Government Accounting

Ruth C. Guzman
MPA-GA Student
 DEFINITION OF GOVERNMENT ACCOUNTING

Government Accounting encompasses the

process of analyzing, recording, classifying,
summarizing and communicating all transactions
involving the receipt and disposition of
government funds and property and interpreting
the results thereof.
 DEFINITION OF GOVERNMENT ACCOUNTING

As process, it consolidates all activities pertaining to the gathering

of data which are to be used as the bases for fiscal management
decisions. It includes:
1. Bookkeeping, referred to as analysis and recording.
2. Posting, grouping or classifying of similar items
3. Preparation of periodic financial reports such as the trial
balance,the financial statements and other supporting schedules.
4. Analysis of the financial reports to determine their accuracy and
adequacy as well as the efficiency and effectiveness of agency
operations.
 OBJECTIVES OF GOVERNMENT ACCOUNTING

Government Accounting has four objectives:

1. To produce information concerning past and present conditions.
2. To provide a basis for guidance for future operations.
3. To provide control of the acts of public bodies and offices in the
receipt, disposition and utilization of funds and property.
4. To report on the financial positions and results of the operations
of government agencies for the information of all persons
concerned.
*The first three objectives relate to management control while
the fourth relates to management accountability.
 GOVERNMENT ACCOUNTING SYSTEM

There are three systems of state accounting:

• NATIONAL GOVERNMENT ACCOUNTING

– that which is used by the different departments, bureaus, offices, and the field offices
and operating units of these agencies

• LOCAL GOVERNMENT ACCOUNTING

– used by provinces, cities and municipalities.

• COMMERCIAL ACCOUNTING
– used by the private sector but applied by Government Owned and/or Controlled
Corporations with propriety function.
GOVERNMENT ACCOUNTING FOR NGA
(Salient Features)
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 GOVERNMENT ACCOUNTING MANUAL FOR NGA

 The GAM will supersede the New Government Accounting Sytem (NGAS) Manual
that National Government Agencies have been using since 2002.

 The GAM contains the accounting policies in accordance with the Philippine Public
Sector Accounting Standards (PPSAS) as well as the guidelines and procedures to be
adopted by the accountants, budget officers, cashiers, property officers, accountable
officers and other finance personnel in recording and reporting government
financial transactions. It will serve as guide in the preparation of the financial
statements and other reports and the accomplishment and/or maintenance of
various registries, records and forms.
 GOVERNMENT ACCOUNTING MANUAL FOR NGA

Legal Basis:
The Government Accounting Manual (GAM) is prescribed by COA pursuant to
Article IX-D, Sec. 2 par. (2) of the 1987 Constitution of the Republic of the Philippines
which provides that:

“The Commission on Audit shall have exclusive authority, subject to the limitations
in this Article, to define the scope of its audit and examination, establish the techniques
and methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of
government funds and properties”.
 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 the PPSAS ;
d) RCA by COA;
e) double entry bookkeeping;
f) financial statements based on accounting and budgetary records; and
g) fund clustering accounting
OBJECTIVES OF GENERAL PURPOSE FINANCIAL STATEMENTS
The objectives of General Purpose Financial Statements (GPFSs) are to provide information about
the financial position, financial performance, and cash flows of an entity that is useful to a wide range of
users in making and evaluating decisions about the allocation of resources. Specifically, the objectives of
general purpose financial reporting in the public sector are to provide information useful for decision-
making, and to demonstrate the accountability of the enity for the resources entrusted to it.

COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS

a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Changes in Net Assets/Equity
d. Statement of Cash Flows
e. Statement of Comparison of Budget and Actual Amounts
f. Notes to the Financial Statements, comprising ammary of significant accounting policies and
other explanatory notes.
 BOOKS OF ACCOUNTS AND REGISTRIES

a. Journals c. Registries
 General Journal  Registries of Revenue and Other Receipts
 Registries of Appropriation and Allotments
 Cash Receipts Journal
 Registries of Allotments, Obligations and
 Cash Disbursement Journal Disbursement
 Check Disbursement Journal  Registries of Budget, Utilization and
Disbursements

b. Ledgers
 General Ledgers
 Subsidiary Ledgers
BUDGET AND FINANCIAL ACCOUNTABILITY REPORTS

