provided they do not contravene

existing laws and regulations.

FUNDAMENTAL PRINCIPLES FOR
DISBURSEMENT OF PUBLIC FUNDS BASIC REQUIREMENTS FOR
DISBURSEMENTS AND THE REQUIRED
No. 1445, the Government Auditing Code CERTIFICATIONS
of the Philippines, provides that all
Disbursements of government funds shall
financial transactions and operations of
comply with the following basic
any government entity shall be governed
requirements and certifications:
by the following fundamental principles:
a. Availability of allotment/budget for
1. No money shall be paid out of the
obligation/utilization certified by the
public treasury or depository except in
Budget Officer/Head of Budget Unit;
pursuance of an appropriation law or
other specific statutory authority; b. Obligations/Utilizations properly
charged against available
2. Government funds or property shall be
allotment/budget by the Chief
spent or used solely for public
Accountant/Head of Accounting Unit;
purposes;
c. Availability of funds certified by the
3. Trust funds shall be available and may
Chief Accountant.
be spent only for the specific purpose
for which the trust was created; d. Availability of cash certified by the
Chief Accountant.
4. Fiscal responsibility shall, to the
greatest extent, be shared by all e. Legality of the transactions and
those exercising authority over the conformity with existing rules and
financial affairs, transactions, and regulations.
operations of the government agency; f. Submission of proper evidence to
5. Disbursements or disposition of establish validity of the claim.
government funds or property shall g. Approval of the disbursement by the
invariably bear the approval of the Head of Agency or by his duly
proper officials; authorized representative.
6. Claims against government funds shall
DISBURSEMENT AUTHORITY
be supported with complete
documentation; a. Notice of Cash Allocation (NCA)

7. All laws and regulations applicable to b. Notice of Transfer of Allocation

financial transaction shall be faithfully (NTA)
adhered to; c. Tax Remittance Advice (TRA)
8. Generally accepted principles and d. Non-Cash Availment Authority (NCAA)
practices of accounting, as well as, of
e. Cash Disbursement Ceiling (CDC)
sound management and fiscal
administration shall be observed,
 NOTICE OF CASH ALLOCATION (NCA) Special Account in the General Fund
Account Title Accoun Debit Credit
The NCA is an authority issued by the
t Code
DBM to central, regional and provincial
Cash –
offices and operating units to cover their
Modified
cash requirements. The NCA specifies the
Disbursement
maximum amount of cash that can be 101040
System
withdrawn from a government servicing 50
(MDS),
bank in a certain period. Special 300,000.
ILLUSTRATION: Account 00

Agency X of national government received Cash – 101040

Treasury/Ag 20
the following NCA from DBM for the first
ency Deposit,
quarter of the current year:
Special 300,000.
Regular Agency Fund P 500,000 Account 00
Special Account in the General Fund To recognize receipt of NCA for Special
300,000 Account in the General Fund

Trust Receipt Fund 200,000

The accounting entries to recognize Trust Receipt Fund

receipt of NCA are as follows: Account Title Accoun Debit Credit
Regular Agency Fund t Code

Account Account Debit Credit Cash –

Title Code Modified
101040
Disbursement
Cash – 60
System 200,000.
Modified
(MDS), Trust 00
Disburseme 101040
nt System 40 Cash – 101040
(MDS), 500,000. Treasury/Ag 30
Regular 00 ency Deposit, 200,000.
Trust 00
403010
Subsidy 10 To recognize receipt of NCA for Trust
from the Receipts Fund
National 500,000.
Govt. 00
NOTICE OF TRANSFER OF ALLOCATION
To recognize receipt of NCA for Regular
(NTA)
Agency Fund
The NTA is an authority issued by an
agency’s Central Office to its regional and
operating units to cover the latter’s cash
requirements.
 TAX REMITTANCE ADVICE (TRA) o Non-Cash Availment Authority
(NCAA)
The TRA is used to recognize: (1) in the
 Tax Remittance Advice (TRA)
books of national government agencies,
the constructive remittance to BIR and DISBURSEMENT BY CHECKS
BOC of taxes and customs’ duties
Checks shall be drawn only on a duly
withheld, and the constructive receipt of
approved Disbursement Voucher (DV) or
NCA for those taxes and customs duties;
Payroll. These shall be used for payment
(2) in the books of the BIR and BOC, the
of regular expenses which cannot be
constructive receipt of tax revenue and
conveniently nor practically paid using the
customs duties; and (3) in the books of the
ADA or not authorized to be paid using
BTr, the constructive receipt of the taxes
the Petty Cash Fund or advances for
and customs duties remitted.
operating expenses. Checks issued shall be
NON-CASH AVAILMENT AUTHORITY reported and recorded in the books of
(NCAA) accounts whether released or unreleased

