courier Expenses 50205010 2,000
 Cash-Modified Disbursement
System (MDS), Regular 10104040 P 16,000
To recognize replenishment of PCF based on the Report on Paid Petty
Cash Vouchers (RPPCV) and SD

6. Remittance of Government’s share

Retirement and Life Insurance

Premium P 3,300
Pag-IBIG Contributions 500
PhilHealth Contributions 300
Total P 4,100

Retirement and Life Insurance

Premiums 50103010 P 3,300
Pag-IBIG Contributions 50103020 500
PhilHealth Contributions 50103030 300
Cash-Modified
Disbursement System
(MDS), Regular 10104040 P 4,100

To recognize remittance of government’s share based on individual

checks issued to GSIS, HDMF and PHIC

7. Remittance of salary deductions

Retirement and Life Insurance
Premium P 3,300
Pag-IBIG Contributions 500
PhilHealth Contributions 300
GSIS-Salary Loan 200
Employees' Association 100
Total P 4,400

Due to GSIS 20201020 P 3,500

Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 300
Other Payables 29999990 100
Cash-Modified
Disbursement System
 (MDS), Regular 10104040 P 4,400

To recognize remittance of salary deductions based on individual checks issued to

Government
Service Insurance System (GSIS), Philippine Health Insurance Corporation (PHIC), Home
Development Mutual Fund (HDMF) and Employees’ Association

Sec. 14. 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-bound undertakings and petty operating expenses. The
granting and liquidation of cash advances shall be governed by the
following existing COA rules and regulations and other pertinent
issuances:
a. No cash advance shall be given unless for a legally authorized specific
purpose
b. A cash advance shall be reported on and liquidated as soon as the
purpose for which it was given has been served;
c. No additional cash advance shall be allowed to any official or
employee unless the previous cash advance given to him/her is first
settled/liquidated or a proper accounting thereof is made;
d. Except for cash advance for official travel, no officer or employee
shall be granted cash advance unless he/she is properly bonded in
accordance with existing laws or regulations. The amount of cash
advance which may be granted shall not exceed the maximum cash
accountability covered by his/her bond;
e. Only permanently appointed officials shall be designated as
disbursing officers;
f. Only duly appointed or designated disbursing officer may perform
disbursing functions. Officers and employees who are given cash
advances for official travel need not be designated as Disbursing
Officers
g. Transfer of cash advance from one accountable officer to another
shall not be allowed; and
h. The cash advance shall be used solely for specific legal purpose for
which it was granted. Under no circumstance shall it be used for
encashment of checks or for liquidation of a previous cash advance.
The specific rules and regulations on the granting, utilization and
liquidation of cash advances are provided for under COA Circular No.
97-002 dated February 10, 1997, as amended by COA Circular No. 2006-
005 dated July 13, 2006.
Sec. 15. Cash Advance for Payroll. Advances for Payroll shall be granted
to Regular Disbursing Officers for payment of salaries, wages,
honoraria, allowances and other personnel benefits of officials and
employees. The Advances for Payroll shall not be used for encashment
of checks or for liquidation of previous or other types of cash advances.
It shall be equal to the net amount of the processed payroll
corresponding to the pay period. Liquidation of the advances shall be
made within five (5) days after the end of the pay period. Any
unclaimed salaries/allowances shall be refunded and issued official
receipt to close the account.
Sec. 16. Documentary Requirements. The documentary requirements
for Payroll Fund for salaries, wages, allowances, honoraria and other
similar expenses are provided under COA Circular No. 2012-001 dated
June 14, 2012, amended by COA Circular No. 2013-001 dated January
10, 2013.
Sec. 17. Accounting Books, Records, Forms and Reports to be
Prepared and Maintained. The Disbursing Officer shall maintain the
Cash Disbursements Record (CDRec) (Appendix 40) to monitor the cash
advances/payroll, current operating expenses, and special
purpose/time-bound undertakings and prepare the Report of Cash
Disbursements (RCDisb) (Appendix 41) to report its utilization.
Payments shall be based on duly approved Payroll and shall be posted
by the Designated Staff to the IP. The JEV shall be prepared based on
the RD and shall be recorded in the
Sec. 19. Illustrative Accounting Entries for Granting and Liquidation of
Advances for Payroll and the Set-up of Salary Deductions and Due to
Officers and Employees

Account Title Account Code Debit Credit

1. Set-up of Due to Officers and Employees and Salary Deductions
Assumptions
Salaries and Wages P35,000
PERA 15,000
Total 50,000
Less: Salary Deductions
Withholding Tax 5,000
Life and Retirement
Premiums 3,000
Pag-IBIG premiums 500
PhilHealth premiums 600
GSIS Salary loan 200
Employees' Association 100
9,400
Net Amount P 40,600
 =======
Salaries and Wages-Regular 50101010 P 35,000
PERA 50102010 15,000
Due to BIR 20201010 P 5,000
Due to GSIS 20201020 3,200
Due to GSIS 20201020 3,200
01 Life and Retirement
Premiums 3,000
02 Salary Loan 200
Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 600
Other Payables 29999990 100
Due to Officers and
Employees 20101020 40,600
To recognize payable to Officers and employees and to set up salary
deductions

2. Granting of Advances for Payroll

Advances for Payroll 19901020 P 40,600
Cash-Modified
Disbursement System
(MDS), Regular 10104040 P 40,600

To record grant of advances to cover payment of salaries and wages of employee

3. Liquidation of Payroll Fund
Due to Officers and Employees 20101020 P 40,600
Advances for Payroll 19901020 P 40,600
To recognize liquidation of Advances for Payroll based on the RCDisb and SDs

Week 15

CHAPTER 13 BUDGET EXECUTION, MONITORING AND

 REPORTING

GENERAL PROVISIONS, BASIC STANDARDS AND POLICIES

Sec. 1. Scope. This chapter covers the general provisions from existing
laws, rules and regulations; and the basic standards/fundamental
accounting principles for financial reporting by national government
agencies.
Sec. 2. Definition of Terms. For the purpose of this Manual, the terms
used as stated below shall be construed to mean as follows:
a. Accrual basis – means a basis of accounting under which transactions
and other events are recognized when they occur (and not only when
cash or its equivalent is received or paid). Therefore, the transactions
and events are recognized in the accounting records and recognized in
the financial statements of the periods to which they relate. The
elements recognized under accrual accounting are assets, liabilities, net
assets/equity, revenue, and expenses.
b. Assets – are resources controlled by an entity as a result of past
events, and from which future economic benefits or service potential
are expected to flow to the entity.
c. Contributions from owners – means future economic benefits or
service potential that have been contributed to the entity by parties
external to the entity, other than those that result in liabilities of the
entity, that establish a financial interest in the net assets/equity of the
entity, which:
1. conveys entitlement both to (i) distributions of future
economic benefits or service potential by the entity during its
life, such distributions being at the discretion of the owners or
their representatives; and to (ii) distributions of any excess of
assets over liabilities in the event of the entity being wound up;
and/or
2. can be sold, exchanged, transferred, or redeemed.
d. Distributions to owners – means future economic benefits or service
potential distributed by the entity to all or some of its owners, either as
a return on investment or as a return of investment.
e. Entity – refers to a government agency, department or
operating/field unit. It may be referred to in this GAM as an agency.
f. Expenses – are decreases 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 decreases in net
assets/equity, other than those relating to distributions to owners.
g. Government Accounting – encompasses the processes of analyzing,
recording, classifying, summarizing and communicating all transactions
involving the receipt and disposition of government funds and
property, and interpreting the results thereof. (Sec. 109, Presidential
Decree (P.D.) No. 1445)
h. Government Budget – is the financial plan of a government for a
given period, usually for a fiscal year, which shows what its resources
are, and how they will be generate and used over the fiscal period. The
budget is the government's key instrument for promoting its socio-
economic objectives. The government budget also refers to the income,
expenditures and sources of borrowings of the National Government
(NG) that are used to achieve national objectives, strategies and
programs.
i. Liabilities – are firm obligations of the entity arising from past events,
the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits or service potential.
j. Net assets/equity – is the residual interest in the assets of the entity
after deducting all its liabilities.
k. 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.
l. 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. (Section 3, P.D. No. 1445)

