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Chapter 3 Page 1

The document discusses the elements of financial statements for government and non-profit organizations under accrual accounting. It defines assets, liabilities, equity, income and expenses and provides the account code structure used in the Philippine Chart of Accounts consisting of an 8 digit code including the account group, major account, sub-major account and general ledger accounts.

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28 views2 pages

Chapter 3 Page 1

The document discusses the elements of financial statements for government and non-profit organizations under accrual accounting. It defines assets, liabilities, equity, income and expenses and provides the account code structure used in the Philippine Chart of Accounts consisting of an 8 digit code including the account group, major account, sub-major account and general ledger accounts.

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dar •
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© © All Rights Reserved
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PRE8 - Accounting For Government & Non-Profit Organization

Elements of Financial Statements

The basis for coding the object classification in the COA Revised Chart of Accounts is accrual
accounting, which requires transactions to be recorded in the period when they occur (and not when
cash or its equivalent is received or paid). Thus, the transactions and events are recorded in the
accounting records and recognized in the financial statements of the periods to which they relate.

Elements of Financial Statements of government agencies recognized under accrual accounting 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 are shown in the Statement of Income and Expenses as
revenue/income and expenses. The codes, per COA Cir. No. 2013-002 dated January 30, 2013 and
definitions of the different elements are as follows:

Code Account Groups

1 Assets - economic resources of an agency that are recognized and measured in


conformity with generally accepted accounting principles. An asset is any owned physical
object (tangible) or right (intangible) with economic value that is expressed, for accounting
purposes, in terms of its cost or some other value. These other values include revalued
amounts, current cost, net realizable value, fair value and recoverable amounts.

2 Liabilities - economic obligations of an agency that are recognized and measured in


conformity with accounting principles. Liabilities also include certain deferred credits that are
not obligations, but which are nonetheless recognized and measured according to accounting
principles as outlined in Philippine Public Sector Accounting Standards.

3 Equity -residual interest of the government in an agency which is the excess of the
agency's assets over its liabilities.

4 Income - the gross inflow of economic benefits or service potential during the reporting
period, when those inflows result in an increase in net assets/equity, other than increases
relating to contributions from owners. The term “income” is broader that revenue and includes
gains in addition to revenue.

5 Expenses - refer to decrease in economic benefits or service potential during the


reporting period in the form of outflows or consumption of assets or incurrence of liabilities that
result in decrease in net assets/equity, other than those relating to distributions to owners.
(PPSAS 1 - Presentation of Financial Statements)
PRE8 - Accounting For Government & Non-Profit Organization

COA Cir. No. 2013-002 further provides that the account code structure consists of eight (8)
mandatory digits as follows:

The Account Group represents the accounts classification as to Assets, Liabilities, Equity, Income
and Expenses.

The Major Account group represents classification within the account group; e.g. for asset major
accounts: Cash and Cash Equivalents, Investments, Receivables, Inventories, Investment Property',
etc.

The Sub-Major Account group represents classification within the major account, e.g. for Cash and
Cash Equivalent: Cash on Hand, Cash in Bank-Local Currency, Cash in Bank-Foreign Currency, etc.

The General Ledger accounts represent the accounts to be presented in the detailed financial
statements, e.g. Cash-Collecting Officer, Petty Cash, etc. This is composed of two segments. The
first two digits from the left is the general ledger code, and the last digit is reserved for contra
accounts like, Allowance for Impairment, Accumulated Depreciation, etc.

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