Chapter 1: Introduction a.

standards, policies, guidelines and

procedures in accounting for government funds and
property;
Recent developments brought about by the
Philippine Public Financial Management Reforms b. coding structure and accounts; and
and significant changes in the field of accounting
prompted the harmonization of the existing c. accounting books, registries, records,
accounting standards with the international forms, reports and financial statements.
accounting standards. This Commission revised the
_______________________________
New Government Accounting System (NGAS)
Manual prescribed under Commission on Audit Chapter 2 GENERAL PROVISIONS, BASIC
(COA) Circular No. 2002-002 dated June 18, 2002 to STANDARDS AND POLICIES
make it responsive to dynamic changes and modern
technology.

Sec. 1. Legal Basis. The Government Sec. 1. Scope. This chapter covers the
Accounting Manual (GAM) is prescribed by COA general provisions from existing laws, rules and
pursuant to Article IX-D, Section 2 par. (2) of the 1987 regulations; and the basic standards/fundamental
Constitution of the Republic of the Philippines which accounting principles for financial reporting by
provides that: national government agencies.

“The Commission on Audit shall have _______________________________

exclusive authority, subject to the limitations in this
Sec. 2. Definition of Terms. For the
Article, to define the scope of its audit and
purpose of this Manual, the terms used as stated
examination, establish the techniques and methods
below shall be construed to mean as follows:
required therefor, and promulgate accounting and
auditing rules and regulations, including those for the a. Accrual basis – means a basis of accounting
prevention and disallowance of irregular, under which transactions and other events are
unnecessary, excessive, extravagant, or recognized when they occur (and not only when cash
unconscionable expenditures, or uses of government or its equivalent is received or paid). Therefore, the
funds and properties". (Underscoring supplied) transactions and events are recognized in the
accounting records and recognized in the financial
_______________________________
statements of the periods to which they relate. The
Sec. 2. Coverage. This Manual presents elements recognized under accrual accounting are
the basic accounting policies and principles in assets, liabilities, net assets/equity, revenue, and
accordance with the Philippine Public Sector expenses.
Accounting Standards (PPSAS) adopted thru COA
b. Assets – are resources controlled by an entity as
Resolution No. 2014-003 dated January 24, 2014
a result of past events, and from which future
and other pertinent laws, rules and regulations. It
economic benefits or service potential are expected
includes the Revised Chart of Accounts (RCA)
to flow to the entity.
prescribed under COA Circular No. 2013-002 dated
January 30, 2013, as amended; the accounting c. Contributions from owners – means future
procedures, books, registries, records, forms, economic benefits or service potential that have been
reports, and financial statements; and illustrative contributed to the entity by parties external to the
accounting entries. It shall be used by all National entity, other than those that result in liabilities of the
Government Agencies (NGAs) in the: entity, that establish a financial interest in the net
assets/equity of the entity, which:
a. preparation of the general purpose
financial statements in accordance with the PPSAS 1. conveys entitlement both to (i) distributions of
and other financial reports as may be required by future economic benefits or service potential by the
laws, rules and regulations; and entity during its life, such distributions being at the
discretion of the owners or their representatives; and
b. reporting of budget, revenue and
to (ii) distributions of any excess of assets over
expenditure in accordance with laws, rules and
liabilities in the event of the entity being wound up;
regulations.
and/or
_______________________________
2. can be sold, exchanged, transferred, or redeemed.
Sec. 3. Objective of the Manual. The
Manual aims to update the following:
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 1. It is the declared policy of the State that all
return on investment or as a return of investment. resources of the government shall be managed,
expended or utilized in accordance with laws and
e. Entity – refers to a government agency, regulations, and safeguarded against loss or
department or operating/field unit. It may be referred wastage through illegal or improper disposition, with
to in this GAM as an agency. a view to ensuring efficiency, economy and
effectiveness in the operations of government. The
f. Expenses – are decreases in economic benefits or
responsibility to take care that such policy is faithfully
service potential during the reporting period in the
adhered to rests directly with the chief or head of the
form of outflows or consumption of assets or
government agency concerned. (Sec. 2, P.D. No.
incurrence ofliabilities that result in decreases in net
1445)
assets/equity, other than those relating to
distributions to owners. 2. Fiscal responsibility shall, to the greatest extent, be
shared by all those exercisingauthority over the
g. Government Accounting – encompasses the
financial affairs, transactions, and operations of the
processes of analyzing, recording, classifying,
government agency. (Sec. 4(4), P.D. No. 1445)
summarizing and communicating all transactions
involving the receipt and disposition of government 3. The head of any agency of the government is
funds and property, and interpreting the results immediately and primarily responsible for all
thereof. (Sec. 109, Presidential Decree (P.D.) No. government funds and property pertaining to his
1445) agency. Persons entrusted with the possession or
custody of the funds or property under the agency
h. Government Budget – is the financial plan of a
head shall be immediately responsible to him, without
government for a given period, usually for a fiscal
prejudice to the liability of either party to the
year, which shows what its resources are, and how
government. (Sec. 102, P.D. No. 1445)
they will be generated 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 b. Accountability over Government Funds and
income, expenditures and sources of borrowings of Property
the National Government (NG) that are used to
achieve national objectives, strategies and programs. 1. Every officer of any government agency whose
duties permit or require the possession or custody of
i. Liabilities – are firm obligations of the entity arising government funds or property shall be accountable
from past events, the settlement of which is expected therefor and for the safekeeping thereof in conformity
to result in an outflow from the entity of resources with law. Every AO shall be properly bonded in
embodying economic benefits or service potential. accordance with law. (Sec. 101, P.D. No. 1445;
Section 50, Chapter 9, Subtitle B, Book V, Executive
j. Net assets/equity – is the residual interest in the Order (E.O.) No. 292)
assets of the entity after deducting all its liabilities.
2. Transfer of government funds from one officer to
k. Revenue – is the gross inflow of economic benefits another shall, except as allowed by law or regulation,
or service potential during the reporting period when be made only upon prior direction or authorization of
those inflows result in an increase in net the Commission or its representative. (Sec. 75, P.D.
assets/equity, other than increases relating to No. 1445)
contributions from owners.
3. When government funds or property are
l. Revenue funds – comprise all funds derived from transferred from one AO to another, orfrom an
the income of any agency of the government and outgoing officer to his successor, it shall be done
available for appropriation or expenditure in upon properly itemized invoice and receipt which
accordance with law. (Section 3, P.D. No. 1445) 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)

Sec. 3. Responsibility, Accountability and

c. Liability over Government Funds and Property
Liability over Government Funds and Property
1. Expenditures of government funds or uses of
government property in violation of law or regulations
a. Responsibility over Government Funds and shall be a personal liability of the official or employee
Property found to be directly responsible therefor. (Sec. 103,
P.D. No. 1445)
2. Every officer accountable for government funds Management and the Chairman, COA, as members.
shall be liable for all losses resulting from the unlawful (Sec. 65(2), P.D. No. 1445)
deposit, use, or application thereof and for all losses
attributable to negligence in the keeping of the funds. d. Receipts shall be recorded as revenue of Special,
(Sec. 105(2), P.D. No. 1445) Fiduciary or Trust Funds or Funds other than the GF,
only when authorized by law as implemented by rules
3. No AO shall be relieved from liability by reason of and regulations issued by the Permanent Committee.
his having acted under the direction of a superior (Sec. 66, P.D. No. 1445)
officer in paying out, applying, or disposing of the
funds or property with which he is chargeable, unless e. No payment of any nature shall be received by a
prior to that act, he notified the superior officer in collecting officer without immediately issuing an
writing of the illegality of the payment, application, or official receipt in acknowledgement thereof. The
disposition. The officer directing any illegal payment receipt may be in the form of postage, internal
or disposition of the funds or property shall be revenue or documentary stamps and the like,
primarily liable for the loss, while the AO who fails to officially numbered receipts, subject to proper
serve the required notice shall be secondarily liable. custody, accountability, and audit. (Sec. 68(1), P.D.
(Sec. 106, P.D. No. 1445) No. 1445)

