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 b. coding structure and accounts; and
Reforms and significant changes in the field of
accounting prompted the harmonization of the c. accounting books, registries, records,
existing 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 STANDARDS AND POLICIES
to 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 regulations; and the basic standards/fundamental
1987 Constitution of the Republic of the Philippines accounting principles for financial reporting by
which 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 a. Accrual basis – means a basis of accounting
the prevention and disallowance of irregular, under which transactions and other events are
unnecessary, excessive, extravagant, or recognized when they occur (and not only when
unconscionable expenditures, or uses of cash or its equivalent is received or paid).
government funds and properties". (Underscoring Therefore, the transactions and events are
supplied) recognized in the accounting records and
recognized in the financial statements of the
_______________________________
periods to which they relate. The elements
Sec. 2. Coverage. This Manual presents recognized under accrual accounting are assets,
the basic accounting policies and principles in 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
Resolution No. 2014-003 dated January 24, 2014
as 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
reports, and financial statements; and illustrative been contributed to the entity by parties external to
accounting entries. It shall be used by all National the entity, other than those that result in liabilities of
Government Agencies (NGAs) in the: 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;
b. reporting of budget, revenue and
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
Sec. 3. Objective of the Manual. The redeemed.
Manual aims to update the following:
d. Distributions to owners – means future a. Responsibility over Government Funds and
economic benefits or service potential distributed Property
by the entity to all or some of its owners, either as a
return on investment or as a return of investment. 1. It is the declared policy of the State that all
resources of the government shall be managed,
e. Entity – refers to a government agency, expended or utilized in accordance with laws and
department or operating/field unit. It may be regulations, and safeguarded against loss or
referred to in this GAM as an agency. wastage through illegal or improper disposition,
with a view to ensuring efficiency, economy and
f. Expenses – are decreases in economic benefits effectiveness in the operations of government. The
or service potential during the reporting period in responsibility to take care that such policy is
the form of outflows or consumption of assets or faithfully adhered to rests directly with the chief or
incurrence ofliabilities that result in decreases in head of the government agency concerned. (Sec.
net assets/equity, other than those relating to 2, P.D. No. 1445)
distributions to owners.
2. Fiscal responsibility shall, to the greatest extent,
g. Government Accounting – encompasses the be shared by all those exercisingauthority over the
processes of analyzing, recording, classifying, financial affairs, transactions, and operations of the
summarizing and communicating all transactions government agency. (Sec. 4(4), P.D. No. 1445)
involving the receipt and disposition of government
funds and property, and interpreting the results 3. The head of any agency of the government is
thereof. (Sec. 109, Presidential Decree (P.D.) No. immediately and primarily responsible for all
1445) government funds and property pertaining to his
agency. Persons entrusted with the possession or
h. Government Budget – is the financial plan of a custody of the funds or property under the agency
government for a given period, usually for a fiscal head shall be immediately responsible to him,
year, which shows what its resources are, and how without prejudice to the liability of either party to the
they will be generated and used over the fiscal government. (Sec. 102, P.D. No. 1445)
period. The budget is the government's key
instrument for promoting its socio-economic
objectives. The government budget also refers to
the income, expenditures and sources of b. Accountability over Government Funds and
borrowings of the National Government (NG) that Property
are used to achieve national objectives, strategies
1. Every officer of any government agency whose
and programs.
duties permit or require the possession or custody
i. Liabilities – are firm obligations of the entity of government funds or property shall be
arising from past events, the settlement of which is accountable therefor and for the safekeeping
expected to result in an outflow from the entity of thereof in conformity with law. Every AO shall be
resources embodying economic benefits or service properly bonded in accordance with law. (Sec. 101,
potential. P.D. No. 1445; Section 50, Chapter 9, Subtitle B,
Book V, Executive Order (E.O.) No. 292)
j. Net assets/equity – is the residual interest in the
assets of the entity after deducting all its liabilities. 2. Transfer of government funds from one officer to
another shall, except as allowed by law or
k. Revenue – is the gross inflow of economic regulation, be made only upon prior direction or
benefits or service potential during the reporting authorization of the Commission or its
period when those inflows result in an increase in representative. (Sec. 75, P.D. No. 1445)
net assets/equity, other than increases relating to
contributions from owners. 3. When government funds or property are
transferred from one AO to another, orfrom an
l. Revenue funds – comprise all funds derived outgoing officer to his successor, it shall be done
from the income of any agency of the government upon properly itemized invoice and receipt which
and available for appropriation or expenditure in shall invariably support the clearance to be issued
accordance with law. (Section 3, P.D. No. 1445) 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

Liability over Government Funds and Property Property

1. Expenditures of government funds or uses of

government property in violation of law or
regulations shall be a personal liability of the official c. Amounts received in trust and from business-
or employee found to be directly responsible type activities of government may be separately
therefor. (Sec. 103, P.D. No. 1445) recorded and disbursed in accordance with such
rules and regulations as may be determined by a
2. Every officer accountable for government funds Permanent Committee composed of the Secretary
shall be liable for all losses resulting from the of Finance as Chairman, and the Secretary of
unlawful deposit, use, or application thereof and for Budget and Management and the Chairman, COA,
all losses attributable to negligence in the keeping as members. (Sec. 65(2), P.D. No. 1445)
of the funds. (Sec. 105(2), P.D. No. 1445)
d. Receipts shall be recorded as revenue of
3. No AO shall be relieved from liability by reason Special, Fiduciary or Trust Funds or Funds other
of his having acted under the direction of a superior than the GF, only when authorized by law as
officer in paying out, applying, or disposing of the implemented by rules and regulations issued by the
funds or property with which he is chargeable, Permanent Committee. (Sec. 66, P.D. No. 1445)
unless prior to that act, he notified the superior
officer in writing of the illegality of the payment, e. No payment of any nature shall be received by a
application, or disposition. The officer directing any collecting officer without immediately issuing an
illegal payment or disposition of the funds or official receipt in acknowledgement thereof. The
property shall be primarily liable for the loss, while receipt may be in the form of postage, internal
the AO who fails to serve the required notice shall revenue or documentary stamps and the like,
be secondarily liable. (Sec. 106, P.D. No. 1445) officially numbered receipts, subject to proper
custody, accountability, and audit. (Sec. 68(1), P.D.
4. When a loss of government funds or property No. 1445)
occurs while they are in transit or the loss is
caused by fire, theft, or other casualty or force f. Where mechanical devices (e.g. electronic official
majeure, the officer accountable therefor or having receipt) are used to acknowledge cash receipts,
custody thereof shall immediately notify the the COA may approve, upon request, exemption
Commission or the auditor concerned and, within from the use of accountable forms. (Sec. 68 (2),
30 days or such longer period as the Commission P.D. No. 1445)
or auditor may in the particular case allow, shall
present his application for relief, with the available g. At no instance shall temporary receipts be
supporting evidence. Whenever warranted by the issued to acknowledge the receipt of public funds.
evidence, credit for the loss shall be allowed. An (Sec. 72, GAAM Volume I)
officer who fails to comply with this requirement
h. Pre-numbered ORs shall be issued in strict
shall not be relieved of liability or allowed credit for
numerical sequence. All copies of each receipt
any loss in the settlement of his accounts. (Sec. 73,
shall be exact copies or carbon reproduction in all
P.D. No. 1445)
respects of the original. (Sec. 73, GAAM Volume I)
_______________________________
i. An officer charged with the collection of revenue
or the receiving of moneys payable to the
government shall accept payment for taxes, dues
Sec. 4. Fundamental Principles for Revenue. All or other indebtedness to the government in the
revenues accruing to the NGAs shall be form of checks issued in payment of government
governed by the following fundamental obligations, upon proper endorsement and
principles: identification of the payee or endorsee. Checks
drawn in favor of the government in payment of any
a. Unless otherwise specifically provided by law, all such indebtedness shall likewise be accepted by
revenues accruing to an entity by virtue of the the officer concerned. At no instance should money
provisions of existing law, orders and regulations in the hands of the CO be utilized for the purpose
shall be deposited/remitted in the National Treasury of cashing private checks. (Sec. 67(1) and (3), P.D.
(NT) or in any duly authorized government No. 1445)
depository, and shall accrue to the General Fund
(GF) of the NG. (Sec. 65(1), P.D. No. 1445) j. Under such rules and regulations as the COA and
the Department of Finance (DOF)may prescribe,
b. Except as may otherwise be specifically the Treasurer of the Philippines and all AGDB shall
provided by law or competent authority, all moneys acknowledge receipt of all funds received by them,
and property officially received by a public officer in the acknowledgement bearing the date of actual
any capacity or upon any occasion must be remittance or deposit and indicating from whom
accounted for as government funds and and on what account it was received. (Sec. 70, P.D.
government property. (Sec. 42, Chapter 7, Title No. 1445)
I(B), Book V, E.O. No. 292)
_______________________________
 f. financial statements based on accounting and
budgetary records; and
Sec. 5. Fundamental Principles for
Disbursement of Public Funds. Section 4 of P.D. g. fund cluster accounting.
No. 1445, the Government Auditing Code of the
Philippines, provides that all financial transactions _______________________________________
and operations of any government entity shall be
governed by the following fundamental principles:
Sec. 7. Keeping of the General Accounts. The
a. No money shall be paid out of any public
COA shall keep the general accounts of the
treasury or depository except in pursuance of an
Government and, for such period as may be
appropriation law or other specific statutory
provided by law, preserve the vouchers and other
authority.
supporting papers pertaining thereto, pursuant to
b. Government funds or property shall be spent or Section 2, par. (1), Article IX-D of the 1987
used solely for public purposes. Philippine Constitution.