The NCAA is the authority issued by the to the respective payees. There are two

DBM to agencies to cover the liquidation types of checks being issued by

of their actual obligations incurred against government agencies as follows:

available allotments for availment of 

proceeds from loans/grants through are checks issued by
supplier’s credit/constructive cash. government agencies chargeable
against the account of the Treasurer
CASH DISBURSEMENT CEILING (CDC)
of the Philippines, which are
The CDC is the disbursement authority maintained with different MDS-GSBs.
issued by the DBM to agencies with
foreign operations allowing them to use
 are checks issued by NGAs chargeable
the income collected by their Foreign
against the Agency Checking Account
Service Posts to cover their operating
with Government Servicing Banks
requirements.
(GSBs). These shall be covered by
MODES OF DISBURSEMENTS income/receipts authorized to be
deposited with Authorized
 Check
Government Depository Banks
 Cash (AGDBs).
 Cashless payments: Illustrative Accounting Entries for
o Advice to Debit Account (ADA) Disbursements by checks:
o Electronic Modified Disbursement Payment of the following utility bills:
System (eMDS) (P4,000)
o Cashless Purchase Card System Electric bill P 2,300
(Credit Card) PLDT bill 1,100
Water bill 600 Pag-IBIG 50103020 1,400
Contributions
Total P 4,000
PhilHealth 50103030 3,800
Account Account Debit Credit
Contributions
Title Code
Cash – 10104040 P
Water
50204010 MDS, Regular 13,700
Expenses P 600
To recognize remittance of government’s
Electricity 50204020 2,300
share based on individual checks issued to
Expenses
GSIS, HDMF and PHIC
Telephone 50205020 1,100
Remittance of salary deductions (P14,600)
Expenses

Cash – 10104040 Retirement and Life Insurance Premium

MDS, P P 8,500
Regular 4,000 Pag-IBIG Contributions
To recognize payment of bills from utility 1,400
companies based on individual checks.
PhilHealth Contributions
Grant of cash advance for travel (P3,000) 3,800
Account Title Account Debit Credit GSIS Salary Loan
Code 700
Advances to
Employee’s Association
Officers and 19901040 P
200
Employees 3,000
Total
Cash – 10104040 P
P 14,600
MDS, Regular 3,000
Account Account Debit Credit
To recognize granting of travel allowance to
Title Code
employees.
P
Remittance of Government’s Share (P Due to GSIS 20201020
9,200
13,7000)
Due to Pag- 20201030 1,400
Retirement and Life Insurance Premium
IBIG
P 8,500
Due to 20201040 3,800
Pag-IBIG Contributions PhilHealth
1,400
Other 29999990 200
PhilHealth Contributions Payables
3,800 Cash – 10104040
Account Title Account Debit Credit MDS, P
Code Regular 14,600