4. When a loss of government funds or property f. Where mechanical devices (e.g. electronic official
occurs while they are in transit or the loss is caused receipt) are used to acknowledge cash receipts, the
by fire, theft, or other casualty or force majeure, the COA may approve, upon request, exemption from the
officer accountable therefor or having custody thereof use of accountable forms. (Sec. 68 (2), P.D. No.
shall immediately notify the Commission or the 1445)
auditor concerned and, within 30 days or such longer
g. At no instance shall temporary receipts be issued
period as the Commission or auditor may in the
to acknowledge the receipt of public funds. (Sec. 72,
particular case allow, shall present his application for
GAAM Volume I)
relief, with the available supporting evidence.
Whenever warranted by the evidence, credit for the h. Pre-numbered ORs shall be issued in strict
loss shall be allowed. An officer who fails to comply numerical sequence. All copies of each receipt shall
with this requirement shall not be relieved of liability be exact copies or carbon reproduction in all respects
or allowed credit for any loss in the settlement of his of the original. (Sec. 73, GAAM Volume I)
accounts. (Sec. 73, P.D. No. 1445)
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
Sec. 4. Fundamental Principles for Revenue. All checks issued in payment of government obligations,
revenues accruing to the NGAs shall be governed upon proper endorsement and identification of the
by the following fundamental principles: payee or endorsee. Checks drawn in favor of the
government in payment of any such indebtedness
a. Unless otherwise specifically provided by law, all shall likewise be accepted by the officer concerned.
revenues accruing to an entity by virtue of the At no instance should money in the hands of the CO
provisions of existing law, orders and regulations be utilized for the purpose of cashing private checks.
shall be deposited/remitted in the National Treasury (Sec. 67(1) and (3), P.D. No. 1445)
(NT) or in any duly authorized government
depository, and shall accrue to the General Fund j. Under such rules and regulations as the COA and
(GF) of the NG. (Sec. 65(1), P.D. No. 1445) the Department of Finance (DOF)may prescribe, the
Treasurer of the Philippines and all AGDB shall
b. Except as may otherwise be specifically provided acknowledge receipt of all funds received by them,
by law or competent authority, all moneys and the acknowledgement bearing the date of actual
property officially received by a public officer in any remittance or deposit and indicating from whom and
capacity or upon any occasion must be accounted for on what account it was received. (Sec. 70, P.D. No.
as government funds and government property. (Sec. 1445)
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
Sec. 5. Fundamental Principles for Disbursement
regulations as may be determined by a Permanent
of Public Funds. Section 4 of P.D. No. 1445, the
Committee composed of the Secretary of Finance as
Government Auditing Code of the Philippines,
Chairman, and the Secretary of Budget and
provides that all financial transactions and operations
of any government entity shall be governed by the
following fundamental principles:
Sec. 7. Keeping of the General Accounts. The
a. No money shall be paid out of any public treasury COA shall keep the general accounts of the
or depository except in pursuance of an appropriation Government and, for such period as may be provided
law or other specific statutory authority. by law, preserve the vouchers and other supporting
papers pertaining thereto, pursuant to Section 2, par.
b. Government funds or property shall be spent or (1), Article IX-D of the 1987 Philippine Constitution.
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.
Sec. 8. Financial Reporting System for the
d. Fiscal responsibility shall, to the greatest extent, be National Government. The financial reporting
shared by all those exercising authority over the system of the Philippine government consists of
financial affairs, transactions, and operations of the accounting system on accrual basis and budget
government agency reporting system on budget basis under the statutory
responsibility of the NGAs, Bureauof the Treasury
e. Disbursement or disposition of government funds (BTr), Department of Budget and Management
or property shall invariably bear the (DBM), and the COA, as follows:
approval of the proper officials. a. Each entity of the National Government (NG)
maintains complete set of accounting books by fund
f. Claims against government funds shall be
cluster which is reconciled with the records of cash
supported with complete documentation.
transactions maintained by the BTr.
g. All laws and regulations applicable to financial
b. The BTr accounts for the cash, public debt and
transactions shall be faithfully adhered to.
related transactions of the NG.
h. Generally accepted principles and practices of
c. Each entity maintains budget registries which are
accounting as well as of sound management and
reconciled with the budget records maintained by the
fiscal administration shall be observed, provided that
DBM and the Government Accountancy Sector
they do not contravene existing laws and regulations.
(GAS), COA.
_______________________________
d. The COA, through the GAS:

1. maintains budget records showing the

Sec. 6. Basic Government Accounting and overall approved budget of the NG and its
Budget Reporting Principles. Each entity shall execution/implementation;
recognize and present its financial transactions and
2. consolidates the FSs and budget
operations conformably to the following:
accountability reports of all NGAs and the BTr with
a. generally accepted government accounting COA’s records to come up with an Annual Financial
principles in accordance with the PPSAS and Report (AFR) for the NG as required in Section 4,
pertinent laws, rules and regulations; Article IX-D of the 1987 Philippine Constitution; and

b. accrual basis of accounting in accordance with the 3. prepares other financial reports required
PPSAS; by law for submission to oversight agencies.

c. budget basis for presentation of budget information _______________________________

in the financial statements (FSs) in accordance with
Sec. 9. Objectives of General Purpose Financial
PPSAS 24;
Statements. The objectives of general purpose
d. RCA prescribed by COA; financial statements (GPFSs) are to provide
information about the financial position, financial
e. double entry bookkeeping; performance, and cash flows of an entity that is useful
to a wide range of users in making and evaluating
f. financial statements based on accounting and
decisions about the allocation of resources.
budgetary records; and
Specifically, the objectives of general purpose
g. fund cluster accounting. 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.
_______________________________ 2. Registry of Appropriations and Allotments
(Appendix 8)
3. Registries of Allotments, Obligations and
Disbursements (Appendices 9A, 9B, 9C
Sec. 10. Responsibility for Financial Statements.
and 9D)
The responsibility for the preparation of the FSs rests
4. Registries of Budget, Utilization and
with the following:
Disbursements (Appendices 10A, 10B, 10C
a. for individual entity/department FSs – the head of and 10D)
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 Sec. 13. Fund Accounting. The books of accounts
finance/accounting division/unit; and shall be maintained by fund cluster as follows:
b. for department/entity FSs as a single entity – the
head of the entity/department COf jointly with the
head of the finance unit. Code Description

_______________________________ 01 Regular Agency Fund

02 Foreign Assisted Projects Fund

Sec. 11. Components of General Purpose 03 Special Account-Locally

Financial Statements. The complete set of GPFSs Funded/Domestic Grants Fund
consists of:
04 Special Account-Foreign
a. Statement of Financial Position (Annex A); Assisted/Foreign Grants Fund

b. Statement of Financial Performance (Annex B); 05 Internally Generated Funds

c. Statement of Changes in Net Assets/Equity (Annex 06 Business Related Funds

C);
07 Trust Receipts
d. Statement of Cash Flows (Annex D);
The composition of fund clusters is enumerated in
e. Statement of Comparison of Budget and Actual Annex P.
Amounts (Annex E); and
_______________________________
f. Notes to the Financial Statements, comprising a
summary of significant accounting policies and other
explanatory notes. (Annex F)
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.
Sec. 12. Books of Accounts and Registries. The 2014-1 dated July 2, 2014):
books of accounts and registries of theNG entities
consist of: a. Quarterly Physical Report of Operation (QPRO) –
BAR No. 1
a. Journals
b. Statement of Appropriations, Allotments,
1. General Journal (Appendix 1) Obligations, Disbursements and Balances
2. Cash Receipts Journal (Appendix 2) (SAAODB) – FAR No. 1
3. Cash Disbursements Journal (Appendix 3)
4. Check Disbursements Journal (Appendix 4) c. Summary of Appropriations, Allotments,
Obligations, Disbursements and Balances by Object
b. Ledgers of Expenditures (SAAODBOE) – FAR No. 1-A
1. General Ledgers (Appendix 5) d. List of Allotments and Sub-Allotments (LASA) –
2. Subsidiary Ledgers (Appendix FAR No. 1-B
c. Registries e. Statement of Approved Budget, Utilizations,
Disbursements and Balances (SABUDB) – FAR No.
1. Registries of Revenue and Other Receipts
2 (for Off-Budget Fund)
(Appendices 7, 7A, 7B, 7C and 7D)
f. Summary of Approved Budget, Utilizations, to discontinue the entity operation, or if there is no
Disbursements and Balances by Object of realistic alternative but to do so.
Expenditures (SABUDBOE) – FAR No. 2-A (for Off-
Budget Fund) _______________________________

g. Aging of Due and Demandable Obligations

(ADDO) – FAR No. 3
Sec. 19. Consistency of Presentation. The
h. Monthly Report of Disbursements (MRD) – FAR presentation and classification of items in the FSs
No. 4 shall be retained from one period to the next unless
laws, rules and regulations, and PPSAS require a
i. Quarterly Report of Revenue and Other Receipts change in presentation.
(QRROR) – FAR No. 5
_______________________________
_______________________________

Sec. 20. Materiality and Aggregation. Each

Sec. 15. Fair Presentation. The FSs shall present material class of similar items shall be presented
fairly the financial position, financial separately in the financial statements. Items of a
dissimilar nature or function shall be presented
performance and cash flows of an entity. Fair separately unless they are immaterial. If a line item is
presentation requires the faithful representation of not material, it is aggregated with other items either
the effects of transactions, other events, and on the face of FSs or in the Notes to the FSs. A
conditions in accordance with the definitions specific disclosure requirement in a PPSAS need not
andrecognition criteria for assets, liabilities, revenue, be satisfied if the information is not material.
and expenses set out in PPSAS. The application of
PPSAS, with appropriate disclosures, if necessary, _______________________________
would result in fair presentation of the FS.

_______________________________
Sec. 21. Offsetting. Assets and liabilities, and
revenue and expenses shall not be allowed to offset
unless required or permitted by a PPSAS except
Sec. 16. Compliance with PPSASs. An entity when offsetting reflects the substance of the
whose financial statements comply with PPSASs transaction or other event.
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. Inappropriate accounting policies that do
Sec. 22. Comparative Information. Comparative
not comply with PPSAS are not rectified either by
information shall be disclosed with respect to the
disclosure of the accounting policies used, or by
previous period for all amounts reported in the FSs.
notes or explanatory material.
Comparative information shall be included for
_______________________________ narrative and descriptive information when it is
relevant to an understanding of the current period’s
FSs.

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
Sec. 23. Structure and Content. The FSs and each
the FSs set forth in PPSAS, the entity may depart
component shall be identified clearly and
from that requirement if the relevant regulatory
distinguished from other information in the same
framework allows, or otherwise does not prohibit,
published document.
such a departure.
_______________________________
_______________________________

Sec. 24. Statement of Financial Position. An entity

Sec. 18. Going Concern. The FSs shall be prepared
shall present current and non-current assets, as well
on a going concern basis unless there is an intention
as current and non-current liabilities, as separate
classifications on the face of the Statement of SCBAA. Notes provide narrative descriptions or
Financial Position (SFP). disaggregation of items disclosed in those FSs and
information about items that do not qualify for
_______________________________ recognition in those statements.

