CHAPTER 1 : OVERVIEW OF GOVERNMENT 1.

Government resources shall be

ACCOUNTING utilized efficiently and effectively
in accordance
GOVERNMENT ACCOUNTING – process of
analyzing, recording, classifying, summarizing with the law. The head of a government
and communicating all transactions involving agency is directly responsible in
the receipt and disposition of government funds implementing this policy and is
and property, and interpreting the results primarily responsible for government
thereof. resources entrusted in his agency.
2. All those who are exercising
OBJECTIVES OF GOV ACCO
authority over a
1. To produce information concerning past government agency shall share fiscal
operations and present conditions. responsibility.
2. To provide a basis for guidance for • ACCOUNTABILITY
future operations. 1. A government officer entrusted with
3. To provide control of the acts of public the possession of government
bodies and officers in the receipt, resources is responsible for safekeeping
disposition, and utilization of funds and therefor in accordance with the law.
property. Every accountable officer shall be
4. To report on the financial position and properly bonded.
the results of operations of government 2. The transfer of government funds from
agencies for the information of all one officer to another, except as
persons concerned. allowed by law, be made only after the
authorization of the COA. The transfer
Government accounting is also a process of
shall be properly documented in an
producing information that is useful in
invoice and receipt.
making economic decisions, but it place
greater emphasis on: • LIABILITY
1. Every unlawful use of government
1. Sources and utilizations of government resources shall be the personal liability
funds. of the employee found to be directly
• Sources – receipts from taxes responsible thereof.
and other fees, borrowings, and 2. Every accountable officer shall be liable
grants from other governments for all losses resulting from the unlawful
and international bodies, use or negligence in the safekeeping of
• Utilization – expenditures on government resources.
programs, projects, 3. No accountable officer shall be relieved
unanticipated losses from from liability merely because he has
calamities. acted under the direction of
2. Responsibility, accountability, and a superior officer, unless
liability of entities entrusted with the before that act, he has
government funds and properties. notified the superior, in
• RESPONSIBILITY writing, that the utilization
is illegal. Superior officer –
primarily liable.
 Accountable officer – - any department, bureau or office of the
secondarily liable. national government.
4. An accountable officer
- responsible in directly implementing the
shall immediately notify the
projects of, and performing the functions
COA for any loss of
delegated by, the government.
government funds from
unseen events within 30 - required by law to have accounting
days. Failure to do so will units/divisions/departments.
not relieve the officer of
FINANCIAL REPORTING SYSTEM
liability.
Entity – a government agency
MAIN CONCEPT : Government resources must
be utilized efficiently and effectively in Financial reporting – process of preparation,
accordance with the law. Government officials presentation, and submission of general
are responsible in implementing this policy, are purpose financial statement. Useful for
accountable for the government resources in accountability purposes and decision-making.
their custody, and are liable for any loss.
THE GAM FOR NGAs
ACCOUNTING RESPONSIBILITY
- Old government accounting system had been
1. Commission on Audit (COA) used for 5 decades, replaced by NGAS in 2002.
2. Department of Budget and NGAS was replaced on 2016 by GAM for NGAS.
Management (DBM) - promulgated to harmonize with IPSAS, it is
3. Bureau of Treasury (BTr) based on IFRS.
4. Government agencies
- PH government adopted IPSAS through PPSAS.
COMMISSION ON AUDIT
LEGAL BASIS
1. Promulgate accounting and auditing
- GAM for NGAs is promulgated by COA based on
rules and regulations
the authority conferred to it by the PH
2. General accounts
constitution.
3. Financial reports
COVERAGE
DEPARTMENT OF BUDGET AND MANAGEMENT
1. General purpose financial statements in
- Formulation and implementation of the
accordance with PPSAS.
national budget
2. Budget, revenue, and expenditure.
BUREAU OF TREASURY
OBJECTIVE
- Cash custodian
1. Standards, policies, guidelines, and
1. Receive and keep national funds and procedures in accounting for
manage control disbursement. government funds and property.

2. Maintain accounts of financial 2. Coding structure and accounts

transactions.

GOVERNMENT AGENCIES
 3. Accounting books, registries, records, 8. Neutrality – free from bias.
forms, reports, and financial 9. Prudence – exercise degree of caution.
statements.
10. Completeness – complete within the
BASIC ACCOUNTING AND BUDGET REPORTING
bounds of materiality and cost.
PRINCIPLES - PABRDAF
11. Comparability – able to identify
1. PPSAS
similarities and differences.
2. Accrual basis of accounting
COMPONENTS OF GENERAL PURPOSE
3. Budget basis
FINANCIAL
4. Revised chart of accounts
STATEMENTS
5. Double entry bookkeeping - meet the needs of users who are not in a
6. Accounting and budgetary records position to demand reports.
7. Fund cluster accounting
1. Statement of Financial Position
Code Fund clusters
2. Statement of Financial Performance
01 Regular agency fund
3. Statement of Changes in Net Assets/
02 Foreign assisted projects fund
Equity
03 Special account – locally 4. Statement of Cash Flows
funded/domestic grants fund
5. Statement of Comparison of Budget
04 Special account – foreign and Actual Amounts
assisted/foreign grants fund 6. Notes to the Financial Statements
05 Internally generated funds
ELEMENTS OF FINANCIAL STATEMENTS
06 Business related funds
07 Trust receipts ASSETS – resources controlled by an entity as a
result of past events, and from which future
economic benefits or service potential are
QUALITATIVE CHARACTERISTICS – URM TRF expected to flow to the entity.
SNP CC
1. Controlled
1. Understandability – users can 2. Past event
comprehend.
3. Future economic benefit
2. Relevance – assist users in evaluating
past, present, future events/ Control – ability to benefit / prevent others
confirming past evaluation. Must also from benefiting. Possession / ownership
be timely. normally evidences control but that is not
3. Materiality – affects relevance. always true (Ex: Finance lease)
Material if its omission could influence
Benefit – ability to use, exchange, lease, sell, or
decision.
use the asset to settle liabilities, or distribute it
4. Timeliness – timely basis 5. Reliability to owners.
– free from material error.
6. Faithful representation – faithfully Indicators of future economic benefit:
transactions.
1. Distinguishable
7. Substance over form – substance is not
2. Generate cash flows/ service potential
always consistent with their legal form.
 3. Potential to contribute to the objectives assets or incurrence of liabilities that result in
of entity decreases in net assets/ equity, other than
4. Capacity to contribute to activities those relating to distribution to owners.