Sec. 1. Scope. This Chapter prescribes the guidelines in monitoring,

accounting and reporting of the budget in the financial statements.
This also prescribes the records to be maintained by the national
government agencies, forms to be used and reports to be prepared to
effectively monitor the budget as well as the required information
disclosure and presentation of budget information in the financial
statements in accordance with PPSAS 24.
FINANCIAL REPORTING
Sec. 1. Scope. This Chapter prescribes the manner in which the general
purpose financial statements (GPFS) should be prepared and presented
to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities.
Sec. 2. Definition of Terms. For the purpose of this Manual, the terms
used as stated below shall be construed to mean as follows:
a. Accounting Policies – are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and presenting
financial statements. (Par. 7, PPSAS 3)
b. Cash – comprises cash on hand and cash in bank (held under current
and savings account) and cash treasury accounts.
c. Cash Equivalents – are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value. (Par. 8, PPSAS 2)
d. Cash Flows – are inflows and outflows of cash and cash equivalents.
(Par. 8, PPSAS 2)
e. Change in accounting estimate – is an adjustment of the carrying
amount of an asset or a liability, or the amount of the periodic
consumption of an asset, that results from the assessment of the
present status of, and expected future benefits and obligations
associated with, assets and liabilities. Changes in accounting estimates
result from new information or new developments and, accordingly,
are not correction of errors. (Par. 7, PPSAS 3)
f. Financial Reporting – is the process of preparation, presentation and
submission of general purpose financial statements and other reports.
The objective of financial reporting is to provide information about the
entity that is useful to users for accountability purposes and decision-
making.
g. General Purpose Financial Statements – are those intended to meet
the needs of users who are not in a position to demand reports tailored
to meet their particular information needs. (Par. 3, PPSAS 1)
h. Material omissions or misstatements of items – are material if they
could, individually or collectively, influence the decisions or
assessments of users made on the basis of the financial statements.
Materiality depends on the nature or size of the omission or
misstatement judged in the surrounding circumstances. The nature or
size of the item, or a combination of both, could be the determining
factor. (Par. 7, PPSAS 1)
i. Notes – contain information in addition to that presented in the
Statement of Financial Position, Statement of Financial Performance ,
Statement of Changes in Net Assets/Equity, and Statement of Cash
Flows. Notes provide narrative descriptions or disaggregation of items
disclosed in those statements and information about items that do not
qualify for recognition in those statements. (Par. 7, PPSAS 1)
j. Prospective application of a change in accounting policy – means
applying the new accounting policy to transactions, other events and
conditions occurring after the date as at which the policy is changed.
(Par. 7, PPSAS 3)
k. Prospective application of recognizing the effect of a change in an
accounting estimate – means recognizing the effect of the change in
the accounting estimate in the current and future periods affected by
the change. (Par. 7, PPSAS 3)
l. Retrospective application – is applying a new accounting policy to
transactions, other events, and conditions as if that policy had always
been applied. (Par. 7, PPSAS 3)
m. Retrospective restatement – is correcting the recognition,
measurement, and disclosure of amounts of elements of financial
statements as if a prior period error had never occurred. (Par. 7, PPSAS
3)

Sec. 3. Purpose of Financial Statements

a. Financial statements are a structured representation of the financial
position and financial performance of an entity. The objectives of
general purpose financial statements are to provide information about
the financial position, financial performance, and cash flows of an entity
that is useful to a wide range of users in making and evaluating
decisions about the allocation of resources. Specifically, the objectives
of general purpose financial reporting in the public sector should be to
provide information useful for decision making, and to demonstrate the
accountability of the entity for the resources entrusted to it, by:
1. providing information about the sources, allocation, and uses of
financial resources;
2. providing information about how the entity financed its activities and
met its cash requirements;
3. providing information that is useful in evaluating the entity’s ability
to finance its activities and to meet its liabilities and commitments;
4. providing information about the financial condition of the entity and
changes in it;
5. providing aggregate information useful in evaluating the entity’s
performance in terms of service costs, efficiency and accomplishments;

b. General purpose financial statements can also have a predictive or

prospective role, providing information useful in predicting the level of
resources required for continued operations, the resources that may be
generated by continued operations, and the associated risks and
uncertainties.

Financial reporting may also provide users with information:

1. indicating whether resources were obtained and used in accordance
with the legally adopted budget; and
2. indicating whether resources were obtained and used in accordance
with legal and contractual requirements, including financial limits
established by appropriate legislative authorities. (Par. 15-16 PPSAS 1)

c. Financial statements provide information about an entity’s:

1. Assets;
2. Liabilities;
3. Net assets/equity;
4. Revenue;
5. Expenses;
6. Other changes in net assets/equity;
7. Cash flows; and
8. Comparison of budget and actual amounts. (Par. 17, PPSAS 1)
Sec. 4. Responsibility for Financial Statements. The responsibility for the
fair presentation and reliability of financial statements rests with the
management of the reporting entity, particularly the head of
finance/accounting office and the head of entity or his authorized
representative. The Statement of Management Responsibility for
Financial Statements (Annex G) shall serve as the covering letter in
transmitting the entity financial statements to the COA, and other
regulatory agencies and other entities. It shows the entity’s
responsibility for the preparation and presentation of the financial
statements.
Sec. 5. Components of Financial Statements. A complete set of financial
statements (condensed and by fund cluster) to be submitted by an
entity shall include the following:
a. Statement of Financial Position (SFP) (Annex A);
b. Statement of Financial Performance (SFPer) (Annex B);
c. Statement of Changes in Net Assets/Equity (SCNA/E) (Annex C);
d. Statement of Cash Flows (SCF) (Annex D);
e. Statement of Comparison of Budget and Actual Amount (SCBAA)
(Annex E); and
f. Notes (Annex F), comprising a summary of significant accounting
policies and other explanatory notes. (Par. 21, PPSAS 1)
For the purpose of preparing the Annual Financial Report, all national
government agencies shall submit to the Government Accountancy
Sector, COA detailed financial statements and trial balances by fund
cluster.
Sec. 6. Basic Government Accounting and Budget Reporting Principles.
Each entity shall recognize and present its financial transactions and
operations conformably to the following:
a. generally accepted government accounting principles in accordance
with the PPSAS and pertinent laws, rules and regulations;
b. accrual basis of accounting in accordance with the PPSAS;
c. budget basis for presentation of budget information in the financial
statements (FSs) in accordance with PPSAS 24;
d. RCA prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records; and
g. fund cluster accounting.
Sec. 7. Keeping of the General Accounts. The COA shall keep the
general accounts of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers
pertaining thereto, pursuant to Section 2, par. (1), Article IX-D of the
1987 Philippine Constitution.
Sec. 8. Financial Reporting System for the National Government. The
financial reporting system of the Philippine government consists of
accounting system on accrual basis and budget reporting system on
budget basis under the statutory responsibility of the NGAs, Bureau of
the Treasury (BTr), Department of Budget and Management (DBM), and
the COA, as follows:
a. Each entity of the National Government (NG) maintains complete set
of accounting books by fund cluster which is reconciled with the
records of cash transactions maintained by the BTr.
b. The BTr accounts for the cash, public debt and related transactions of
the NG.
c. Each entity maintains budget registries which are reconciled with the
budget records maintained by the DBM and the Government
Accountancy Sector (GAS), COA.
d. The COA, through the GAS:
1. maintains budget records showing the overall approved budget of
the NG and its execution/implementation;
2. consolidates the FSs and budget accountability reports of all NGAs
and the BTr with COA’s records to come up with an Annual Financial
Report (AFR) for the NG as required in Section 4, Article IX-D of the
1987 Philippine Constitution; and
3. prepares other financial reports required by law for submission to
oversight agencies.
Sec. 9. Objectives of General Purpose Financial Statements. The
objectives of general purpose financial statements (GPFSs) are to
provide information about the financial position, financial performance,
and cash flows of an entity that is useful to a wide range of users in
making and evaluating decisions about the allocation of resources.
Specifically, the objectives of general purpose financial reporting in the
public sector are to provide information useful for decision-making, and
to demonstrate the accountability of the entity for the resources
entrusted to it.
Sec. 10. Responsibility for Financial Statements. The responsibility for
the preparation of the FSs rests with the following:
a. for individual entity/department FSs – the head of the
entity/department central office (COf) or regional office (RO) or
operating unit (OU) or his/her authorized representative jointly with
the head of the finance/accounting division/unit; and
b. for department/entity FSs as a single entity – the head of the
entity/department jointly with the head of the finance unit.
Sec. 11. Components of General Purpose Financial Statements. The
complete set of GPFSs consists of:
a. Statement of Financial Position (Annex A);
b. Statement of Financial Performance (Annex B);
c. Statement of Changes in Net Assets/Equity (Annex C);
d. Statement of Cash Flows (Annex D);
e. Statement of Comparison of Budget and Actual Amounts (Annex E);
and
f. Notes to the Financial Statements, comprising a summary of
significant accounting policies and other explanatory notes. (Annex F)
Sec. 12. Books of Accounts and Registries. The books of accounts and
registries of the NG entities consist of:
a. Journals
1. General Journal (Appendix 1)
2. Cash Receipts Journal (Appendix 2)
3. Cash Disbursements Journal (Appendix 3)
4. Check Disbursements Journal (Appendix 4)
b. Ledgers
1. General Ledgers (Appendix 5)
2. Subsidiary Ledgers (Appendix
c. Registries
1. Registries of Revenue and Other Receipts (Appendices 7, 7A,
7B, 7C and 7D)
2. Registry of Appropriations and Allotments (Appendix 8)
3. Registries of Allotments, Obligations and Disbursements
(Appendices 9A, 9B, 9C and 9D)
4. Registries of Budget, Utilization and Disbursements
(Appendices 10A, 10B, 10C and 10D)
Sec. 13. Fund Accounting. The books of accounts shall be maintained
by fund cluster as follows:
Code Description
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/Domestic Grants Fund
04 Special Account-Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts
Sec. 14. Components of Budget and Financial Accountability Reports.
The budget reports consist of the following Budget and Financial
Accountability Reports (COA-DBM-DOF Joint Circular No. 2013-1, as
amended by COA and DBM Joint Circular No. 2014-1 dated July 2,
2014):
a. Quarterly Physical Report of Operation (QPRO) – BAR No. 1
b. Statement of Appropriations, Allotments, Obligations,
Disbursements and Balances (SAAODB) – FAR No. 1
c. Summary of Appropriations, Allotments, Obligations,
Disbursements and Balances by Object of Expenditures
(SAAODBOE) – FAR No. 1-A
d. List of Allotments and Sub-Allotments (LASA) – FAR No. 1-B
e. Statement of Approved Budget, Utilizations, Disbursements and
Balances (SABUDB) – FAR No. 2 (for Off-Budget Fund)
f. Summary of Approved Budget, Utilizations, Disbursements and
Balances by Object of Expenditures (SABUDBOE) – FAR No. 2-A
(for Off-Budget Fund)
g. Aging of Due and Demandable Obligations (ADDO) – FAR No. 3
h. Monthly Report of Disbursements (MRD) – FAR No. 4
i. Quarterly Report of Revenue and Other Receipts (QRROR) – FAR No.
5
Sec. 15. Fair Presentation. The FSs shall present fairly the financial
position, financial performance and cash flows of an entity. Fair
presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, revenue, and
expenses set out in PPSAS. The application of PPSAS, with appropriate
disclosures, if necessary, would result in fair presentation of the FS.
Sec. 16. Compliance with PPSASs. An entity whose financial statements
comply with PPSASs shall make an explicit and unreserved statement of
such compliance in the notes.
Financial statements shall not be described as complying with PPSASs
unless they comply with all the requirements of PPSASs. nappropriate
accounting policies that do not comply with PPSAS are not rectified
either by disclosure of the accounting policies used, or by notes or
explanatory material.
Sec. 17. Departure from PPSAS. In the event that Management strongly
believes that compliance with the requirement of PPSAS would result in
misleading presentation that it would contradict the objective of the
FSs set forth in PPSAS, the entity may depart from that requirement if
the relevant regulatory framework allows, or otherwise does not
prohibit, such a departure.
Sec. 18. Going Concern. The FSs shall be prepared on a going concern
basis unless there is an intention to discontinue the entity operation, or
if there is no realistic alternative but to do so.
Sec. 19. Consistency of Presentation. The presentation and
classification of items in the FSs shall be retained from one period to
the next unless laws, rules and regulations, and PPSAS require a change
in presentation.
Sec. 20. Materiality and Aggregation. Each material class of similar
items shall be presented separately in the financial statements. Items of
a dissimilar nature or function shall be presented separately unless they
are immaterial. If a line item is not material, it is aggregated with other
items either on the face of FSs or in the Notes to the FSs. A specific
disclosure requirement in a PPSAS need not be satisfied if the
information is not material.
Sec. 21. Offsetting. Assets and liabilities, and revenue and expenses
shall not be allowed to offset unless required or permitted by a PPSAS
except when offsetting reflects the substance of the transaction or
other event.
Sec. 22. Comparative Information. Comparative information shall be
disclosed with respect to the previous period for all amounts reported
in the FSs. Comparative information shall be included for narrative and
descriptive information when it is relevant to an understanding of the
current period’s FSs.
Sec. 23. Structure and Content. The FSs and each component shall be
identified clearly and distinguished from other information in the same
published document.
Sec. 24. Statement of Financial Position. An entity shall present current
and noncurrent assets, as well as current and non-current liabilities, as
separate classifications on the face of the Statement of Financial
Position (SFP).
Sec. 25. Statement of Financial Performance. The Statement of
Financial Performance (SFPer) shall include line items that present the
revenue, expenses and net surplus or deficit for the period.
Sec. 26. Statement of Changes in Net Assets/Equity. An entity shall
present in the Statement of Changes in Net Assets/Equity (SCNA/E) the
following:
a. Net Income or Deficit for the period;
b. Each item of revenue and expenses for the period that, as required
by Standards, is recognized directly in net assets/equity, and the total
of these items;
c. Total revenue and expenses for the period; and
d. For each component of net assets/equity separately disclosed, the
effects of changes in accounting policies and corrections of errors
recognized in accordance with PPSAS 3-Accounting Policies, Changes in
Accounting Estimates and Errors.
Sec. 27. Statement of Cash Flows. The Statement of Cash Flows (SCF)
provides information to users of FSs a basis to assess the ability of the
entity to generate cash and cash equivalents and to determine the
entity’s utilization of funds. This also provides information on how the
entity generates income authorized to be used in their operation and
its utilization.
Sec. 28. Statement of Comparison of Budget and Actual Amounts. A
comparison of budget and actual amounts will enhance the
transparency of financial reporting in government. This shall be
presented by government agencies as a separate additional financial
statement referred in this Manual as the Statement of Comparison of
Budget and Actual Amounts (SCBAA).
Sec. 29. Notes to Financial Statements. The Notes to FSs contain
information in addition to that presented in the SFP, SFPer, SCNA/E, SCF
and SCBAA. Notes provide narrative descriptions or is aggregation of
items disclosed in those FSs and information about items that do not
qualify for recognition in those statements.
Sec. 30. Qualitative Characteristics of Financial Reporting. An entity
shall present information including accounting policies in a manner that
meets a number of qualitative characteristics such as understandability,
relevance, materiality, reliability and comparability.
These qualitative characteristics are the attributes that make the
information provided in the FSs useful to users.
Sec. 31. Key Features of Assets. The key features of an asset are:
a. the benefits must be controlled by the entity;
b. the benefits must have arisen from a past event; and
c. future economic benefits or service potential must be expected to
flow to the entity.
The following are indicators of control of the benefits by the entity:
a. the ability of an entity to benefit from the asset and to deny or
regulate the access of others to that benefit.
b. an entity can, depending on the nature of the asset, exchange it, use
it to provide goods or services, exact a price for others’ use of it, use it
to settle liabilities, hold it, or perhaps even distribute it to owners.
c. possession or ownership of an object or right would normally be
synonymous with control over the future economic benefits embodied
in the right or object.
However, there are instances when an entity may possess an object or
right but not expect to enjoy the benefits embodied in it, e.g. under a
finance lease agreement, control over the leased property owned by
the lessor is transferred to the lessee.
The following are indicators of past event:
a. the specification of a past event differentiates assets from intentions
to acquire assets, which are not to be recognized.
b. a transaction or event giving rise to control of the future economic
benefits must have occurred.
The following are indicators of future economic benefits:
a. distinguishable from the source of the benefit i.e. the particular
physical resource or legal right;
b. does not imply that assets necessarily generate cash flows, the
benefits can also be in the form of ‘service potential’;
c. in determining whether a resource or right needs to be accounted for
as an asset, the potential to contribute to the objectives of the entity
should be the prime consideration;
d. capacity to contribute to activities/objectives/programs; and
e. the fact that an asset cannot be sold does not preclude it from
providing future economic benefits.
Sec. 32. Recognition of an Asset. An asset shall be recognized in the
financial position when and only when (a) it is probable that the future
economic benefits will flow to the entity; and (b) the asset has a cost or
value that can be measured reliably.
The following are indicators of probable inflow of future economic
benefits:
a. the chance of benefits arising is more likely rather than less likely
(e.g. greater than 50%).
b. benefits can be expected on the basis of available evidence or logic.