Retirement To recognize remittance of salary

and Life deductions based on individual checks issued to
50103010
Insurance P GSIS, PhilHealth, HDMF and Employee’s
Premium 8,500 Association.
 government agencies chargeable
against the account of the Treasurer
of the Philippines, which are
FINANCIAL ASSETS maintained with different MDS-GSBs.
• Financial instrument – is any contract
that gives rise to both a financial 2. COMMERCIAL CHECKS – are checks
asset of one entity and a financial issued by NGAs chargeable against the
liability or equity instrument of Agency Checking Account with the
another entity. (PPSAS 28.9) Government Servicing Banks (GSBs).
These shall be covered by
• Financial asset – is any asset that is: income/receipts authorized to be
a. Cash; deposited with Authorized
b. An equity instrument of another Government Depository Banks
entity; (AGDBs).
c. A contractual right to receive cash
or another financial asset from Cash disbursements constitute payments
another entity; out of cash advances granted to the
d. A contractual right to exchange regular and special disbursing officers for
financial instruments with another Personal Services, Petty Expenses and
entity under conditions that are MOOE for field operating requirements.
potentially favorable; or All cash payment shall be covered by duly
e. A contract that will or may be approved DVs/payrolls/Petty Cash
settled in the entity’s own equity Vouchers (PCVs). The cash advances may
instruments. be granted to the cashiers, disbursing
officers/officials and employees to cover
the following: salaries and wages, travel,
• A financial asset is recognized when an special time-bound undertakings and petty
entity becomes a party to the operating expenses.
contractual provisions of the
instrument. (PPSAS 29.16) The granting, utilization and liquidation
of cash advances shall be governed by
• Financial assets are initially measured following the existing rules and
at fair value plus transaction costs, regulations:
except for financial assets at fair a. No cash advance shall be given unless
value through surplus or deficit whose for legally authorized specific purpose.
transaction costs are expensed. b. A cash advance shall be reported on
• Transaction costs are incremental and liquidated as soon as the purpose
costs that are directly attributable to for which it was given has been served.
the acquisition, issue, or disposal of a c. No additional cash advance shall be
financial instrument. allowed to any official or employee
unless the previous cash advance given
• Cash – comprises cash on hand, cash in to him/her is first liquidated or a
bank and cash treasury accounts. proper accounting thereof is made.
d. Except for cash advance for official
travel, no officer or employee shall be
1. MODIFIED DISBURSEMENT granted cash advance unless he/she is
CHECKS – are checks issued by properly bonded in accordance with
 existing laws or regulations. The To record the establishment of PCF.
amount of cash advance which may be
granted shall not exceed the maximum • Replenishment of Petty Cash Fund
cash accountability covered by his/her Petty Cash Fund XXX
bond. Cash – Modified Disbursement XXX
System (MDS), Regular
e. Only permanently appointed officials
To record the replenishment of Petty Cash
shall be designated as disbursing
Fund
officers.
f. Only duly appointed or designated
• The disbursing officer is liable for any
officer may perform disbursing
cash shortage while any cash overage
functions. Officers and employees who
that he cannot satisfactorily explain
are given cash advances for official
to the auditor is forfeited in favor of
travel need not be designated as
Disbursing Officers. the government.
g. Transfer of cash advance from one
accountable officer to another shall
Cash Collecting Officer XXX
not be allowed.
Miscellaneous Income XXX
h. The cash advance shall be used solely
To recognize forfeiture of cash overage of the
for specific legal purpose for which it Collecting Officer
is granted. Under no circumstance
shall it be used for encashment of
Cash – Treasury/Agency XXX
checks or for liquidation of a previous Deposit, Regular
cash advance. Cash Collecting Officer XXX
To recognize the remittance of forfeited cash
Advances for/to (ACCOUNT) XXX overage to the BTr.
Cash – Modified Disbursement XXX
System (MDS), Regular
For record the grant of cash advances Due from Officers & XXX
Employees
Expenses (ACCOUNT) XXX Cash Collecting Officer XXX
Advances for/to (ACCOUNT) XXX Advances for Payroll*** XXX
For record the liquidation of cash advances To recognize cash shortage of Collecting
Officer/Disbursing Officer
• The Petty Cash Fund of a government
entity is: Cash Collecting Officer XXX
 maintained using the imprest Due from Officers & XXX
Employees
system.
To recognize restitution of cash shortage
 sufficient to defray recurring
petty expenses for 1 month.
Cash – Treasury/Agency Deposit, XXX
 used for disbursements not Regular
exceeding ₱15,000 per Cash Collecting Officer XXX
transaction. To recognize the remittance of restituted cash
 replenished as soon as shortage to the BTr
disbursements reach at least 75%
or as needed.
• Journal Entry to establish PCF.
Petty Cash Fund XXX
Cash – MDS, Regular XXX
Checks may be cancelled when they • A government entity prepares monthly
become stale, voided or spoiled. The bank reconciliations for each of the
depository bank considers a check stale, if bank accounts it maintains, using the
it has been outstanding for over six adjusted balance method.
months from date of issue or as
prescribed. AGENCY A’s BANK RECONCILIATION:
Balance per bank statement ₱ XXX
A stale, voided or stale check shall be Add deposit in transit XXX
marked cancelled on its face and reported XXX
as follows: Less outstanding checks ( XXX)
a. Voided, spoiled or unclaimed stale Balance per books ₱ XXX
checks with the Cashier shall be
reported as cancelled in the List of
Unreleased Checks that will be • Only debt instruments acquired within
attached to the Registry of Checks 3 months before their scheduled
Issued (RCI). maturity date can qualify as cash
b. New checks may be issued for the equivalents.
replacement of stale/spoiled checks in
the hands of the payees or holders in
due course, upon submission of the • Receivables are initially measured at
stale/spoiled checks to the Accounting fair value plus transaction costs and
Division/Unit. subsequently measured at amortized
cost.
Journal Entry to RECORD and CANCEL
checks which have become OVERPAYMENT TAKEN UP AS
stale/voided/spoiled. RECEIVABLE
Cash – MDS, Regular or XXX Due from Officers and XXX
Accumulated Surplus (Deficit) Employees
Accounts Payable XXX Salaries and Wages - XXX
To recognize the cancellation of Regular
stale/voided/spoiled MDS checks To recognize overpayment of salaries and
wages
Accounts Payable XXX
Cash – MDS, Regular XXX Cash Collecting Officer XXX
To recognize the replacement of Due from Officers and XXX
stale/voided/spoiled MDS checks Employees
To recognize receipt of refund