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,
National Government. The financial reporting
be 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
e. Disbursement or disposition of government statutory responsibility of the NGAs, Bureauof the
funds or property shall invariably bear the Treasury (BTr), Department of Budget and
Management (DBM), and the COA, as follows:
approval of the proper officials.
a. Each entity of the National Government (NG)
f. Claims against government funds shall be maintains complete set of accounting books by
supported with complete documentation. fund cluster which is reconciled with the records of
cash transactions maintained by the BTr.
g. All laws and regulations applicable to financial
transactions shall be faithfully adhered to. b. The BTr accounts for the cash, public debt and
related transactions of the NG.
h. Generally accepted principles and practices of
accounting as well as of sound management and c. Each entity maintains budget registries which are
fiscal administration shall be observed, provided reconciled with the budget records maintained by
that they do not contravene existing laws and the DBM and the Government Accountancy Sector
regulations. (GAS), COA.

_______________________________ d. The COA, through the GAS:

1. maintains budget records showing the

overall approved budget of the NG and its
Sec. 6. Basic Government Accounting and execution/implementation;
Budget Reporting Principles. Each entity shall
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
COA’s records to come up with an Annual Financial
a. generally accepted government accounting Report (AFR) for the NG as required in Section 4,
principles in accordance with the PPSAS and Article IX-D of the 1987 Philippine Constitution; and
pertinent laws, rules and regulations;
3. prepares other financial reports
b. accrual basis of accounting in accordance with required by law for submission to oversight
the PPSAS; agencies.
c. budget basis for presentation of budget _______________________________
information in the financial statements (FSs) in
accordance with PPSAS 24; Sec. 9. Objectives of General Purpose Financial
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 1. General Ledgers (Appendix 5)
evaluating decisions about the allocation of 2. Subsidiary Ledgers (Appendix
resources. Specifically, the objectives of general
purpose financial reporting in the public sector are c. Registries
to provide information useful for decision-making,
1. Registries of Revenue and Other Receipts
and to demonstrate the accountability of the entity
(Appendices 7, 7A, 7B, 7C and 7D)
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
and 9D)
Sec. 10. Responsibility for Financial 4. Registries of Budget, Utilization and
Statements. The responsibility for the preparation Disbursements (Appendices 10A, 10B,
of the FSs rests with the following: 10C and 10D)
a. for individual entity/department FSs – the head
of the entity/department central office (COf) or
regional office (RO) or operating unit (OU) or Sec. 13. Fund Accounting. The books of accounts
his/her authorized representative jointly with the shall be maintained by fund cluster as follows:
head of the finance/accounting division/unit; and

b. for department/entity FSs as a single entity – the

head of the entity/department COf jointly with the Code Description
head of the finance unit.
01 Regular Agency Fund
_______________________________
02 Foreign Assisted Projects Fund

03 Special Account-Locally
Sec. 11. Components of General Purpose Funded/Domestic Grants Fund
Financial Statements. The complete set of GPFSs
04 Special Account-Foreign
consists of:
Assisted/Foreign Grants Fund
a. Statement of Financial Position (Annex A);
05 Internally Generated Funds
b. Statement of Financial Performance (Annex B);
06 Business Related Funds
c. Statement of Changes in Net Assets/Equity
07 Trust Receipts
(Annex C);
The composition of fund clusters is enumerated in
d. Statement of Cash Flows (Annex D);
Annex P.
e. Statement of Comparison of Budget and Actual
_______________________________
Amounts (Annex E); and

f. Notes to the Financial Statements, comprising a

summary of significant accounting policies and Sec. 14. Components of Budget and Financial
other explanatory notes. (Annex F) Accountability Reports. The budget reports
consist of the following Budget and Financial
_______________________________
Accountability Reports (COA-DBM-DOF Joint
Circular No. 2013-1, as amended by COA and
DBM Joint Circular No. 2014-1 dated July 2, 2014):
Sec. 12. Books of Accounts and Registries. The
books of accounts and registries of theNG entities a. Quarterly Physical Report of Operation (QPRO)
consist of: – BAR No. 1

a. Journals b. Statement of Appropriations, Allotments,

Obligations, Disbursements and Balances
1. General Journal (Appendix 1) (SAAODB) – FAR No. 1
2. Cash Receipts Journal (Appendix 2)
3. Cash Disbursements Journal (Appendix 3) c. Summary of Appropriations, Allotments,
4. Check Disbursements Journal (Appendix Obligations, Disbursements and Balances by
4) Object of Expenditures (SAAODBOE) – FAR No. 1-
A
b. Ledgers
d. List of Allotments and Sub-Allotments (LASA) – _______________________________
FAR No. 1-B

e. Statement of Approved Budget, Utilizations,

Disbursements and Balances (SABUDB) – FAR Sec. 18. Going Concern. The FSs shall be
No. 2 (for Off-Budget Fund) prepared on a going concern basis unless there is
an intention to discontinue the entity operation, or if
f. Summary of Approved Budget, Utilizations, there is no realistic alternative but to do so.
Disbursements and Balances by Object of
Expenditures (SABUDBOE) – FAR No. 2-A (for Off- _______________________________
Budget Fund)

g. Aging of Due and Demandable Obligations

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

_______________________________
Sec. 20. Materiality and Aggregation. Each
material class of similar items shall be presented
Sec. 15. Fair Presentation. The FSs shall present separately in the financial statements. Items of a
fairly the financial position, financial dissimilar nature or function shall be presented
separately unless they are immaterial. If a line item
performance and cash flows of an entity. Fair is not material, it is aggregated with other items
presentation requires the faithful representation of either on the face of FSs or in the Notes to the FSs.
the effects of transactions, other events, and A specific disclosure requirement in a PPSAS need
conditions in accordance with the definitions not be satisfied if the information is not material.
andrecognition criteria for assets, liabilities,
revenue, and expenses set out in PPSAS. The _______________________________
application of PPSAS, with appropriate disclosures,
if necessary, would result in fair presentation of the
FS.
Sec. 21. Offsetting. Assets and liabilities, and
_______________________________ revenue and expenses shall not be allowed to
offset unless required or permitted by a PPSAS
except when offsetting reflects the substance of the
transaction or other event.
Sec. 16. Compliance with PPSASs. An entity
whose financial statements comply with PPSASs _______________________________
shall make an explicit and unreserved statement of
such compliance in the notes.Financial statements
shall not be described as complying with PPSASs
Sec. 22. Comparative Information. Comparative
unless they comply with all the requirements of
information shall be disclosed with respect to the
PPSASs. Inappropriate accounting policies that do
previous period for all amounts reported in the FSs.
not comply with PPSAS are not rectified either by
Comparative information shall be included for
disclosure of the accounting policies used, or by
narrative and descriptive information when it is
notes or explanatory material.
relevant to an understanding of the current period’s
_______________________________ FSs.