The following are indicators of reliable measurement:

a. valuation method is free from material error or bias.
b. faithful representation of the asset’s benefits.
c. reliable information will, without bias or undue error, faithfully
represent those transactions and events.
Sec. 6. Qualitative Characteristics of Financial Reporting. An entity
shall present information including accounting policies in a manner that
meets the following qualitative characteristics enumerated in PPSAS 1:
a. Understandability – information is understandable when users might
reasonably be expected to comprehend its meaning. For this purpose,
users are assumed to have a reasonable knowledge of the entity’s
activities and the environment in which it operates, and to be willing to
study the information. Information about complex matters should not
be excluded from the financial statements merely on the grounds that
it may be too difficult for certain users to understand.
b. Relevance – information is relevant to users if it can be used to assist
in evaluating past, present or future events or in confirming, or
correcting, past evaluations. In order to be relevant, information must
also be timely.
c. Materiality – the relevance of information is affected by its nature
and materiality. Information is material if its omission or misstatement
could influence the decisions of users or assessments made on the basis
of the financial statements. Materiality depends on the nature or size of
the item or error, judged in the particular circumstances of its omission
or misstatement.
d. Timeliness – the usefulness of financial statements is impaired if
they are not made available to users within a reasonable period after
the reporting date. Ongoing factors such as the complexity of an
entity’s operations are not sufficient reason for failing to report on a
timely basis. More specific deadlines are dealt with by legislation and
regulations in many jurisdictions If there is an undue delay in the
reporting of information, it may lose its relevance. To provide
information on a timely basis, it may often be necessary to report
before all aspects of a transaction are known, thus impairing reliability.
i. Prudence – is the inclusion of a degree of caution in the exercise of
the judgments needed in making the estimates required under
conditions of uncertainty, such that assets or revenue are not
overstated and liabilities or expenses are not understated.
However, the exercise of prudence does not allow, for example, the
creation of hidden reserves or excessive provisions, the deliberate
understatement of assets or revenue, or the deliberate overstatement
of liabilities or expenses, because the financial statements would not
be neutral and, therefore, not have the quality of reliability.
j. Completeness – the information in financial statements should be
complete within the bounds of materiality and cost.
k. Comparability – information in financial statements is comparable
when users are able to identify similarities and differences between
that information and information in other reports. Comparability
applies to the comparison of financial statements of different entities
and comparison of the financial statements of the same entity over
periods of time. An important implication of the characteristic of
comparability is that users need to be informed of the policies
employed in the preparation of financial statements, changes to those
policies, and the effects of those changes. Because users wish to
compare the performance of an entity over time, it is important that
financial statements show corresponding information for preceding
periods. (PPSAS 1)
Sec. 7. Fair Presentation and Compliance with PPSAS. Financial
statements shall present fairly the financial position, financial
performance and cash flows of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events, and
conditions in accordance with the definitions and recognition criteria
for assets, liabilities, revenue, and expenses set out in PPSASs. The
application of PPSASs, with additional disclosures when necessary, is
presumed to result in financial statements that achieve a fair
presentation. (Par. 27, PPSAS 1)

An entity whose financial statements comply with PPSASs shall make an

explicit and unreserved statement of such compliance in the notes.
Financial statements shall not be described as complying with PPSASs
unless they comply with all the requirements of PPSASs. (Par. 28, PPSAS
1)
A fair presentation also requires an entity:
a. To select and apply accounting policies in accordance with PPSAS 3,
Accounting Policies, Changes in Accounting Estimates and Errors. PPSAS
3 sets out a hierarchy of authoritative guidance that management
considers, in the absence of a Standard that specifically applies to an
item.
b. To present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information.
c. To provide additional disclosures when compliance with the specific
requirements in PPSASs is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity’s financial transactions, other events and conditions on the
entity’s financial position and financial performance. (Par. 29, PPSAS 1)
Inappropriate accounting policies are not rectified either by disclosure
of the accounting policies used, or by notes or explanatory material.
(Par. 30, PPSAS 1)
Sec. 8. Going Concern. When financial statements are not prepared on
a going concern basis, that fact shall be disclosed, together with the
basis on which the financial statements are prepared and the reason
why the entity is not regarded as a going concern. (Par. 38, PPSAS 1)
Sec. 9. Consistency of Presentation. The presentation and classification
of items in the financial statements shall be retained from one period
to the next unless:
a. it is apparent, following a significant change in the nature of the
entity’s operations or a review of its financial statements, that another
presentation or classification would be more appropriate having regard
to the criteria for the selection and application of accounting policies in
PPSAS 3; or b. a PPSAS requires a change in presentation. (Par. 42,
PPSAS 1)
Sec. 10. Materiality and Aggregation. Each material class of similar
items shall be
presented separately in the financial statements. Items of a dissimilar
nature or function shall be presented separately, unless they are
immaterial. (Par. 45, PPSAS 1)
Sec. 11. Offsetting. Assets and liabilities, and revenue and expenses,
shall not be offset unless required or permitted by a PPSAS. (Par. 48,
PPSAS 1)

In addition, gains and losses arising from a group of similar transactions

are reported on a net basis, for example, foreign exchange gains and
losses and gains and losses arising on financial instruments held for
trading. Such gains and losses are, however, reported separately if they
are material. (Par. 51, PPSAS 1)

Sec. 12. Comparative Information. Except when a PPSAS permits or

requires otherwise, comparative information shall be disclosed in
respect of the previous period for all amounts reported in the financial
statements. Comparative information shall be included for narrative
and descriptive information when it is relevant to an understanding of
the current period’s financial statements. (Par. 53, PPSAS 1)
a. When the presentation or classification of items in the financial
statements is amended, comparative amounts shall be reclassified
unless the reclassification is impracticable. When comparative amounts
are reclassified, an entity shall disclose:
1. The nature of the reclassification;
2. The amount of each item or class of items that is reclassified; and
3. The reason for the reclassification. (Par. 55, PPSAS 1)

b. When it is impracticable to reclassify comparative amounts, an entity

shall disclose:
1. The reason for not reclassifying the amounts; and
2. The nature of the adjustments that would have been made if the
amounts had been reclassified. (Par. 56, PPSAS 1)

Sec. 13. Identification of the Financial Statements. The financial

statements shall be identified clearly, and distinguished from other
information in the same published document. (Par. 61, PPSAS 1). In
addition, the following information shall be displayed prominently, and
repeated when it is necessary for a proper understanding of the
information presented:
a. The name of the reporting entity or other means of identification,
and any change in that information from the preceding reporting date;
b. Whether the financial statements cover the individual entity or a
group of entity;
c. The reporting date or the period covered by the financial statements,
whichever is appropriate to that component of the financial
statements;
d. Name of fund cluster;
e. The reporting currency; and
f. The level of rounding used in presenting amounts in the financial
statements.
(Par. 63, PPSAS 1)

Sec. 14. Reporting Period. Financial statements shall be presented at

least annually.
When an entity’s reporting date changes and the annual financial
statements are presented for a period longer or shorter than one
year, an entity shall disclose, in addition to the period covered by the
financial statements:
a. The reason for using a longer or shorter period; and
b. The fact that comparative amounts for certain statements such as
the statement of financial performance, statement of changes in net
assets/equity, cash flow statement, and related notes are not entirely
comparable. (Par. 66, PPSAS 1)

Sec. 15. Statement of Financial Position. The Statement of Financial

Position is a formal statement which shows the financial condition of
the entity as at a certain date. It includes information on the three
elements of financial position, namely, assets, liabilities and equity. The
Statement of Financial Position shall be presented in comparative,
detailed and condensed format.
a. Condensed Statement of Financial Position – presents only the major
subclassification of Statement of Financial Position accounts in the
Revised Chart of Accounts. Condensed Statement of Financial Position
shall be submitted at yearend to the concerned Auditor. Its breakdown
and other relevant information shall be disclosed in the Notes to
Financial Statements.
b. Detailed Statement of Financial Position – presents all Statement of
Financial Position accounts in the Revised Chart of Accounts as a line
item in the financial report. Detailed Statement of Financial Position
shall be submitted at yearend to the Government Accountancy Sector,
COA, as part of the yearend financial statements.
Sec. 16. Current/Non-current Distinction. An entity shall present
current and noncurrent assets, and current and non-current liabilities,
as separate classifications on the face of its Statement of Financial
Position.
a. Current/Non-current Assets. An asset shall be classified as current
when it satisfies any of the following criteria:
1. It is expected to be realized in, or is held for sale or consumption in,
the entity’s normal operating cycle;
2. It is held primarily for the purpose of being traded;
3. It is expected to be realized within twelve months after the reporting
date; or
4. It is cash or a cash equivalent, unless it is restricted from being
exchanged or used to settle a liability for at least twelve months after
the reporting date.
All other assets shall be classified as non-current. (Par. 76, PPSAS 1)

b. Current/Non-current Liabilities. A liability shall be classified as

current when it satisfies any of the following criteria:
1. It is expected to be settled in the entity’s normal operating cycle;
2. It is held primarily for the purpose of being traded;
3. It is due to be settled within twelve months after the reporting date;
or
4. The entity does not have an unconditional right to defer settlement
of the liability for at least twelve months after the reporting date.
All other liabilities shall be classified as non-current. (Par. 79, PPSAS 1)

Sec. 17. Information to be presented on the Face of Statement of

Financial Position. As a minimum, the face of the Statement of
Financial Position shall include line items that present
the following amounts:
a. Cash and cash equivalents;
b. Receivables from exchange transactions;
c. Recoverable from non-exchange transactions (taxes and transfers);
d. Financial assets (excluding amounts shown under (a), (b) and (c));
e. Inventories;
f. Investment Property;
g. Property, Plant and Equipment;
h. Intangible assets;
i. Taxes and Transfers Payable;
j. Payables under exchange transactions;
k. Provisions;
l. Financial liabilities (excluding amounts shown under (h), (i) and (j));
and
m. Net assets/equity.