• Quarterly Physical Report of Operation

• Statement of Appropriations, Allotments, Obligations, Disbursements and
Balances (SAAODB)
• Summary of Appropriations, Allotments, Obligations, Disbursements and
Balances by Object of Expenditures (SAAODBOE)
• List of Allotments and Sub-Allotments (LASA)
• Statement of Approved Budget,Utilizations, Disbursement and Balances
(SABUDB)
• Summary of Approved Budget, Utilizations, Disbursement and Balances by
Object of Expenditures (SABUDBBOE)
• Aging of Due and Demandable Obligations (ADDO)
• Monthly Report Of Disbursement (MRD)
• Quarterly Report of Revenue and Other Receipts (QRROR)
 CLASSIFICATION OF EXPENDITURES
Expenditures shall be classified into categories as maybe determined by the
DBM including, but not limited to the following;
a) entity incurring the obligation
b) Program, Activity and Project (PAP);
c) Object of expenditures, including personnel services (PS), maintenance
and other operating expenditures (MOOE), financial expenses (FE), and
capital outlays (CO);
d) Region or locality of use;
e) Economic or functional classification of the expenditures;
f) Obligational authority and cash transactions arising from fund releases;
and
g) Such other classifications as may be necessary for the budget process.
 REGISTRY OF APPROPRIATIONS AND ALLOTMENTS

The Registry of Appropriations and Allotments (RAPAL)

shall be maintained by NGAs to monitor appropriations and
allotments charged thereto. It shall show the original,
supplemental and final budget for the year and all allotments
received charged against the corresponding appropriation.
The balance is extracted every time an entry is made to
prevent incurrence of overdraft in appropriations. Separate
RAPAL shall be maintained by fund cluster and by Major
Final Output (MFO)/PAP/Appropriation Acts.
 REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENT

The Registries of Allotments, Obligations and

Disbursements (RAOD) shall be maintained by the Budget
Division/Unit of agencies to record allotments, obligations and
disbursements. It shall show the allotments received for the
year, obligations incurred against the corresponding allotment
and the actual disbursements made. The balance is extracted
every time an entry is made to prevent incurrence of
obligations in excess of allotment and overdraft in
disbursements against obligations incurred.
 REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENT

The RAODs shall be maintained by appropriation act, fund cluster, MFO/PAP, and
allotment class.
a) Registry of Allotments, Obligations and Disbursements-Personnel Services (RAOD-PS)
shall be used to record the allotments received, obligations incurred and disbursements
classified under PS.
b) Registry of Allotments, Obligations and Disbursements-Maintenance and Other
Operating Expenses (RAOD-MOOE) shall be used to record the allotments received,
obligations incurred and disbursements classified under MOOE.
c) Registry of Allotments, Obligations and Disbursements-Financial Expenses (RAOD-FE)
shall be used to record the allotments received, obligations incurred and disbursements
classified under FE.
d) Registry of Allotments, Obligations and Disbursements-Capital Outlays (RAOD-CO)
shall be used to record the allotments received, obligations incurred and disbursements
classified under CO.
 Responsibility Accounting
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 Responsibility Accounting

Responsibility Accounting is a system that

measures the plans (by budgets) and actions (by
actual results) of each responsibility center.

Responsibility Center- a part, segment, unit or

function of a government agency, headed by a
manager, who is accountable for a specified set of
activities
 Objectives of Responsibility Accounting

 Charge/Credit all costs and revenues to the correct

responsibility center
 Provide basis for making decisions for future
operations
 Facilitate review activities
 Monitor performance of each responsibility center
 Facilitate evaluation of effectiveness of agency’s
operations
 Revenue and Other Receipts
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 FUNDAMENTAL PRINCIPLES FOR REVENUE

 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.
 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 property.
 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.
 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 riles and
regulations issued by the Permanent Committe.
 FUNDAMENTAL PRINCIPLES FOR REVENUE

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

issuing an Official Receipt in acknowledgement therof.
 Where mechanical devices are used to acknowledge cash receipts, the COA may
approve, upon request, exemption from the use of accountable forms.
 At no instance shall temporary receipts be issued to acknowledge the receipt of public
funds.
 Pre-numbered ORs shall be issued in strict numerical sequence.
 An officer charged with the collection of revenue shall accept payment of 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.
 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 what account it was received.
 REVENUE SOURCES

