Overview of

Government Accounting
Chapter 1

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Learning Objectives:

Differentiate government accounting from the accounting for business

entities.
State the government entities charged with accounting responsibilities.
.

Describe briefly the GAM for NGAs.

State the basic principles used in government accounting.
State the recognition criteria for assets.

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Government Accounting?

It encompasses the process of analyzing, recording, classifying, summarizing

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and communicating all transactions involving the receipt and disposition of
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government funds and property, and interpreting the results thereof. (State
Audit Code of the Philippines, P.D. 1445 Sec. 109).

The objective of Government Accounting:

To produce information concerning past operations and present conditions;
To provide a basis for guidance for future operations;
To provide for control of the acts of public bodies and officers in the receipt,
disposition and utilization of funds and property; and
To report on the financial position and the result of operations of government
agencies for the information of all persons concerned. (P.D. 1445, Sec 110)

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Government Accounting?

It places greater emphasis on the following:

The sources of government funds include receipts from taxes and other fees,
borrowings, and grants from other government and international bodies.
The utilization of government funds include expenditures on programs, projects,
unanticipated losses from calamities and the like.

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Responsibility, Accountability and Liability
over Government Funds and Property

Responsibility over Government Funds and Property

Government resources should be utilized efficiently and effectively in accordance
with law.
The head of the agency is directly responsible in implementing this policy and
primary responsible for government resources entrusted to his agency.
Those who are entrusted with the possession of government resources are directly
responsible to the head of the agency (ex. staffs of the RD).
All those who are exercising authority over a government agency shall share fiscal
responsibility.

State Audit Code of the Philippines , P.D. No. 1445

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Responsibility, Accountability and Liability
over Government Funds and Property

Accountability over Government Funds and Property

A government officer entrusted with the possession of government resources is
responsible for the safekeeping therefor in accordance with the law. Every
accountable officer shall be properly bonded. (P.D. 1445 and E.O. No. 292)
The transfer of government funds from one officer to another shall, except as
allowed by law, be made only after the authorization of the COA. The transfer shall
be properly documented in an invoice and receipt. (P.D. No. 1445)

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Responsibility, Accountability and Liability
over Government Funds and Property

Liability over Government Funds and Property

The unlawful use of government resources shall be the personal liability of the
employee found to be directly responsible therefor.
Every accountable officer shall be liable for all those resulting from unlawful use or
negligence in the safekeeping of government resources.
No accountable officer shall be relieved from liability merely because he has acted
under the direction of a superior officergumis unlawfully utilizing the government
resources entrusted to him, unless before the act, he has not notified the superior
officer, in writing, that the utilization is illegal. The superior officer shall be
primarily liable while the accountable officer who fails to serve the required notice
shall be secondary liable.
An accountable officer shall immediately notify COA for any loss of government
funds from unforeseen events (force majeure) within 30 days. Failure to do so will
not relieve the officer of liability.

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 Accounting Responsibility

Commission on Audit (COA)

l Department of Budget and Management (DBM)

Bureau of Treasury (BTr)
Government Agencies

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Accounting Responsibility

Commission on Audit (COA)

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

Department of Budget and Management (DBM)

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

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Accounting Responsibility
y
Bureau of Treasure (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 and control the disbursement thereof; and
Maintain accounts of financial transactions of all national government offices, agencies
and instrumentalities.

Government Agencies
It 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
GOCC, including its subsidiaries, or other self-governing board or commission of the
government. (P.D. 1445) .

Are responsible in directly implementing the projects of, and performing the
functions delegated by, the government.
Each agency shall maintain accounting books and budget registries which are
reconciled with the cash records of the BTr and the budget records of the COA and
DBM.
All agencies are required by law to have accounting units/divisions/departments
even barangays.
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Financial Reporting System of National
Government Bureau of Treasury (BTr)
-each entity reconciles
accounting books with cash
records of BTr.

Government Agencies
-maintains its own
accounting books and budget
registries.
Commission On Audit
-each accounting books are subject to
Department of Budget and audit by COA.
Management. -each entities reconciles budget registries
-each entities reconciles with budget records of COA.
budget registries with budget -each entity submits financial reports to
records of DBM. COA for consolidation.
-consolidates financial reports of
government agencies and submits it to
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the President and Congress.
Government Accounting Manual for NGAs
The old GAM was replaced by the New Government Accounting Manual (NGAM)
in 2002.
NGAM was replaced by GAM for NGAs in January 1, 2016.
GAM for NGAs was promulgated to harmonize the government accounting
standards with international accounting standards, particularly the
International Public Sector Accounting Standards (IPSAS). The IPSAS is based
on the International Financial Reporting Standards (IFRS).
The Philippine Government has adopted the IPSAS through Philippine Public
Sector Accounting Standards (PPSAS). The Provision of the PPSAS are
incorporated in the GAM for NGAs.
IFRS to PPSAS to IPSAS to the creation of GAM.
GAM for NGAS is promulgated by COA based on the authority conferred to it
by the Philippine Constitution. (Art. IX-D, Sec 2 (2), Philippine Constitution)

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GAM for NGAs
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It provide concepts for the preparation of general purpose financial statements in

y accordance with the Philippine Public Sector Accounting Standards (PPSAS).