Additional line items, headings, and sub-totals shall be presented on

the face of the Statement of Financial Position when such presentation
is relevant to an understanding of the entity’s financial position. (Par.
89, PPSAS 1)

An entity shall disclose, either on the face of the Statement of Financial

Position or in the notes, further sub-classifications of the line items
presented, classified in a manner appropriate to the entity’s operations.
(Par. 93, PPSAS 1)

Sec. 18. Statement of Financial Performance. The Statement of

Financial Performance shows the results of operation/performance of
the entity at the end of a particular period. All items of revenue and
expense recognized in a period shall be included in surplus or deficit
unless a PPSAS requires otherwise.
a. Normally, all items of revenue and expense recognized in a period
are
included in surplus or deficit. This includes the effects of changes in
accounting estimates. However, circumstances may exist when
particular items may be excluded from surplus or deficit for the current
period, as follows:
1. The correction of prior period errors (PPSAS 3);
2. The effect of changes in accounting policies (PPSAS 3); and
3. Gains or losses on remeasuring available-for-sale financial assets.
(PPSAS 29)
b. The Statement of Financial Performance shall be prepared in
comparative detailed and comparative condensed format.
Sec. 19. Information to be presented in the Statement of Financial
Performance.
The presentation of information in the Statement of Financial
Performance shall be governed by the following provisions:
a. As a minimum, the face of the statement of financial performance
shall include line items that present the following amounts for the
period

1. Revenue;
2. Finance costs;
3. Share of the surplus or deficit of associates and joint ventures
accounted for using the equity method;
4. Gain or loss recognized on the disposal of assets or settlement of
liabilities
attributable to discontinuing operations; and
5. Surplus or deficit. (Par. 102, PPSAS 1)
b. Additional line items, headings, and subtotals shall be presented on
the face of the statement of financial performance when such
presentation is relevant to an
understanding of the entity’s financial performance. (Par. 104, PPSAS 1)
c. When items of revenue and expense are material, their nature and
amount shall be disclosed separately. (Par. 105, PPSAS 1)

d. Circumstances that would give rise to the separate disclosure of

items of revenue and expense include:
1. Write-downs of inventories to net realizable value or of property,
plant, and equipment to recoverable amount or recoverable service
amount as appropriate,
as well as reversals of such write-downs;
2. Restructurings of the activities of an entity and reversals of any
provisions for the costs of restructuring;
3. Disposals of items of property, plant, and equipment;
4. Privatizations or other disposals of investments;
5. Discontinuing operations;
6. Litigation settlements; and
7. Other reversals of provisions. (Par. 107, PPSAS 1)

e. An entity shall present, either on the face of the statement of

financial performance or in the notes:
1. a sub-classification of total revenue, classified in a manner
appropriate to the entity’s operations (Par. 108, PPSAS 1); and,
2. an analysis of expenses using a classification based on either the
nature of expenses or their function within the entity, whichever
provides information that is reliable and more relevant. (Par. 109,
PPSAS 1)
f. Entities classifying expenses by function shall disclose additional
information on the nature of expenses, including depreciation and
amortization expense and employee benefits expense. (Par. 115, PPSAS
1
Sec. 20. Statement of Changes in Net Assets/Equity. The Statement of
Changes in Net Assets/Equity shows the changes in equity between two
accounting periods reflecting the increase or decrease in the entity’s
net assets during the year.

An entity shall present a statement of changes in net assets/equity

showing on the face of the statement:
a. Surplus or deficit for the period;
b. Each item of revenue and expense for the period that, as required by
other Standards, is recognized directly in net assets/equity, and the
total of these items (example: unrealized gain/(loss) from changes in
the fair value of financial assets);
c. Total revenue and expense for the period (calculated as the sum of
(a) and (b);
d. The effects of changes in accounting policies and corrections of
errors for each
component of net asset/equity disclosed; and
e. The balance of accumulated surpluses or deficits at the beginning of
the period and at the reporting date, and the changes during the
period.

Sec. 21. Statement of Comparison of Budget and Actual Amount. A

separate additional financial statement for comparison of budget and
actual amounts shall be prepared since the financial statements and
budget of NGAs are not on the same accounting basis. (PAG4, PPSAS 1)

Sec. 22. Statement of Cash Flows. The Statement of Cash Flows

summarizes the cash flows from operating, investing and financing
activities of an entity during a given period. It identifies the sources of
cash inflows, the items on which cash was expended during the
reporting period, and the cash balance as at the reporting date. Cash
flow information provides users of financial statements with a basis to
assess (a) the ability of the entity to generate cash and cash
equivalents, and (b) the needs of the entity to utilize those cash flows.
(Par. 126, PPSAS 1)
Cash equivalents are held for the purpose of meeting short term cash
commitments rather than for investment or other purposes. For an
investment to qualify as a cash equivalent, it must be readily
convertible to a known amount of cash and be subject to an
insignificant risk of changes in value. Therefore, an investment qualifies
as a cash equivalent only when it has a short maturity of three months
or less from the date of acquisition. Equity investments are excluded
from cash equivalents unless they are, in substance, cash equivalents.
(Par. 9, PPSAS 2)
Cash flows exclude movements between items that constitute cash or
cash equivalents, because these components are part of the cash
management of an entity rather than part of its
operating, investing and financing activities. Cash management includes
the investment of excess cash in cash equivalents. (Par. 11, PPSAS 2)
Sec. 23. Presentation of Statement of Cash Flows. The cash flow
statement shall report cash flows during the period classified by
operating, investing, and financing activities.
a. Operating Activities – Cash flows from operating activities are
primarily derived from the principal cash-generating activities of the
entity.

1. Cash inflows from operating activities include, among others:

i. Cash receipt of assistance and subsidy from other NGAs, LGUs and
GOCCs
ii. Receipt of NCA;
iii. Collection of income and revenues including tax revenues, service
and
business income, shares, grants, donations and prior year’s income;
iv. Collection of loans, leases and other receivables including
receivables from audit disallowances;
v. Cash receipt of trust liabilities and other trust receipts;
vi. Receipt of inter-entity and intra-entity fund transfers; and
vii. Receipt of advance payments, refunds, and other deferred credits.

2. Cash outflows from operating activities include, among others:

i. Yearend closing of remittances/deposits to National Treasury;
ii. Cash payments of expenses including replenishment of PCF;
iii. Cash payments to suppliers for goods and services;
iv. Cash payments for purchases of consumable biological assets;
v. Grant of cash advances;
vi. Prepayments and deposits;
vii. Payment of accounts payable;
viii. Payments representing financial assistance/subsidy;
ix. Remittances of personnel benefit contributions and mandatory
deductions;
x. Cash payments in relation to litigation settlements;
xi. Release of inter/intra entity fund transfers; and
xii. Other cash disbursements included in the computation of
surplus/deficit.

b. Investing Activities – Involve the acquisition and disposal of non-

current assets and other investments not included in cash equivalent.
These activities include cash transactions such as the purchase of PPE,
short and long-term investments and other non-current assets.

1. Cash inflows under investing activities include, among others:

i. Cash receipts from sales/disposal of PPE, intangibles, investment
property and other long-term assets;
ii. Cash receipts from sales of stocks, bonds, interests in joint ventures
and other investments;
iii. Collection of long-term loans (other than advances and loans of a
public financial institution);
iv. Proceeds from matured/return of investments; and
v. Cash receipts from futures contracts, forward contracts, option
contracts and swap contracts except when the contracts are held for
dealing or trading purposes, or the receipts are classified as financing
activities.

2. Cash outflows under investing activities include, among others:

i. Cash payments to acquire PPE, intangibles and other long-term
assets. These payments include those relating to capitalized
development costs and selfconstructed PPE;
ii. Cash payments to acquire equity or debt instruments of other
entities and interests in joint ventures (other than payments for those
instruments considered to be cash equivalents or those held for dealing
or trading purposes);
iii. Cash advances and loans made to other parties (other than advances
and loans made by a public financial institution); and
iv. Cash payments for futures contracts, forward contracts, option
contracts and swap contracts except when the contracts are held for
dealing or trading purposes, or the payments are classified as financing
activities.
c. Financing Activities – Are activities concerning buildup of equity
capital or borrowings of the entity. These include cash transactions
involving the equity and non-current liabilities. Examples of cash flows
arising from financing activities are:
1. Cash proceeds from issuing debentures, loans, notes, bonds,
mortgages and other short or long-term borrowings;
2. Cash repayments of amounts borrowed; and
3. Cash payments by a lessee for the reduction of the outstanding
liability relating to a finance lease.

