MODULAR LEARNING NO.

1
PUBLIC ACCOUNTING AND BUDGETING
Professor: MRS. JESUSA MARIE R. MUSNIT, MPA

In this chapter, the Chart of Accounts based Volume III of the New Government Accounting
System of the Philippines will be discussed. This focuses on the accounts being used by the national
government agencies and local government units. It is a standard tool in government accounting and
paves way for government employees, officials and the public to have a parallel understanding in the
use of the account codes.

I. INTRODUCTION

The Chart of Accounts provides the framework within which the accounting records are
constructed. It is defined as a list of general ledger accounts consisting of real and nominal accounts.

II. RATIONALE

Its rationale is prescribed for use by all national government agencies and local government
units. The descriptions of all the accounts and the instructions as to when these are to be debited and
credited are provided to achieve uniformity in the recording of government financial transactions.

III. THE ELEMENTS OF FINANCIAL STATEMENTS

Elements of financial statements of government agencies are those elements that relate to the
status or measurement of financial position and measurement of performance of government
agencies, which are relevant to decisions that would require the commitment of resources. Those
elements directly related to the measurement of financial position as shown in the Balance Sheet are
assets, liabilities and equity. The elements directly related to the measurement of performance which
are shown in the Statement of Income and Expenses are revenue/income and expenses. The
definitions of the different elements are as follows:

a. Assets – economic resources of an agency that are recognized and measured in

conformity with generally accepted accounting principles. Assets also include certain
deferred charges that are not resources but that are recognized and measured in
conformity with generally accepted accounting principles.

b. Liabilities – economic obligations of an agency that are recognized and measured in

conformity with generally accepted accounting principles. Liabilities also include certain
deferred credits that are not obligations but that are recognized and measured in
conformity with generally accepted accounting principles.

c. Equity – residual interest of the government in an agency which is the excess of the
agency’s assets over its liabilities.
d. Revenue/Income – increase in economic benefits during the accounting period in the
form of inflows or enhancements of assets or decrease of liabilities that results in
increases in equity.
e. Expenses – decrease in economic benefits during an accounting period in the form of
outflows or depletions of assets or incurrence of liabilities that results in decreases in
equity.
MODULAR LEARNING NO. 1
PUBLIC ACCOUNTING AND BUDGETING
Professor: MRS. JESUSA MARIE R. MUSNIT, MPA

Balance Sheet Accounts

The balance sheet accounts consist of assets, liabilities and equity. These are classified into
the following:

Assets -
Current Assets
Cash
Receivables
Marketable Securities
Inventories
Prepaid Expenses
Other Current Assets
Long-Term Investments
Property, Plant and Equipment
Other Assets

Liabilities -
Current Liabilities
Long-Term Liabilities
Other Liabilities

Equity -
Government Equity

Revenue/Income and Expense Account

The revenue/income and expenses consist of the following:

Revenue/Income
General Income Accounts
Specific Income Accounts

Expenses
Personal Services
Maintenance and Other Operating Expenses
Financial Expenses

Classification of Revenue/Income
The revenue/ income accounts are classified into:

a. General Income Accounts - This account classification encompasses all types of

revenue/income generated by government agencies in the exercise of their administrative
and regulatory function, income from public enterprises/investments, and income from
grants and donations including subsidies.
MODULAR LEARNING NO. 1
PUBLIC ACCOUNTING AND BUDGETING
Professor: MRS. JESUSA MARIE R. MUSNIT, MPA

b. Specific Income Accounts - This account classification encompasses all taxes imposed
on taxable income, properties, and use or sale of goods and services, taxes on
international trade and transactions and other taxes including fines and penalties. Also
included under these accounts are income generated from local government, schools and
hospital operations.

Income realized/collected for which the agency is authorized to use but required to be
remitted to the National Treasury shall be recorded under the Regular Agency (RA) books. A
receivable account, Due from National Treasury, shall be debited upon remittance to the account of
the Treasurer of the Philippines and the same account shall be credited upon receipt of the Notice of
Cash Allocation issued by the DBM. At the end of the year, the income account shall be closed to the
Income and Expense Summary account. Likewise, income collected and deposited under the
agencies’ accounts with AGDBs, as authorized, shall be recorded in the RA books.

Those income realized/collected for the National Government (NG) and for which the agency
is not authorized to use shall be recorded under the NG books maintained by the agency. A liability
account, Due to National Treasury, shall be set up upon accrual/collection and the same account shall
be debited upon remittance to the National Treasury.

Classification of Expenses
The expense accounts are classified into:

a. Personal Services (PS) - These accounts include basic pay, all authorized allowances,
bonus, cash gifts, incentives and other personnel benefits of officials and employees of
the government.

b. Maintenance and Other Operating Expenses (MOOE) - These accounts include

expenses necessary for the regular operations of an agency like, among others, traveling
expenses, training and seminar expenses, water, electricity, supplies expense,
maintenance of property, plant and equipment, and other maintenance and operating
expenses.

c. Financial Expenses (FE) - These accounts include bank charges, interest expense,
commitment charges, documentary stamp expense and other financial charges. It also
includes losses incurred relative to foreign exchange transactions and debt service subsidy
to GOCCs.

Intermediate Accounts

These are accounts which are closed ultimately to the Government Equity account at the end
of the accounting period. These include Cost of Goods Sold, Income and Expense Summary, Prior
Years’ Adjustments, Retained Operating Surplus, Subsidy to Regional Offices/Staff Bureaus and
Subsidy to Operating Units, among others.
MODULAR LEARNING NO. 1
PUBLIC ACCOUNTING AND BUDGETING
Professor: MRS. JESUSA MARIE R. MUSNIT, MPA

ACTIVITY:
1. (20 points) Based on the Chart of Accounts, give at least ten (10) account titles with its
corresponding account codes for:
a. Assets (10); and
b. Libality and Equity (10).

2. (20 points) Based on the Chart of Accounts, give at least ten (10) account titles with its
corresponding account codes for:
a. Expenses (10); and
b. Revenue/Income (10).

3. Describe the following accounts according to the Volume III Manual:

a. Petty Cash Fund (2 points)
b. Accounts Receivable (2 points)
c. Receivables-Disallowances/Charges (2 points)
d. Gratuity Deposits (2 points)
e. Furniture and Fixture (2 points)

4. (10 points) What is the importance of the Chart of Accounts in government accounting?