• A dishonored check is a check that is Cash – Treasury/Agency Deposit, XXX

not accepted when presented for Regular
payment, e.g., a check returned by the Cash Collecting Officer XXX
To recognize the deposit of collection
bank because of lack of sufficient
NOTE: If the agency chose not to take it
funds - ‘bounced’ check.
as RECEIVABLE, skip the entry no. 1.
• Dishonored checks are recorded in the
“Other Receivables” account. INVENTORY
a. Inventory Held for Sale (e.g., • Current replacement cost is the cost
medicines for sale in government the entity would incur to acquire the
pharmacies) asset on the reporting date.
b. Inventory Held for Distribution (e.g.,
rice and other welfare goods held for
distribution) • Specific identification – used for
c. Inventory Held for Manufacturing items that are not ordinarily
(e.g., raw materials, work-in-process) interchangeable and those that are
d. Inventory Held for Consumption (e.g., segregated for specific projects.
office supplies inventory) • Weighted average cost – used for
e. Semi-Expendable Property – consists large numbers of items of inventory
of machinery, equipment, furniture and that are ordinarily interchangeable.
fixtures and similar items that are not This shall be applied under a perpetual
capitalized as PPE because their costs inventory system.
are below the ₱15,000 capitalization
threshold for PPE.
Purchase of supplies and materials
for stock regardless of whether or not
• Inventories are initially measured at they are consumed within the accounting
cost and subsequently measured at period, shall be recorded as Inventory
the: account following the Perpetual Inventory
a. Lower of Cost and Net realizable method. Under this method, detailed
value – for goods held for sale; and perpetual inventory records, in addition to
b. Lower of Cost and Current the usual ledger accounts are maintained
replacement cost – for goods held for each inventory item, and an inventory
for distribution. control account is maintained in the
general ledger on a current basis.

• Cost comprises the following: The perpetual inventory record for

a. Purchase cost, excluding trade each item must provide information for
discounts. receipts, issues, and balance on hand,
b. Direct costs incurred in bringing usually both in units and peso amounts.
the asset to its intended location
and condition.
• Cost excludes the following: The Government Accounting
a. Abnormal amounts of wasted Manual (GAM) provides that tangible items
materials, labor, and production below the capitalization threshold of
overhead; P15,000 shall be accounted as semi-
b. Selling costs; and expendable property. Semi-expendable
c. Administrative overheads which were recognized as PPE shall be
reclassified to the affected accounts.
These tangible items shall be recognized
• Net Realizable Value (NRV) is as expenses upon issue to the end-users.
estimated selling price less estimated In order to establish accountability,
costs of completion and estimated Inventory Custodian Slip (ICS) shall be
selling/disposal costs. issued to end-users of Semi-expendable
Property. Accountability will be 2. Requisition and issue of inventory
extinguished upon return of the item to items.
the Property & Supply Division/Unit or in 3. Transfer and/or disposal of inventory
case of loss, upon approval of the relief items.
from property accountability.

