GOVERNMENT ACCOUNTING

Government Accounting
–encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government funds and
property, and interpreting the results thereof. (Sec. 109, Presidential Decree (P.D.) No. 1445)

Government Budget
– is the financial plan of a government for a given period, usually for a fiscal year, which
shows what its resources are, and how they will be generated and used over the fiscal period.
The budget is the government's key instrument for promoting its socio-economic objectives.
The government budget also refers to the income, expenditures and sources of borrowings of
the National Government (NG) that are used to achieve national objectives, strategies and
programs.

Basic Government Accounting and Budget Reporting Principles.

Each entity shall recognize and present its financial transactions and operations conformably
to the following:
a. generally accepted government accounting principles in accordance with the
PPSAS
and pertinent laws, rules and regulations;
b. accrual basis of accounting in accordance with the PPSAS;
c. budget basis for presentation of budget information in the financial statements
(FSs)
in accordance with PPSAS 24;
d. RCA prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records; and
g. fund cluster accounting

General Purpose Financial Statements:

The objectives:
 are to provide information about the financial position, financial performance, and
cash flows of an entity that is useful to a wide range of users in making and
evaluating decisions about the allocation of resources. Specifically, the objectives of
general purpose financial reporting in the public sector are to provide information
useful for decision-making, and to demonstrate the accountability of the entity for the
resources entrusted to it.
Components:
a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Changes in Net Assets/Equity
d. Statement of Cash Flows
e. Statement of Comparison of Budget and Actual Amounts
f. Notes to the Financial Statements, comprising a summary of significant accounting
policies and other explanatory notes.

Books of Accounts and Registries.

The books of accounts and registries of the NG entities consist of:
a. Journals
1. General Journal (Appendix 1)
2. Cash Receipts Journal (Appendix 2)
3. Cash Disbursements Journal (Appendix 3)
 4. Check Disbursements Journal (Appendix 4)
b. Ledgers
1. General Ledgers (Appendix 5)
2. Subsidiary Ledgers (Appendix 6)
c. Registries (memorize)
1. Registries of Revenue and Other Receipts (ReRevOR)
2. Registry of Appropriations and Allotments (RApAl)
3. Registries of Allotments, Obligations and Disbursements (RAODi)
4. Registries of Budget, Utilization and Disbursements (RoBUD)

Mode of Disbursements.
Payments/Disbursements by NGAs may be effected through the Treasury Single Account
(TSA), by:
 issuing Modified Disbursements System (MDS) check or commercial check,
 cash through cash advance,
 Advice to Debit Account (ADA), or
 Non-Cash Availment Authority (NCAA).
Authority to Disburse/Pay:
NGAs are authorized to disburse/pay based on the Notice of Cash Allocation (NCA), Notice of
Transfer of Allocation (NTA), Cash Disbursement Ceiling (CDC) or other authority that may be
provided by law.

BUDGETARY ACCOUNTS: (MEMORIZE!!!)

a. Appropriation – is the authorization made by a legislative body to allocate funds for
purposes specified by the legislative or similar authority.
 Automatic Appropriations – are the authorizations programmed annually or for
some other period prescribed by law, by virtue of outstanding legislation which
does not require periodic action by Congress.
 Continuing Appropriations – are the authorizations to support obligations for a
specific purpose or project, such as multi-year construction projects which
require the incurrence of obligations even beyond the budget year.
 Supplemental Appropriations – are additional appropriations authorized by law to
augment the original appropriations which proved to be insufficient for their
intended purpose due to economic, political or social conditions supported by a
Certification of Availability of Funds (CAF) from the BTr.

b. Allotment – is an authorization issued by the DBM to NGAs to incur obligations for

specified amounts contained in a legislative appropriation in the form of budget release
documents. It is also referred to as Obligational Authority.

c. Obligation – a commitment by the government agency arising from an act of duly

authorized official which binds the government to the immediate or eventual payment of
sum of money.
Fund Release Documents.
a. Obligational Authority or Allotment – the following are the documents which authorize
the entity to incur obligations:

1. General Appropriations Act Release Document (GAARD) – serves as the

obligational authority for the comprehensive release of budgetary items appropriated in
the GAA.

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.