_______________________________
Sec. 25. Statement of Financial Performance. The
Statement of Financial Performance (SFPer) shall
include line items that present the revenue, expenses Sec. 30. Qualitative Characteristics of Financial
and net surplus or deficit for the period. 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.
Sec. 26. Statement of Changes in Net
These qualitative characteristics are the attributes
Assets/Equity. An entity shall present in the
that make the information provided in the FSs useful
Statement of Changes in Net Assets/Equity
to users.
(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 Sec. 31. Key Features of Assets. The key features
in net assets/equity, and the total of these items; of an asset are:
c. Total revenue and expenses for the period; and a. the benefits must be controlled by the entity;
d. For each component of net assets/equity b. the benefits must have arisen from a past event;
separately disclosed, the effects of changes in and
accounting policies and corrections of errors
recognized in accordance with PPSAS 3-Accounting c. future economic benefits or service potential must
Policies, Changes in Accounting Estimates and be expected to flow to the entity.
Errors. _______________________________
The following are indicators of control of the benefits
by the entity:

Sec. 27. Statement of Cash Flows. The Statement a. the ability of an entity to benefit
of Cash Flows (SCF) provides information to users of from the asset and to deny or
FSs a basis to assess the ability of the entity to regulate the access of others to
generate cash and cash equivalents and to that benefit.
determine the entity’s utilization of funds. This also b. an entity can, depending on the
provides information on how the entity generates nature of the asset, exchange it,
income authorized to be used in their operation and use it to providegoods or services,
its utilization. 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
Sec. 28. Statement of Comparison of Budget and object or right would normally be
Actual Amounts. A comparison of budget and actual synonymous with control over the
amounts will enhance the transparency of financial future economic benefits
reporting in government. embodied in the right or object.
However, there are instances
This shall be presented by government agencies as when an entity may possess an
a separate additional financial statement referred in object or right but not expect to
this Manual as the Statement of Comparison of enjoy the benefits embodied in it,
Budget and Actual Amount (SCBAA). e.g. under a finance lease
agreement, control over the leased
_______________________________
property owned by the lessor is
Sec. 29. Notes to Financial Statements. The Notes transferred to the lessee.
to FSs contain information in addition to that
presented in the SFP, SFPer, SCNA/E, SCF and
The following are indicators of past event:

a. the specification of a past event Sec. 33. Accounting Standards for Revenue. The
differentiates assets from following accounting standards shall apply for
intentions to acquire assets, which revenue and receipts of government entities:
are not to be recognized.
b. a transaction or event giving rise to a. Revenue includes only the gross inflows of
control of the future economic economic benefits or service potential
benefits must have occurred.
received and receivable by the entity in its own
account. (PPSAS 9)

The following are indicators of future economic b. Receipts/Collections shall refer to all cash actually
benefits: received from all sources during a given accounting
period.
a. distinguishable from the source of the
benefit i.e. the particular physical resource c. Fines shall include economic benefits or service
or legal right; potential received or receivable by a public sector
b. does not imply that assets necessarily agency, as determined by a court or other law
generate cash flows, the benefits can also enforcement body, as a consequence of the breach
be in the form of ‘service potential’; of laws or regulations. Fines and penalties, either on
c. in determining whether a resource or right tax revenue or other specific income account, shall
needs to be accounted for as an asset,the be recognized as income of the year these were
potential to contribute to the objectives of collected.
the entity should be the prime consideration;
d. Gifts and donations shall consist of voluntary
d. capacity to contribute to
transfers of assets including cash or other monetary
activities/objectives/programs; and
assets, goods in-kind and services in-kind that one
e. the fact that an asset cannot be sold does
agency makes to another, normally free from
not preclude it from providing future
stipulations. (PPSAS 23)
economic benefits.
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
Sec. 32. Recognition of an Asset. An asset shall be development organizations often includes a
recognized in the financial position when and only component of goods in-kind. (PPSAS 23)
when (a) it is probable that the future economic
benefits will flow to the entity; and (b) the asset has a f. Taxes are economic benefits or service potentials
cost or value that can be measured reliably. The compulsory paid or payable to public sector
following are indicators of probable inflow of future agencies, in accordance with laws and or regulations,
economic benefits: established to provide revenue to the government.
Taxes do not include fines or other penalties imposed
a. the chance of benefits arising is more likely rather for breaches of the law. (PPSAS 23)
than less likely (e.g. greater than 50%).
g. Transfers are inflows of future economic benefits
b. benefits can be expected on the basis of available or service potential from non-exchange transactions,
evidence or logic. other than taxes. (PPSAS 23)

_______________________________

The following are indicators of reliable measurement:

a. valuation method is free from Sec. 34. Use of Appropriated Funds. All moneys
material error or bias. appropriated for functions, activities, projects and
b. faithful representation of the programs shall be available solely for the specific
asset’s benefits. purposes for which these are appropriated.
c. reliable information will, without
bias or undue error, faithfully _______________________________
represent those transactions and
events.
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, approved by the head of the agencies or his duly
whether in cash or in kind, shall not be used without authorized representatives.
the corresponding release of funds through a Special
Budget. _______________________________

_______________________________

Sec. 36. Basic Requirements for Disbursements Sec. 37. Certification of Availability of Funds. No
and the Required Certifications. Disbursements of funds shall be disbursed, and no expenditures or
government funds shall comply with the following obligations chargeable against any authorized
basic requirements and certifications: allotment shall be incurred or authorized in any
department, office or agency without first securing the
a. Availability of allotment/budget for certification of its Chief Accountant or head of
obligation/utilization certified by the Budget accounting unit as to the availability of funds and the
Officer/Head of Budget Unit; allotment to which the expenditure or obligation may
be properly charged.
b. Obligations/Utilizations properly charged against
available allotment/budget by the Chief No obligation shall be certified to accounts payable
Accountant/Head of Accounting Unit; unless the obligation is founded on a valid claim that
is properly supported by sufficient evidence and
c. Availability of funds certified by the Chief unless there is proper authority for its incurrence. Any
Accountant. The Head of the Accounting Unit shall certification for a non-existent or fictitious obligation
certify the availability of funds before an Agency and/or creditor shall be considered void. The
Head or his duly authorized representative enter into certifying official shall be dismissed from the service,
any contract that involves the expenditure of public without prejudice to criminal prosecution under the
funds based on the copy of budget release provisions of the Revised Penal Code. Any payment
documents; made under such certification shall be illegal and
every official authorizing or making such payment, or
d. Availability of cash certified by the Chief
taking part therein or receiving such payment, shall
Accountant. The Head of the Accounting Unit shall
be jointly and severally liable to the government for
certify the availability of cash and completeness of
the full amount so paid or received. (Book VI, Section
the supporting documents in the disbursement
41 of EO No. 292)
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 Sec. 38. Prohibition against the Incurrence of
approving officials shall ensure that the Overdraft. Heads of departments, bureaus, offices
disbursements of government funds are legal and in and agencies shall not incur nor authorize the
conformity with applicable rules and regulations; incurrence of expenditures or obligations in excess of
allotments released by the DBM Secretary for their
f. Submission of proper evidence to establish validity respective departments, offices and agencies.
of the claim. The Head of the Requesting Unit shall Parties responsible for the incurrence of overdrafts
certify on the necessity and legality of charges to shall be held personally liable therefor. (Book VI,
allotments under his/her supervision as well as the Chapter 5, Section 41 of EO No. 292)
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
Sec. 39. Mode of Disbursements.
basis in the evaluation of authenticity andauthority of
Payments/Disbursements by NGAs may be effected
the claim. It should be cleared, however, that the
through the Treasury Single Account (TSA), by
submission of the supporting documents does not
issuing Modified Disbursements System (MDS)
preclude reasonable questions on the funding,
check or commercial check, cash through cash
legality, regularity, necessity and/or economy of the
advance, Advice to Debit Account (ADA), or Non-
expenditures or transactions; and
Cash Availment Authority (NCAA).
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
Sec. 40. Authority to Disburse/Pay. NGAs are budget release documents. It is also referred to as
authorized to disburse/pay based on the Notice of Obligational Authority.
Cash Allocation (NCA), Notice of Transfer of
Allocation (NTA), Cash Disbursement Ceiling (CDC) b. Appropriation – is the authorization made by a
or other authority that may be provided by law. 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
Sec. 41. Disbursement Voucher/Payroll. anticipated revenue or receipts for the budgetary
Checks/ADA shall be drawn based on duly approved period. The approved budget consists of the
disbursement voucher or payroll. following:
_______________________________

UACS Code
Sec. 42. Maintenance of Records. All checks/ADA New General Appropriations 01
drawn during the day, whether released or
unreleased including cancelled checks shall be Continuing Appropriations 02
recognized chronologically in the Checks/ADA
Disbursement Record maintained by the Supplemental Appropriations 03
Cash/Treasury Unit.
Automatic Appropriations 04
_______________________________
Unprogrammed Funds 05

Retained Income/Funds 06
Sec. 43. Reporting of Disbursements. All
Revolving Funds 07
payments/disbursements shall be reported using the
prescribed forms for recording in the books of Trust Receipts 08
accounts.
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.
Chapter 3
e. Budget Information – the budgetary information
BUDGET EXECUTION, MONITORING AND consists of, among others, data on appropriations or
REPORTING the approved budget, allotments, obligations,
revenues and other receipts, and disbursements.
Sec. 1. Scope. This Chapter prescribes the
guidelines in monitoring, accounting and reporting of f. Continuing Appropriations – are the authorizations
the budget in the financial statements. This also to support obligations for a specific purpose or
prescribes the records to be project, such as multi-year construction projects
which require the incurrence of obligations even
maintained by the national government agencies, beyond the budget year.
forms to be used and reports to be prepared to
effectively monitor the budget as well as the required g. Disbursements – are the actual amounts spent or
information disclosure and presentation of budget paid out of the budgeted amounts.
information in the financial statements in accordance
h. Final Budget – is the original budget adjusted for
with PPSAS 24.
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