Exchange Transactions Non-Exchange Transactions

• Sale of goods or Provision of • Tax Revenues
Services
• Fines and Penalties
-Service Income
-Business Income
• Shares, Grants and
• Use by others of entity assets Donations
-Interest Income • Present Obligation
-Royalties Recognized as a liability
-Dividends
is satisfied
 Other Receipts
• Notice of Cash Allocation
• Non-cash Availment Authority
• Cash Disbursement Ceiling
• Tax Remittance Advice
• Subsidy/Assistance from other NGAs, LGUs, GCs and Other Funds
• Refund of Cash Advances
• Performance bond/security deposits
• Refund of overpayment of expenses
• Collections made on behalf of another entity or non-government/private
organizations
• Intra-agency and inter-agency transfers
 Recognition

Non-Exchange
Exchange Transactions Transactions

Future economic When collected

benefits or service
 Measurable and
potential flow to the
legally collectible
entity
Such benefits can be
measured reliably
 Recognition (Exchange Transactions)

Sale of Goods
• Transfer of significant risk and rewards of ownership of the goods.
• Retains neither managerial involvement nor effective control over the
goods sold.
Provision of Services
• Straight-line basis over the specified period of the services
• Stage of completion of the transaction at the reporting date.
Use by others of entity assets
Interest- effective yield on the asset
Royalties- as earned
Dividends- right to receive payment is established
 Recognition (Non-Exchange Transactions)

The cash basis of accounting shall be applied by all

government agencies until a reliable model of measurement is
developed.
Taxation Revenue- determined future economic
at gross amount benefits potential flow
to the entity
Gifts and Donations (Other than
services in kind)
Fair value of the assets
can be measured
Goods in kind without condition- reliably
recognized immediately as
received
 Disbursement
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Basic Requirements for Disbursements and Required Certifications

• Necessity and legality of charges to allotments as well as the validity,

propriety and legality of supporting documents certified by the Head of the
Requesting Unit;
• Availability of allotment/budget for obligation/utilization certified by the Budget
Officer/Head of Budget Unit;
• Legality of the transactions and conformity with existing rules and regulations
certified by the requesting and approving officials;
• Availability of cash and completeness of supporting documents certified by
the Chief Accountant;
• Approval of the disbursement by the Head of Agency or by his duly
authorized representative; and
• Availability of funds certified by the Chief Accountant.
• Disbursement Authority
NGA's are authorized to disburse/pay based on the Notice of Cash Allocation
(NCA), Notice of Transfer Allocation (NTA), Cash Disbursement Ceiling (CDC) or other
authority that may be provided by law.
• Mode of Disbursement
Payments /Disbursements by NGAs may be effected through the treasury Account
(TSA), by issuing:
 Modified Disbursement System (MDS) check or commercial check
 Cash through Cash Advance
 Advice to Debit Account (ADA)
 Tax Remittance Advice (TRA)
 Working Fund/CDC
 Direct Payment
 Cashless Purchase Cash System (CPCS)
 INVENTORIES
• Classification of Inventories
– For Manufacturing
– For Sale
– For Distribution
– For Consumption
• Measurement of Inventories
– Lower of cost and net realizable value
– FV at the date of acquisition
– Lower of cost and current replacement cost
 Methods of Accounting for Inventories
• Perpetual Inventory
Continually records all the changes in inventory
Use of supply ledger card-by the Accounting Unit
Use of Stock Card- by the Supply Unit

• Periodic Inventory
All acquisition are recognized by debit to purchases
 Property, Plant and Equipment
• Tangible Asset
– purchased, constructed, developed or otherwise acquired
– expected to be used during more than one reporting period
– held for use in the production or supply of goods and services, rental to others
and administrative purposes
– not intended for resale in the ordinary course of operations

• Criteria for Recognizing PPE

 future economic benefits or service potential will flow to the entity
 cost or fair value can be measured reliably
 beneficial ownership and control rest with the entity
 used to achieve government objectives
 meets the capitalization threshold of P15,000.00
 Property, Plant and Equipment
Policies on the Application of P15,000 Threshold
– minimum cost of the individual asset
– individual items below the threshold but work together as one network of asset, the
amount exceeds the threshold
– the P15,000 shall not be applied to the aggregate value of PPE acquired in bulk