• Requisition
1. End users prepare the Purchase
Inventory Held for Inventory Held for Request (PR) form.
Sale Distribution 2. Purchasing Unit prepares the Purchase
Dr. Merchandise Dr. Welfare Goods Order (PO).
Inventory xxx for Distribution
Cr. Accounts xxx (Note: A canvass from at least 3
Payable xxx Cr. Accounts Payable
suppliers is required for purchases
xxx
amounting to ₱1,000 and above.)
Inventory Held for Inventory Held for
Manufacturing Consumption
• Receipt
Dr. Raw Materials Dr. Office Supplies
Inventory xxx Inventory xxx 3. Property/Supply Division prepares
Cr. Accounts Cr. Accounts Payable the Inspection and Acceptance
Payable xxx xxx Report (IAR) and forwards it to
the Property Inspector.
Semi-Expandable
4. Property Inspector inspects the
Property
delivered items and fills up the
Dr. Semi-Expendable
Machinery xxx IAR.
Cr. Accounts 5. The Property/Supply Division
Payable records accepted deliveries in the
xxx Stock Card (SC).
6. The Accounting Division records
accepted deliveries in the books of
The carrying amount of an inventory is accounts and in the Supplies
recognized as expense in the period it is: Ledger Card (SLC).
a. Sold; 7. The Property/Supply Division
b. Distributed; prepares the Disbursement
c. Exchanged; Voucher (DV) then forwards it,
d. Consumed; or together with the supporting
e. Written down to its NRV or Current documents, to the Accounting
replacement cost (only the portion of Division for processing of payment.
the carrying amount in excess of the • Disposition
NRV or CRC is recognized as expense). 8. End users prepare the Requisition
and Issue Slip (RIS) to request
for the issuance of inventory.
9. The Property/Supply Division
1. Receipt, inspection, acceptance and prepares the Report of Supplies
recording deliveries of inventory and Materials Issued (RSMI).
items. The Stock Card is updated using
the RSMI.
 10. The Accounting Division uses the
RSMI for recording in the books
of accounts and updating of the
Stock Ledger Card.

• Other documents ACCOUNTING FOR BIOLOGICAL

1. Waste Materials Report – used to ASSETS
report wasted materials, such as
• Agricultural Activity is the
destroyed spare parts and other
management by an entity of the
spoilages.
biological transformation and harvest
2. Report on the Physical Count of
of biological assets for sale, including
Inventories – used in reporting the
exchange or non-exchange
results of physical counts.
transactions, or for conversion into
3. Report of Accountability for
agricultural produce, or into additional
Accountable Forms – used to
biological assets.
report the movement and status of
Common Features of agricultural
accountable forms.
activities
4. Inventory Custodian Slip –
a. Capability to change
prepared when issuing semi-
b. Management of change
expendable property.
c. Measurement of change
DEFINITIONS
Journal Entry for PURCHASE and
a. Biological Asset – is a living animal
ISSUANCE of inventory
or plant
Office Supplies Inventory XXX
b. Agricultural Produce – is the
Accounts Payable XXX
harvested product of the entity’s
Due to BIR XXX
To recognize payment of duly approved
biological assets.
purchase order for office supplies
• Biological assets - initially and
Office Supplies Expense XXX subsequently measured at fair value
Office Supplies XXX less costs to sell.
Inventory
To recognize issuance of office supplies based • Gain or loss arising from measurement
on the Requisition and Issue Slip. are recognized in surplus or deficit.
• Biological assets whose fair value
cannot be reliably determined on initial
recognition are initially measured at
cost and subsequently measured at
cost less accumulated depreciation
and accumulated impairment losses.
• Agricultural produce - initially
measured at fair value less costs to
sell at the point of harvest.