Sec. 2. Definition of Terms. For the purpose of this authorizations for incurring obligations during a
Manual, the terms stated below shall be construed to specified budget year, as listed in the GAA.
mean as follows:
j. Obligation – is an act of a duly authorized official
a. Allotment – is an authorization issued by the DBM which binds the government to the immediate or
to NGAs to incur obligations for specified amounts eventual payment of a sum of money. Obligation
contained in a legislative appropriation in the form of maybe referred to as a commitment that
encompasses possible future liabilities based on common to most, if not all, agencies without need of
current contractual agreement. special clearance or approval from competent
authority, i.e. Retirement and Life Insurance
k. Original Budget – is the initial approved budget for Premium.
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 b. Disbursement Authority – the following documents
commitments or possible future liabilities based on a authorize the entity to pay obligations and payables:
current contractual agreement.
1. Notice of Cash Allocation (NCA) – authority issued
l. Revenues – are increases in economic benefits or by the DBM to central, regional and provincial offices
service potential during the accounting period in the and operating units to cover the cash requirements of
form of inflows or increases of assets or decreases of the agencies;
liabilities that result in increases in net assets/equity,
2. Non-Cash Availment Authority (NCAA) – authority
other than those relating to contributions from
issued by the DBM to agencies to cover the
owners.
liquidation of their actual obligations incurred against
m. Supplemental Appropriations – are additional available allotments for availment of proceeds from
appropriations authorized by law to augment the loans/grants through supplier’s credit/constructive
original appropriations which proved to be insufficient cash;
for their intended purpose due to economic, political
3. Cash Disbursement Ceiling (CDC) – authority
or social conditions supported by a Certification of
issued by DBM to the Department of Foreign Affairs
Availability of Funds (CAF) from the BTr.
(DFA) and Department of Labor and Employment
_______________________________ (DOLE) to

Sec. 3. Fund Release Documents. With the

adoption of the UACS and the Performance-Informed
Budgeting (PIB), the following are the fund release
documents:

utilize their income collected/retained by their Foreign

a. Obligational Authority or Allotment – the following Service Posts (FSPs) to cover their operating
are the documents which authorize the entity to incur requirements, but not to exceed the released
obligations: allotment to the said post; and
1. General Appropriations Act Release Document 4. Notice of Transfer of Allocation – authority issued
(GAARD) – serves as the obligational authority for by the Central Office to its regional and operating
the comprehensive release of budgetary items units to cover the latter’s cash requirements.
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
_______________________________

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);

d. Region or locality of use;

e. Economic or functional classification of the

expenditures;

f. Obligational authority and cash transactions arising

from fund releases; and

g. Such other classifications as may be necessary for

the budget process.

_______________________________
extracted every time an entry is made to prevent
incurrence of overdraft in appropriations. Separate
RAPAL shall be maintained by fund cluster and by
Sec. 5. Monitoring of the Budget. The budget shall
Major Final Output (MFO)/PAP/Appropriation Acts.
be monitored by the Budget Division/Units of NGAs
through the maintenance of registries for that
purpose.

_______________________________

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. 10. Registries of Allotments, Obligations and

Disbursements. The Registries of Allotments,
Obligations and Disbursements (RAOD) shall be
_______________________________ maintained by the Budget Division/Unit of agencies
to record allotments, obligations and disbursements.
It shall show the allotments received for the year,
Sec. 8. Registry of Appropriations and obligations incurred against the corresponding
Allotments. The Registry of Appropriations and allotment and the actual disbursements made. The
Allotments (RAPAL) (Appendix 8) shall be balance is extracted every time an entry is made to
maintained by NGAs to monitor appropriations and prevent incurrence of obligations in excess of
allotments charged thereto. It shall show the original, allotment and overdraft in disbursements against
supplemental and final budget for the year and all obligations incurred. The RAODs shall be maintained
allotments received charged against the by appropriation act, fund cluster, MFO/PAP, and
corresponding appropriation. The balance is allotment class.
a. Registry of Allotments, Obligations and adjustment shall be effected through a positive entry
Disbursements-Personnel Services (RAOD-PS) (if additional obligation is necessary) or a negative
(Appendix 9A) shall be used to record the allotments entry (if reduction is necessary) in the ‘Obligation’
received, obligations incurred and disbursements column of the ORS and RAOD.
classified under PS.
_______________________________
b. Registry of Allotments, Obligations and
Disbursements-Maintenance and Other Operating
Expenses (RAOD-MOOE) (Appendix 9B) shall be
Sec. 14. Notice of Obligation Request and Status
used to record the allotments received, obligations
Adjustment. The NORSA shall be prepared by the
incurred and disbursements classified under MOOE.
Accounting Division/Unit after the processing of the
c. Registry of Allotments, Obligations and claim which shall be used in adjusting the original
Disbursements-Financial Expenses (RAOD-FE) amount obligated to the actual obligations incurred in
(Appendix 9C) shall be used to record the allotments the RAOD. It shall be forwarded by the Accounting
received, obligations incurred and disbursements Division/Unit to the Budget Division/Unit to take up
classified under FE. the adjustments of obligation in the RAOD. The
following transactions shall also need adjustments of
d. Registry of Allotments, Obligations and obligations:
Disbursements-Capital Outlays (RAOD-CO)
(Appendix 9D) shall be used to record the allotments
received, obligations incurred and disbursements
classified under CO.

_______________________________

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 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. 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
Sec. 15. Procedures in Recording Obligation.

Sec.
31.

Obligation shall be recorded in the appropriate RAOD

through ORS with the following procedures:
 3. Program/Activity/Project; and
4. Major Programs/Projects -
identified by Key Result area (KRA)

c. Summary of Appropriations, Allotments,

Obligations, Disbursements and Balances by Object
of Expenditures – FAR No. 1.A (SAAODBOE)
(Appendix 18). This report shall be prepared by
Funding Source Code (FSC) as clustered and shall
reflect the summary of appropriations, allotments,
obligations, disbursements and balances detailed by
object of expenditures consistent with the COA
Revised Chart of Accounts per COA Circular No.
2013-002 dated January 30, 2013 and the Adoption
of the PPSAS per COA Resolution No. 2014-003
dated January 24, 2014.

d. List of Allotments and Sub-Allotments – FAR No.

1.B (Appendix 19). This report shall reflect the
allotments released by the DBM and the sub-
allotments issued by theEntity Central Office/RO,
their corresponding numbers, date of issuance, and
amounts by allotment class and FSC. The total
allotments per this report should be equal to the total
allotments appearing in the SAAODB (FAR No. 1).

e. Statement of Approved Budget, Utilizations,

Disbursements and Balances – FAR No. 2 (Appendix
20). This report shall reflect the approved budget, the
utilizations, disbursements and balance of the entity’s
income authorized by law to use, such as
OWWA/SUCs, duly approved by their Board of
Trustee/Regents and shall be prepared by FSC as
clustered.

f. Summary of Approved Budget, Utilizations,

Disbursements and Balances by Object of
Expenditures – FAR No. 2.A (Appendix 21). This
Preparation of the Budget Reports. The following
report shall reflect the details of the approved budget,
budget reports/documents as required by DBM and
utilizations, disbursements and balance of the entity’s
COA shall be submitted:
income authorized by law to use presented by object
a. Quarterly Physical Report of Operation (QPRO) – of expenditures consistent with the COA Revised
Budget Accountability Report (BAR) No. 1 (Appendix Chart of Accounts and shall be prepared by Funding
16). This report shall reflect the Source Code as clustered.
Department’s/Agency’s actual physical
g. Aging of Due and Demandable Obligations – FAR
accomplishments as at a given quarter, in terms of
No. 3 (Appendix 22). This report shall be prepared by
the performance measures indicated in its Physical
FSC as clustered and shall reflect the balance of
Plan.
unpaid obligations as indicated in the Obligation
b. Statement of Appropriations, Allotments, Request (ObR) and the ADDOs as at yearend.
Obligations, Disbursements and Balances –Financial
h. Monthly Report of Disbursements – FAR No. 4
Accountability Report (FAR) No. 1 (SAAODB)
(Appendix 23). The report shall reflect the total
(Appendix 17). This report shall reflect the authorized
disbursements made by department, office or entity
appropriations and adjustments, total allotments
and operating unit from the following disbursement
received including transfers, total obligations, total
authorities:
disbursements and the balances of unreleased
appropriations, unobligated allotments, and unpaid 1. Notice of Cash Allocation;
obligations of a department/office/entity by source 2. NCA for Working Fund issued to BTr as an
and by allotment class. It shall be presented by: advance funding from loan/grant
a. proceeds in favor of an entity;
1. Fund Authorization;
3. Tax Remittance Advice issued;
2. Major Final Output;
 4. CDC issued by departments with foreign- Sec. 2. Definition of Terms. For the purpose of this
based agencies or units; Manual, the terms used in this chapter shall be
5. Non-Cash Availment Authority; and construed to mean as follows:
6. Others, e.g. Customs, Duties and Taxes
(CDT), BTr Documentary Stamps. a. Responsibility Accounting – provides access to
cost and revenue information under the supervision
The report shall track the actual disbursement of the of a manager having a direct responsibility for its
departments/agencies against their Disbursement performance. It is a system that measures the plans
Program. The reasons for over or under spending (by budgets) and actions (by actual results) of each
shall be indicated. responsibility center.

i. Quarterly Report of Revenue and Other Receipts – b. Responsibility Center – is a part, segment, unit or
FAR No. 5 (Appendix 24). This report shall reflect the function of a government agency, headed by a
actual revenue and other receipts/collections from all manager, who is accountable for a specified set of
sources remitted with the BTr and deposited in other activities. Except for some, which derive most of their
AGDB for the current year presented by quarter, and income from collection of taxes and fees, NGAs are
by specific sources consistent with the COA Revised basically cost centers which primary purpose is to
Chart of Accounts. render service to the public at the

_______________________________________ lowest possible cost. Cost centers are established to

provide each government agency’s accessibility to
cost information and to facilitate cost monitoring at
any given period.
Sec. 32. Submission of Budget and Financial
Accountability Reports. All departments/agencies _______________________________________
shall observe the following timelines in submitting the
required FARs to COA-GAS and DBM: Sec. 3. Objectives of Responsibility Accounting.
Responsibility accounting aims to:
a. Within thirty (30) days after the end of each quarter
– a) ensure that all costs and revenues are properly
charged/credited to the correct responsibility center
5. SAAODB – FAR No. 1 so that deviations from the budget can be readily
6. SAAODBOE – FAR No. 1.A attributed to managers accountable therefor;
7. List of Allotments/Sub-Allotments -
FAR No. 1.B b) provide a basis for making decisions for future
8. SABUDB – FAR No. 2 operations; and
9. SABUDBOE – FAR No. 2.A
10. QRROR – FAR No. 5 c) facilitate review activities, monitoring the
performance of each responsibility center and
b. On or before 30th day following the end of the year evaluation of the effectiveness of agency’s
– ADDO – FAR No. 3 operations.