Reporting on budget, revenue, and expenditure in accordance with the rules and
regulations.
Objective of GAM for NGAs:
Setting the standards, policies, and procedures in accounting for government funds
.

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and property.
Coding structures and accounts; and
Accounting books, registries, records forms, reports and financial statements.

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.
Basic Accounting and Budget Reporting
Principles
It should comply with the following:
Philippine Public Sector Accounting Standards (PPSAS) and other relevant rules and
regulations;
Budget Basis- the presentation of the budget information in the financial statement;
Revised Chart of Accounts as prescribed by COA;
Double Entry Bookkeeping;
Financial Statement based on Accounting and Budgetary Records;
Fund Cluster Accounting
Code 01 Regular Agency Fund
Code 02 Foreign Assisted Project Fund
Code 03 Special Account-Locally Funded/Domestic Grant Fund
Code 04 Special Account-Foreign Assisted/Foreign Grant Fund
Code 05 Internally Generated Funds
Code 06 Business Related Funds
Code 07 Trust Receipts
(*Separate accounting books (journals and ledgers and budget registries shall be maintained for every
cluster ex. separate accounting books and budget registries should be prepared for cluster 01 and
07. 7TH .

Accrual Basis of Accounting 14

Transactions are recognized when they occur and not when cash is received or paid. Thus,
transactions are recognized in the period which they relate.
Qualitative Characteristics of Financial
Reporting
These are the attributes that make information useful to users:
Understability – users can comprehend its meaning excluding complex matters.
Relevance – if it assist the users from evaluating past, present, or future events or
in conforming or correcting past evaluations. In order to be relevant, information
must be timely.
Materiality – Information is material if its omission or misstatement could influence
the decision of users. (Materiality depends on the nature or size of the item or
error, judged in the particular circumstances of its omission or misstatement. ) HF .

Timeliness – Information loses its relevance if there is undue delay in its reporting.
The complexity of an entity’s operation is not a sufficient reason for failing to
report on timely basis.
Reliability – free from material error and bias, and can be depended on by users to
represent faithfully that which it purports to represent or could reasonably be
expected to represent.
Faithful Representation – it should be presented in accordance with the substance
of the transaction and other events and not merely their legal form.
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Qualitative Characteristics of Financial
Reporting
These are the attributes that make information useful to users:
Substance Over Form – the substance of a transaction or other events is not always
consistent with their legal form. Transactions are presented in accordance with
their substance and economic reality, and not merely their legal form.
Neutrality – When it is free from bias. Information shall not be presented in a
manner that is designed to influence the user’s decision in order to achieve a
predetermined outcome.
Prudence – exercising caution when making estimates under conditions of
uncertainty, such that assets or revenue are not overstated and liabilities or
expenses are not understated.
Completeness – information should be complete within in the bounds of materiality
and cost.
Comparability – when users are able to identify similarities and differences
between information and information in other reports. It applies to the comparison
of financial statements of different entities and comparison of the same entity
over different periods. It also requires that users must be informed of the entity’s
policies, changes to those policies, and the effects of those changes and that 16
financial statements show corresponding information for preceding periods.
Components of General Purpose
Financial Statements
General Purpose Financial Statements are those intended to meet the needs
of users who are not in a position to demand reports tailored to meet their
particular information needs. (PPSAS 1.3)
Its complete set includes:
Statement of Financial Position
Statement of Financial Performance
Statement of Changes in Net Asset/Equity
Statement of Cashflows
Statement of Comparison of Budget and Actual Amounts (applicable only to Gov’t)
Notes to Financial Statements comprising a summary of significant accounting
policies and other explanatory notes.

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Elements of Financial Statements
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Assets
These are resources controlled by an entity as a result of past events, and from
which future economic benefits or service potential are expected to flow to the
entity.
Key features are:
The benefit must be controlled by the entity;
The benefit must have risen from past event; and
Future economic benefit or service potential must be expected to flow to the entity.

Control means the agency benefits the asset or preventing others from benefiting
the asset. Exception when the government agency has the legal ownership of the
property but the control of it is transferred to another party.
Benefit means the ability to use, exchange, lease, sell, or use the asset to settle
liabilities, or distribute to owners.
Past Event – a transaction or event giving rise to control of future economic
benefits must have occurred. A mere intention to acquire assets in the future does
not result to the recognition of assets in the present. 18
Elements of Financial Statements
Assets
Recognition of an Asset:
It is probable that economic benefits will flow to the entity; and
The asset has a cost or value (such as fair value) that can be measured reliabily.
Liabilities
Present obligations of the entity arising from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic
benefits or service potential.
Equity
Net Asset/Equity – It is the residual interest in the asset of the entity after deducting all
its liabilities.
Revenue
It is 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 contribution to owners.
Expenses
Are decreases 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 19
decrease in net assets’ equity, other than those relating to distribution to owners.
References:

GAM for NGAs Volume 1;

P.D. 1445 and E.O. No. 292;
Philippine Public Sector Accounting Standards (PPSAS) and .

Materials provided by Sir Roy

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