_______________________________

Sec. 17. Departure from PPSAS. In the event that

Management strongly believes that compliance
Sec. 23. Structure and Content. The FSs and
with the requirement of PPSAS would result in
each component shall be identified clearly and
misleading presentation that it would contradict the
distinguished from other information in the same
objective of the FSs set forth in PPSAS, the entity
published document.
may depart from that requirement if the relevant
regulatory framework allows, or otherwise does not _______________________________
prohibit, such a departure.
Sec. 24. Statement of Financial Position. An _______________________________
entity shall present current and non-current assets,
as well as current and non-current liabilities, as Sec. 29. Notes to Financial Statements. The
separate classifications on the face of the Notes to FSs contain information in addition to that
Statement of Financial Position (SFP). presented in the SFP, SFPer, SCNA/E, SCF and
SCBAA. Notes provide narrative descriptions or
_______________________________ 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 and net surplus or deficit for the period.
Sec. 30. Qualitative Characteristics of Financial
_______________________________ Reporting. An entity shall present information
including accounting policies in a manner that
meets a number of qualitative characteristics such
as understandability, relevance, materiality,
Sec. 26. Statement of Changes in Net
reliability and comparability.
Assets/Equity. An entity shall present in the
Statement of Changes in Net Assets/Equity These qualitative characteristics are the attributes
(SCNA/E) the following: that make the information provided in the FSs
useful to users.
a. Net Income or Deficit for the period;
_______________________________
b. Each item of revenue and expenses for the
period that, as required by Standards, is
recognized directly in net assets/equity, and the
total of these items; Sec. 31. Key Features of Assets. The key
features 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
separately disclosed, the effects of changes in b. the benefits must have arisen from a past event;
accounting policies and corrections of errors and
recognized in accordance with PPSAS 3-
Accounting Policies, Changes in Accounting c. future economic benefits or service potential
Estimates and Errors. must be expected to flow to the entity.
_______________________________
The following are indicators of control of the
benefits by the entity:

Sec. 27. Statement of Cash Flows. The a. the ability of an entity to benefit
Statement of Cash Flows (SCF) provides from the asset and to deny or
information to users of FSs a basis to assess the regulate the access of others to
ability of the entity to generate cash and cash that benefit.
equivalents and to determine the entity’s utilization b. an entity can, depending on the
of funds. This also provides information on how the nature of the asset, exchange it,
entity generates income authorized to be used in use it to providegoods or
their operation and its utilization. services, exact a price for others’
use of it, use it to settle liabilities,
_______________________________ hold it, or perhaps even distribute
it to owners.
c. possession or ownership of an
object or right would normally be
Sec. 28. Statement of Comparison of Budget
synonymous with control over
and Actual Amounts. A comparison of budget and
the future economic benefits
actual amounts will enhance the transparency of
embodied in the right or object.
financial reporting in government.
However, there are instances
This shall be presented by government agencies when an entity may possess an
as a separate additional financial statement object or right but not expect to
referred in this Manual as the Statement of enjoy the benefits embodied in it,
Comparison of Budget and Actual Amount e.g. under a finance lease
(SCBAA). agreement, control over the
leased property owned by the
 lessor is transferred to the represent those transactions
lessee. and events.

_______________________________

The following are indicators of past event:

a. the specification of a past event Sec. 33. Accounting Standards for Revenue.
differentiates assets from The following accounting standards shall apply for
intentions to acquire assets, revenue and receipts of government entities:
which are not to be recognized.
b. a transaction or event giving rise a. Revenue includes only the gross inflows of
to 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
benefits: actually 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
c. in determining whether a resource or right on tax revenue or other specific income account,
needs to be accounted for as an asset,the shall be recognized as income of the year these
potential to contribute to the objectives of were collected.
the entity should be the prime
d. Gifts and donations shall consist of voluntary
consideration;
transfers of assets including cash or other
d. capacity to contribute to
monetary assets, goods in-kind and services in-
activities/objectives/programs; and
kind that one agency makes to another, normally
e. the fact that an asset cannot be sold does
free from stipulations. (PPSAS 23)
not preclude it from providing future
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
development organizations often includes a
Sec. 32. Recognition of an Asset. An asset shall component of goods in-kind. (PPSAS 23)
be recognized in the financial position when and
only when (a) it is probable that the future f. Taxes are economic benefits or service potentials
economic benefits will flow to the entity; and (b) the compulsory paid or payable to public sector
asset has a cost or value that can be measured agencies, in accordance with laws and or
reliably. The following are indicators of probable regulations, established to provide revenue to the
inflow of future economic benefits: government. Taxes do not include fines or other
penalties imposed for breaches of the law. (PPSAS
a. the chance of benefits arising is more likely 23)
rather 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 or service potential from non-exchange
available evidence or logic. transactions, other than taxes. (PPSAS 23)

_______________________________

The following are indicators of reliable

measurement:
Sec. 34. Use of Appropriated Funds. All moneys
a. valuation method is free from appropriated for functions, activities, projects and
material error or bias. programs shall be available solely for the specific
b. faithful representation of the purposes for which these are appropriated.
asset’s benefits.
c. reliable information will, without _______________________________
bias or undue error, faithfully
 g. Approval of the disbursement by the Head of
Agency or by his duly authorized representative.
Sec. 35. Appropriation for Loan Proceeds. Disbursement or disposition of government funds
Expenditures funded by foreign and domestic or property shall invariably bear the approval of the
borrowings shall be included within the expenditure proper officials. The DVs/Payrolls shall be signed
program of the entity concerned. Loan proceeds, and approved by the head of the agencies or his
whether in cash or in kind, shall not be used duly authorized representatives.
without the corresponding release of funds through
a Special Budget. _______________________________

_______________________________

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

_______________________________
UACS Code

New General Appropriations 01

Sec. 42. Maintenance of Records. All
Continuing Appropriations 02
checks/ADA drawn during the day, whether
released or unreleased including cancelled checks Supplemental Appropriations 03
shall be recognized chronologically in the
Checks/ADA Disbursement Record maintained by Automatic Appropriations 04
the Cash/Treasury Unit.
Unprogrammed Funds 05
_______________________________
Retained Income/Funds 06

Revolving Funds 07
Sec. 43. Reporting of Disbursements. All
payments/disbursements shall be reported using Trust Receipts 08
the prescribed forms for recording in the books of
d. Automatic Appropriations – are the
accounts.
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

consists of, among others, data on appropriations
BUDGET EXECUTION, MONITORING AND or the approved budget, allotments, obligations,
REPORTING revenues and other receipts, and disbursements.
Sec. 1. Scope. This Chapter prescribes the f. Continuing Appropriations – are the
guidelines in monitoring, accounting and reporting authorizations to support obligations for a specific
of the budget in the financial statements. This also purpose or project, such as multi-year construction
prescribes the records to be projects which require the incurrence of obligations
even beyond the budget year.
maintained by the national government agencies,
forms to be used and reports to be prepared to g. Disbursements – are the actual amounts spent
effectively monitor the budget as well as the or paid out of the budgeted amounts.
required information disclosure and presentation of
budget information in the financial statements in h. Final Budget – is the original budget adjusted for
accordance 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
authorizations for incurring obligations during a
this Manual, the terms stated below shall be
specified budget year, as listed in the GAA.
construed to mean as follows:
j. Obligation – is an act of a duly authorized official 3. General Allotment Release Order (GARO) – is a
which binds the government to the immediate or comprehensive authority issued to all national
eventual payment of a sum of money. Obligation government agencies, in general, to incur
maybe referred to as a commitment that obligations not exceeding an authorized amount
encompasses possible future liabilities based on during a specified period for the purpose indicated
current contractual agreement. therein. It covers automatically appropriated
expenditures common to most, if not all, agencies
k. Original Budget – is the initial approved budget without need of special clearance or approval from
for the budget period usually the General competent authority, i.e. Retirement and Life
Appropriations Act (GAA). The original budget may Insurance Premium.
include residual appropriated amounts
automatically carried over from prior years by law
such as prior year commitments or possible future
liabilities based on a current contractual b. Disbursement Authority – the following
agreement. documents authorize the entity to pay obligations
and payables:
l. Revenues – are increases in economic benefits
or service potential during the accounting period in 1. Notice of Cash Allocation (NCA) – authority
the form of inflows or increases of assets or issued by the DBM to central, regional and
decreases of liabilities that result in increases in net provincial offices and operating units to cover the
assets/equity, other than those relating to cash requirements of the agencies;
contributions from owners.
2. Non-Cash Availment Authority (NCAA) –
m. Supplemental Appropriations – are additional authority issued by the DBM to agencies to cover
appropriations authorized by law to augment the the liquidation of their actual obligations incurred
original appropriations which proved to be against available allotments for availment of
insufficient for their intended purpose due to proceeds from loans/grants through supplier’s
economic, political or social conditions supported credit/constructive cash;
by a Certification of Availability of Funds (CAF)
3. Cash Disbursement Ceiling (CDC) – authority
from the BTr.
issued by DBM to the Department of Foreign Affairs
_______________________________ (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:

a. Obligational Authority or Allotment – the following

are the documents which authorize the entity to utilize their income collected/retained by their
incur obligations: Foreign Service Posts (FSPs) to cover their
operating requirements, but not to exceed the
1. General Appropriations Act Release Document
released allotment to the said post; and
(GAARD) – serves as the obligational authority for
the comprehensive release of budgetary items 4. Notice of Transfer of Allocation – authority issued
appropriated in the GAA, categorized as For by the Central Office to its regional and operating
Comprehensive Release (FCR). units to cover the latter’s cash requirements.
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.
_______________________________

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.

_______________________________
RAPAL shall be maintained by fund cluster and by
Major Final Output (MFO)/PAP/Appropriation Acts.
Sec. 5. Monitoring of the Budget. The budget
shall 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, obligations incurred against
Sec. 8. Registry of Appropriations and the corresponding allotment and the actual
Allotments. The Registry of Appropriations and disbursements made. The balance is extracted
Allotments (RAPAL) (Appendix 8) shall be every time an entry is made to prevent incurrence
maintained by NGAs to monitor appropriations and of obligations in excess of allotment and overdraft
allotments charged thereto. It shall show the in disbursements against obligations incurred. The
original, supplemental and final budget for the year RAODs shall be maintained by appropriation act,
and all allotments received charged against the fund cluster, MFO/PAP, and allotment class.
corresponding appropriation. The balance is
a. Registry of Allotments, Obligations and
extracted every time an entry is made to prevent
Disbursements-Personnel Services (RAOD-PS)
incurrence of overdraft in appropriations. Separate
(Appendix 9A) shall be used to record the negative entry (if reduction is necessary) in the
allotments received, obligations incurred and ‘Obligation’ column of the ORS and RAOD.
disbursements 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
used to record the allotments received, obligations
Status Adjustment. The NORSA shall be
incurred and disbursements classified under
prepared by the Accounting Division/Unit after the
MOOE.
processing of the claim which shall be used in
c. Registry of Allotments, Obligations and adjusting the original amount obligated to the
Disbursements-Financial Expenses (RAOD-FE) actual obligations incurred in the RAOD. It shall be
(Appendix 9C) shall be used to record the forwarded by the Accounting Division/Unit to the
allotments received, obligations incurred and Budget Division/Unit to take up the adjustments of
disbursements classified under FE. obligation in the RAOD. The following transactions
shall also need adjustments of obligations:
d. Registry of Allotments, Obligations and
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 adjustment shall be effected through a positive
entry (if additional obligation is necessary) or a
Sec. 15. Procedures in Recording Obligation.
Obligation shall be recorded in the appropriate
RAOD through ORS with the following procedures:
 the authorized appropriations and adjustments,
total allotments received including transfers, total
obligations, total disbursements and the balances
of unreleased appropriations, unobligated
allotments, and unpaid obligations of a
department/office/entity by source and by allotment
class. It shall be presented by:

1. Fund Authorization;
2. Major Final Output;
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,

Sec. 31. Preparation of the Budget Reports. The Disbursements and Balances by Object of
following budget reports/documents as required by Expenditures – FAR No. 2.A (Appendix 21). This
DBM and COA shall be submitted: report shall reflect the details of the approved
budget, utilizations, disbursements and balance of
a. Quarterly Physical Report of Operation (QPRO)
the entity’s income authorized by law to use
– Budget Accountability Report (BAR) No. 1
presented by object of expenditures consistent with
(Appendix 16). This report shall reflect the
Department’s/Agency’s actual physical the COA Revised Chart of Accounts and shall be
accomplishments as at a given quarter, in terms of prepared by Funding Source Code as clustered.
the performance measures indicated in its Physical
g. Aging of Due and Demandable Obligations –
Plan.
FAR No. 3 (Appendix 22). This report shall be
b. Statement of Appropriations, Allotments, prepared by FSC as clustered and shall reflect the
Obligations, Disbursements and Balances – balance of unpaid obligations as indicated in the
Financial Accountability Report (FAR) No. 1 Obligation Request (ObR) and the ADDOs as at
(SAAODB) (Appendix 17). This report shall reflect yearend.
h. Monthly Report of Disbursements – FAR No. 4 RESPONSIBILITY ACCOUNTING
(Appendix 23). The report shall reflect the total
disbursements made by department, office or entity
and operating unit from the following disbursement
Sec. 1. Scope. This Chapter covers the definition
authorities:
of terms, objectives, concepts, presentation of
1. Notice of Cash Allocation; costs and revenue in the financial statements, and
2. NCA for Working Fund issued to BTr as an the responsibility center code structure.
advance funding from loan/grant
_______________________________________
a. proceeds in favor of an entity;
3. Tax Remittance Advice issued; Sec. 2. Definition of Terms. For the purpose of
4. CDC issued by departments with foreign- this Manual, the terms used in this chapter shall be
based agencies or units; construed to mean as follows:
5. Non-Cash Availment Authority; and
6. Others, e.g. Customs, Duties and Taxes a. Responsibility Accounting – provides access to
(CDT), BTr Documentary Stamps. cost and revenue information under the supervision
of a manager having a direct responsibility for its
The report shall track the actual disbursement of performance. It is a system that measures the
the departments/agencies against their plans (by budgets) and actions (by actual results)
Disbursement Program. The reasons for over or of each responsibility center.
under spending shall be indicated.
b. Responsibility Center – is a part, segment, unit
i. Quarterly Report of Revenue and Other Receipts or function of a government agency, headed by a
– FAR No. 5 (Appendix 24). This report shall reflect manager, who is accountable for a specified set of
the actual revenue and other receipts/collections activities. Except for some, which derive most of
from all sources remitted with the BTr and their income from collection of taxes and fees,
deposited in other AGDB for the current year NGAs are basically cost centers which primary
presented by quarter, and by specific sources purpose is to render service to the public at the
consistent with the COA Revised Chart of
Accounts. 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 Sec. 3. Objectives of Responsibility
shall observe the following timelines in submitting Accounting. Responsibility accounting aims to:
the required FARs to COA-GAS and DBM:
a) ensure that all costs and revenues are properly
a. Within thirty (30) days after the end of each charged/credited to the correct responsibility center
quarter – so that deviations from the budget can be readily
attributed to managers accountable therefor;
5. SAAODB – FAR No. 1
6. SAAODBOE – FAR No. 1.A b) provide a basis for making decisions for future
7. List of Allotments/Sub-Allotments - operations; and
FAR No. 1.B
8. SABUDB – FAR No. 2 c) facilitate review activities, monitoring the
9. SABUDBOE – FAR No. 2.A performance of each responsibility center and
10. QRROR – FAR No. 5 evaluation of the effectiveness of agency’s
operations.
b. On or before 30th day following the end of the
year – ADDO – FAR No. 3 _______________________________________

c. On or before 30th day of the following month Sec. 4. Concepts of Responsibility Accounting.
covered – MRD – FAR No. 4 The following are the concepts of responsibility
accounting:
d. On or before February 14 of the following
calendar year – Consolidated Statement of a. Responsibility accounting involves accumulating
Allotments, Obligations, and Balances per and reporting data on revenues and costs on the
Summary of Appropriations under FCR under GAA, basis of the manager’s action who has authority to
GARO, and SARO. make the day-to-day decisions about the items;