5. The fact that an asset cannot be sold • Distribution to owners – are future
does not preclude it from providing economic benefits distributed by
benefit. the entity to its owners, either as a
return on investment or as a return
Past event – transaction or event that occurred. of investment.
RECOGNITION OF AN ASSET CHAPTER 2 : THE BUDGET PROCESS
1. Probable THE NATIONAL BUDGET
• More likely than less likely
Government accounting is primarily budgetary
• Benefits can be expected
accounting. They also provide budget
2. Measure reliably
information in accordance with PPSAS 24.
• Valuation is free from material error
• Faithful representation The Philippine Constitution and other laws
• Reliable information require government funds ito be utilized in
accordance with a national budget that is duly
LIABILITIES – present obligations of the entity approved by legislation.
arising from past events, the settlement of
which is expected to result in an outflow from The national budget (government budget) is the
the entity of resources embodying economic government’s estimate of the sources and uses
benefits or service potential. of government funds within a fiscal year.

EQUITY – residual interest in the assets of the The formulation and eventual utilization of the
entity after deducting all its liabilities. national budget are summarized in the budget
cycle.
REVENUE – gross inflow of economic benefits
or service potential during the reporting period THE BUDGET CYCLE
when those inflows result in an increase in net
1. Budget Preparation
asset/equity, other than increases relating to
contributions from owners. 2. Budget Legislation
3. Budget Execution
• Contribution from owners – future 4. Budget Accountability
economic benefits that have been
contributed to the entity by BUDGET PREPARATION
external parties which do not result - PH uses a “bottom-up” approach, starting from
to liabilities. the lowest to the highest levels of the
• Revenue funds – all funds derived government.
from the income of any agency of
the government. - “top-down” budgeting, budget preparation
starts from the agency heads.
EXPENSES – are decrease in economic benefits
or service potential during the reporting period - in 2011 PH government shifted from old
in the form of outflows or consumption of “incremental” system to “zero-based”
budgeting approach.
INCREMENTAL ZERO-BASED year which are to be paid either in the
same year or in the following year.
- Current year budget - Current year budget
is formulated based is formulated 2. BUDGET HEARINGS – conducted after
the agencies submits their proposals.
on the previous without regard to the
Each agency defends its budget
year’s budget. previous year’s
“roll-over” approach budget. proposal before the DBM, they
Prone to abuse. “back-to-zero” / deliberates on the budget proposals,
“clean slate” makes recommendations, and
approach
consolidates into the NEP and BESF.
efficient and
DBM then submits the proposed budget
effective utilization
to the President.
of funds.
3. PRESENTATION TO THE OFFICE OF THE
PRESIDENT – president and cabinet
1. BUDGET CALL – budget preparation members review the proposed budget,
starts when DBM issues a budget call, it after President approves, DBM finalizes
contains among other things, the next it to be submitted to the Congress. At
fiscal year’s targets, the agency’s this point the proposed budget is
budget ceiling, ang other guidelines in referred to as “President’s Budget”,
the completion and submission of which are intended to assist the
agency budget proposals. Congress in their review and
• Balanced budget – prepared in such a deliberation of the proposed national
way that estimated revenues exceed budget, this contains:
estimated expenditures. R > E = Surplus • President’s Budget Message –
| R < E = Deficit president’s explanation of the country’s
• Annual budget – covers a period of one fiscal policy and budget priorities.
year and forms the basis for the annual • National Expenditure Program (NEP) –
appropriation. details of all the government entities
• Special budget – provides for items not proposed expenditures.
adequately covered or not included in • Budget of Expenditures and Sources of
the general appropriations act. Financing (BESF) – estimated
• Line item budget – focuses on specific expenditures accompanied by estimates
expenditures such as salaries and of expected sources of financing.
wages, travel expenses, freight, • Other documents – further explanation
supplies, materials, and equipment. of selected items in the NEP.
• Performance budget – a plan of NOTE: The President shall submit the proposed
activities to be undertaken, including budget to the Congress within 30 days from the
their related costs, with the emphasis opening of every regular session.
on meeting targets and desired results.
The main focus is on the work to be BUDGET LEGISLATION
done or services to be rendered.
4. HOUSE DELIBERATIONS – House of
• Obligations budget – focuses on
Representatives conducts hearings to
expenditures incurred in the current
scrutinize the various agencies’
 respective proposed programs and Appropriations
expenditures. House of Representatives
Automatic
prepares the General Appropriations Bill 04
Appropriations
(GAB).
Unprogrammed Funds 05
5. SENATE DELIBERATIONS – senate
conducts its own deliberation on the Retained Income/
06
GAB. Normally start after Senate Funds
receives GAB from HOR but for Revolving Funds 07
expediency, hearing in the Senate start Trust Receipts 08
even as Representatives deliberations
are ongoing.
6. BICAMERAL DELIBERATIONS – - Appropriation is the authorization made
Bicameral Conference Committee is by a legislative body to allocate funds for
formed to harmonize any conflicts purposes specified by the legislative or
between the Representatives and similar authority.
Senate versions of GAB. Harmonized  New General
GAB (‘Bicam’ version) is submitted back Appropriations – annual
to both houses for ratification. After authorizations for incurring
ratification, final GAB is submitted to obligations during a
the President for enactment. specified budget year.
7. PRESIDENT’S ENACTMENT – president  Continuing Appropriation –
enacts the budget, now known as support obligations for a
General Appropriations Act (GAA). specific purpose / project