Quoted price in an active market xx

Less: Transport costs (xx)
Fair value xx
• If there are more than one active b. Land held for a currently
markets, the entity shall use the price undetermined future use.
in the market expected to be used. c. A building owned by the entity (or
• If there is no active market, the held by the entity under a finance
entity shall estimate the market price lease) and leased out under one or
based on one of the following: more operating leases on a
 Most recent market transaction commercial basis.
price d. A building that is vacant but is
 Market prices for similar assets held to be leased out under one or
with adjustment to reflect more operating leases.
differences e. Property that is being constructed
 Sector benchmarks or developed for future use as
 Present value of expected net cash investment property.
flows from the asset. The following are NOT considered
investment property:
• Biological assets and Mineral
• Consumable and Bearer biological rights and mineral reserves
assets • Property held for sale in the
 Consumable Biological Assets – are ordinary course of operations
those that are to be harvested as • Property being constructed on
agricultural produce or to be sold behalf of third parties.
or distributed as biological assets. • Property held for future
 Bearer Biological Assets – are development and subsequent use as
those that are self-generating and owner-occupied property.
are used repeatedly for more than • Property occupied by employees.
one year. • Owner-occupied property awaiting
• Mature and immature biological disposal.
assets • Property that is leased to another
 Mature Biological Assets – are entity under a finance lease.
those that have attained • Property held to provide a social
harvestable specifications or are service and which also generates
able to sustain regular harvests. cash inflows.
• The amount of change in fair value less • Property held for strategic
costs to sell due to physical changes purposes.
and due to price changes. • Property held for use in the
production or supply of goods or
services or for administrative
purposes.
Investment Property – is land and/or
building held for rentals or capital
appreciation. • An investment property is initially
Examples: measured at cost. The measurement of
a. Land held for long-term capital cost depends on the mode of
appreciation rather than for acquisition.
short-term sale in the ordinary • Modes of Acquisition
course of operations. a. Cash purchase – purchase price
plus direct costs necessary in
 bringing the asset to its intended
condition.
Section 3, Chapter 10 – PPE, GAM
b. Installment purchase – cash price
provides that the cost of an item of PPE
equivalent
shall be recognized as an asset if, and only
c. Non-exchange transaction – fair
if:
value at acquisition date
1. It is probable that future economic
d. Self-construction – direct
benefits or service potential
materials, labor, and construction
associated with the items will flow to
overhead
the entity; and
2. The cost or fair value can be measured
• Investment properties are subsequently reliably.
measured at cost less accumulated 3. Beneficial ownership and control
depreciation and accumulated impairment clearly rest with the government.
losses (i.e., Cost Model). 4. The asset is used to achieve
• Note: The fair value model is not allowed government objectives.
for government entities. 5. It meets the capitalization threshold
of P15,000.