3. General Allotment Release Order (GARO) – is a comprehensive authority issued to

all national government agencies, in general, to incur obligations not exceeding an
authorized amount during a specified period for the purpose indicated therein.

b. Disbursement Authority – the following documents authorize the entity to pay obligations
and payables:

1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central, regional
and provincial offices and operating units to cover the cash requirements of the agencies;

2. Non-Cash Availment Authority (NCAA) – authority issued by the DBM to agencies to

cover the liquidation of their actual obligations incurred against available allotments for
availment of proceeds from loans/grants through supplier’s credit/constructive cash;

3. Cash Disbursement Ceiling (CDC) – authority issued by DBM to the Department of

Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their
income collected/retained by their Foreign Service Posts (FSPs) to cover their operating
requirements, but not to exceed the released allotment to the said post; and
4. Notice of Transfer of Allocation – authority issued by the Central Office to its
regional and operating units to cover the latter’s cash requirements.

Government REGISTRIES:
A. Registries of Revenue and Other Receipts. (ReReVOR)– tomonitor the revenue and
other receipts estimated/budgeted, collected and remitted/deposited.

B. Registry of Appropriations and Allotments. (RAPAL) –to monitor appropriations and

allotments charged thereto. It shall show the original, supplemental and final budget for
the year and all allotments received charged against the corresponding appropriation.

C. Registries of Allotments, Obligations and Disbursements. (RAODi) –to record

allotments, obligations and disbursements. It shall show the allotments received for the
year, obligations incurred against the corresponding allotment and the actual
disbursements made.

a. Registry of Allotments, Obligations and Disbursements-Personnel Services

(RAOD-PS) (Appendix 9A) shall be used to record the allotments received,
obligations incurred and disbursements classified under PS.
 b. Registry of Allotments, Obligations and Disbursements-Maintenance and
Other Operating Expenses (RAOD-MOOE) (Appendix 9B) shall be used to record
the allotments received, obligations incurred and disbursements classified under
MOOE.

c. Registry of Allotments, Obligations and Disbursements-Financial Expenses

(RAOD-FE) (Appendix 9C) shall be used to record the allotments received,
obligations incurred and disbursements classified under FE.

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.
D. Registries of Budget, Utilization and Disbursements. (RoBUDi)

The Registries of Budget, Utilization and Disbursements (RoBUDi) shall be used to

record the approved special budget and the corresponding utilizations and disbursements
charged to retained income authorized under R.A. 8292 for SUCs and other retained income
collection of a national government agency with similar authority, Revolving Funds and Trust
Receipts/Custodial Funds.
a. ROBUDi - Personnel Services (RBUD-PS)
b. ROBUDi-Maintenance and Other Operating Expenses (RBUD-MOOE)
c. RFOBUDi-Financial Expenses (RBUD-FE)
d.ROBUDi-Capital Outlays (RBUD-CO)

[PS-MOOpEx-FinEx-CapO]

REVENUE AND RECEIPTS:

I. Revenue from Exchange Transactions.

II. Grant with Condition.
If conditions are attached to a grant, a liability is recognized, which is reduced and revenue
recognized as the conditions are satisfied. If the government is required to recognize a liability
in respect of any conditions relating to assets recognized as a consequence of specific
purposes, it does not recognize revenue until the condition is satisfied and the liability is
reduced.

Illustrative Problem:

The NG received a foreign grant amounting to P10 million for the construction of a railroad
system. Under the terms of the grant, the construction project shall be completed within a
period of two years from the receipt of the grant, otherwise, the money shall be returned to
the grantor. The money can only be used as stipulated and the NG is required to include a
note in the financial statement detailing how the money was spent. The Department of Public
Works and Highways (DPWH) will be the implementing entity.

REQUIREMENTS:
1. Journal entry upon receipt of grant
2. Journal entry in the implementing agency
3. Journal entry in Purchasing construction materials and payment for labor for
the construction of a railroad system amounting to P10,000,000
4. Journal entry upon Receipt of the report from DPWH for the completion of the
construction of a railroad system amounting to P10,000,000.
 5. Journal Entry for the turnover of the completed project

a. Receipt of the Grant

Books of the NG – BTr (Bureau of Treasury):

To recognize receipt of grant directly credited to the account of the NG maintained by

the BSP

Cash in Bank-Local Currency, BSP ……. P10,000,000

Other Deferred Credits ……………. P10,000,000
Books of the Implementing NGA – DPWH:

To recognize receipt of the NCA for the construction of a railroad system

Cash-Modified Disbursement System (MDS),

Special Account … P10,000,000
Subsidy from National Government(SUFroNG)……P10,000,000

b. Purchase of construction materials and payment for labor for the construction of a
railroad system amounting to P10,000,000.