Before enactment, President may which require the
exercise his veto power as conferred to incurrence of obligations
him under the PH Constitution. even beyond the budget
NOTE: When the proposed budget is not year.
enacted before the fiscal year starts, the last  Supplemental
year’s GAA is automatically reenacted. Appropriation – additional
appropriations to augment
THE APPROVED BUDGET – is the expenditure the original which proved
authority derived from appropriations laws, to be insufficient for their
government ordinances, and other decisions intended purpose
related to the anticipated revenue or receipts supported by a Certification
for the budgetary period. It consists: of Availability of Funds from
UNIFIED ACCOUNTS BTr.
CODE STRUCTURE  Automatic Appropriation –
(UACS) programmed annually / for
New General some other period which
01
Appropriations do not require periodic
Continuing action by Congress.
02  Unprogrammed Funds –
Appropriations
standby appropriations
Supplemental 03 authorized by Congress in
 the annual GAA which may • Local Government Agencies
be availed only when any of (LGUs)
the following occur: - • Government Owned and
Revenue collections > Controlled corporations
original revenue targets in (GOCCs)
BESF. 9. ALLOTMENT – DBM formulates the
- New revenues are collected / realized. - Allotment Release Program (ARP) to set
Newly approved loans for foreignassisted the limit for allotment releases during
projects. the upcoming year. This is used as a
 Retained Income/Funds – collections control device to ensure that releases
which are authorized by law to be used conform to the national budget.
directly by agencies concerned for their Alongside, is a Cash Release program
operation or specific purposes. (CRP), which sets the disbursement
 Revolving Funds – receipts derived limits for the year, for each quarter and
from business-type activities of for each month.
departments/agencies to be instituted • Allotment – authorization issued by
and deposited in an authorized DBM to incur obligations for specified
government depository bank. These amounts. Also referred to as
funds shall be self-liquidating and all Obligational Authority. It is illegal for a
obligations and expenditures incurred government entity
by virtue shall be charged against said
fund. to incur obligations without
having first received the
 Trust Receipts – receipts by any “allotment.”
government agency acting as trustee, • Obligation – act of a duly authorized
agent or administrator for the official which binds the government to
fulfillment of some obligations or the immediate or eventual payment of
conditions. a sum of money. It is a commitment
BUDGET EXECUTION that encompasses possible future
liabilities based on current contractual
8. RELEASE GUIDELINES AND BEDs – DBM agreement.
issues guidelines on release and
utilization of funds while various Documents used in releasing allotments:
agencies submits their Budget
• General Appropriations Act Release
Execution Documents (BEDs).
Document (GAARD) – for
• Physical and financial plan comprehensive release.
• Monthly cash program • Special Allotment Release Order
• Estimate of monthly income (SARO)– for later release.
• List of obligations that are not • Geneal Allotment Release Order
yet due and demandable (GARO) – all national government
Major recipients of budget: agencies. Without need of special
clearance.
• National Government Agencies
(NGAs)
 10. INCURRENCE OF OBLIGATIONS – 12. BUDGET ACCOUNTABILITY REPORTS – •
government agencies incur obligations Monthly Report of
which will be paid by the government. Disbursements – submitted to
11. DISBURSEMENT AUTHORITY – DBM COA and DBM within 30 days
issues disbursement authority to the after the end of each month.
government agencies. This is the point • Quarterly Physical Report of
where government agencies obtain Operation – physical
access to the government funds. accomplishment in a given quarter
Documents used in releasing disbursements: vis-à-vis its physical targets.
• Statement of Appropriations,
• Notice of Cash Allocation (NCA) – max Allotments, Obligations,
amount that can be withdrawn. Disbursements and Balances
• Notice of Transfer of Allocation – cover • Summary of Appropriations,
cash requirements. Allotments, Obligations,
• Non-Cash Availment Authority – cover Disbursements and Balances
liquidation. by
• Cash Disbursement Ceiling – use Object of Expenditures
income from Foreign Service Posts to • List of Allotments and Sub-
cover operating requirements. Allotments
• Statement of Approved Budget,
Disbursements are most commonly made
Utilizations,
through checks chargeable against the
Disbursements and Balances
account of the Treasurer of the Philippines
(Treasury Single Account). Checks are called • Summary of Approved Budget,
“Modified Disbursement System” Checks. Utilizations, Disbursements and
Balances by Object of Expenditures
Appropriation Authorization by a
• Quarterly Report of Revenue and
legislative body to
Other Receipts NOTE: B to H
allocate funds for
prepared on a quarterly basis,
specified purposes.
submitted to COA and DBM within
Allotment Authorization to 30 days after the end of each
agencies to incur quarter.
obligations.
• Aging of Due and Demandable
Obligation Amount contracted Obligations – names of creditors,
by an authorized amounts owed, number of days
officer for which outstanding. Submitted within 30
the government is days after the end of the year.
held liable. NOTE: Consolidated Statement of
Disbursement Actual amount paid Allotments, Obligations, and
out of the Balances per Summary of
budgeted amount. Appropriations shall be submitted
on or before February 14 of the
following year.
BUDGET ACCOUNTABILITY (occurs concurrently
with Budget Execution)
13. PERFORMANCE REVIEWS – DBM and COA  Registries of Appropriations and
perform periodic reviews of the agencies’ Allotments (RAPAL)
performance and budget accountability and  Registries of Allotments,
report to the President. Obligations, and Disbursements
14. AUDIT – COA audits the agencies. (RAOD)
 Registries of Budget, Utilization
The budget reports, together with other budget
and Disbursements (RBUD)
records, provide information in preparing the
Statement of Comparison of Budget and Actual Journal & Ledgers – considered as accounting
Amounts. records, maintained by accounting unit.