The net increase in cash provided by (used in) operating activities,

investing activities and financing 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 as shown in the Statement of Financial Position.

Sec. 24. Direct Method of Reporting Cash Flows from Operating

Activities. The entity shall report cash flows from operating activities
using the direct method disclosing major classes of gross cash receipts
and gross cash payments (PAG2, PPSAS 2). Information about major
classes of gross cash receipts and gross cash payments may be obtained
either:
a. From the accounting records of the entity; or

b. By adjusting operating revenues, operating expenses (interest and

similar revenue, and interest expense and similar charges for a public
financial institution) and other items in the statement of financial
performance for:
1. Changes during the period in inventories and operating receivables
and payables;
2. Other non-cash items; and
3. Other items for which the cash effects are investing or financing cash
flows. (Par. 28, PPSAS 2)
Entities reporting cash flows from operating activities using the direct
method shall provide a reconciliation of the surplus/deficit from
ordinary activities with the net cash flow from operating activities. This
reconciliation shall be provided in the notes to the financial statements.
(Par. 29, PPSAS 2)

Sec. 25. Reporting Cash Flows from Investing and Financing Activities.
The entity shall report separately major classes of gross cash receipts
and gross cash payments arising from investing and financing activities,
except to the extent that cash flows described in Sec. 26 of this Chapter
are reported on a net basis. (Par. 31, PPSAS 2)

Sec. 26. Reporting Cash Flows on a Net Basis. Cash flows from
operating, investing and financing activities may be reported on a net
basis for:
a. Cash receipts collected and payments made on behalf of customers,
taxpayers or beneficiaries when the cash flows reflect the activities of
the other party rather than those of the entity; and
b. Cash receipts and payments for items in which the turnover is quick,
the amounts are large, and the maturities are short. (Par. 32, PPSAS 2)

Sec. 27. Foreign Currency Cash Flows. Cash flows arising from
transactions in a foreign currency shall be recorded in an entity’s
functional currency by applying to the foreign currency amount the
exchange rate between the functional currency and the foreign
currency at the date of the cash flow. (Par. 36, PPSAS 2)

Sec. 28. Unrealized Gains and Losses. These are unrealized gains and
losses arising from changes in foreign currency exchange rates are not
cash flows. However, the effect of exchange rate changes on cash and
cash equivalents held or due in a foreign currency is reported in the
cash flow statement in order to reconcile cash and cash equivalents at
the beginning and the end of the period. This amount is presented
separately from cash flows from operating, investing, and financing
activities, and includes the differences, if any, if those cash flows had
been reported at end of period exchange rates. (Par. 39, PPSAS 2)

Sec. 29. Components of Cash and Cash Equivalents. An entity should

disclose the components of cash and cash equivalents and should
present a reconciliation of the amounts in its cash flow statement with
the equivalent items reported in the Statement of Financial Position.
(Par. 56, PPSAS 2)

ILLUSTRATIVE ENTRIES
REGULAR AGENCY FUND
FUND 101
Account Account Debit Credit
Title Code
Assumptions:
Beginning Balances
Cash-Collecting Officer Cash-Collecting Officers 10101010 10,000
Permit Fees 10,000 Accounts Receivable 10301010 25,000
Accounts Receivable Office Equipment 10605020 80,000
Rent/Lease Income 25,000 Buildings 10604010 500,000
Office Equipment 80,000 Due to BIR 20201010 4,250
Building 500,000 Due to GSIS 20201020 1,275
Total Assets 615,000 Due to Pag-IBIG 20201030 850
Due to PhilHealth 20201040 43
Due to BIR (PS) 4,250 Accounts Payable 20101010 20,000
Due to GSIS 1,275 Accumulated Surplus/(Deficit) 30101010 588,583
Due to PagIBIG 850
Due to PhilHealth 43 615,000 615,000
Accounts Payable 20,000
Total Liabilities 26,418
Accumulated Surplus/
(Deficit) 588,583
Net Assets/Equity 588,583

Notes:
1- Not yet due and demandable obligations
for undelivered office supplies 200
2- AP pertains to unpaid training expenses
A. REVENUE
1) Billing of revenue/income
Rent/Lease Income 30,000 Accounts Receivable 10301010 300,000
Waterworks System Fees 50,000 Rent/Lease Income 40202050
30,000
Power Supply System Fees 100,000 Waterworks System Fees 40202090 50,000
Seaport System Fees 45,000 Power Supply System Fees 40202100 100,000
Landing and Parking Fees 75,000 Seaport System Fees 40202110 45,000
total 300,000 Landing and Parking Fees 40202120 75,000
To recognize billing of income
2) Collections and Remittances
a. Prior year's Billed Revenue/Income
a.1 collection
Permit Fees 10,000 Cash-Collecting Officers 10101010 10,000
Accounts Receivable 10301010 10,000
To recognize collection of prior year's
billed income

a.2 remittance Cash-Treasury/Agency Deposit,

Regular 10104010 10,000
Cash-Collecting Officers 10101010 10,000
To recognize remittance of income to BTr
APPROPRIATIONS, ALLOTMENTS AND OBLIGATIONS
3) Receipt of GAA Posting to the appropriate Registry of Approptiation and
PS 650,000 Allotment (RAPAL)
MOOE 750,000
CO 1,000,000
Total 2,400,000
4) Receipt of allotment from the DBM Posting to the appropriate RAPAL and Registry of Allotments,
Obligations and Disbursements (RAOD)
PS 640,000
MOOE 725,000
CO 950,000
Total 2,315,000

5) Incurrence of obligation Posting of Obligation Request and Status (ORS) to the

appropriate RAOD
PS 600,000
MOOE 69,000
Capital Outlays 940,000
1,609,000
6) Receipt of Notice of Cash of Allocation Cash-Modified Disbursement System
from DBM (net of tax) (MDS), Regular 10104040 1,200,000
a) for current year's
appropriation 1,200,000 Subsidy from Nati’l Gov’t 40301010
1,200,000
To recognize receipt of NCA from the DBM

b) for prior year's accounts payable and Cash-Modified Disbursement System

not yet due and demandable obligations (MDS), Regular 10104040 26,618
26,618 Subsidy from National Govt 40301010
26,618
 To recognize receipt of NCA from the DBM

7) Delivery of Office Equipment and Office Supplies

for agency use
(Assumption: Beginning of the year)
a. Prior Year's obligation
a.1 receipt of delivery Office Supplies Inventory 10404010 200
Office Supplies Inventory 200 Accounts Payable 20101010
200
To recognize delivery of Office
Equipment and Supplies based on the
Delivery Receipt (DR) and Inspection and
Acceptance Report (IAR

a.2. posting of payable to the Section C of ORS Posting to the payable column of Section C of
the Obligation Request and Status (ORS)

b. Current year's purchases and delivery

b.1 receipt of delivery Office Equipment 10605020 658,000
Office Equipment 658,000 Office Supplies Invty 10404010 13,800
Office Supplies Inventory 13,800 Accounts Payable 20101010
671,800
Total 671,800 To recognize delivery of Office
Equipment and Supplies based on the
Delivery Receipt (DR) and Inspection and
Acceptance Report (IAR)
b.2. posting of payable to the Section C of ORS Posting to the payable column of Section C of
the Obligation Request and Status (ORS

8) Payment of Personnel Benefits

a. Set up of payable to Officers and Employees upon
approval of payroll Salaries and Wages Regular 50101010 510,000
PERA) 50102010 55,000
Due to BIR 20201010
51,000
Salaries and Wages 510,000 Due to GSIS 20202020
15,300
PERA 55,000 Due to PagIBIG 20202030
10,200
Gross Compensation 565,000 Due to PhilHealth 20202040
510
Withholding Tax 51,000 Due to Officers and Emp 20101020
487,990
GSIS 15,300 To recognize liabilities to officers and
PAG-IBIG 10,200 and employees upon approval of payroll
PhilHealth 510
Total Deductions 77,010
Net 487,990
=====