Books of the Implementing NGA-DPWH:

To recognize payment for the materials and labor for the construction of a railroad
system
Books of the NG-BTr
Construction in Progress Infrastructure Assets ……………P10,000,000
Cash-Modified Disbursement System (MDS),
Special Account…. P10,000,000

To recognize replenishment of MDS checks issued for payment of the materials and
labor for the construction of a railroad system
Subsidy from National Government …………. P10,000,000
Cash in Bank-Local Currency, BSP ………. P10,000,000

C. Receipt of the report from DPWH for the completion of the construction of a railroad
system amounting to P10,000,000.

Books of the NG – BTr:

To recognize the income from grants and donations representing payment for
expenses in connection with the grant agreement.
Other Deferred Credits ……………. P10,000,000
Income from Grants and Donations in Cash……… P10,000,000

d. Turnover and Acceptance of Completed Infrastructure Asset

Books of the Implementing NGA – DPWH:

To recognize the turnover and acceptance of completed railway system
Railway Systems ………………… P10,000,000
Construction in Progress Infrastructure Assets … P10,000,000
DISBURSEMENTS:
Modes of Disbursements
The different modes of disbursements are as follows:
(a) checks (MDS or commercial checks),
(b) cash (out of cash advance granted to authorized Disbursing Officer),
(c) advice to debit the account,
(d) tax remittance advice,
(e) working Fund/CDC, and direct payment method

Illustrative Accounting Entries for Disbursements By Check:

1. Payment of the following utility bills:
Meralco Bill P 1,200
PLDT Bill 500
Maynilad Bill 200
Total P 1,900

To recognize payment of bills from utility companies based on individual checks

issued
Water Expenses P 200
Electricity Expenses 1,200
Telephone Expenses 500
Cash-Modified Disbursement System (MDS), Regular P 1,900

2. Grant of cash advance for travel

To recognize granting of travel allowance to employees
Advances to Officers and Employees P 1,000
Cash-Modified Disbursement System (MDS), Regular P 1,000
3. Advance payment to Procurement Service

To recognize advance payment to Procurement Service for the purchase of Office

Equipment
Due from NGAs P 2,500
Cash-Modified Disbursement System (MDS), Regular P 2,500
4. Establishment of Petty Cash Fund (PCF) – P 20,000
To recognize establishment of PCF to cover petty expenses
Petty Cash Fund P 20,00
Cash-Modified Disbursement System (MDS), Regular P 20,000

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

To recognize replenishment of PCF based on the Report on Paid Petty Cash

Vouchers (RPPCV) and SDs
Office Supplies Expenses P 14,000
Postage and Courier Expenses 2,000
Cash-Modified Disbursement System (MDS), Regular P 16,000
6. Remittance of Government’s share
Retirement and Life Insurance Premium P 3,300
Pag-IBIG Contributions 500
PhilHealth Contributions 300
Total P 4,100

To recognize remittance of government’s share based on individual checks issued

to GSIS, HDMF and PHIC
Retirement and Life Insurance Premiums P 3,300
Pag-IBIG Contributions ………………………………..500
PhilHealth Contributions ……………………………… 300
Cash-Modified Disbursement System (MDS), Regular…….. P
4,100

7. Remittance of salary deductions

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

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

Government Service Insurance System (GSIS), Philippine Health Insurance
Corporation (PHIC), Home Development Mutual Fund (HDMF) and Employees’
Association:
Due to GSIS P 3,500
Due to Pag-IBIG 500
Due to PhilHealth 300
Other Payables 100
Cash-Modified Disbursement System (MDS), Regular P 4,400
1. Which government office is responsible for the design, preparation and approval of
accounting system of government agencies?(FAQ)

A. Bureau of Internal Revenue

B. Commission on Audit
C. Department of Budget and Management
D. Department of Finance

2.Which government body prepares the annual financial statements of the national
government, local government; government agencies and government-
ownedorcontrolled corporations?

A. Bureau of Treasury
B. Chief Accountant of each government agency
C. Commission on Audit
D. Department of Budget and Management

3. The functions of the Commission on Audit do not include

a. Designing, preparing, and approving the accounting systems of government agencies.
b. Keeping the general accounts of the government.
c. Promulgating accounting and auditing rules and regulations.
d. Examining, auditing, and settling all accounts of the government.

4. The agency of government which plays a pivotal role in the cash operations of the
national government
a. Bureau of Internal Revenue.
b. Department of Budget and Management.
c. Bureau of Treasury.
d. Commission on Audit.