_______________________________________ b. Evaluation of a manager’s performance is based

on the matters directly under hiscontrol;
Chapter 4
c. Responsibility accounting can be used at every Responsibility reports usually compare actual costs
level of management in which the following with flexible budget data. The reports show only
conditions exist: controllable costs and no distinction is made between
variable and fixed costs.
1. Cost and revenues can be directly
associated with the specific level of management f. Evaluation of a manager’s performance for cost
responsibility; centers is based on his ability to meet budgeted goals
for controllable costs.
2. Costs and revenues are controllable at
the level of responsibility with which they are _______________________________________
associated; and
Sec. 5. Presentation of Revenue in the Financial
3. Budget data can be developed for Statements. An agency shall present, in the notes of
evaluating the manager’s effectiveness in the SFPer the total revenue, classified by MFO/PAP
controlling the costs and revenues. and by major classification of the nature of revenue
attributed to the major offices/organizational unit of
d. The reporting of costs and revenues under the agency.
responsibility accounting differs from budgeting in two
respects: _______________________________________

1. A distinction is made between controllable Sec. 6. Presentation of Costs in the Financial

and non-controllable costs. Statements. An agency shall present, in the notes of
the SFPer, an analysis of expenses using a
i. A cost is considered controllable classification based on the MFO/PAP andby major
at a given level of managerial classification of the nature of revenue attributed to the
responsibility 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:

if the manager has the power to incur it within a given Chapter 5

period of time. It follows that (1) all costs are
REVENUE AND OTHER RECEIPTS
controllable by top management because of the broad
range of its activity; and (2) fewer costs are Sec. 1. Scope. This Chapter provides the standards,
controllable as one move down to lower level of policies, guidelines and procedures in accounting for
managerial responsibility because of the manager’s revenue and other receipts including those collections
decreasing authority. through authorized agent banks, remittance of
collections to the NT through AGDB and deposits with
ii. Non-controllable costs are costs
the AGDB in accordance with PPSAS 9-Revenue
incurred indirectly and allocated to
from Exchange Transactions and PPSAS 23-
a responsibility level.
Revenue from Non-exchange Transactions.
2. Performance reports either emphasize or
_______________________________________
include only items controllable by individual
manager. Sec. 2. Definition of Terms. For the purpose of this
Manual, the following terms shall be construed to
e. A responsibility reporting system involves the
mean as follows:
preparation of a report for each level of responsibility.
a. Bequest – is a transfer made according to the
provisions of a deceased person’s will. The past
event giving rise to the control of resources
embodying future economic benefits or service
potential for a bequest occurs when the entity has an
enforceable claim, for example on the death of the
testator, or the granting of probate, depending on the
laws of the jurisdiction. (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 Sec. 3. Accrual of Revenue to the General Fund.
normally the receipt of the gift or donation. (Par. 93, Unless otherwise specifically provided by law, all
PPSAS 23) revenue (income) accruing to the departments, offices
and agencies by virtue of the provisions of existing
g. Non-exchange transactions – are transactions in
laws, orders and regulations shall be deposited in the
which an entity either receives value from another
NT or in the duly authorized depository of the
entity without directly giving approximately equal
Government and shall accrue to the xxx General
value in exchange, or gives value to another entity
Fund of the Government: Provided, that amounts
without directly receiving approximately equal value in
received in trust and from business-type activities of
exchange. (Par. 11, PPSAS 9)
government may be separately recorded and
h. Pledges – are unenforceable undertakings to disbursed in accordance with such rules and
transfer assets to the recipient entity. regulations as may be determined by the Permanent
Committee. (Sec. 44, Chapter V, Book VI, E.O. No.
i. Revenue – is the gross inflow of economic benefits 292)
or service potential during the reporting period when
those inflows result in an increase in net Sec. 4. Special, Fiduciary and Trust Funds.
assets/equity, other than increases relating to Receipts shall be recorded as revenue of Special,
contributions from owners. Fiduciary or Trust Funds (TF) or Funds other than the
GF, only when authorized by law and following such
j. Services in-kind – are services provided by rules and regulations as may be issued by the
individuals to public sector agencies in a non- Permanent Committee consisting of the Secretary of
exchange transaction. Finance as Chairman, and the Secretary of the
Budget and the Chairman, Commission on Audit, as
members. The same Committee shall likewise
monitor and evaluate the activities and balances of all 2. Business Income – School Fees, Affiliation Fees,
Funds of the NG other than the GF and may Examination Fees, Seminar/Training Fees,
recommend for the consideration and approval of the Rent/Lease Income, Communication Network Fees,
President, the reversion to the GF of such amounts Transportation System Fees, Road Network Fees,
as are: Waterworks System Fees, Power Supply System
Fees, Seaport System Fees, Landing and Parking
(1) no longer necessary for the attainment of the Fees, Income from Hostels/Dormitories and Other
purposes for which said Funds were established, Like Facilities, Slaughterhouse Operation, Income
from Printing and Publication, Sales Revenue,
(2) needed by the GF in times of emergency, or (3)
Hospital Fees, Share in the Profit of Joint Venture and
violative of the rules and regulations adopted by the
Other Business Income.
Committee: provided, that the conditions originally
agreed upon at the time the funds were received shall b. Use by other entity of assets yielding interest,
be observed in case of gifts or donations or other royalties and dividends or similar distributions.
payments made by private parties for specific Examples are:
purposes. (Sec. 45, Chapter V, Book VI, EO 292).
1. Interest income – charges for the use of cash or
Sec. 5. Sources of Revenue and Other Receipts. cash equivalents, or amounts due to the entity;
Revenues received by NGAs may arise from
exchange and non-exchange transactions. 2. Royalties – fees paid for the use of entity’s assets
such as trademarks, patents, software, and
In a transaction where the entity may provide some copyrights; and
consideration directly in return for the resources
received, but that consideration does not approximate 3. Dividends – share of the National Government from
the fair value of the resources received, the entity the earnings of its capital/equity investments in
determines whether there is a combination of Government-Owned or Controlled Corporations
exchange and non-exchange transactions. Each (GOCCs) and other entities.
component of which is recognized separately. (Par.
10, PPSAS 23) Sec. 7. Recognition and Measurement of Revenue
from Exchange Transactions. Revenue from
There are transactions where it is not immediately exchange transaction shall be measured at fair value
clear whether they are an exchange or a non- of the consideration received or receivable.
exchange transaction. In these cases, an examination
of the substance of the transaction will determine if a. Revenue shall be recognized when it is probable
they are on exchange or non-exchange transactions. that future economic benefits or service potential will
For example, the sale of goods is normally classified flow to the entity and these benefits can be measured
as an exchange transaction. If, however, the reliably.
transaction is conducted at a subsidized price, that is,
1. Revenue from the sale of goods shall be
a price that is not approximately equal to the fair
recognized when all the following conditions have
value of the goods sold, that transaction falls within
been satisfied:
the definition of a non-exchange transaction.
i. The entity has transferred to the purchaser the
Agencies may receive trade discounts, quantity
significant risks and rewards of ownership of the
discounts, or other reductions in the quoted price of
goods; (Par. 28, PPSAS 9)
assets for a variety of reasons. These reductions in
price do not necessarily mean that the transaction is a ii. The entity retains neither continuing managerial
non-exchange transaction. (Par. 11, PPSAS 23) involvement to the degree usually associated with
ownership nor effective control over the goods sold;
Sec. 6. Revenue from Exchange Transactions.
Revenues received by the NGAs from exchange iii. The amount of revenue can be measured
transactions are derived from the following: reliably;
a. Sale of goods or provisions of services to third iv. It is probable that the economic benefits or
parties or to other NGAs. Examples are: service potential associated with the transaction will
flow to the entity; and
1. Service Income – Permit Fees, Registration Fees,
Registration Plates, Tags and v. The costs incurred or to be incurred in respect
of the transaction can be measured reliably.
Stickers Fee, Clearance and Certification Fees,
Franchising Fees, Licensing Fees, Supervision and 2. Revenue from the supply of services shall be
Regulation Enforcement Fees, Spectrum Usage recognized on a straight line basis over the specified
Fees, Legal Fees, Inspection Fees, Verification and period of the services unless an alternative method
Authentication Fees, Passport and Visa Fees, better
Processing Fees and Other Service Income; and
represents the stage of completion of the transaction.
When the outcome of a transaction involving the discounts of 10%, 10% and 5%. The invoice price of
rendering of services can be estimated reliably, the merchandise is computed as follows:
revenue associated with the transaction shall be
recognized by reference to the stage of completion of
the transaction at the reporting date. The outcome of
a transaction can be estimated reliably when all the
following conditions are satisfied:

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
iv. The costs incurred for the transaction and the or receivable is deferred, the fair value of the
costs to complete the transaction can be measured consideration may be less than the nominal amount
reliably. (Par. 19, PPSAS 9) of cash received or receivable. The fair value of the
consideration is determined by discounting all future
For practical purposes, when services are performed receipts using an imputed rate of interest. The
by an indeterminate number of acts over a specified difference between the fair value and the nominal
time frame, revenue is recognized on a straight line amount of the consideration is recognized as interest
basis over the specified time frame unless there is revenue. (Par. 16, IPSAS 9)
evidence that some other method better represents
the stage of completion. (Par. 24, PPSAS 9) Example: Assume that on August 5, 2015, Entity A
received a 60-day, 9%, P12,000 promissory note from
When the outcome of the transaction involving the X entity for accounting manuals sold. On October 4,
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; and the amount of the revenue can be
measured reliably. (Pars. 33 and 34, PPSAS 9)
2015, Entity X paid cash in settlement of its note.
i. Interest shall be recognized on a time proportion
basis that takes into account the effective yield on the Sec. 8. Exchanges of Goods or Services for
asset; Similar/Dissimilar Good or Services. When goods
or services are exchanged or swapped for goods or
ii. Royalties shall be recognized as they are earned in services which are of a similar nature and value, the
accordance with the substance of the relevant exchange is not regarded as a transaction which
agreement; and generates revenue. However, when goods are sold or
iii. Dividends or similar distributions shall be services are rendered in exchange for dissimilar
recognized when the shareholder’s or the entity’s goods or services, the exchange is regarded as a
right to receive payment is established. transaction which generates revenue. The revenue is
measured at the fair value of the goods or services
b. Revenue shall be measured at the fair value of the received, adjusted by the amount of any cash or cash
consideration received or receivable. Any amount of equivalents transferred. When the fair value of the
trade discounts and volume rebates allowed by the goods or services received cannot be measured
entity shall be taken into account. (Par. 14-15, IPSAS reliably, the revenue is measured at the fair value of
9) the goods given up, adjusted by the amount of any
cash or cash equivalents transferred. (Par. 17,
Example: Entity A is authorized to print accounting PPSAS 9)
manuals for sale to other NGAs. Assume that on July
16, 2014, Entity A sold accounting manuals on Sec. 9. Impairment Losses and Allowance for
account with a list price of P100,000 less trade Impairment Losses. When an uncertainty arises
about the collectibility of an amount already included d. Revenue from non-exchange transactions may
in revenue, the uncollectible amount, or the amount in also arise when, in respect of an inflow of resources
respect of which recovery has ceased to be probable, from a non-exchange transaction, the entity satisfies
is recognized as an expense (impairment losses), a present obligation recognized as a liability which
rather than as an adjustment of the amount of may be as follows:
revenue 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 2. Deferred Credits – Deferred Finance Lease
bad debts, customer/recipient credit-worthiness, Revenue and Other Deferred Credits
current economic trends and changes in payment 3. Unearned Revenue – Investment Property and
activity. An allowance is provided for known and Other Unearned Revenue
estimated bad debts.

Sec. 10. Disclosure. An entity shall disclose: Sec. 12. Recognition of Revenue from Non-
Exchange Transactions. The cash basis of
a. The accounting policies adopted for the recognition accounting shall be applied by all government
of revenue, including the methods adopted to agencies in the recognition of revenue from non-
determine the stage of completion of transactions exchange transaction until a reliable model of
involving the rendering of services; measurement of this revenue is developed.Therefore,
asset and the corresponding revenue or liability that
b. The amount of each significant category of revenue
arises from non-exchange transaction shall be
recognized during the period, including revenue
recognized when collected or when these are
arising from:
measurable and legally collectible.
1. Rendering of services;
a. Taxation revenue shall be determined at a gross
2. Sale of goods;
amount. It shall not be reduced for expenses paid
3. Interest;
through the tax system.
4. Royalties;
5. Dividends or similar distributions; and b. Gifts and donations, other than services in kind
6. Amount of revenue arising from exchanges of shall be recognized as assets and revenue when it is
goods or services included in each significant probable that the future economic benefits or service
category of revenue. potential will flow to the entity and shall be measured
at fair value.
Sec. 11. Revenue from Non-Exchange
Transactions. Revenue of the NGAs from c. Goods in-kind received without conditions shall be
nonexchange transactions are derived mostly from recognized as revenue immediately.
taxes, gifts and donations, goods in kind and fines
and penalties. Most NGAs derive revenues from d. Donation in cash or in kind shall be recognized as
transactions where they receive resources and revenue.
provide no or nominal consideration directly in return.
These are as follows:

a. Tax Revenue
1. Tax Revenue-Individual and Corporation
2. Tax Revenue-Property
3. Tax Revenue-Goods and Services
4. Tax Revenue-Others
Sec. 13. Measurement of Revenue from Non-
Exchange Transactions. Revenue from non-
b. Fines and Penalties
exchange transactions shall be measured at the
1. Tax Revenue
amount of the increase in net assets recognized by
2. Service Income
the entity, unless it is also required to recognize a
3. Business Income
liability. Where a liability is recognized and
subsequently reduced, because the taxable event
c. Shares, Grants and Donations
occurs, or a condition is satisfied, the amount of the
1. Share from National Wealth
reduction in the liability will be recognized as revenue.
2. Share from Philippine Amusement and Gaming
(Pars. 48 and 49, PPSAS 23)
Corporation (PAGCOR)/ Philippine Charity
Sweepstakes Office (PCSO) Sec. 14. Measurement of Assets on Initial
3. Share from Earnings of GOCCs Recognition from Non-ExchangeTransactions. An
4. Income from Grants and Donations in Cash asset acquired through a non-exchange transaction
5. Income from Grants and Donations in Kind shall initially be measured at its fair value as at the
date of acquisition. (Par. 42, PPSAS 33)
Sec. 15. Measurement of Liabilities on Initial Sec. 20. Taxation Revenue Shall Not Be Grossed
Recognition. Where the time value of money is Up For the Amount of Tax Expenditures. Tax
material, the liability will be measured at the present expenditures are preferential provisions of the tax law
value of the amount expected to be required to settle that provide certain taxpayers with concessions that
the obligation. (Par. 58, PPSAS 23) are not available to others. Tax expenditures are
foregone revenue, not expenses, and do not give rise
Sec. 16. Tax Revenue. Taxes are economic benefits to inflows or outflows of resources that is, they do not
or service potential compulsory paid or payable to give rise to assets, liabilities, revenue, or expenses of
public sector agencies, in accordance with laws and the government. (Pars. 73 and 74, IPSAS 23)
or regulations, established to provide revenue to the
government. Taxes do not include fines or other Examples are the tax expenditure fund, which is a
penalties imposed for breaches of the law. Unless subsidy released by the DBM to government-owned
otherwise specified in laws and regulations, the or controlled corporations and government financial
taxable event for: institutions to settle