FORMULAS: Registries – considered as budget records,

maintained by budget division.
UNRELEASED APPROPRIATION =
Appropriation – Allotment BUDGET REGISTRIES
1. RROR – monitor the budgeted amounts,
UNOBLIGATED ALLOTMENT = Allotment – actual collections and remittances of revenue
Obligations and other receipts.
UNPAID OBLIGATIONS = Obligations – 2. RAPAL – monitor appropriations and
Disbursements allotments.
UNUSED NCA = NCA – Disbursements 3. RAOD – monitor the allotment received,
REPONSIBILITY ACCOUNTING – system of obligations incurred against the corresponding
providing cost and revenue information over allotment received, and the actual
which a manager has direct control of. It disbursements made. Maintained for each
requires identification of responsibility centers object of expenditure.
and distinction between controllable and OBJECT OF EXPENDITURES:
noncontrollable costs.
 Personnel Services (PS) – all
types of employee benefits
CHAPTER 3 : THE GOVERNMENT ACCOUNTING  Maintenance and Other
PROCESS Operating Expenses (MOOE) –
various operating expenses
BOOKS OF ACCOUNTS AND REGISTRIES other than employee benefits
1. Journals and financial expenses
 General journal  Financial Expenses (FE) –
 Cash receipts journal finance costs
 Cash disbursement journal  Capital Outlays (CO) –
 Check disbursement journal capitalizable expenditures
2. Ledgers 4. RBUD – record the approved special budget
 General ledgers and the corresponding utilizations and
 Subsidiary ledgers disbursements charged to retained income.
3. Registries Maintained for each object of expenditure.
 Registries of Revenue and Other (RBUD-PS, RBUD-MOOE, RBUD-FE, RBUD-CO)
Receipts (RROR)
NOTE: COA shall keep the general accounts of Allocation (NTA) and to monitor the
the Gov’t and preserve the vouchers and available balance of NTA.
supporting documents.
JOURNALS
BASIC RECORDINGS a. General Journal – record transaction not
in the Special Journal.
Recording in: Special Journals:
TRANSACTION Registries b. Cash Receipts Journal – record RCD
Journal & Ledger &CRReg.
& Others
Appropriation RAPAL  Report of Collection and Deposit
Allotment RAPAL & (RCD) – prepared by collecting
RAOD officer to report collections and
Incurrence of ORS & deposits to an AGDB.
Obligations RAOD  Cash Receipts Register (CRReg) –
used by field offices without a
NOTE: Obligations shall be incurred through the complete set of books to record
issuance of ORS which is prepared by the their cash collections and
Requesting Office. Head of Requesting Office shall deposits in the books of their
certify the necessity and legality of the obligation mother unit.
and the validity of the supporting document. c. Cash Disbursement Journal – record cash
Head of Budget Division shall certify the disbursement of the Disbursing Officer.
availability of the allotment. d. Check Disbursement Journal – record
Subsequent adjustment shall be made check disbursement of the Disbursing
through Notice of Obligation Request and Status Officer.
Adjustment (NORSA). LEDGERS
Recordings on journal entries shall be a. General Ledger – summarizes all
made only if : transactions recorded in the journals.
1. Employees have rendered services. Arranged according to Revised chart of
2. Office supplies are delivered and Accounts.
received. b. Subsidiary Ledgers – show details of each
3. Office equipment is delivered and control account in the general ledger.
received. “NCA species the maximum amount of
Obligations in the entries are referred to withdrawal that an entity can make from a
as “Not Yet Due and Demandable”. government bank for the period indicated. The
Government entity – Obligation is an act of a duly Collecting Officer shall NOT issue an official
authorized official which binds the government to receipt of NCA.”
the immediate or eventual payment of a sum of Disbursement Update Expense/Asset payable XX
Payable XX
money. ORS & Payable XX
Business entity – Obligation is another term for RAOD Cash-MDS, Regular XX

liability. Tax Remittance Update Cash-TRA XX

NCA Cash-MDS, Regular XX Advice Subsidy from NG XX
RANCA Subsidy from NG XX ORS & Due to BIR XX
RAOD Cash-TRA XX
NOTE: Registries to monitor NCA are:
1. Registry of Allotments and Notice of Cash NOTE: TRA is used to recognize:
Allocation (RANCA) – used to determine a. In the books of government agencies –
the amount of allotments not covered by constructive remittance of taxes withheld
NCA and to monitor the available to BIR and custom duties withheld to
balance of NCA. BOC, and constructive receipt of NCA for
2. Registry of Allotment and Notice of those taxes and custom duties.
Transfer of Allocation (RANTA) – used to b. In the books of BIR and BOC –
determined the amount of allotments constructive receipt of tax revenue and
not covered by Notice of Transfer of custom duties.
 c. In the books of the BTR – constructive
receipt of taxes and custom duties
remitted.
Billings, Accounts Receivable XX
Cash-CO XX
Collections, & RROR,
Cash-CO XX
Remittances RCD/CRRe Accounts Receivable XX

g Cash-Treasury/Agency XX
Cash-CO XX

NOTE: PD 1445 requires all collections must be

remitted to the National Treasury, unless another
law specifically allows otherwise.
Reversion of Subsidy from NG XX
RANCA Cash-MDS, Regular XX
Unused NCA
NOTE: Entry is the exact opposite of the entry to
record the receipt of NCA.

Chart of Accounts – a list of all the accounts

used by an entity. Government entities shall use
the account titles and account codes in the
Revised Chart of Accounts (RCA) issued by COA.
NOTE:

To maximize the available NCAs of the agency,

the Common Fund System Policy shall be
adopted whereby cash allocation balances of
agencies under the Regular MDS Account may
be used to cover payment of current year’s
accounts payable.

Unbilled revenue – fees from regulatory

functions and collections of revenue with no
direct exchange of services or goods.

Unadjusted trial balance – list of the accounts in

GL with their balances, its purpose is to test the
equality of total debits and total credits.

CLOSING ENTRIES:

a. Cash-Treasury/Agency Deposit, Regular

> Accumulated Surplus/(Deficit)
 b. Subsidy from NG > Revenue and 9. Collecting officer shall accept payment
Expense Summary in the form of checks, upon proper
c. Income and Expense > Revenue and endorsement and identification of the
Expense Summary payee or endorsee. He shall not use
d. Net balance of revenue and Expense government funds to encase private
Summary > Accumulated checks.
Surplus/(Deficit) 10. Receipts of government funds shall be
acknowledge in accordance with the
CHAPTER 4 : REVENUE AND OTHER RECEIPTS
law.
Revenue – is the gross inflow of economic
TYPES OF FUNDS
benefits or services potential during the
reporting period when does inflows result in an 1. General fund – available for any
increase in equity. Includes only those that are purpose.
received or receivable by the entity. Receipts = 2. Special fund – designated for special
actual cash collections. purposes.
3. Trust fund (Fiduciary fund) – held by a
FUNDAMENTAL PRINCIPLES FOR REVENUE
government agency or officer acting as
1. All revenues shall be remitted to the trustee, agent, administrator.
National Treasury and included in the 4. Revenue fund – all funds derived from
general Fund. income of any government agency and
2. All moneys and property received by a available for appropriation or
public officer, shall be accounted for as expenditure.
government funds and government 5. Depository fund – held by depository
property. bank
3. Amounts received in trust and from 6. Special account in the general fund
business-type activities of government (SAGF) – facilitate funding of priority
may be separately recorded and activities of the government.
disbursed.  All income and collections for
4. Receipts shall be recorded as revenue Special and Fiduciary Funds
of Special, Fiduciary, or Trust Funds, or shall be remitted to the
Funds other than General Fund only Treasury and treated as SAGF.
when authorized by law.  Automatically considered
5. Collecting officer shall immediately appropriated, except when GAA
issue an official receipt (OR) upon provides otherwise.
collecting payment.  Subject to the approval of the
6. Where mechanical devices are used to President.
acknowledge cash receipts, COA may 7. Special purpose funds (SPFs) – funds
approve upon request, exemption from that the President allocated for special
use of accountable forms. programs and projects. Not under the
7. Temporary receipts shall never be used accountability of any particular agency.
to acknowledge receipt of public funds.
SOURCES OF REVENUE
8. Pre-numbered OR shall be issued in
strict numerical sequence. 1. Exchange transactions – reciprocal
transfers
 2. Non-exchange transfer – non-reciprocal Consideration in advance = initially as liability
transfers and subsequently recognized as revenue.

EXCHANGE TRANSACTIONS NON-EXCHANGE TRANSACTIONS

1. Sale of goods or provisions of services 1. Taxes – compulsory payment

 Service income 2. Fines and penalties – monetary
 Business income sanctions
2. Use by other entity of assets yielding 3. Gifts, donations and goods/services in-
interest, royalties and dividends. kind – voluntary transfers
 Interest income
RECOGNITION OF REVENUE DEOM NON-
 Royalties
EXCHANGE TRANSACTIONS
 Dividends
Revenue are recognized on a cash basis until a
RECOGNITION OF REVENUE FROM EXCHANGE
reliable measurement model is developed.
TRANSACTIONS
Tax revenue Recognized at a gross amount and not
- significant risks and rewards are transferred to reduced for expenses paid through the tax
buyer. system.
- entity does not retain continuing managerial Tax revenue shall not be grossed up for the
Sale of
involvement. amount of tax expenditure (forgone
goods
- probable that economic benefits will flow. revenue, not expenses)
- revenue can be measured reliably.  Income tax = earning of taxable
- cost can be measured reliably. income
- recognized on straight line basis  VAT = undertaking of a taxable
- stage of completion (Percentage of completion activity
method) if it can be estimated reliably  Goods and services tax =
Services - indeterminate number of acts = straight line purchase or sale of taxable goods
- cannot be estimated reliably = revenue or services
recognized only to the extent of expenses that  Customs duty = movement of
are recoverable dutiable goods or services across
Interest time proportion basis the customs boundary
as earned in accordance with substance of the  Death duty = death of the owner
Royalties
relevant agreement of the taxable property
Dividends when entity has the right to receive  Property tax = passage of the
Similar nature = do not give rise to revenue time period for which the tax is
Exchange
Dissimilar nature = give rise to revenue levied
s of goods
measured by order of priority : Fines and Recognized as income in the year they are
and
- FV of goods received penalties collected
services
- FV of goods given up Entity collecting fines in the capacity of agent
Service when service are rendered / when fees are shall not treat fines as revenue
income collected. Gifts, Without condition = recognized immediately
Business when fees are billed / when fees are collected donations and With condition = initially as liability until
income goods in-kind condition is satisfied
Services in- Not recognized as revenue
kind
MEASUREMENT OF REVENUE FROM EXCHANGE Debt Lender cancels debt
TRANSACTIONS forgiveness Carrying amount of debt forgiven is
recognized as revenue
If a controlling entity cancels debt of a wholly
Fair value – amount for which an asset could be owned controlled entity it is treated as
exchange or liability settled. contribution from owners not revenue
Bequest Transfers according to deceased person’s will
Cash flow are deferred = FV<Nominal amount, Recognized as revenue at FV
Grant with Initially as liability until condition is satisfied
FV is determined by discounting all future cash condition
flows using an imputed rate of interest. Pledges Unenforceable undertaking to transfer assets
to the recipient entity
Not recognized as revenue
Concessionary Loans received by an entity at below market
 loans terms Disbursements – constitute all payments in
Difference between FV and transaction price
is recognized as revenue, if non-exchange cash, in whatever manner. It shall be supported
transaction by Disbursement Vouchers.
Impairment If the amount recognized as revenue
losses and becomes uncollectible, it is recognized as
allowances expense rather than as an adjustment
FUNDAMENTAL PRINCIPLES FOR
for DISBURSEMENT OF PUBLIC FUNDS
impairment
losses 1. All government resources shall be used
Subsidiary Recognized as revenue from assistance and
from NG and subsidy only in accordance with the law and
other NGAs only for public purposes.
Receipts from Not recognized
excess cash 2. Trust funds shall be used only for their
advance specific purpose.
3. Fiscal responsibility shall be strictly
shared by all those exercising authority
MEASUREMENT OF REVENUE FROM NON-
over a government agency.
EEXCHANGE TRANSACTION
4. The use of government resources shall
1. Assets – acquisition date FV be approved by proper officials.
2. Liabilities – PV 5. Claims against government funds shall
3. Revenue – amount of increase in net be supported with complete
assets. If initially recognized as liability, documentation.
the subsequent reduction in that 6. All laws and regulations applicable to
liability is recognized as revenue. financial transactions shall be faithfully
adhered to.
OTHER RECEIPTS
NOTE: Expenditures funded by borrowings are
1. Receipt of subsidy from the NG
included in the expenditure program of the
 NCA
entity. The loan proceeds shall not be used
 TRA
without the corresponding release of funds
 NCAA
through a Special Budget.
 CDC
2. Receipt of subsidy or assistance from AUTHORITY TO DISBURSE
other government agencies including
1. NCA
LGUs and GOCCs
2. NTA
3. Receipt of excess cash advance granted
3. TRA
to officers and employees
4. NCAA
4. Receipt of refund of overpayment of
5. CDC
expenses
5. Receipt of performance bond or
security deposit
6. Collections made in behalf of another
entity
7. Intra-agency and inter-agency fund
transfers

CHAPTER 5 : DISBURSEMENTS
  Cashless Purchase Card System
(Credit Card)
 Non-Cash Availment Authority
(NCAA)
 Tax Remittance Advice (TRA)

DISBURSEMENT THROUGH CHECK

1. Modified Disbursement System Checks

– chargeable against the account of the
Treasurer of the Philippines.
2. Commercial Checks – chargeable
against the Agency Checking Account
with GSBs.

