MODULE 1

Topic 1- Overview of Government Accounting

I. Learning Outcomes

At the end of the topic, students are expected to:

1) Compare and contrast the government accounting from the accounting for business
entities;
2) Identify the basic principles used in government accounting; and
3) Explain briefly the GAM for NGAs.

II. Discussions

Definition of 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.” (State Audit Code of the
Philippines, P.D. No. 1445, Sec. 109)

Government Accounting vs. Business Accounting

Compared to the accounting for business entities, government accounting places greater
emphasis on the following:
 Sources and utilization of government funds; and
 Responsibility, accountability and liability of entities entrusted with government funds and
properties.

Responsibility, Accountability and Liability over Government Funds and Property

 Government resources must be utilized efficiently and effectively in accordance with the
law.
 The head of a government agency is directly responsible in implementing this policy.
 All other personnel entrusted with the custody government resources are responsible to
the head of the government agency, are accountable for the safeguarding thereof, and
are liable for any losses.
Accounting Responsibility

The following offices are charged with government accounting responsibility:

1) Commission on Audit (COA)

 Has the exclusive authority to promulgate accounting and auditing rules and
regulations
 Keep the general accounts of the government, supporting vouchers and other
documents
 Submit financial reports to the President and Congress.

2) Department of Budget and Management (DBM)

 Responsible for the formulation and implementation od the national budget with
the goal of attaining the nation’s economic objectives.

3) Bureau of Treasury (BTr)

 The BTr functions under the Department of Finance and is the cash custodian of
the government. The BTr is authorized to receive and keep national funds and
manage control the disbursements thereof and maintain accounts of financial
transaction of all national government agencies, and instrumentalities.

4) Government agencies
 Government agencies refers to any department, bureau or office of the national
government, or any of its branches and instrumentalities, or any political
subdivision, as well as any government-owned or controlled corporation (GOCC)
including its subsidiaries or other self-governing board or commission of
government.
 The government agencies are responsible in directly implementing the projects of,
and performing the functions delegated by, the government.
 Each agency shall maintain accounting books and budget restrictions which are
reconciled with the cash records of the Btr and the budget records of the COA and
DBM.
 Government agencies are required by law to have accounting
units/divisions/departments.

Fundamental Principles for Revenue

All revenues accruing to the NGAs shall be governed by the following fundamental principles:

a) Unless otherwise specifically provided by law, all revenues accruing to an entity by

virtue of the provisions of existing law, orders and regulations shall be
 deposited/remitted in the National Treasury (NT) or in any duly authorized government
depository, and shall accrue to the General Fund (GF) of the NG. (Sec. 65(1), P.D. No.
1445)

b) Except as may otherwise be specifically provided by law or competent authority, all

moneys and property officially received by a public officer in any capacity or upon any
occasion must be accounted for as government funds and government property. (Sec.
42, Chapter 7, Title I(B), Book V, E.O. No. 292)

c) Amounts received in trust and from business-type activities of government may be

separately recorded and disbursed in accordance with such rules and regulations as
may be determined by a Permanent Committee composed of the Secretary of Finance
as Chairman, and the Secretary of Budget and Management and the Chairman, COA,
as members. (Sec. 65(2), P.D. No. 1445)

d) Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds

other than the GF, only when authorized by law as implemented by rules and
regulations issued by the Permanent Committee. (Sec. 66, P.D. No. 1445)

e) No payment of any nature shall be received by a collecting officer without immediately

issuing an official receipt in acknowledgement thereof. The receipt may be in the form
of postage, internal revenue or documentary stamps and the like, officially numbered
receipts, subject to proper custody, accountability, and audit. (Sec. 68(1), P.D. No.
1445)

f) Where mechanical devices (e.g. electronic official receipt) are used to acknowledge
cash receipts, the COA may approve, upon request, exemption from the use of
accountable forms. (Sec. 68 (2), P.D. No. 1445)

g) At no instance shall temporary receipts be issued to acknowledge the receipt of public

funds. (Sec. 72, GAAM Volume I)

h) Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each
receipt shall be exact copies or carbon reproduction in all respects of the original. (Sec.
73, GAAM Volume I)

i) An officer charged with the collection of revenue or the receiving of moneys payable to
the government shall accept payment for taxes, dues or other indebtedness to the
government in the form of checks issued in payment of government obligations, upon
proper endorsement and identification of the payee or endorsee. Checks drawn in
favor of the government in payment of any such indebtedness shall likewise be
accepted by the officer concerned.

At no instance should money in the hands of the CO be utilized for the purpose of
cashing private checks. (Sec. 67(1) and (3), P.D. No. 1445)
 j) Under such rules and regulations as the COA and the Department of Finance (DOF)
may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge
receipt of all funds received by them, the acknowledgement bearing the date of actual
remittance or deposit and indicating from whom and on what account it was received.
(Sec. 70, P.D. No. 1445)

Fundamental Principles for Disbursement of Public Funds

Section 4 of P.D. No. 1445, the Government Auditing Code of the Philippines, provides
that all financial transactions and operations of any government entity shall be governed by
the following fundamental principles:

a) No money shall be paid out of any public treasury or depository except in pursuance of
an appropriation law or other specific statutory authority.

b) Government funds or property shall be spent or used solely for public purposes.

c) Trust funds shall be available and may be spent only for the specific purpose for which
the trust was created or the funds received.

d) Fiscal responsibility shall, to the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and operations of the government
agency.

e) Disbursement or disposition of government funds or property shall invariably bear the

approval of the proper officials.

f) Claims against government funds shall be supported with complete documentation.

g) All laws and regulations applicable to financial transactions shall be faithfully adhered
to.

h) Generally accepted principles and practices of accounting as well as of sound

management and fiscal administration shall be observed, provided that they do not
contravene existing laws and regulations.

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.

***For the complete Government Accounting Manual (GAM) for National Government
Agencies (NGAs), please see the succeeding section of Module 1 in the Canvass.
(Please read Chapters 1-2 of the GAM for NGAs, Volume 1)

References:

 Millan, Z.V.B. (2017). Government Accounting & Accounting for Non-Profit

Organizations. Bandolin Enterprise.
 Government Accounting Manual for National Government Agencies, Volume 1 –
Accounting Policies, Guidelines and Procedures, and Illustrative Accounting Entries
 Presidential Decree No. 1445