5. As one of the operating bureaus of the Department of Finance, the Bureau of

Treasury is authorized to

I. Receive and keep national funds, and manage and control disbursements thereof.

II. Maintain accounts of financial transactions of all national government offices,

agencies and instrumentalities.

a. I only
b. II only
c. Both I and II
d. Neither I nor II Valix 12

6. Pursuant to the Philippine Constitution, no money shall be paid out of the Treasury
except in pursuance of(FAQ)
a. An appropriation made by law.
b. An allotment.
c. President’s directive.
d. Program. RPCPA

7. The process of analyzing, classifying, summarizing and communicating all

transactions involving the receipt and disposition of government funds and property
and interpreting the results thereof is
 a. Financial accounting.
b. Budgetary accounting.
c. Government accounting.
d. Obligation accounting. RPCPA

8. It is a systematic recording, classifying, summarizing governmental transactions in

terms of money and other resources consistent with accounting and budgetary law.

a. Local government.
b. National government.
c. Government budgeting.
d. Government accounting. RPCPA

9. The review and approval of the national budget by the Congress of the Philippines
and the formulation of an appropriate bill(FAQ)
a. Authorization. .
b. Preparation.
c. Execution
d. Accountability. RPCPA

10. Congressional authorization in the form of a law to make payments out of the
public treasury for specific purposes after compliance with certain conditions.(FAQ)
a. Appropriation.
b. Allotment.
c. Budgeting.
d. Obligation. RPCPA

11. An authorization by the legislative body in the form of laws for payments to be
made with funds of the government for specified purpose is

a. Allotment.
b. Authorization.
c. Budget.
d. Appropriation. RPCPA

12. It provides for the ceiling or the maximum extent an agency can commit the
resources of the government in the performance of its functions
a. Obligation accounting.
b. Allotment.
c. Fund accounting.
d. Commercial accounting. RPCPA

13. Financial plan for the general expenditures of government

a. Special budget.
b. Deficiency budget.
c. Supplemental budget.
d. General budget. RPCPA

14. A government official cannot disburse government funds beyond the approved
budget in accordance with the constitutional provision that “no money shall be
paid out of the National Treasury except in pursuance of an appropriation law”.
Otherwise, the government official may be charged with

A. Theft
 B. Graft and corruption
C. An administrative case
D. Technical malversation RPCPA

15. The functions and activities necessary for the performance of major purpose for
which a government entity is established
a. Resources.
b. Program.
c. Appropriation.
d. Performance budget. RPCPA

16. As used in government budgeting, it comprises all the functions and activities
devoted to the accomplishment of a major purpose for which a government entity
is established

a. Budget.
b. Object.
c. Project.
d. Program. RPCPA

17. A subdivision of a program covering a homogenous group of activities and

describing the work to be done.
a. Program.
b. Project.
c. Plan.
d. Budget. RPCPA

18. A document which sets out the chief measures that the government intends to take
in order to achieve defined goals of development.
a. Plan.
b. Object.
c. Project.
d. Financial statement. RPCPA

19. The term “fund” as used in government or fund accounting usually denotes a (an)
a. Sum of money designated for a special purpose.
b. Liability to other governmental units.
c. Fiscal and accounting entity having a set of self-balancing accounts. \
d. Appropriation authorized by the legislature for use of an agency, bureau or office.

20. One of the following is not considered government income:(FAQ)

a. Proceeds from loans and borrowings.
b. Government buildings.
c. Grants and aids received from foreign governments.
d. Taxes. A

21. Proceeds of borrowing either from domestic or foreign sources are considered
income of the national government because (?)
a. All receipts of funds are deposited in the Bureau of Treasury.
b. Government funds should be spent solely for public purposes.
c. It forms part of the current surplus unappropriated of the government which should
be budgeted and appropriated.
d. It should always be used for capital outlay, hence it should be considered income.
22. The journal entry to be made in the books of the government agency upon receipt
of the Notice of Cash Allocation is(FAQ)

a. Cash — National Treasury, MDS

Subsidiary income from National Government
b. Cash in bank — local currency, current account
Subsidy income from National Government
c. Cash in bank - local currency, savings account
Subsidy income from National Government
d. Cash in bank -- local currency, time deposit
Subsidy income from National Government

23. In government accounting, the revenue control account is increased when

recording?
a. The budget.
b. The appropriations.
c. The closing of budgetary accounts.
d. Property taxes

suggested answers:
1.C; 2.C; 3.A; 4.C; 5.C; 6.A; 7.C; 8.D; 9.A; 10.A;
11.D; 12.B; 13.D; 14.D; 15.B; 16.D; 17.C; 18.A; 19.C; 20.B; 21.C; 22.A; 23.D