NOTE: All checks drawn, whether released or

unreleased, including cancelled checks, are
BASIC REQUIREMENTS & CERTIFICATIONS FOR recorded chronologically in the Checks/ADA
DISBURSEMENTS Disbursement Record maintained by the
Cash/Treasury Unit.
1. Budget Officer shall certify the
availability of allotment. DISBURSEMENT THROUGH CASH
2. Chief Accountant shall charge 1. Cash advances shall be made only for
obligations against available allotment. legally authorized specific purpose.
3. Chief Accountant shall certify the 2. Cash advance, other than advances for
availability of funds/ cash and the travel, shall be given only to duly
completeness of the supporting appointed Disbursing Officers.
documents. 3. Only designated Disbursing Officers are
4. Requesting and approving officials shall allowed to perform disbursing functions
ensure that the disbursements are and only permanently appointed
legal. officials shall be designated as
5. Head of the Requesting Unit shall certify disbursing officers.
the necessity and legality of 4. Must be liquated as soon as the
disbursements. Payments shall be made purpose for which it was given has been
through Disbursement Vouchers (DVs) served.
or Payroll  Cash advance for payroll –
6. Head of Agency shall approve all DVs or liquidated within 5 days after
Payroll the end of the pay period.
MODES OF DISBURSEMENTS Unclaimed salaries shall be
refunded and issued official
1. Check receipt to close the account.
2. Cash  Cash advance for local travel –
3. Cashless payments: within 30 days upon return to
 Advice to Debit Account (ADA) the personnel’s workstation.
 Electronic Modified  Cash advances for foreign travel
Disbursement System (eMDS) – within 60 days upon return to
 PH. No official or employee is Made through the use of an electronic card. The
allowed to go on an official authorized credit card company is the Citibank.
foreign travel if he is due to
Guidelines in the use of CPC System:
retire within 1 year after the
foreign travel. 1. Only for eligible items and only with
5. No additional cash advance shall be specific merchants.
given unless previous cash advance 2. Only authorized individuals shall be
given is first liquidated. allowed. Changes in credit limits or
6. Transfer of cash advance from one cardholder require the prior approval of
officer to another is prohibited. the Steering Committee.
7. A cash advance shall not be used to 3. Agency official who approved the CPC
encash checks or to liquidate a previous are jointly accountable with the
cash advance. cardholders.
4. Shall comply with existing disbursement
DISBURSEMENT THROUGH ADA
policies and procedures under the law.
ADA/List of Due and Demandable Accounts 5. Amount covered by CPC shall form part
Payable – Advice to Debit Account (LDDAP-ADA) of the cash advance levels of the
– an accountable form used as an authorization participating agencies.
issued by a gov’t agency to the MDS_GSB 6. Shall be used for purchases of small
instructing the bank to debit a specified amount value, non-common use items which
from its available NCA. are not available with the Procurement
Service.
- like a check but ADA can be drawn to pay
7. Unauthorized items purchased using
various payees. ADA payments are directly
CPC shall be the personal liability of the
credited to the payees’ accounts.
cardholder.
- authorization for a fund transfer or bank 8. Participating agencies shall immediately
transfer inform Citibank of any discrepancy
regarding items which they dispute as
Following expenditure shall not be paid through having procured using CPC.
ADA: 9. Shall ensure the timely payment of CPC
1. Payment of Terminal Leave and billings. In case of delay, late payment
Retirement Gratuity Benefits charges shall be the personal liability of
2. Remittance of GSIS, PhilHealth, and Pag- employee responsible. NCA shall never
IBIG contributions be used to pay late payment charges.
3. Payments to utility companies 10. Cardholder shall submit all receipts
4. Other payables from use of the CPC to the accounting
unit.
DISBURSEMENTS THROUGH eMDS 11. In case CPC is lost or stolen, cardholder
eMDS – like ADA except disbursement are made shall immediately notify the Program
directly from the accounts of the BTr that are Administrator and the Citibank.
maintained with the Land Bank of the Cardholder shall be liable for any CPC
Philippines (LBP). charges during the period the card was
lost or stolen.
DISBURSEMENT THROUGH CPC SYSTEM
DISBURSEMENTS THROUGH NCAA
NCAA is the authority issued by the DBM to  Held for consumption
agencies to cover the liquidation of their actual  Semi-expandable property (Below
obligations incurred against available allotments 50,000 threshold)
for availment of proceeds from loans/grants
MEASUREMENT
through supplier’s credit/constructive cash.
 Initially – At cost
Disbursement through NCAA (Direct Payment
 Subsequently – Lower of cost and net
Method/Direct Payment Scheme of Loan
realizable value (held for sale) & Lower
Availment) are made through Journal Entry
of cost and current replacement cost
Voucher (JEV) issued by BTr. JEV is recorded in
(held for distribution)
the General Journal.
COST INCLUDES:
DISBURSEMENT THROUGH TRA
 Purchase cost
TRA is used for the constructive remittance of
 Direct cost
taxes or customs duties withheld to the BIR /
BOC. COST EXCLUDES:
ACCOUNTING FOR DISALLOWANCES  Abnormal amounts of waste
 Selling costs
Disallowances – expenditures made by an
 Administrative overheads
agency that are subsequently invalidated or
disallowed by the COA because they are found Exceptions:
to be irregular, unnecessary, excessive,
extravagant or unconscionable. Disallowances  Inventories received from non-
are recorded in the books of accounts only exchange transactions are initially
when become final and executory. Similar to measured at acquisition date FV.
the accounting for current and prior period  Agricultural produce are initially
errors by a business entity. measured at FV less CTS at the point of
harvest.
ACCOUNTING FOR OVERPAYMENTS
Net realizable Value (NRV) – estimated selling
In case of overpayments, refunds shall be price less estimated costs of completion and
demanded of the employees concerned. estimated selling/disposal costs.
Correcting entries for overpayments are similar
to the accounting for disallowances. Current replacement cost – cost the entity
would incur to acquire the asset on the
CHAPTER 7 – INVENTORIES reporting date.
Inventories are assets: COST FORMULAS
 Finished goods 1. Specific identification – used for items
 Work in process that are not ordinarily interchangeable
 Raw materials and supplies and those that are segregated for
specific projects.
In a government entity:
 Cost of sales = actual cost of
 Held for sale items sold
 Held for distribution  Ending inventory = actual costs
 Held for manufacturing of items on hand
 2. Weighted average cost – used for large
numbers of items of inventory that are
ordinarily interchangeable. Applied
under a perpetual inventory system.