a. Income tax is the earning of assessable income customs duties and other taxes arising from the
during the taxation period by the taxpayer; importation of goods; and benefits granted to
taxpayers like the tax credits.
b. Value added tax is the undertaking of taxable
activity during the taxation period by the taxpayer; Sec. 21. Recognition of Asset through Transfers.
An entity shall recognize an asset in respect of
c. Goods and services tax is the purchase or sale of transfers when the transferred resources meet the
taxable goods and services during the taxation definition of an asset and satisfy the criteria for
period; recognition as an asset. (Par. 76, PPSAS 23)
d. Customs duty is the movement of dutiable goods or a. Transfers meet the definition of an asset when the
services across the customs boundary; entity controls the resources as a result of a past
event (the transfer), and expects to receive future
e. Death duty is the death of a person owning taxable
economic benefits or service potential from those
property; and
resources. Transfers satisfy the criteria for recognition
f. Property tax is the passing of the date on which the as an asset when it is probable that the inflow of
tax is levied, or the period for which the tax is levied, if resources will occur, and their fair value can be
the tax is levied on a periodic basis. reliably measured. In certain circumstances, such as
when a creditor forgives a liability, a decrease in the
Sec. 17. Illustrative Accounting Entries. Refer to carrying amount of a previously recognized liability
Annexes H to N for illustrative accounting entries. may arise. In these cases, instead of recognizing an
asset as a result of the transfer, the entity decreases
Sec. 18. Transfer of Internal Revenue Allotment.
the carrying amount of the liability. (Par. 78, PPSAS
Where an NG imposes a tax, the entire proceeds of
23)
which is collected by NGAs and transferred to LGUs
through an appropriation, the NGAs recognize assets b. Transfers include grants, debt forgiveness, fines,
and revenue for the tax, and a decrease in assets and bequests, gifts, donations and goods and services in-
an expense for the transfer to LGUs. The LGUs will kind. All of these transactions transfer resources
recognize the assets and revenue for the transfer. without approximate equal value in exchange and are
The following is the accounting entry at the books of not taxes but some are with conditions.
accounts of the DBM:
c. Transfers are established by a binding arrangement
that includes conditions, such as inter-entity and intra-
entity fund transfers:
Sec. 19. Expenses Paid Through the Tax System
and Tax Expenditures. Taxation revenue shall be 1. From an NGA to another NGA;
determined at gross amount. It shall not be reduced 2. From the NGA’s Central Office to its
for expenses paid through the tax system. Expenses Regional/Bureau Offices and Operating/Field Units;
of the government paid through the tax system or as 3. From an NGA to an LGU and vice-versa;
reduction from tax revenue received should not be 4. From an NGA to a GOCC and vice-versa;
offset or deducted from that tax revenue. Therefore, 5. From an entity that is created by law or regulation
taxation revenue shall be recognized at the gross to perform specific functions with operational
amount and the expenses deducted shall be autonomy; and 6. From donor entity to NGAs.
recognized and shall form part of the statement of
financial performance. Expenses paid through the tax d. An entity shall recognize an asset in respect of
system are those expenses which should be paid transfers when the transferred resources meet the
irrespective of whether the taxpayer pay taxes, or use definition of an asset and satisfy the criteria for
a particular mechanism to pay taxes. (Par. 71, recognition as an asset.
PPSAS 23)
e. An entity obtains control of transferred resources c. Assets arising from fines are measured at the best
either when the resources have been transferred to estimate of the inflow of resources to the entity. (Par.
the entity, or the entity has an enforceable claim 89, PPSAS 23)
against the transferor. Many arrangements to transfer
resources become binding on all parties before the Sec. 25. Recognition and Measurement of
transfer of resources takes place. (Par. 79, PPSAS Bequests
23)
a. Bequests which satisfy the definition of an asset
f. Transfers of resources that satisfy the definition of are recognized as assets and revenue when it is
contributions from owners will not give rise to probable that the future economic benefits or service
revenue. Agreements that specify that the entity potential will flow to the entity and the fair value of the
providing resources (a) is entitled to distributions of assets can be measured reliably. Determining the
future economic benefits or service potential during probability of an inflow of future economic benefits or
the recipient entity’s life, or distribution of any excess service potential may be problematic if a period of
of assets over liabilities in the event that the recipient time elapses between the death of the testator and
entity is wound up, or (b) acquires a financial interest the entity receiving any asset. The entity will need to
in the determine if the deceased person’s estate is sufficient
to meet all claims on it, and satisfy all bequests. If the
recipient entity that can be sold, exchanged, will is disputed, this will also affect the probability of
transferred or redeemed, are, in substance, assets flowing to the entity. (Par. 91, PPSAS 23)
agreements to make a contribution from owners. (Par.
80, PPSAS 23) b. The fair value of bequeathed assets is determined
in the same manner as for gifts and donations. Where
Sec. 22. Measurement of Transferred Assets. deceased estates are subject to taxation, the tax
Transferred assets are measured at their fair value as authority may already have determined the fair value
at the date of acquisition. (Par. 83, PPSAS 23) of the asset bequeathed to the entity, and this amount
may be available to the entity. Bequests are
Sec. 23. Debt Forgiveness and Assumption of measured at the fair value of the resources received
Liabilities or receivable. (Par. 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 loan owed by an LGU. In such circumstance, the a. Gifts and donations (other than services in-kind)
LGU concerned recognizes an increase in net assets are recognized as assets and revenue when it is
because a liability it previously recognized is probable that the future economic benefits or service
extinguished. (Par. 84, PPSAS 23) potential will flow to the entity and the fair value of the
assets can be measured reliably. With gifts and
b. Entities recognize revenue in respect of debt donations, the making of the gift or donation and the
forgiveness when the former debt no longer meets transfer of legal title are often simultaneous, in such
the definition of a liability or satisfies the criteria for circumstances, there is no doubt as to the future
recognition as a liability, provided that the debt economic benefits flowing to the entity. (Par. 95,
forgiveness does not satisfy the definition of a PPSAS 23)
contribution from owners. (Par. 85, PPSAS 23)

c. Where a controlling entity forgives debt owed by a

wholly owned controlled entity,or assumes its
liabilities, the transaction may be a contribution from
owners. (Par. 86, PPSAS 23)

d. Revenue arising from debt forgiveness is

measured at the carrying amount of the debt forgiven.
(Par. 87, PPSAS 23)

Sec. 24. Recognition and Measurement of Fines

a. Fines are recognized as revenue when the

receivable meets the definition of an asset and
satisfies the criteria for recognition as an asset. (Par.
89, PPSAS 23)

b. Where an entity collects fines in the capacity of an

agent, the fine will not be recognized as revenue of
the collecting entity. (Par. 89, PPSAS 23)
b. Goods in-kind are tangible assets transferred to an
entity in a non-exchange transaction, without charge,
but may be subject to stipulations. External
assistance provided by multilateral or bilateral
development organizations often includes a
component of goods in-kind. (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 implementing entity. The transactions shall be recognized as
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 follows:
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. Sec. 28. Recognition and Measurement of
As an entity satisfies a present obligation recognized Services In-kind. These services meet the
as a liability in respect of an inflow of resources from definition of an asset because the entity controls a
a non-exchange transaction recognized as an asset, resource from which future economic benefits or
it shall reduce the carrying amount of the liability service potential is expected to flow to the entity.
recognized and recognize an amount of revenue These assets are, however, immediately consumed
equal to that reduction. and a transaction of equal value is also recognized
Example: The NG received a foreign grant amounting to P10 to reflect the consumption of these services in-kind.
million for the construction of a railroad system. Under the (Par. 98, PPSAS 23)
terms of the grant, the construction project shall be
completed within a period of two years from the receipt of a. Public sector entities may be recipients of
the grant, otherwise, the money shall be returned to the services in-kind under voluntary or involuntary
grantor. The money can only be used as stipulated and the schemes operated in the public interest. For
NG is required to include a note in the financial statement example:
detailing how the money was spent. The Department of
Public Works and Highways (DPWH) will be the 1. Technical assistance from other governments or
international organizations;

2. Persons convicted of offenses may be required

to perform community service for public sector
entity;