c. On or before 30th day of the following month _______________________________________

covered – MRD – FAR No. 4
Sec. 4. Concepts of Responsibility Accounting.
d. On or before February 14 of the following calendar The following are the concepts of responsibility
year – Consolidated Statement of Allotments, accounting:
Obligations, and Balances per Summary of
Appropriations under FCR under GAA, GARO, and a. Responsibility accounting involves accumulating
SARO. and reporting data on revenues and costs on the
basis of the manager’s action who has authority to
_______________________________________ make the day-to-day decisions about the items;

Chapter 4 b. Evaluation of a manager’s performance is based

on the matters directly under hiscontrol;
RESPONSIBILITY ACCOUNTING
c. Responsibility accounting can be used at every
level of management in which the following
conditions exist:
Sec. 1. Scope. This Chapter covers the definition of
terms, objectives, concepts, presentation of costs 1. Cost and revenues can be directly
and revenue in the financial statements, and the associated with the specific level of management
responsibility center code structure. responsibility;
_______________________________________
 2. Costs and revenues are controllable at f. Evaluation of a manager’s performance for cost
the level of responsibility with which they are centers is based on his ability to meet budgeted goals
associated; and for controllable costs.

3. Budget data can be developed for _______________________________________

evaluating the manager’s effectiveness in controlling
the costs and revenues. Sec. 5. Presentation of Revenue in the Financial
Statements. An agency shall present, in the notes of
d. The reporting of costs and revenues under the SFPer the total revenue, classified by MFO/PAP and
responsibility accounting differs from budgeting in two by major classification of the nature of revenue
respects: attributed to the major offices/organizational unit of the
agency.
1. A distinction is made between controllable
and non-controllable costs. _______________________________________

i. A cost is considered controllable at Sec. 6. Presentation of Costs in the Financial

a given level of managerial Statements. An agency shall present, in the notes of
the SFPer, an analysis of expenses using a
classification based on the MFO/PAP andby major
classification of the nature of revenue attributed to the
major offices/organizational unit of the agency. The
analysis of expense by MFO/PAP classifies expenses
according to the program or purpose for which they
were made. This method can provide more relevant
information to users although allocating costs to
functions may require arbitrary allocations and involves
considerable judgment.

_______________________________________

Sec. 7. Responsibility Center Code Structure. Each

NGA shall be assigned a responsibility center code
defined as organization code in the UACS Manual. For
monitoring revenue and expenses, additional three-digit
codes for the agency’s major offices/departments shall
be appended to the organization code. The organization
code and the agency’s major offices/departments’ code
shall consist of 15 digits as follows:
responsibility

if the manager has the power to incur it within a given

period of time. It follows that (1) all costs are controllable Chapter 5
by top management because of the broad range of its
activity; and (2) fewer costs are controllable as one REVENUE AND OTHER RECEIPTS
move down to lower level of managerial responsibility
Sec. 1. Scope. This Chapter provides the standards,
because of the manager’s decreasing authority.
policies, guidelines and procedures in accounting for
ii. Non-controllable costs are costs revenue and other receipts including those collections
incurred indirectly and allocated to a through authorized agent banks, remittance of
responsibility level. collections to the NT through AGDB and deposits with
the AGDB in accordance with PPSAS 9-Revenue from
2. Performance reports either emphasize or Exchange Transactions and PPSAS 23-Revenue from
include only items controllable by individual Non-exchange Transactions.
manager.
_______________________________________
e. A responsibility reporting system involves the
preparation of a report for each level of responsibility. Sec. 2. Definition of Terms. For the purpose of this
Responsibility reports usually compare actual costs with Manual, the following terms shall be construed to mean
flexible budget data. The reports show only controllable as follows:
costs and no distinction is made between variable and
a. Bequest – is a transfer made according to the
fixed costs.
provisions of a deceased person’s will. The past event
giving rise to the control of resources embodying future
economic benefits or service potential for a bequest
occurs when the entity has an enforceable claim, for
example on the death of the testator, or the granting of
probate, depending on the laws of the jurisdiction. (Par.
90, PPSAS 23)

b. Concessionary loans – are loans received by an

entity at below market terms.

c. Exchange transactions – are transactions in which

one entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal
value (primarily in the form of cash, goods, services, or
use of assets) to another entity in exchange. (Par. 11,
PPSAS 9)

d. Fair value – is the amount for which an asset could

be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length
transaction

e. Fines – are economic benefits or service potential

received or receivable by NGAs, from an individual or
other entity, as determined by a court or other law
enforcement body, as a consequence of the individual
or other entity breaching the requirements of laws or
regulations. (Par. 88, PPSAS 23)

f. Gifts, Donations and Goods In-kind – are voluntary

transfers of assets, including cash or other monetary
assets, goods in-kind and services in-kind that one
entity makes to another, normally free from stipulations.
The transferor may be an entity or an individual. For
gifts and donations of cash or other monetary assets
and goods in-kind, the past event giving rise to the
control of resources embodying future economic
benefits or service potential is normally the receipt of
the gift or donation. (Par. 93, PPSAS 23)

g. Non-exchange transactions – are transactions in

which an entity either receives value from another entity
without directly giving approximately equal value in
exchange, or gives value to another entity without
directly receiving approximately equal value in
exchange. (Par. 11, PPSAS 9)

h. Pledges – are unenforceable undertakings to transfer

assets to the recipient entity.

i. 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.

j. Services in-kind – are services provided by individuals

to public sector agencies in a non-exchange
transaction.
Sec. 3. Accrual of Revenue to the General Fund. Agencies may receive trade discounts, quantity
Unless otherwise specifically provided by law, all discounts, or other reductions in the quoted price of
revenue (income) accruing to the departments, offices assets for a variety of reasons. These reductions in
and agencies by virtue of the provisions of existing laws, price do not necessarily mean that the transaction is a
orders and regulations shall be deposited in the NT or non-exchange transaction. (Par. 11, PPSAS 23)
in the duly authorized depository of the Government
and shall accrue to the xxx General Fund of the Sec. 6. Revenue from Exchange Transactions.
Government: Provided, that amounts received in trust Revenues received by the NGAs from exchange
and from business-type activities of government may be transactions are derived from the following:
separately recorded and disbursed in accordance with
a. Sale of goods or provisions of services to third parties
such rules and regulations as may be determined by the
or to other NGAs. Examples are:
Permanent Committee. (Sec. 44, Chapter V, Book VI,
E.O. No. 292) 1. Service Income – Permit Fees, Registration Fees,
Registration Plates, Tags and
Sec. 4. Special, Fiduciary and Trust Funds. Receipts
shall be recorded as revenue of Special, Fiduciary or Stickers Fee, Clearance and Certification Fees,
Trust Funds (TF) or Funds other than the GF, only when Franchising Fees, Licensing Fees, Supervision and
authorized by law and following such rules and Regulation Enforcement Fees, Spectrum Usage Fees,
regulations as may be issued by the Permanent Legal Fees, Inspection Fees, Verification and
Committee consisting of the Secretary of Finance as Authentication Fees, Passport and Visa Fees,
Chairman, and the Secretary of the Budget and the Processing Fees and Other Service Income; and
Chairman, Commission on Audit, as members. The
same Committee shall likewise monitor and evaluate 2. Business Income – School Fees, Affiliation Fees,
the activities and balances of all Funds of the NG other Examination Fees, Seminar/Training Fees, Rent/Lease
than the GF and may recommend for the consideration Income, Communication Network Fees, Transportation
and approval of the President, the reversion to the GF System Fees, Road Network Fees, Waterworks System
of such amounts as are: Fees, Power Supply System Fees, Seaport System
Fees, Landing and Parking Fees, Income from
(1) no longer necessary for the attainment of the Hostels/Dormitories and Other Like Facilities,
purposes for which said Funds were established, Slaughterhouse Operation, Income from Printing and
Publication, Sales Revenue, Hospital Fees, Share in
(2) needed by the GF in times of emergency, or (3)
the Profit of Joint Venture and Other Business Income.
violative of the rules and regulations adopted by the
Committee: provided, that the conditions originally b. Use by other entity of assets yielding interest,
agreed upon at the time the funds were received shall royalties and dividends or similar distributions.
be observed in case of gifts or donations or other Examples are:
payments made by private parties for specific purposes.
(Sec. 45, Chapter V, Book VI, EO 292). 1. Interest income – charges for the use of cash or cash
equivalents, or amounts due to the entity;
Sec. 5. Sources of Revenue and Other Receipts.
Revenues received by NGAs may arise from exchange 2. Royalties – fees paid for the use of entity’s assets
and non-exchange transactions. such as trademarks, patents, software, and copyrights;
and
In a transaction where the entity may provide some
consideration directly in return for the resources 3. Dividends – share of the National Government from
received, but that consideration does not approximate the earnings of its capital/equity investments in
the fair value of the resources received, the entity Government-Owned or Controlled Corporations
determines whether there is a combination of exchange (GOCCs) and other entities.
and non-exchange transactions. Each component of
Sec. 7. Recognition and Measurement of Revenue
which is recognized separately. (Par. 10, PPSAS 23)
from Exchange Transactions. Revenue from exchange
There are transactions where it is not immediately clear transaction shall be measured at fair value of the
whether they are an exchange or a non-exchange consideration received or receivable.
transaction. In these cases, an examination of the
a. Revenue shall be recognized when it is probable that
substance of the transaction will determine if they are
future economic benefits or service potential will flow to
on exchange or non-exchange transactions. For
the entity and these benefits can be measured reliably.
example, the sale of goods is normally classified as an
exchange transaction. If, however, the transaction is 1. Revenue from the sale of goods shall be recognized
conducted at a subsidized price, that is, a price that is when all the following conditions have been satisfied:
not approximately equal to the fair value of the goods
sold, that transaction falls within the definition of a non-
exchange transaction.
 i. The entity has transferred to the purchaser the and the amount of the revenue can be measured
significant risks and rewards of ownership of the goods; reliably. (Pars. 33 and 34, PPSAS 9)
(Par. 28, PPSAS 9)
i. Interest shall be recognized on a time proportion
ii. The entity retains neither continuing managerial basis that takes into account the effective yield on the
involvement to the degree usually associated with asset;
ownership nor effective control over the goods sold;
ii. Royalties shall be recognized as they are earned in
iii. The amount of revenue can be measured reliably; accordance with the substance of the relevant
agreement; and
iv. It is probable that the economic benefits or
service potential associated with the transaction will iii. Dividends or similar distributions shall be recognized
flow to the entity; and when the shareholder’s or the entity’s right to receive
payment is established.
v. The costs incurred or to be incurred in respect of
the transaction can be measured reliably. b. Revenue shall be measured at the fair value of the
consideration received or receivable. Any amount of
2. Revenue from the supply of services shall be trade discounts and volume rebates allowed by the
recognized on a straight line basis over the specified entity shall be taken into account. (Par. 14-15, IPSAS 9)
period of the services unless an alternative method
better Example: Entity A is authorized to print accounting
manuals for sale to other NGAs. Assume that on July
represents the stage of completion of the transaction. 16, 2014, Entity A sold accounting manuals on account
with a list price of P100,000 less trade discounts of 10%,
When the outcome of a transaction involving the
10% and 5%. The invoice price of the merchandise is
rendering of services can be estimated reliably, revenue
computed as follows:
associated with the transaction shall be recognized by
reference to the stage of completion of the transaction
at the reporting date. The outcome of a transaction can
be estimated reliably when all the following conditions
are satisfied:

i. The amount of revenue can be measured reliably;

ii. It is probable that the economic benefits or service

potential associated with the transaction will flow to the
entity;

iii. The stage of completion of the transaction at the

reporting date can be measured reliably; and
When the inflow of cash or cash equivalents received or
iv. The costs incurred for the transaction and the receivable is deferred, the fair value of the consideration
costs to complete the transaction can be measured may be less than the nominal amount of cash received
reliably. (Par. 19, PPSAS 9) or receivable. The fair value of the consideration is
determined by discounting all future receipts using an
For practical purposes, when services are performed by imputed rate of interest. The difference between the fair
an indeterminate number of acts over a specified time value and the nominal amount of the consideration is
frame, revenue is recognized on a straight line basis recognized as interest revenue. (Par. 16, IPSAS 9)
over the specified time frame unless there is evidence
that some other method better represents the stage of Example: Assume that on August 5, 2015, Entity A
completion. (Par. 24, PPSAS 9) received a 60-day, 9%, P12,000 promissory note from
X entity for accounting manuals sold. On October 4,
When the outcome of the transaction involving the 2015, Entity X paid cash in settlement of its note.
rendering of services cannot be estimated reliably,
revenue should be recognized only to the extent of the
expenses recognized that are recoverable. (Par. 25,
PPSAS 9).

3. Revenue arising from the use by others of entity

assets yielding interest, royalties and dividends or
similar distributions shall be recognized when it is
probable that the economic benefits or service potential
associated with the transaction will flow to the entity;
Sec. 8. Exchanges of Goods or Services for 2. Tax Revenue-Property
Similar/Dissimilar Good or Services. When goods or 3. Tax Revenue-Goods and Services
services are exchanged or swapped for goods or 4. Tax Revenue-Others
services which are of a similar nature and value, the
exchange is not regarded as a transaction which b. Fines and Penalties
generates revenue. However, when goods are sold or 1. Tax Revenue
services are rendered in exchange for dissimilar goods 2. Service Income
or services, the exchange is regarded as a transaction 3. Business Income
which generates revenue. The revenue is measured at
the fair value of the goods or services received, c. Shares, Grants and Donations
adjusted by the amount of any cash or cash equivalents 1. Share from National Wealth
transferred. When the fair value of the goods or services 2. Share from Philippine Amusement and Gaming
received cannot be measured reliably, the revenue is Corporation (PAGCOR)/ Philippine Charity
measured at the fair value of the goods given up, Sweepstakes Office (PCSO)
adjusted by the amount of any cash or cash equivalents 3. Share from Earnings of GOCCs
transferred. (Par. 17, PPSAS 9) 4. Income from Grants and Donations in Cash
5. Income from Grants and Donations in Kind
Sec. 9. Impairment Losses and Allowance for
Impairment Losses. When an uncertainty arises about
the collectibility of an amount already included in d. Revenue from non-exchange transactions may also
revenue, the uncollectible amount, or the amount in arise when, in respect of an inflow of resources from a
respect of which recovery has ceased to be probable, is non-exchange transaction, the entity satisfies a present
recognized as an expense (impairment losses), rather obligation recognized as a liability which may be as
than as an adjustment of the amount of revenue follows:
originally recognized.
1. Trust Liabilities – Customers’ Deposits Payable and
Entities shall evaluate the collectibility of accounts Guaranty/Security Deposits Payable
receivable on an ongoing basis based on historical bad 2. Deferred Credits – Deferred Finance Lease Revenue
debts, customer/recipient credit-worthiness, current and Other Deferred Credits
economic trends and changes in payment activity. An 3. Unearned Revenue – Investment Property and Other
allowance is provided for known and estimated bad Unearned Revenue
debts.