The capitalization threshold of

IPSAS/PPSAS 17 applies to Property, P15,000, as initially discussed in the
Plant and Equipment (PPE), including preceding section, represents the minimum
Specialist Military Equipment and cost of an individual asset recognized as a
Infrastructure Assets. This standard PPE on the Statement of Financial Position.
neither require nor prohibit the Some items may have individual values
recognition of heritage assets. However, below the threshold but which work
an entity which recognizes heritage assets together as a group of network asset
is required to comply with the disclosure whose total value exceeds the threshold
requirements of this standard. Property, shall be recognized as part of the primary
plant and equipment are tangible items PPE (e.g. computer network). This
that are: threshold shall be applied on an individual
a. held for use in the production or asset or per item basis. Each item within
supply of goods, services or the bulk acquisition with total value of PPE
program outputs, for rental to will need to meet the capitalization
others, or for administrative threshold to be recognized as PPE.
purposes, and not intended for
resale in the ordinary course of Major spare parts and stand-by
operations; and equipment qualify as PPE when an entity
b. expected to be used for more than expects to use them for more than one
one reporting period period. Similarly, if the spare parts and
servicing equipment can be used only in
The useful life of PPE is the period connection with an item of PPE, they may
over which an asset is expected to be be accounted as PPE.
available for use by an entity; or a number
of production or similar units expected to
be obtained from the asset by an entity. • PPE are initially measured at cost. Cost
comprises the following:
 a. Purchase price, including non- policy and shall apply that policy to the
refundable taxes but excluding entire class of PPE.
trade and cash discounts; Under the cost model, an item of
b. Direct costs; and PPE shall be carried at its cost less any
c. Present value of decommissioning accumulated depreciation and any
and restoration costs. accumulated impairment losses.
Under the revaluation model, an
Examples of directly attributable costs item of PPE, whose fair value can be
• Costs of employee benefits arising measured reliably shall be carried at
directly from the construction or revalued amount less any subsequent
acquisition of PPE; accumulated depreciation and subsequent
• Costs of site preparation; accumulated impairment losses.
• Initial delivery and handling costs (e.g., Depreciation is charged
freight costs); systematically over the useful life of the
• Installation and assembly costs; depreciable asset. Depreciation begins
• Testing costs, net of disposal when it is available for use and even it is
proceeds of samples generated during idle or retired from active use and held
testing; and for disposal because depreciation ceases
• Professional fees. when derecognized or fully depreciated.
The estimation of useful life of the asset
Examples of costs that are expensed is a matter of judgment based on the
outright experience of the entity with similar
• Costs of opening a new facility. assets.
• Costs of introducing a new product or
Property, Plant and Estimated Useful
service (including costs of advertising Equipment Life
and promotional activities). Land Improvements Useful life of the
• Costs of conducting business in a new asset or the
location or with a new class of improvement
customers (including costs of staff whichever is shorter
training). Infrastructure Assets 20-50 years
• Administration and other general Building & Other 30-50 years
overhead costs. Structures
Machinery & 5-15 years
Equipment
Motor vehicles 5-15 years
a. Acquisition by Purchase
Motor vehicles 3-20 years
b. Acquisition by Construction
(Military vehicles)
c. Acquisition through Exchange
Trains 10-20 years
d. Acquisition through Non-Exchange Aircrafts & Aircrafts 10-20 years
Transaction ground equipment
e. Acquisition through Intra-agency Watercrafts 10-25 years
or Inter-agency Transfers Furniture, Fixtures 2-15 years
and Books
Leased assets, Useful life of the
excluding Land leased asset or the
lease term, including
Subsequent to recognition, an
any renewal option,
entity shall choose either the cost model whichever is shorter
or the revaluation model as its accounting Other PPE 2-15 years
 A residual value equivalent to at
least five percent (5%) of the cost shall
be adopted unless a more appropriate LIABILITIES
percentage is determined by the entity • Liability – is a present obligation
based on its operations subject to the arising from past event, the
approval of COA. Generally, infrastructure settlement of which is expected to
assets have no residual value. result in an outflow of resources
The residual value and useful life embodying economic benefits or
of an asset shall be reviewed at least at service potential.
each annual reporting date and, if • Present obligation means that as of
expectations differ from previous the reporting date, an obligating event
estimate, the change shall be accounted must have already occurred.
for as a change in accounting estimate. • An obligating event is an event that
creates either:
a. Legal Obligation – is an obligation
According to IPSAS 17, the that results from a contract,
ownership of infrastructure asset is not legislation, or other operation of
confined for entities in the public sector, law; or
however significant infrastructure assets b. Constructive Obligation – is an
are frequently found in the public sector. obligation that results from an
To identify these assets as entity’s actions (e.g., past practice,
infrastructure, the following published policies) that create a
characteristics may be useful: valid expectation from others that
1. They are part of the system or the entity will accept and
network. discharge certain responsibilities.
2. They are specialized in the nature
and do not have alternative uses.
3. They are immovable.
4. They are subject to constraints on • A liability is recognized only when all
disposal. of the following are met:
Examples of infrastructure assets, a. The item meets the definition of a
provided by this standard, include road liability (i.e., present obligation);
network, sewer systems, water and power b. It is probable that an outflow of
supply systems, and communication resources embodying economic
networks. benefits will be required to settle
the obligation; and
c. The obligation has a cost or value
(e.g., fair value) that can be
measured reliably.

• A financial liability is any liability that

is:
a. A contractual obligation to deliver
cash or another financial asset to
another entity;
 b. A contractual obligation to outflow, and reliable measurement). If
exchange financial instruments one or more of the criteria are not
with another entity under met, the item is a contingent liability,
conditions that are potentially not a provision, and therefore not
unfavorable to the entity; or recognized as liability.
c. A contract that will or may be
settled in the entity’s own equity
instruments. • Contingent Liability is:
Examples: • A possible obligation that arises from
Accounts Payable past events, and whose existence will
Notes Payable be confirmed only by the occurrence
Interest Payable or non-occurrence of one or more
Loans Payable uncertain future events not wholly
Bonds Payable within the control of the entity; or
Accrued Payables • A present obligation that arises from
past events, but is not recognized
because:
• Financial liabilities are initially a. It is not probable that an outflow
measured at fair value minus of resources embodying economic
transaction costs, except for financial benefits or service potential will
liabilities at fair value through surplus be required to settle the
or deficit (e.g., designated financial obligation; or
liabilities and derivative liabilities) b. The amount of the obligation
whose transaction costs are expensed. cannot be measured with
• Transaction costs are incremental sufficient reliability.
costs that are directly attributable to
the acquisition, issue, or disposal of a
financial instrument. • Contingent Asset – is a possible asset
that arises from past events, and
whose existence will be confirmed only
• Financial liabilities are subsequently by the occurrence or non-occurrence
measured at amortized cost, except of one or more uncertain future events
for financial liabilities at fair value not wholly within the control of the
through surplus or deficit which are entity.
subsequently measured at fair value. Contingent Probable Possible Remote
Recognize
Disclose
 Liability and Ignore
• A financial liability is derecognized only
Disclose
when it is extinguished, such as when
it is discharged, waived, cancelled, or Disclose
 Asset Ignore Ignore
it expires. only