3. Public hospitals may receive the services of

volunteers; and

4. Public schools may receive voluntary services

from parents as teachers’ aides or as board
members. (Par.100, PPSAS 23)
b. Due to the many uncertainties surrounding and payment is refused or cannot be obtained; or
services in-kind, including the ability to exercise (b) presentment is excused and the check is
control over the services, and measuring the fair overdue and unpaid (Sec. 83, RA No. 2031,
value of the services, the entity is not required to Negotiable Instruments Law). Dishonor by
recognize services in-kind as revenue and as an nonacceptance happens when (a) the check is duly
asset but is encouraged to disclose the nature and presented for acceptance, and such an
type of services in-kind received during the acceptanceas is prescribed by law is refused or
reporting period. (Par.102, PPSAS 23) cannot be obtained; or (b) presentment for
acceptance is excused and the check is not
Sec. 29. Recognition and Disclosure of accepted (Sec. 149, RA No. 2031, Negotiable
Pledges. Pledges do not meet the definition of an Instruments Law). A dishonored check may also be
asset because the recipient entity is unable to defined as a check paid to the agency that was
control the access of the transferor to the future dishonored by the AGDB due to “Drawn Against
economic benefits or service potential embodied in Insufficient Fund (DAIF)” or “Drawn Against
the item pledged. Agencies do not recognize Uncleared Deposits (DAUD).”
pledged items as assets or revenue. If the pledged
item is subsequently transferred to the recipient When a check drawn in favor of the government is
entity, it is recognized as a gift or donation. Pledges not accepted by the drawee for any reason, the
may warrant disclosure as contingent assets. (Par. drawer shall continue to be liable for the sum due
104, PPSAS 23) and all penalties resulting from delayed payments.
Where the reason for non-acceptance by the
Sec. 30. Advance Receipts of Revenue. When an drawee bank is insufficiency of funds, the drawer
entity receives resources before a transfer shall be criminally liable therefor.
arrangement becomes binding, the resources are
recognized as an asset when they meet the Responsibility over dishonored checks:
definition and satisfy the criteria for recognition as
an asset and recognized as a liability until the a. When a check is dishonored by non-payment or
event that makes the transfer arrangement binding non-acceptance, the Collecting Officer should issue
occurs, and all other conditions under the a Notice of Dishonored Checks (NDC) (Appendix
agreement are fulfilled. When that event occurs 25) to the drawer and to each endorser, and any
and all other conditions under the agreement are drawer or endorser to whom such notice is not
fulfilled, the liability is discharged and revenue is given is discharged from liability. The NDC shall be
recognized. (Par.105, PPSAS 23) furnished to the Agency Head, Accountant, Auditor
and a copy thereof retained by the Collecting
Sec. 31. Recognition and Measurement of Officer. The Collecting Officer shall cancel the OR
Concessionary Loans covering the dishonored check. If necessary, the
head of the agency shall promptly institute the
a. The portion of the loan that is repayable, along corresponding action for the collection of the
with any interest payments, is an exchange amount involved.
transaction and is accounted for in accordance with
PPSAS 29, Financial Instruments: Recognition and b. The Collecting Officer neglecting or failing to give
Measurement, Chapter 7 of this Manual. the required NDC to the drawer (or to the endorser-
payor of the government check), who, as a result
b. An entity considers whether any difference thereof, is discharged from liability, shall be
between the transaction price (loan proceeds) and personally answerable for the resulting loss
the fair value of the loan on initial recognition is suffered by the government.
non-exchange transaction. When an entity
determines that the difference between the c. The making, drawing and issuance of a check
transaction price (loan proceeds) and the fair value payment of which is refused by the drawee
of the loan on initial recognition is nonexchange because of insufficient funds in or credit with such
revenue, an entity recognizes the difference as bank, when presented within ninety (90) days from
revenue, except if a present obligation exists, e.g., the date of the check, shall be prima facie evidence
where specific conditions imposed on the of knowledge of such insufficiency of funds or credit
transferred assets by the recipient result in a unless such maker or drawer pays the holder
present obligation. Where a present obligation thereof the amount due thereon, or makes
exists, it is recognized as a liability. As the entity arrangements for payment in full by the drawee of
satisfies the present obligation, the liability is such check within five (5) banking days after
reduced and an equal amount of revenue is receiving notice that
recognized. (Par. 105A and B, PPSAS 23)
such check has not been paid by the drawee.
Sec. 32. Dishonored Checks. A check is
dishonored either by non-payment or non- d. A dishonored check shall be settled by tendering
acceptance. Dishonor by non-payment occurs payment in cash or by certified check to the
when (a) the check is duly presented for payment
Collecting Officer concerned. No other mode of the Auditor that cannot be satisfactorily explained
payment shall be accepted. by the Collecting Officer shall be forfeited in favor
of the government and an official receipt shall be
e. Upon settlement of the dishonored check in the issued by the Collecting Officer/Cashier. The cash
manner herein prescribed, the Collecting Officer overage shall be taken up as Miscellaneous
shall not return the check to the payor concerned Income.
unless the latter first surrenders the previous OR
therefor. If the previous receipt is no longer Cash shortage which is not restituted by the
available, sworn statement to the effect that it has Collecting Officer despite demand in writing by the
been lost or misplaced should be submitted by the Auditor shall be taken up as receivable from 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
Sec. 35. Accounting for Cash Overage/Shortage on transferred assets;
of Collecting Officer. Cash overage discovered by
5. The amount of assets recognized that are a. Receipt of NCA. The NCA specifies the
subject to restrictions and the nature ofthose maximum amount of withdrawal that an entity can
restrictions; make from a government bank for the period
indicated. The Collecting Officer shall not issue an
6. The existence and amounts of any advance OR for the receipt of NCA. The accounting entries
receipts in respect of non-exchange transactions; to recognize receipt of NCA are as follows:
and

7. The amount of any liabilities forgiven.

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

1. The accounting policies adopted for the

recognition of revenue from nonexchange
transactions;

2. For major classes of revenue from non- follows:

exchange transactions, the basis on which the fair
value of inflowing resources was measured;

3. For major classes of taxation revenue that the c. Cash Disbursement Ceiling. The accounting
entity cannot measure reliably during the period in entries for the collection of revenue of, and the
which the taxable event occurs, information about constructive receipt of disbursement authority to,
the nature of the tax; and Foreign Service Posts (FSPs) of DFA and DOLE

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:

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 Officer shall issue OR upon receipt of cash
duties remitted. subsidy/assistance.

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

e. Receipt of Subsidy/Assistance from other NGAs, refunds from officers, employees and
LGUs, GOCCs and Other Funds. The Collecting suppliers/creditors resulting from overpayment of
expenses
 Sec. 39. Reporting of Collections and Deposits.
Receipts and deposits shall be reported as follows:
a. At the close of the business day, the Collecting
Officers shall prepare the Report of Collections
and Deposits (RCD) (Appendix 26) for submission
to Accounting Office/Unit. The report lists all the
ORs 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
i. Collections made on behalf of another entity or Division/Unit shall recognize the collections and
non-government/private organizations. Receipts of deposits based on the generated reports duly
income, receivables or trust funds for the account 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 documents, duplicate copies of
ORs and Deposit Slip (DSs) shall be submitted
within five (5) days after the end of each month to
the concerned mother unit (central/regional/division
of other NGAs, LGUs, GOCCs or non- office) by the FOs (a unit under the central/regional/
government/private organizations. These division office) for review and recording of the
collections are later remitted to the government transactions in the CRJ by the Chief Accountant.
agencies or non-government/private organizations
concerned.
1. NGAs (other than University of the Philippines- Sec. 42. Submission of the Quarterly Report of
Legal Research Fund (UP-LRF)) Books Revenue and Other Receipts. The Chief
j. Intra-agency and inter-agency fund transfers. Accountant shall prepare the Quarterly Report of
Cash received from central office/regional Revenue and Other Receipts (QRROR) (Appendix
office/operating units of an entity and from another 24) and submit the report to the GAS, COA, the
entity for the purpose of implementing specific DBM and the BTr within 30 days after the end of
projects. 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.