11) Payments of MOOE and Traveling Expenses -Local 50201010 4,416

 accounts payable Training Expenses 50200010 11,040
a. payment of expenses Water Expenses 50204010 1,656
Traveling-Local (reimbursement) 4,416 Electricity Expense 50204020 8,280
Training 11,040 Telephone Expenses 50205020 1,656
Water 1,656 Janitorial Services 50212020 1,104
Electricity 8,280 Security Services 50212030 2,760
Telephone 1,656 Rent/Lease Expenses 50299050 22,080
Janitorial 1,104 Due to BIR 20201010 2,158
Security 2,760 Cash-Modified Disbursement System
Rent 22,080 (MDS), Regular 10104040 50,834
52,992 To recognize issuance of MDS checks based
Less: Withholding taxes* 2,158 on the Report of Checks Issued (RCI)
Net 50,834
======
* Withholding taxes:
Training 283
10% withholding tax (income) 110
1% withholding tax on income 99
5% withholding of final tax (VAT) 74
Water 33
Electricity 414
Telephone 83
Janitorial 69
2% withholding tax on income 20
5% withholding of final tax (VAT) 49
Security 173
2% withholding tax on income 49
5% withholding of final tax (VAT) 123
Rent 1,104
Total Withholding taxes 2,158
====
b. payment of accounts payable
b.1 current year's accounts payable Accounts Payable 20101010 537,440
Purchase of : Due to BIR 20201010
28,791
Office Equipment 526,400 Cash-Modified Disbursement System
Office Supplies Inventory 11,040 (MDS), Regular 10104040
508,649
Total 537,440 To recognize payment of accounts payable
Less: Withholding tax 28,791
1% withholding tax on income 4,799
5% withholding of final tax (VAT) 23,993
Net 508,649
=======
Breakdown of Wtax
Office Equipment 28,200
Office Supplies Inventory 591
28,791
======

b.2 prior year's accounts payable Accounts Payable 20101010 20,000

MOOE Due to BIR 20201010 1,250
 Total 20,000 Cash-Modified Disbursement System
Less: Withholding tax 1,250 (MDS), Regular 10104040 18,750
2% withholding tax on income 357 To recognize payment of accounts payable
5% withholding of final tax (VAT) 893
Net 18,750
====

c. grant of cash advance for Advances to Officers and Employees 19901040 2,000
traveling expenses 2,000 Cash-Modified Disbursement System
(MDS), Regular 10104040 2,000
To recognize grant of cash advance for travel

d. posting of disbursements to the registry Posting to the payments column of Section C

CY 561,482 of the Obligation Request and Status (ORS)
PY 18,939 Posting to the disbursements column of the
580,422 RAOD based on the report of disbursements
=======

e. liquidation of cash advance for 1,900 Traveling Expenses-Foreign 50201020 1,900

traveling expenses -foreign Advances to Officers and
Employees 19901040
1,900
To recognize liquidation of cash advance for travel

f. receipt and deposit of refund 100 Cash-Collecting Officers 10101010 100

of excess cash advance for Advances to Officers and
Employees 19901040
100
traveling expenses To recognize refund of excess cash
advance for travel

Cash-Treasury/Agency Deposit, Regular 10104010 100

Cash-Collecting Officers 10101010
100
To recognize remittance of the refund
of excess cash advance for travel

e. posting of adjustment in disbursement to the Posting of adjustments to the appropriate ORS and RAOD
registry 100

12) Remittance of taxes thru TRA

a. Constructive receipt of NCA Cash-Tax Remittance Advice 10104070 87,460
for TRA consisting of: Subsidy from National Govt 40301010
87,460
 PS 55,250 To recognize constructive receipt of NCA
MOOE 4,010 for withholding taxes
CO 28,200
Total 87,460
======
Breakdown per type of tax:
Income Tax 60,685
Business Tax 26,775
Total 87,460
======

b. Remittance of taxes thru TRA Due to BIR 2020101 87,460

Cash-Tax Remittance Advice 10104070 87,460
Income Tax 60,685 To recognize remittance of withholding
Business Tax 26,775 taxes thru TRA
Total 87,460
=======

c. posting of disbursement to the Posting to the payments column of Section C

registry 87,460 of the Obligation Request and Status (ORS)
Posting to the disbursements column of the
RAOD based on the report of disbursement

13) Remittance of the following:

GSIS 15,300 Due to GSIS 20202020 15,300
PAG-IBIG 10,200 Due to PagIBIG 20202030 10,200
PhilHealth 510 Due to PhilHealth 20202040 510
26,010 Cash-Modified Disbursement System
====== (MDS), Regular 10104040 26,010
To recognize remittance to GSIS, Pag-IBIG
and PhilHealth

14) Issuance of supplies and materials Office Supplies Expenses 50203010 12,420
to end users Office Supplies Inventory 10404010
12,420
To take up issuance of supplies and
materials based on the Monthly Report of
Supplies and Materials Issued and supporting
documents submitted by the property office

15) Adjustment for unused NCA Subsidy from National Govt 40301010 132,196
NCA Received 1,226,618 Cash-Modified Disbursement System
Payments 1,094,422 (MDS), Regular 10104040
132,196
132,196 To recognize reversion of unused NCA
 =====
16) Depreciation of Office Equipment
(estimated life of 5 years) Depr’tion-Machinery and Equipt 50501050 140,220
yearly depreciation 140,220 Accu Depreciation-Office Equipment 10605021
140,220
To recognize depreciation of office equipmen

17) Depreciation of building with an estimated

life of 25 years Depr’tion-Bldgs and Other Struc. 50501040 19,000
yearly depreciation 19,000 Accumulated Depr’n-Buildings 10604010 19,000
To recognize depreciation of office equipment

TRUST RECEIPTS DEPOSITED WITH AGENCY GOVERNMENT DEPOSITORY BANK

FUND 184

ASSUMPTION: COLLECTION OF PROCESSING FEES AUTHORIZED AS SPECIAL ACCOUNT

1) Collections of following: Cash - Collecting Officers 10101010 500,000

Donations for calamity victims 500,000 Trust Liabilities - Disaster Risk Reduction
and Management Fund 20401020
500,000
500,000
=======
To take up collection of donations for calamity victims

2) Deposit of collections to the Cash in Bank - Local Currency,

Authorized Govt Depository Bank 500,000 Current Account 10102020 500,000
Cash - Collecting Officers 10101010
500,000
To record remittance of collections to the BTr

3) Purchase of the following:

Welfare Goods 290,000 Welfare Goods for Distribution 10402020 290,000
Disaster Response and Rescue Response and Rescue Eqpt 50209040 200,000
Equipment (April 5, 20X5) 200,000 Due to BIR 20201010
26,250
Total 490,000 Cash in Bank - Local Currency,
Less: Withholding tax 26,250 Current Account 10102020
463,750
 1% withholding tax on income 4,375
5% withholding of final tax (VAT) 21,875
Net Amount Paid 463,750 To record issuance of check.

4) Remittance of Taxes thru TRA Due to BIR 20201010 26,250

Cash in Bank - Local Currency,
Current Account 10102020
26,250

5) Distribution of welfare goods 275,500 Welfare Goods Expenses 50203060 275,500

Welfare Goods for Distribution 10402020
275,500

6) Recording of depreciation (9 months) Depr’n - Machinery and Equipment 50501050 28,500

Accumulated Depreciation - Disaster
Assume that Estimated Life is 5 years Response and Equipment 10605091 28,500
Depreciation for 9 months =
(200-000 - (20000,000x 5%) / 5 x 9/12) 28,500

7) Adjustment for expenses chargeable to Trust Liabilities - Disaster Risk Reductio

liability (Due to NGA) and Management Fund 20401020 304,000
Welfare Goods Expenses 50203060
275,500
Depr’n - Machinery and Equipt 50501050
28,500

PRE-CLOSING TRIAL BALANCE AGENCY BOOKS

Cash in Bank - Local Currency,
Current Account 10102020 10,000
Welfare Goods for Distribution 10402020 14,500
Disaster Resp and Resc.Equipt 50209040 200,000
Accumulated Depreciation - Disaster
Response and Equipment 28,500
Trust Liabilities - Disaster Risk Reduction
and Management Fund 20401020 196,000
Total 224,500 224,50
========================

Week 16
 PUBLIC ACCOUNTING
for
Local Government Units

INTRODUCTION

Section 1. Objective. This Manual prescribes the guidelines for the

uniform recognition, measurement, presentation and disclosure of
financial transactions, and preparation of financial reports in the local
government units (provinces, cities and municipalities).

