Overview of Government

Accounting
Chapter 1
Learning Objectives
▪ Differentiate government accounting from accounting for
business entities
▪ State the government entities charged with accounting
responsibilities
▪ Describe briefly the GAM for NGAs
▪ State the Basic principles used in government accounting
▪ State the recognition criteria for assets
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
Objectives of Government
Accounting
▪ To produce information concerning past operations and
present conditions
▪ To provide a basis for guidance for future operations
▪ To provide control of the acts of public bodies and officers in
the receipt, disposition and utilization of funds and property
▪ To report on the financial position and the results of
operations of government agencies for the information of all
persons concerned
Government Accounting places
great emphasis on the following:
▪ Sources and utilization of government funds
▪ Responsibility, accountability and liability of entities entrusted
with government funds and properties
Government Accounting places
great emphasis on the following:
▪ Sources and utilization of government funds
▪ The sources of government funds include receipts from taxes and
other fees, borrowings, and grants from other governments and
international bodies
▪ Responsibility, accountability and liability of entities entrusted
with government funds and properties
Government Accounting places
great emphasis on the following:
▪ Sources and utilization of government funds
▪ The sources of government funds include receipts from taxes and
other fees, borrowings, and grants from other governments and
international bodies
▪ Responsibility, accountability and liability of entities entrusted
with government funds and properties
▪ The utilization of government funds includes expenditures or
programs, projects, unanticipated losses from calamities and the
like.
Responsibility over Government
Funds and Properties
▪ Government resources shall be utilized efficiently and
effectively in accordance with the Law

▪ All those who are exercising authority over a government

agency shall share fiscal responsibility
Responsibility over Government
Funds and Properties
▪ Government resources shall be utilized efficiently and
effectively in accordance with the Law
▪ The Head of the Agency is directly responsible in implementing
this policy and is primarily responsible for government resources
entrusted to his agency

▪ All those who are exercising authority over a government

agency shall share fiscal responsibility
Responsibility over Government
Funds and Properties
▪ Government resources shall be utilized efficiently and effectively in
accordance with the Law
▪ The Head of the Agency is directly responsible in implementing this
policy and is primarily responsible for government resources entrusted
to his agency

▪ All those who are exercising authority over a government agency

shall share fiscal responsibility
▪ Fiscal Responsibility - defined as: an agreed set of policies,
processes, or arrangements intended to improve fiscal outcomes,
discipline, transparency, and accountability by requiring
governments to commit to monitorable fiscal policy objectives and
strategies.
Accountability over Government
Funds and Properties
▪ A government officer entrusted with the possession of
government resources is responsible for the safekeeping
therefore in accordance with the Law
▪ The transfer of government funds from one officer to another
shall, except as allowed by the Law, be made only after
authorization of the COA.
Liability over Government Funds
and Properties
▪ The unlawful use of government resources shall be the personal
liability of the employee found to be directly responsible therefor
▪ Every accountable officer shall be liable for all losses resulting
from the unlawful use or negligence in the safekeeping of the
government resources
▪ No accountable officer shall be relieved from liability merely
because he has acted under the direction of a superior officer in
unlawfully utilizing the government resources entrusted to him,
unless before that act, he has notified the superior officer in
writing, that the authorization is illegal
▪ An accountable officer shall immediately notify the COA for any
loss of government funds from unforeseen events within 30 days.
Accounting Responsibility
▪ Offices Charged with Government Responsibility
▪ Commission on Audit (COA)
▪ Department of Budget an Management (DBM)
▪ Bureau of Treasury (BTr)
▪ Government Agencies
Commission on Audit
▪ Has the exclusive authority to promulgate accounting and
auditing rules and regulations
▪ Keeps the general accounts of the government, supporting
vouchers, and other documents
Department of Budget and
Management (DBM)
▪ Responsible for the formulation and implementation of the
national budget with the goal of attaining the nation’s
socio-economic objectives
Bureau of Treasury (BTr)
▪ Functions under Department of Finance and is the cash
custodian of the government.

▪ Authorized to:
▪ Receive and keep national funds and manage and control the
disbursements thereof
▪ Maintain accounts of financial transactions of all national
government offices, agencies and instrumentalities
Government Agencies
▪ Refers to any departments, bureau or office of the national
government, or any of its branches and instrumentalities, or
any political subdivision, as well as any government owned
or controlled corporation (GOCC), including its subsidiaries,
or other self-governing board or commission of the
government
▪ Government agencies are required by law to have
accounting units/divisions/departments
Financial Reporting System of the
National Government
▪ (see page 6 of the schema)

▪ Entity – refers to a government agency, department or

operating/field unit
▪ Financial Reporting – the process of preparation,
presentation and submission of general purpose financial
statements and other reports
▪ Its objective is to provide information about the entity that is
useful to users for accountability purposes and decision-making
The GAM for NGAs