Sec. 10. Disclosure. An entity shall disclose: Sec. 12. Recognition of Revenue from Non-
Exchange Transactions. The cash basis of accounting
a. The accounting policies adopted for the recognition shall be applied by all government agencies in the
of revenue, including the methods adopted to determine recognition of revenue from nonexchange transaction
the stage of completion of transactions involving the until a reliable model of measurement of this revenue is
rendering of services; developed.Therefore, asset and the corresponding
revenue or liability that arises from non-exchange
b. The amount of each significant category of revenue
transaction shall be recognized when collected or when
recognized during the period, including revenue arising
these are measurable and legally collectible.
from:
a. Taxation revenue shall be determined at a gross
1. Rendering of services;
amount. It shall not be reduced for expenses paid
2. Sale of goods;
through the tax system.
3. Interest;
4. Royalties; b. Gifts and donations, other than services in kind shall
5. Dividends or similar distributions; and be recognized as assets and revenue when it is
6. Amount of revenue arising from exchanges of goods probable that the future economic benefits or service
or services included in each significant category of potential will flow to the entity and shall be measured at
revenue. fair value.
Sec. 11. Revenue from Non-Exchange Transactions. c. Goods in-kind received without conditions shall be
Revenue of the NGAs from nonexchange transactions recognized as revenue immediately.
are derived mostly from taxes, gifts and donations,
goods in kind and fines and penalties. Most NGAs d. Donation in cash or in kind shall be recognized as
derive revenues from transactions where they receive revenue.
resources and provide no or nominal consideration
directly in return. These are as follows: Sec. 13. Measurement of Revenue from Non-
Exchange Transactions. Revenue from non-
a. Tax Revenue exchange transactions shall be measured at the
1. Tax Revenue-Individual and Corporation amount of the increase in net assets recognized by the
entity, unless it is also required to recognize a liability. Sec. 19. Expenses Paid Through the Tax System
Where a liability is recognized and subsequently and Tax Expenditures. Taxation revenue shall be
reduced, because the taxable event occurs, or a determined at gross amount. It shall not be reduced for
condition is satisfied, the amount of the reduction in the expenses paid through the tax system. Expenses of the
liability will be recognized as revenue. (Pars. 48 and 49, government paid through the tax system or as reduction
PPSAS 23) from tax revenue received should not be offset or
deducted from that tax revenue. Therefore, taxation
Sec. 14. Measurement of Assets on Initial revenue shall be recognized at the gross amount and
Recognition from Non-ExchangeTransactions. An the expenses deducted shall be recognized and shall
asset acquired through a non-exchange transaction form part of the statement of financial performance.
shall initially be measured at its fair value as at the date Expenses paid through the tax system are those
of acquisition. (Par. 42, PPSAS 33) expenses which should be paid irrespective of whether
the taxpayer pay taxes, or use a particular mechanism
Sec. 15. Measurement of Liabilities on Initial
to pay taxes. (Par. 71, PPSAS 23)
Recognition. Where the time value of money is
material, the liability will be measured at the present Sec. 20. Taxation Revenue Shall Not Be Grossed Up
value of the amount expected to be required to settle For the Amount of Tax Expenditures. Tax
the obligation. (Par. 58, PPSAS 23) expenditures are preferential provisions of the tax law
that provide certain taxpayers with concessions that are
Sec. 16. Tax Revenue. Taxes are economic benefits or
not available to others. Tax expenditures are foregone
service potential compulsory paid or payable to public
revenue, not expenses, and do not give rise to inflows
sector agencies, in accordance with laws and or
or outflows of resources that is, they do not give rise to
regulations, established to provide revenue to the
assets, liabilities, revenue, or expenses of the
government. Taxes do not include fines or other
government. (Pars. 73 and 74, IPSAS 23)
penalties imposed for breaches of the law. Unless
otherwise specified in laws and regulations, the taxable Examples are the tax expenditure fund, which is a
event for: subsidy released by the DBM to government-owned or
controlled corporations and government financial
a. Income tax is the earning of assessable income
institutions to settle
during the taxation period by the taxpayer;
customs duties and other taxes arising from the
b. Value added tax is the undertaking of taxable activity
importation of goods; and benefits granted to taxpayers
during the taxation period by the taxpayer;
like the tax credits.
c. Goods and services tax is the purchase or sale of
Sec. 21. Recognition of Asset through Transfers. An
taxable goods and services during the taxation period;
entity shall recognize an asset in respect of transfers
d. Customs duty is the movement of dutiable goods or when the transferred resources meet the definition of an
services across the customs boundary; asset and satisfy the criteria for recognition as an asset.
(Par. 76, PPSAS 23)
e. Death duty is the death of a person owning taxable
property; and a. Transfers meet the definition of an asset when the
entity controls the resources as a result of a past event
f. Property tax is the passing of the date on which the (the transfer), and expects to receive future economic
tax is levied, or the period for which the tax is levied, if benefits or service potential from those resources.
the tax is levied on a periodic basis. Transfers satisfy the criteria for recognition as an asset
when it is probable that the inflow of resources will
Sec. 17. Illustrative Accounting Entries. Refer to
occur, and their fair value can be reliably measured. In
Annexes H to N for illustrative accounting entries.
certain circumstances, such as when a creditor forgives
Sec. 18. Transfer of Internal Revenue Allotment. a liability, a decrease in the carrying amount of a
Where an NG imposes a tax, the entire proceeds of previously recognized liability may arise. In these
which is collected by NGAs and transferred to LGUs cases, instead of recognizing an asset as a result of the
through an appropriation, the NGAs recognize assets transfer, the entity decreases the carrying amount of the
and revenue for the tax, and a decrease in assets and liability. (Par. 78, PPSAS 23)
an expense for the transfer to LGUs. The LGUs will
b. Transfers include grants, debt forgiveness, fines,
recognize the assets and revenue for the transfer. The
bequests, gifts, donations and goods and services in-
following is the accounting entry at the books of
kind. All of these transactions transfer resources without
accounts of the DBM:
approximate equal value in exchange and are not taxes
but some are with conditions.
c. Transfers are established by a binding arrangement the transaction may be a contribution from owners. (Par.
that includes conditions, such as inter-entity and intra- 86, PPSAS 23)
entity fund transfers:
d. Revenue arising from debt forgiveness is measured
1. From an NGA to another NGA; at the carrying amount of the debt forgiven. (Par. 87,
2. From the NGA’s Central Office to its Regional/Bureau PPSAS 23)
Offices and Operating/Field Units;
3. From an NGA to an LGU and vice-versa; Sec. 24. Recognition and Measurement of Fines
4. From an NGA to a GOCC and vice-versa;
a. Fines are recognized as revenue when the receivable
5. From an entity that is created by law or regulation to
meets the definition of an asset and satisfies the criteria
perform specific functions with operational autonomy;
for recognition as an asset. (Par. 89, PPSAS 23)
and 6. From donor entity to NGAs.
b. Where an entity collects fines in the capacity of an
d. An entity shall recognize an asset in respect of
agent, the fine will not be recognized as revenue of the
transfers when the transferred resources meet the
collecting entity. (Par. 89, PPSAS 23)
definition of an asset and satisfy the criteria for
recognition as an asset. c. Assets arising from fines are measured at the best
estimate of the inflow of resources to the entity. (Par. 89,
e. An entity obtains control of transferred resources
PPSAS 23)
either when the resources have been transferred to the
entity, or the entity has an enforceable claim against the Sec. 25. Recognition and Measurement of Bequests
transferor. Many arrangements to transfer resources
become binding on all parties before the transfer of a. Bequests which satisfy the definition of an asset are
resources takes place. (Par. 79, PPSAS 23) recognized as assets and revenue when it is probable
that the future economic benefits or service potential will
f. Transfers of resources that satisfy the definition of flow to the entity and the fair value of the assets can be
contributions from owners will not give rise to revenue. measured reliably. Determining the probability of an
Agreements that specify that the entity providing inflow of future economic benefits or service potential
resources (a) is entitled to distributions of future may be problematic if a period of time elapses between
economic benefits or service potential during the the death of the testator and the entity receiving any
recipient entity’s life, or distribution of any excess of asset. The entity will need to determine if the deceased
assets over liabilities in the event that the recipient person’s estate is sufficient to meet all claims on it, and
entity is wound up, or (b) acquires a financial interest in satisfy all bequests. If the will is disputed, this will also
the affect the probability of assets flowing to the entity. (Par.
91, PPSAS 23)
recipient entity that can be sold, exchanged, transferred
or redeemed, are, in substance, agreements to make a b. The fair value of bequeathed assets is determined in
contribution from owners. (Par. 80, PPSAS 23) the same manner as for gifts and donations. Where
deceased estates are subject to taxation, the tax
Sec. 22. Measurement of Transferred Assets.
authority may already have determined the fair value of
Transferred assets are measured at their fair value as
the asset bequeathed to the entity, and this amount may
at the date of acquisition. (Par. 83, PPSAS 23)
be available to the entity. Bequests are measured at the
Sec. 23. Debt Forgiveness and Assumption of fair value of the resources received or receivable. (Par.
Liabilities 92, PPSAS 23)

a. Lenders will sometimes waive their right to collect a Sec. 26. Recognition and Measurement of Gifts,
debt owed by a public sector entity, effectively Donations and Goods In-kind
cancelling the debt. For example, an NGA may cancel
a. Gifts and donations (other than services in-kind) are
a loan owed by an LGU. In such circumstance, the LGU
recognized as assets and revenue when it is probable
concerned recognizes an increase in net assets
that the future economic benefits or service potential will
because a liability it previously recognized is
flow to the entity and the fair value of the assets can be
extinguished. (Par. 84, PPSAS 23)
measured reliably. With gifts and donations, the making
b. Entities recognize revenue in respect of debt of the gift or donation and the transfer of legal title are
forgiveness when the former debt no longer meets the often simultaneous, in such circumstances, there is no
definition of a liability or satisfies the criteria for doubt as to the future economic benefits flowing to the
recognition as a liability, provided that the debt entity. (Par. 95, PPSAS 23)
forgiveness does not satisfy the definition of a
b. Goods in-kind are tangible assets transferred to an
contribution from owners. (Par. 85, PPSAS 23)
entity in a non-exchange transaction, without charge,
c. Where a controlling entity forgives debt owed by a but may be subject to stipulations. External assistance
wholly owned controlled entity,or assumes its liabilities, provided by multilateral or bilateral development
organizations often includes a component of goods in-
kind. (Par. 94, PPSAS 23)

c. Goods in-kind are recognized as assets when the

goods are received, or there is a binding arrangement
to receive the goods. If goods in-kind are received
without conditions attached, revenue is recognized
immediately. If conditions are attached, a liability is
recognized, which is reduced and revenue recognized
as the conditions are satisfied. (Par. 96, PPSAS 23)

d. On initial recognition, gifts and donations including

goods in-kind are measured at their fair value as at the
date of acquisition, which may be ascertained by
reference to an active market, or by appraisal. An
appraisal of the value of an asset is normally
undertaken by a member of the valuation profession
who holds a recognized and relevant professional
qualification. For many assets, the fair value will be
readily ascertainable by reference to quoted prices in
an active and liquid market. For example, current
market prices can usually be obtained for land, non-
specialized buildings, motor vehicles and many types of
plant and equipment. (Par. 97, PPSAS 23)

Sec. 27. Grant with Condition. If conditions are

attached to a grant, a liability is recognized, which is
reduced and revenue recognized as the conditions are
satisfied. If the government is required to recognize a
liability in respect of any conditions relating to assets
recognized as a consequence of specific purposes, it
does not recognize revenue until the condition is
satisfied and the liability is reduced. As an entity
satisfies a present obligation recognized as a liability in Sec. 28. Recognition and Measurement of
respect of an inflow of resources from a non-exchange Services In-kind. These services meet the definition
transaction recognized as an asset, it shall reduce the of an asset because the entity controls a resource
carrying amount of the liability recognized and from which future economic benefits or service
recognize an amount of revenue equal to that reduction. potential is expected to flow to the entity. These
assets are, however, immediately consumed and a
Example: The NG received a foreign grant amounting transaction of equal value is also recognized to
to P10 million for the construction of a railroad system. reflect the consumption of these services in-kind.
Under the terms of the grant, the construction project (Par. 98, PPSAS 23)
shall be completed within a period of two years from the
receipt of the grant, otherwise, the money shall be a. Public sector entities may be recipients of services
returned to the grantor. The money can only be used as in-kind under voluntary or involuntary schemes
stipulated and the NG is required to include a note in operated in the public interest. For example:
the financial statement detailing how the money was
1. Technical assistance from other governments or
spent. The Department of Public Works and Highways
international organizations;
(DPWH) will be the implementing entity. The
transactions shall be recognized as follows: 2. Persons convicted of offenses may be required to
perform community service for public sector entity;