NOTE: FIFO cost formula and the periodic

inventory system are not used by government
entities.

RECOGNITION AS AN EXPENSE

The carrying amount of an inventory is

recognized as expense the period it is sold,
distributed, exchange, or consumed. The write-
down of inventory to its NRV or current
replacement cost is also recognized as expense.
RECEIPT AND DISPOSITION OF INVENTORIES

RECEIPT:

1. End users prepare the Purchase

Request (PR) form to request for the
purchase of items not available on
stock.
2. The authorized official prepares the
Purchase Order (PO). A canvass from at
least 3 suppliers is required for
purchases amounting to P1,000 and
above
3. When delivered, property/Supply
Division signs the “received” portion of
the Delivery Receipt (DR) and prepares
the Inspection and Acceptance Report
(IAR), which will be used by the
Property Inspector in inspecting and
accepting the delivered items. The
Property/Supply Division forwards the
DR, IAR, PO to the Property Inspector.
4. Property Inspector inspects the
conformance of the delivered items
with the specification in both the PO
and DR. copies of DR, IAR, PO is
forwarded to Property/supply Division
and Accounting Division for recording.
5. Property/Supply Division, through the
Stock Card Keeper, records the
 accepted deliveries in the Stock Card  Held for use in the production or supply
(SC). of goods
6. Accounting Division records the  Expected to be used for more than one
accepted deliveries in the books of reporting period.
accounts and in the Supplies Ledger
RECOGNITION
Card (SLC).
7. Property/Supply Division prepares the Capitalization threshold of P50,000 is the
Disbursement Voucher then forwards it minimum cost an item should have before it is
to the Accounting Division. capitalized as PPE, it is applied on a per item
basis, except:
DISPOSITION:
1. Individual items with values below the
8. End users prepare the Requisition and
threshold bout work as a group of asses
Issue Slip (RIS) to request for the
are recognized as PPE if total is P50,000
issuance of items available on stock.
or more.
9. Property/Supply Division prepares the
2. Bulk acquisition of small items of PPE
Report of Supplies and Materials Issued
are recognized as PPE if their aggregate
(RSMI).
cost is P50,000 or more.
10. Accounting Division records the items
issued in the books of accounts and Items below the capitalization threshold are
updates the SLC. recognized as inventories (semi-expendable
11. Other documents used in the property).
disposition:
 Waste Material Report – INITIAL MEASUREMENT
prepared by the PPE are initially measures at cost. Initial cost
Property/Supply Custodian to comprises the following:
report wasted materials.
 Report on the Physical Count of 1. Purchase price
Inventories – used in the results 2. Direct costs
of physical counts. It shows the 3. Present value of decommissioning and
balance of inventory, as well as restoration costs
any shortages or overages. Examples of directly attributable costs:
 Report of Accountability for
Accountable Forms – used to 1. Costs of employee benefits arising
report the movement and directly
status of accountable forms in 2. Costs of site preparation
the possession of an officer. 3. Initial delivery and handling cost
 Inventory Custodian Slip – 4. Installation and assembly cost
prepared when issuing semi- 5. Testing cost, net of disposal proceeds
expendable property. generated during testing
6. Professional fees
CHAPTER 10 : PROPERTY, PLANT, AND
EQUIPMENT Examples of costs that are expensed outright:

PPE are: 1. Costs of opening a new facility

 Tangible assets
 2. Cost of introducing a new product or  Construction by administration
service (self-construction) – costs of
3. Cost of conducting business in a new DM, DL, OH
location or with a new class of 3. Acquisition through exchange –
customers measurement depends on whether the
4. Administration and other general exchange transaction has commercial
overhead costs substance or not.
 With commercial substance –
MODE OF ACQUISITION
an exchange has a commercial
1. Acquisition by purchase – acquisitions substance if the subsequent
of PPE through purchase are classified cash flows of the entity change
as Capital Outlays (CO) in the budget as a result of the exchange.
registries. - FV of asset given up (+ cash
 Cash discounts are excluded paid / - cash received)
from initial measurement. - FV of asset received
 PPE purchased under - CA of asset given up (+ cash
installment basis is initially paid / -cash received)
measures at the cash price  Lacks commercial substance
equivalent. - CA of asset given up (+ cash
 Promotional items – same = paid / - cash received)
total acquisition cost is
No gain or loss shall arise if the asset
allocated to all, different =
received is measured at the carrying
initial cost of the promotional
amount of the asset given up.
item is its fair value.
 Individual costs of items of PPE 4. Acquisition through non-exchange
acquired at a “lump sum price” transaction – initially measured at FV
are determine by allocating it  Without condition – recognized
based on the relative FV of the immediately as income.
items.  With condition – initially
 Individual costs of items of PPE recognized as liability and
acquired at a “lump sum price” subsequently recognized as
are indicated in the invoice, the income when condition is met.
items shall be recognized as 5. Acquisition through intra-agency or
indicated in the invoice. inter-agency transfers – measured as CA
2. Acquisition by construction – of the asset received.
acquisition of PPE through construction 6. Acquisition through finance lease
are also classified as Capital Outlays
SUBSEQUENT EXPENDITURES ON RECOGNIZED
(CO) in the budget registries. Costs are
PPE
initially recorded in CIP, upon
completion it is reclassified to the Capitalization of costs ceases when the PPE is in
appropriate PPE account. the location and condition necessary for it to be
 Acquisition through capable. Cost incurred in using or redeploying a
construction contracts awarded PPE are not capitalized.
to contractors – contract price
Subsequent expenditures recognized as Rearrangement – relocation /
expenses: reinstallation. Rearrangement cost are
capitalized and depreciated over the
1. Cost incurred while an item capable of
remaining life of the related asset.
operating in the manner intended by
the management has yet to be brought SUBSEQUENT MEASURENT
into the use or is operated at less than
PPE are subsequently measured using cost
full capacity.
model, cost less any accumulated depreciation
2. Initial operating losses.
and any accumulated impairment losses.
3. Cost of relocating or reorganizing part
or all of the entity’s operations.  Depreciation – is the systematic
allocation of the depreciable amount of
As a general rule, subsequent expenditures on
an asset over its useful life.
recognized PPE are expensed.
 Depreciable amount – cost of an asset
GUIDELINES WHEN ACCOUNTING FOR less its residual value.
SUBSEQUENT EXPENDITURES  Residual value – amount the entity
would currently obtain from disposal of
1. Repairs and maintenance
the asset, after deducting the estimated
 Minor repairs – expense
costs of disposal.
 Major repairs – capitalized
2. Replacement costs – capitalized Depreciation is recognized as expense unless it
3. Spare parts and servicing equipment forms part of the carrying amount f another
 Minor – inventory, expense asset.
 Major – PPE
GUIDELINES IN DEPRECIATING ITEMS IN PPE
4. Betterments – capitalized
- an increase in the previously assessed 1. Three factors to consider:
physical output / service capacity  Initial cost
- a reduction in associated operating  Useful life
costs  Residual value
- an extension of the estimated useful 2. All items of PPE shall be depreciated,
life except land and heritage assets.
- an improvement in the quality of 3. Depreciation begins when the asset is
output available for its intended use.
Subsequently depreciated as follows:  On or before 15th of the month
 Over the remaining useful life – computed at the beginning of
 Over the extended useful life that month.
5. Additions and rearrangements  After the 15th of the month –
Additions – computed at the beginning of
 new unit (depreciated over its the following month.
own useful life) 4. Depreciation ceases when the asset is
 expansion, extension, derecognized or fully depreciated.
enlargement (depreciated over 5. Straight line method of depreciation
the shorter of its useful life and shall be used unless another method is
remaining life of PPE) appropriate.
6. The estimation of the useful life is a IMPAIRMENT
matter of judgement, based on the
PPE is impaired if its CA > Recoverable service
entity’s experience with similar assets.
amount (higher of a non cash-generating asset’s
FV less CTS and its Value in use)

An entity shall consider the following

indications of impairment:

1. External sources of information

 Cessation
 Significant long-term changes
with adverse effect
2. Internal sources of information
 Physical damage
 Significant changes in the
expected use of an asset that
adversely affects its recoverable
amount
 Cessation
 Service performance is
significantly worse

COMPUTATION OF VALUE IN USE

1. Value in use of a cash generating asset –

PV of the estimated cash flows.
2. Value in use of a non-cash generating
asset – PV of asset’s remaining service
potential.
7. Residual value shall be at least 5% of It can be computed using:
cost, unless an entity determines a
more appropriate estimate, subject to  Depreciated replacement cost approach
approval of COA.  Restoration cost approach
8. Residual value and useful life of an asset  Service units approach
shall be reviewed at least each annual REVERSAL OF IMPAIRMENT – same as those
reporting date, any changes shall be used for investment property.
accounted for as a change in an
accounting estimate. HERITAGE ASSETS
9. Depreciation shall be recognized on a Heritage assets are those which have historical,
monthly basis. cultural and environmental significance, and are
10. Each part of an item of PPE with a cost intended to be preserved for future
that is significant in relation to the total generations.
cost shall be recorded and depreciated
separately. - measured at cost but if acquired through non-
exchange transaction cost is FV.
- not depreciated but subject to impairment. - disposals shall be in accordance with the
Supply and Property Management Manual.
- not recognized in the books of accounts,
recorded in the registry of Heritage Assets. IDLE, FULLY DEPRECIATED, UNSERVICEABLE &
LOST PPE
INFRASTRUCTURE ASSETS
 Idle – not derecognized
Infrastructure assets:
 Fully depreciated – not derecognized
 Part of a system  Unserviceable – derecognized
 Specialized in nature  Lost – derecognized
 Immovable
RECEIPT AND DISPOSITION OF PPE
 May be subject to constraints on
disposal 1. Property card
2. Property, plant and equipment ledger
- measures at cost and subsequently
card
depreciated.
3. Property acknowledgement receipt
- no residual value. 4. Report on the physical count of
property, plant and equipment
REFORESTATION PROJECTS 5. Inventory and inspection report for
- recorded as land improvements in the books unserviceable property
of accounts of DENR 6. Report of lost, stolen, damaged or
destroyed property
Initial cost include: 7. Property transfer report
 Survey, mapping, planning BORROWING COSTS
 Nursery operation and seedling
production or procurement Borrowing costs are interest and other
 Plantation establishment expenses incurred by an entity in connection
with the borrowing of funds.
- initial cost are recorded in “CIP-Land
Improvements” account pending the Recognition:
completion which normally takes 3 years. 1. Benchmark treatment – expense in the
- upon completion costs are reclassifies to the period incurred.
“Land Improvements, Reforestation Projects.” 2. Allowed alternative treatment –
capitalized if the borrowing costs are
- not depreciated but subject to impairment. directly attributable to the acquisition
DERECOGNITION of a qualifying asset (takes a substantial
period of time to get ready for its
Carrying amount of a PPE is derecognized when intended use/sale)
it is disposed or when no future economic
benefits is expected. Applications:

- difference between CA and net disposal 1. NG (recorded by BTr) – expensed

proceed is recognized as gain/loss in surplus or 2. Government agencies – capitalized
deficit. SPECIFIC BORROWINGS
Capitalizable BC = Actual borrowing costs –
Investment income

GENERAL BORROWINGS

Capitalizable BC = Average Expenditure X

Capitalization Rate*

*Capitalization rate = Total interest expense on

general borrowings/Total general borrowings