Government
New Government Accounting Manual for
Old Government
Accounting System National Government
Accounting System
(NGAS) Agencies (GAM for
NGAs)
The GAM for NGAs
▪ Promulgated to harmonize the government accounting
standards with International accounting standards particularly
the International Public Sector Accounting Standards
(IPSAS) – based on IFRS
▪ The Philippine Government has adopted IPSAS through
PPSAS
Legal Basis
▪ The GAM for NGAs is promulgated by the Commission on
Audit based on the authority conferred to it by the Philippine
Constitution
Coverage
▪ Preparing general purpose financial statements in
accordance with the PPSAS and other financial reports as
may be required by laws, rules and regulations
▪ Reporting of budget, revenue and expenditure in accordance
with laws, rules and regulations
Objective
▪ The GAM for NGA’s aims to update the following:
▪ Standards, policies, guidelines and procedure in accounting for
government funds and property
▪ Code structuring and accounts
▪ Accounting books, registries, records, forms, reports and financial
statements
Basic Accounting and Budget
reporting Principles
▪ PPSAS and relevant laws, rules and regulations
▪ Accrual basis of accounting
▪ Accrual accounting is an accounting method where revenue or
expenses are recorded when a transaction occurs rather
than when payment is received or made. The method follows
the matching principle, which says that revenues and expenses
should be recognized in the same period.
▪ Budget basis for presentation of budget information in the
financial statements
▪ Revised Chart of Accounts
Basic Accounting and Budget
reporting Principles
▪ Double Entry Bookkeeping
▪ Financial statements based on accounting and budgetary
records
▪ Fund Cluster Accounting
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make information
useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form
▪ Neutrality
▪ Prudence
▪ Completeness
▪ Comparability
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability – information is understandable when users
can reasonably be expected to comprehended its meaning
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance – information is relevant if it can assist users in
evaluating past, present or future events or in confirming or
correcting past evaluations.
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality – Affects the relevance of information
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness – information loses its relevance if there is undue
delay in its reporting
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability – reliable information is free from material error and
bias, and can be depended on by the users to represent faithfully
that which it purports to represent or could reasonably be
expected to represent
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation – for information to represent faithfully
transactions and other events, it should be presented in
accordance with the substance of the transactions and other
events, and not merely their legal form.
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form – the substance of the transaction or other
events is not always consistent with their legal form
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make
information useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form
▪ Neutrality – information is neutral if it is free from bias
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make information
useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form
▪ Neutrality
▪ Prudence – the exercise of a degree of caution when making
estimates under conditions of uncertainty, such that assets or revenue
are not overstated and liabilities or expenses are not understated
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make information
useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form
▪ Neutrality
▪ Prudence
▪ Completeness – information should be complete within the bounds of
materiality and cost
Qualitative Characteristics of
Financial Reporting
▪ Qualitative characteristics are the attributes that make information
useful to users
▪ Understandability
▪ Relevance
▪ Materiality
▪ Timeliness
▪ Reliability
▪ Faithful representation
▪ Substance over form
▪ Neutrality
▪ Prudence
▪ Completeness
▪ Comparability – information is comparable when users are able to
identify similarities and differences between that information and
information in other reports
Components of General Purpose
Financial Statements
▪ Statement of Financial Position
▪ Statement of Financial Performance
▪ Statement of Changes in Net Assets/Equity
▪ Statement of Cash Flows
▪ Statement of Comparison of Budget and Actual Amounts
▪ Notes to Financial Statements comprising a summary of
significant accounting policies and other explanatory notes
Elements of Financial Statements
▪ Assets – are resources controlled by an entity as a result of
past events, and form which future economic benefits or
service potential are expected to flow to the entity
Elements of Financial Statements
▪ Assets – are resources controlled by an entity as a result of
past events, and form which future economic benefits or
service potential are expected to flow to the entity
▪ Liabilities – are present obligations of the entity arising from
past events and settlement of which is expected to result in
an outflow from the entity of resources embodying economic
benefits or service potential
Elements of Financial Statements
▪ Assets – are resources controlled by an entity as a result of
past events, and form which future economic benefits or
service potential are expected to flow to the entity
▪ Liabilities – are present obligations of the entity arising from
past events and settlement of which is expected to result in
an outflow from the entity of resources embodying economic
benefits or service potential
▪ Equity – Net Assets/ Equity is the residual interest in the
assets of the entity after deducting all its liabilities
Elements of Financial Statements
▪ Revenue – is the gross inflow of economic benefits or service
potential during the reporting period when those inflows
result in an increase in net asset/equity, other than increase
relating to contribution from owners
▪ Revenue funds – comprise all funds derived from the income of
any agency of the government and available for appropriation or
expenditure in accordance with law
Elements of Financial Statements
▪ Revenue – is the gross inflow of economic benefits or service
potential during the reporting period when those inflows
result in an increase in net asset/equity, other than increase
relating to contribution from owners
▪ Expenses – are decrease in economic benefits or service
potential during the reporting period in the form of outflows or
consumption of assets or incurrence of liabilities that result in
decrease in net asset/equity other than those relating to
distribution to owners
Elements of Financial Statements
▪ Revenue – is the gross inflow of economic benefits or service
potential during the reporting period when those inflows
result in an increase in net asset/equity, other than increase
relating to contribution from owners
▪ Expenses – are decrease in economic benefits or service
potential during the reporting period in the form of outflows or
consumption of assets or incurrence of liabilities that result in
decrease in net asset/equity other than those relating to
distribution to owners
End of Presentation