3. Public hospitals may receive the services of

volunteers; and

4. Public schools may receive voluntary services

from parents as teachers’ aides or as board
members. (Par.100, PPSAS 23)

b. Due to the many uncertainties surrounding

services in-kind, including the ability to exercise
control over the services, and measuring the fair
value of the services, the entity is not required to nonacceptance happens when (a) the check is duly
recognize services in-kind as revenue and as an presented for acceptance, and such an
asset but is encouraged to disclose the nature and acceptanceas is prescribed by law is refused or
type of services in-kind received during the reporting cannot be obtained; or (b) presentment for
period. (Par.102, PPSAS 23) acceptance is excused and the check is not accepted
(Sec. 149, RA No. 2031, Negotiable Instruments
Sec. 29. Recognition and Disclosure of Pledges. Law). A dishonored check may also be defined as a
Pledges do not meet the definition of an asset check paid to the agency that was dishonored by the
because the recipient entity is unable to control the AGDB due to “Drawn Against Insufficient Fund
access of the transferor to the future economic (DAIF)” or “Drawn Against Uncleared Deposits
benefits or service potential embodied in the item (DAUD).”
pledged. Agencies do not recognize pledged items as
assets or revenue. If the pledged item is When a check drawn in favor of the government is
subsequently transferred to the recipient entity, it is not accepted by the drawee for any reason, the
recognized as a gift or donation. Pledges may drawer shall continue to be liable for the sum due and
warrant disclosure as contingent assets. (Par. 104, all penalties resulting from delayed payments. Where
PPSAS 23) the reason for non-acceptance by the drawee bank is
insufficiency of funds, the drawer shall be criminally
Sec. 30. Advance Receipts of Revenue. When an liable therefor.
entity receives resources before a transfer
arrangement becomes binding, the resources are Responsibility over dishonored checks:
recognized as an asset when they meet the definition
and satisfy the criteria for recognition as an asset and a. When a check is dishonored by non-payment or
recognized as a liability until the event that makes the non-acceptance, the Collecting Officer should issue
transfer arrangement binding occurs, and all other a Notice of Dishonored Checks (NDC) (Appendix 25)
conditions under the agreement are fulfilled. When to the drawer and to each endorser, and any drawer
that event occurs and all other conditions under the or endorser to whom such notice is not given is
agreement are fulfilled, the liability is discharged and discharged from liability. The NDC shall be furnished
revenue is recognized. (Par.105, PPSAS 23) to the Agency Head, Accountant, Auditor and a copy
thereof retained by the Collecting Officer. The
Sec. 31. Recognition and Measurement of Collecting Officer shall cancel the OR covering the
Concessionary Loans dishonored check. If necessary, the head of the
agency shall promptly institute the corresponding
a. The portion of the loan that is repayable, along with action for the collection of the amount involved.
any interest payments, is an exchange transaction
and is accounted for in accordance with PPSAS 29, b. The Collecting Officer neglecting or failing to give
Financial Instruments: Recognition and the required NDC to the drawer (or to the endorser-
Measurement, Chapter 7 of this Manual. payor of the government check), who, as a result
thereof, is discharged from liability, shall be
b. An entity considers whether any difference personally answerable for the resulting loss suffered
between the transaction price (loan proceeds) and by the government.
the fair value of the loan on initial recognition is non-
exchange transaction. When an entity determines c. The making, drawing and issuance of a check
that the difference between the transaction price payment of which is refused by the drawee because
(loan proceeds) and the fair value of the loan on initial of insufficient funds in or credit with such bank, when
recognition is nonexchange revenue, an entity presented within ninety (90) days from the date of the
recognizes the difference as revenue, except if a check, shall be prima facie evidence of knowledge of
present obligation exists, e.g., where specific such insufficiency of funds or credit unless such
conditions imposed on the transferred assets by the maker or drawer pays the holder thereof the amount
recipient result in a present obligation. Where a due thereon, or makes arrangements for payment in
present obligation exists, it is recognized as a liability. full by the drawee of such check within five (5)
As the entity satisfies the present obligation, the banking days after receiving notice that
liability is reduced and an equal amount of revenue is
recognized. (Par. 105A and B, PPSAS 23) such check has not been paid by the drawee.

Sec. 32. Dishonored Checks. A check is dishonored d. A dishonored check shall be settled by tendering
either by non-payment or non-acceptance. Dishonor payment in cash or by certified check to the
by non-payment occurs when (a) the check is duly Collecting Officer concerned. No other mode of
presented for payment and payment is refused or payment shall be accepted.
cannot be obtained; or (b) presentment is excused
e. Upon settlement of the dishonored check in the
and the check is overdue and unpaid (Sec. 83, RA
manner herein prescribed, the Collecting Officer shall
No. 2031, Negotiable Instruments Law). Dishonor by
not return the check to the payor concerned unless
the latter first surrenders the previous OR therefor. If Cash shortage which is not restituted by the
the previous receipt is no longer available, sworn Collecting Officer despite demand in writing by the
statement to the effect that it has been lost or Auditor shall be taken up as receivable from the
misplaced should be submitted by the payor. Collecting Officer.

f. Dishonored checks shall remain in the custody of Sec. 36. Illustrative Accounting Entries for Cash
the Collecting Officer, pending their redemption, Overage/Shortage of Collecting Officer
unless the agency head or the court shall direct
otherwise, in which case appropriate receipts should
be secured from the officer authorized to take
custody of the checks. The Collecting Officer shall
immediately advise the transfer of custody of the
check.

Sec. 34. Illustrative Accounting Entries for

Dishonored Checks

Sec. 37. Disclosures. An entity shall disclose

pertinent revenue transactions as follows: either on
the face of, or in the notes to, the GPFS:

a. Disclosure on the face of, or in the notes to, the

GPFS (Par. 106, IPSAS 26)

1. The amount of revenue from non-exchange

transactions recognized during the period:

i. Taxes, showing separately major classes of

taxes; and

ii. Transfers, showing separately major classes of

transfer revenue.

2. The amount of receivables recognized in respect

of non-exchange revenue;

3. The amount of liabilities recognized in respect of

transferred assets subject to conditions;

4. The amount of liabilities recognized in respect of

concessionary loans that are subject to conditions on
Sec. 35. Accounting for Cash Overage/Shortage transferred assets;
of Collecting Officer. Cash overage discovered by
the Auditor that cannot be satisfactorily explained by 5. The amount of assets recognized that are subject
the Collecting Officer shall be forfeited in favor of the to restrictions and the nature ofthose restrictions;
government and an official receipt shall be issued by
6. The existence and amounts of any advance
the Collecting Officer/Cashier. The cash overage
receipts in respect of non-exchange transactions;
shall be taken up as Miscellaneous Income.
and

7. The amount of any liabilities forgiven.

b. Disclosure in the notes to the GPFS (Par. 107, b. Non-Cash Availment Authority. The accounting
IPSAS 26) entry to recognize the receipt of NCAA is as follows:

1. The accounting policies adopted for the

recognition of revenue from nonexchange
transactions;

2. For major classes of revenue from non-exchange

transactions, the basis on which the fair value of
inflowing resources was measured;
c. Cash Disbursement Ceiling. The accounting
3. For major classes of taxation revenue that the entries for the collection of revenue of, and the
entity cannot measure reliably during the period in constructive receipt of disbursement authority to,
which the taxable event occurs, information about the Foreign Service Posts (FSPs) of DFA and DOLE are
nature of the tax; and as follows:

4. The nature and type of major classes of bequests,

gifts, and donations, showing separately major
classes of goods in-kind received.

c. Entities are encouraged to disclose the nature and

type of major classes of services inkind received,
including those not recognized. Such disclosures
may assist users to make informed judgment about:

1. the contribution made by such services to the

achievement of the entity’s objectives during the
reporting period; and

2. the entity’s dependence on such services for the

achievement of its objectives in the future.

Sec. 38. Other Receipts. Other receipts of NGAs

shall be composed of, but not limited to, the following:

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:

d. Tax Remittance Advice. This shall be used to

recognize: (1) in the books of national government
agencies, the constructive remittance to BIR and
BOC of taxes and customs’ duties withheld, and the
constructive receipt of NCA for those taxes and
customs duties; (2) in the books of the BIR and BOC,
the constructive receipt of tax revenue and customs
duties; and (3) in the books of the BTr, the
constructive receipt of the taxes and customs duties
remitted.
 f. Refund of excess cash advances granted to officers
and employees. Cash advances may be classified into:

1. Advances to Officers and Employees – for official

travels;
2. Advances for Operating Expenses – granted to
regular disbursing officer for
3. Advances for Payroll – for payment of salaries,
wages and other personnel benefits; and
4. Advances to Special Disbursing Officer (SDO) –
for special purpose/time-bound undertakings.

g. Performance bond/security deposits. Receipts of

performance bond posted by contractor or supplier to
guaranty full and faithful performance of their
contract. It may be in the form of cash or certified
checks.

h. Refund of overpayment of expenses. Receipts of

refunds from officers, employees and
e. Receipt of Subsidy/Assistance from other NGAs,
suppliers/creditors resulting from overpayment of
LGUs, GOCCs and Other Funds. The Collecting
expenses
Officer shall issue OR upon receipt of cash
subsidy/assistance.
i. Collections made on behalf of another entity or non-
government/private organizations. Receipts of
income, receivables or trust funds for the account of Sec. 39. Reporting of Collections and Deposits.
other NGAs, LGUs, GOCCs or non- Receipts and deposits shall be reported as follows:
government/private organizations. These collections a. At the close of the business day, the Collecting
are later remitted to the government agencies or non- Officers shall prepare the Report of Collections and
government/private organizations concerned. Deposits (RCD) (Appendix 26) for submission to
1. NGAs (other than University of the Philippines- Accounting Office/Unit. The report lists all the ORs
Legal Research Fund (UP-LRF)) Books issued in numerical sequence including cancelled
ones.

b. The RCD shall be supported by documentary

evidence such as duplicate copies of ORs and
validated deposit slips.

c. The Collecting government entity issuing electronic

Official Receipt (eOR) should generate and submit
daily to the Auditor a copy of the RCD. In case the
collection system is not integrated with the
accounting system, the Accounting Division/Unit
shall recognize the collections and deposits based on
the generated reports duly certified by the Collecting
Officer/Cashier/Head of Cash/Treasury Unit.

d. Field Offices (FOs)/Operating Units (OUs) without

complete set of books shall record their collections of
income chronologically in the Cash Receipts
Register(CRReg) (Appendix 27). The certified copy
of the CRReg together with the required supporting
j. Intra-agency and inter-agency fund transfers. Cash documents, duplicate copies of ORs and Deposit Slip
received from central office/regional office/operating (DSs) shall be submitted within five (5) days after the
units of an entity and from another entity for the end of each month to the concerned mother unit
purpose of implementing specific projects. (central/regional/division office) by the FOs (a unit
under the central/regional/ division office) for review
and recording of the transactions in the CRJ by the
Chief Accountant.

Sec. 42. Submission of the Quarterly Report of

Revenue and Other Receipts. The Chief
Accountant shall prepare the Quarterly Report of
Revenue and Other Receipts (QRROR) (Appendix
24) and submit the report to the GAS, COA, the DBM
and the BTr within 30 days after the end of each
quarter. A separate report shall be prepared and
submitted for income of the GF and for income and
receipts for Special Account and Trust Fund.