• Provision – is a liability of uncertain

timing or amount. Receipts of performance bond
• A provision is recognized if all the posted by contractor/supplier to guaranty
recognition criteria for a liability are full and faithful performance of their
met (i.e., present obligation, probable
 contract may be in the form of cash or
certified checks. ILLUSTRATION:
ILLUSTRATION: Agency X collected fees accruing to the
University of the Philippines legal
The Collecting Officer of Agency research fund in the amount of P3,000 and
DEF received P20,000 cash for the remitted the same to the Bureau of
performance bond from Contractor X to Treasury. The UP legal research fund and
guaranty full performance of their Bureau of Treasury appropriately
contract. Said amount was remitted to recognized this in their respective books.
Bureau of Treasury.
The following journal entries shall be
The following journal entries shall be prepared to record the transactions:
prepared to record the above Books of Agency X
transactions: ACCOUNT ACCOUNT
DR. CR.
ACCOUNT TITLE CODE
ACCOUNT TITLE DR. CR.
CODE Cash
Cash Collecting Collecting
Officer 10101010 P20,000 Officer 10101010 P3,000
Guaranty/Security Due to
Deposits Payable 19901010 P20,000 NGAs 20201050 P 3,000
To recognize collection of performance bond/security To recognize collection of fees accruing to the
deposits UP-LRF

ACCOUNT ACCOUNT ACCOUNT ACCOUNT

DR. CR. DR. CR.
TITLE CODE TITLE CODE
Cash –
Due to NGAs 20201050 P3,000
Treasury/Agency
Cash
Deposit, Trust 10104010 P20,000
Collecting
Cash
Officer 10101010 P 3,000
Collecting
To recognize remittance of collection to BTr for
Officer 10101010 P20,000
the account of UP-LRF
To recognize remittance of collections to BTr
Books of BTr
ACCOUNT ACCOUNT
DR. CR.
TITLE CODE
Cash In Bank –
Local Currency,
Savings Account 10102030 P3,000
Cash –
Treasury/Agency P
These are receipts of income, receivables Deposit, Trust 10104030 3,000
or trust funds for the account of other To recognize receipt of remitted collections for
NGAs, LGUs, GOCCs or non- UP-LRF
government/private organizations. These
collections are later remitted to the Books of UP-LRF
government agencies or non- ACCOUNT ACCOUNT
DR. CR.
government/private organizations TITLE CODE
concerned. Cash – 10104030 P3,000
Treasury/Agency Cash
Deposit, Trust Collecting P
Trust P Officer 10101010 500,000
Liabilities 20401010 3,000
To recognize remitted collections for UP-LRF by To recognize remittance of collections of BTr
other NGAs

These are cash received from

central office/regional office/operating
units of an entity for the purpose of
implementing specific projects.

ILLUSTRATION:
In an intra-agency transaction, the
Central Office (CO) of DOH made fund
transfer to its Regional Office (RO) in the
amount of P500,000 for the
implementation of its campaign against
dengue in Zone A of Region X. Said amount
was accordingly remitted to the Bureau of
Treasury by the RO.
The following journal entries shall
be prepared to record the above
transactions:
ACCOUNT ACCOUNT
DR. CR.
TITLE CODE
Cash
Collecting P
Officer 10101010 500,000
Due
to Regional
Offices
(Due to 20301030/ P
NGAs) (20201050) 500,000
To recognize receipt of intra-entity fund
transfer

ACCOUNT ACCOUNT
DR. CR.
TITLE CODE
Cash
Treasury/Age
ncy Deposit - P500,
Trust 10104030 000