Section 2. Coverage. This Manual covers the basic policies and

standards, the chart of accounts, the detailed guidance for the
recognition, measurement and presentation procedures, and the
record and report forms and formats.
Section 3. Legal Basis. This Manual is prescribed by the Commission on
Audit pursuant to Section 2(2), Article IX-D 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)
 Chapter 1

BASIC FEATURES AND POLICIES

Section 4. Basic Features and Policies. The Local Government

Accounting System shall have the following features and policies, to
wit:
a. International Public Sector Accounting Standards (IPSAS). IPSAS shall
be the framework in the preparation and presentation of the local
governments’ financial statements.

b. Accrual accounting. Income and expenses shall be on accrual basis of

accounting. Income from taxes shall be recognized as receivable when
the taxable event occurs. Expense shall also be recognized upon
incurrence.

c. Fund Concept. Local governments, except the barangays, shall

maintain three funds; namely:
1. General Fund – consists of monies and resources of the province,
municipal, city or barangay that may be received by ad disbursed from
the provincial treasurer, municipal treasurer, city treasurer, barangay
treasurer, respectively.
2. Special Education Fund – consisting of share in the proceeds of the
additional tax on real property.
3. Trust Fund – consisting of private and public monies which have
come into possession of the local government or of a provincial
government official or trustees, agents or administrator, or which have
been received as a guarantee for the fulfillment of some obligation.
d. Separation of Books. Separate set of books of accounts shall be
maintained for each fund.

e. Budgetary Accounts. Separate set of books shall be maintained for

the budgetary accounts in view of the difference of the budgetary basis
from the accounting baZsis.

f. Special Accounts in the General Fund. Special Accounts in the

General Fund (SAGF) shall be maintained for the following:
1. Public utilities and economic enterprises
2. Loans, interests, bonds issued and other contributions for specific
purposes
3. Development projects funded from the Share in Internal Revenue
Collections
4. Share from National Wealth
5. Such other special accounts which may be created by law or
ordinance
g. Complete subsidiary records for all accounts (assets, liabilities and
equity) shall
be maintained for public utilities and economic enterprises. Subsidiary
records for the receipts, transfers and expenditures of all other special
accounts shall be maintained.
h. Chart of accounts. A new chart of accounts shall be adopted.

i. Books of accounts.
The following books of accounts shall be maintained:

1. Books of original entry

i. Cash Receipts Journal
ii. Procurement Received Journal
 iii. Cash Disbursement Journal
iv. Check Disbursement Journal
v. Authority to Debit Account Disbursement Journal
vi. General Journal

2. Books of Final Entry

i. General Ledger
ii. Subsidiary Ledgers
1. Special Accounts
2. General Ledger Accounts
j. Cashbooks. Treasurers and disbursing officers shall maintain the
following
cashbooks, as applicable:
1. Cashbook – Cash in Treasury
2. Cashbook – Cash in Bank
3. Cashbook – Cash Advances (except for Cash Advances to
Officers and Employees)
k. General Purpose Financial Statements. A complete set of financial
statements
comprises:
1. Statement of financial position
2. Statement of financial performance
3. Statement of changes in net assets/equity
4. Statement cash flows
5. Statement of comparison of budget and actual amounts
6. Notes to financial statements, comprising a summary of
significant accounting policies and explanatory notes
l. Consolidated financial statements. Financial statements of controlled
entities shall be consolidated with the financial statements of the
controlling entity.m. Current/Non-Current Distinction. LGUs shall
present current and non-current assets, and current and non-current
liabilities, as separate classifications on the face of their statement of
financial position.
n. Current Asset. Asset shall be classified as current when it is expected
to be realized in, or is held for sale or consumption within, the LGU’s
accounting cycle or cash or cash equivalent not restricted for
exchanged or used for at least 12 months after the reporting date.
o. Current Liability. Liability shall be classified as current when it is
expected to be settled in the LGU’s accounting cycle or twelve months
after the reporting date.
p. Non-current Assets or Liabilities. All other assets or liabilities not
classified as current shall be considered as non-current.
q. Direct Method. The Cash Flow Statement shall be presented
following the direct method of presentation.
r. Cash equivalents. Cash equivalents shall comprise short term
investments with maturities of 3 months or less from acquisition date
that are readily convertible to known amounts of cash and which are
subject to insignificant risk in changes in value.
s. Changes in Accounting Policy. Any change in the accounting policy
shall be applied to transactions, other events and a condition
retrospectively as if the policy had always been observed except to the
extent that it is impracticable to determine either the period-specific
effects or the cumulative effect of the change.
t. Changes in Accounting Estimates. Any change in accounting estimate
shall be applied prospectively.
u. Prior Period Errors. Omissions from, and misstatements in, the
entity’s
financial statements for one or more prior periods shall be
corrected through retrospective restatement in the recognition,
 measurement, and disclosure of amounts of elements of the
financial statements as if a prior period error had never occurred.
v. Appropriations and Allotments. The Budget Office shall maintain the
Record of Appropriations and Allotments, which shall be the basis for
the the availability of appropriations.
w. Allotments and Obligations. The Accounting Office shall maintain
the Registry of Appropriations, Allotments and Obligations, which shall
be the basis in the recording of allotments and obligations in the books
of accounts.
x. Measurement of Inventory. Inventories for sale at the end of the
period shall be measured at the lower of cost or net realizable value.
Inventories for distribution at no charge or nominal charge and those
for consumption shall be measured at the lower of cost and current
replacement cost. Where inventories are acquired through non-
exchange transaction, their cost shall be measured at their fair value at
the date of acquisition.
y. Weighted average cost formula. Cost of each item for similar
inventory items shall be computed through the weighted average cost
formula. The cost of each item is determined from the weighted
average cost of similar items at the beginning of the period and the
cost of similar items purchased for the period.
z. Cost Model. After recognition as an asset, property, plant and
equipment shall be carried at its cost, less any accumulated
depreciation and any accumulated impairment losses.

Week 18
 ILLUSTRATIVE ACCOUNTING ENTRIES

Section 28. Illustrative Accounting Entries FOR LGUs

Particulars Account Title Account Code Debit Credit

Annual Budget:

A. Estimates of Income: B. Appropriations

Tax Revenue-
Real Property Tax – Basic 8,000 Personal Services 5,000
Business Tax 2,000 MOOE 7,000
Share from National Taxes- CO 10,000
Share from Internal Revenue
Collections 15,000 20% Devt Fund 3,000
Total 25,000 Total 25,000
====== =====

Estimates of Income

a. To record :Estimates of Income Revenues :

estimated sources of : and Receipts : 3-05-02-010 25,000
revenues and receipts for :Estimates-Internal Sources : 3-05-02-020 10,000
appropriation. :Estimates-External Sources : 3-05-02-030 15,000

Appropriations

b. To record the : Appropriations-Annual Budget : 3-05-02-050 25,000

appropriation : Legislative Appropriations : 3-05-02-070 25,000
25,000

Release of the following Allotment:

Personal Services 5,000

 MOOE 6,000
Capital Outlay 7,000
20% Dev. Fund 3,000
Total 21,000
====

c. To record release of : Released Current Allotment : 3-05-02-080 21,000

allotment : Current Allotment : 3-05-02-090
21,000

Realization of the Estimated Income

A. Realized Income:
Tax Revenue-
Real Property Tax – Basic 2,000
Business Tax 3,000
Share from National Taxes-
Share from Internal Revenue Collections 15,000
Total 20,000
=====

d. To record realized : Fund Balance : 3-05-01-010 20,000

estimates of income : Realized Income Revenues and
based on the Report of Receipts : 3-05-02-040 20,000
the Realized Budgetary
Income Revenues and
Receipt

Obligation

A. Obligation
Personal Services 3,000
MOOE 4,000
CO 2,000
20% Development Fund 3,000
Total 12,000
=====

e. To record the :Current Allotments – Obligated : 3-05-03-010 20,000

obligation from current :Obligations-Current Allotment : 3-05-03-020 20,000
allotment based on the
CAFOA

Consummated Obligations

A. Consummated Obligations
 Personal Services 2,500
MOOE 3,800
CO 2,000
20% Development Fund 3,000
Total 11,300
=====

f. To record : Current Allotment - Obligations

consummated : Consummated : 3-05-03-050 11,300
obligations from current : Consummated Obligations : 3-05-03-070
11,300
allotment

Pre-closing trial balance

Account Title Account Code Dr. Bal. Cr.

Bal.
Estimates of Income Revenues and Receipts 3-05-02-010 25,000
Estimates – Internal Sources 3-05-02-020 10,000
Estimates – External Sources 3-05-02-030
15,000
Appropriations –Annual Budget 3-05-02-050 25,000
Legislative Appropriations 3-05-02-070
25,000
Released Current Allotment 3-05-02-080 21,000
Current Allotment 3-05-02-090 21,000
Realized Income Revenues and Receipts 3-05-02-040 20,000
Fund Balance 3-05-01-010
20,000
Current Allotments-Obligated 3-05-03-010 12,000
Obligations-Current Allotment 3-05-03-020
12,000
Current Allotment –Obligations Consummated 3-05-03-050 11,300
Consummated Obligations 3-05-03-070 11,300
Total 114,300 114,300
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WEEK 19 FINAL EXAMINATION