Policies Applicable to Depreciation of PPE

• All PPE shall be depreciated except land and not recognized heritage assets
• Depreciation begins when the asset is available for use, if availability is on or before
the 15th of the month, record depreciation during the month, if after the 15th of the
month, depreciation shall be for the succeeding month
• Adopt straight line method of depreciation
• Estimation of the useful life of the asset is a matter of judgment based on the
experience of the entity
PPE Shall be Depreciated over the Following Life Spans

Property, Plant and Equipment Estimated Useful Life

Land Improvements useful life of the asset to which the

improvement was made
Infrastructure Assets 20 to 50 years
Buildings and Other Structures 30 to 50 years
Machinery and Equipment 5 to 15 years
Transportation Equipment:
Motor Vehicle 5 to 15 years
Motor Vehicles (Military Vehicles) 3 to 20 years
Trains 10 to 20 years
Aircrafts and Aircrafts Ground Equipment 10 to 20 years
PPE Shall be Depreciated over the Following Life Spans

Property, Plant and Equipment Estimated Useful Life

Watercrafts 10 to 25 years
Furniture, Fixtures and Books 2 to 15 years
Leased Assets, excluding Land
useful life of the leased asset or the lease
term, whichever is shorter.
Leased Assets Improvements
useful life of the improvement or the lease
term, whichever is shorter.

Service Concession Assets useful life of the service concession asset or

the term of the service concession
arrangement, whichever is shorter.
Other Property, Plant and Equipment
2 to 15 years
 Policies applicable to Depreciation of PPE

• Residual value is at least 5% of the cost

• Estimated useful life and residual value shall be reviewed on a
regular basis and revised if a change is clearly demonstrated
• Depreciation is recorded as a debit to Depreciation
Expense and a credit to Accumulated Depreciation
• Each part of a PPE with a cost that is significant to the total cost
shall be recorded and depreciated separately
• Computation of depreciation shall be cost less residual value over
the estimated useful life
 Idle, Unserviceable and Fully Depreciated PPE
• IDLE
• does not preclude depreciating the PPE
• future benefits are consumed not only through usage but also through obsolescence, and war
and tear
• UNCERVICEABLE
– no longer capable of providing future economic benefits or service potential
– reported in the Inventory and Inspection Report of Unserviceable Property (IIRUP)
– dropped from the books by debiting impairment loss
-PPE (net of cost of the PPE less accumulated depreciation)
• FULLY DEPRECIATED
– carrying amount is equal to zero, or carrying amount is equal to residual value
– fully depreciated assets remaining in service and related accumulated depreciation shall not be
removed from the accounts.
 REVISED CHART OF ACCOUNTS

A. ACCOUNT CLASSIFICATION

1 ASSETS
01 Cash and Cash Equivalents
02 Investments
03 Receivables
04 Inventories
05 Investment Property
06 Property, Plant & Equipment
07 Biological Assets
08 Intangible Assets
09 Other Assets
 REVISED CHART OF ACCOUNTS

A. ACCOUNT CLASSIFICATION

2 LIABILITIES
01 Financial Liabilities
02 Inter-Agency Payables
03 Intra-Agency Payables
04 Trust Liabilities
05 Deferred Credits/Unearned Income
06 Provisions
07 Other Payables
 REVISED CHART OF ACCOUNTS
A. ACCOUNT CLASSIFICATION

3 EQUITY

01 Government Equity
02 Revaluation Surplus
03 Intermediate Accounts
04 Equity in Joint Venture
05 Unrealized Gain/Loss
 REVISED CHART OF ACCOUNTS
A. ACCOUNT CLASSIFICATION
REVENUES AND EXPENSES

4 REVENUE
01 Tax Revenue
02 Service and Business Income
03 Assistance and Subsidy
04 Shares, Grants and Donations
05 Gains
06 Other Non-Operating Income
 REVISED CHART OF ACCOUNTS
A. ACCOUNT CLASSIFICATION
REVENUES AND EXPENSES

5 EXPENSE

01 Personnel Services
02 Maintenance and Other Operating Expenses
03 Financial Expenses
04 Direct Costs
05 Non-Cash Expenses
 REVISED CHART OF ACCOUNTS
B. CODING SCHEME
1. Codes are assigned to account groups to facilitate location of accounts in the general
and subsidiary ledgers, to provide systematic arrangement and classification of
accounts and facilitate preparation of the consolidated financial reports as follows:
Code Account Groups
1 Assets
2 Liabilities
3 Equity
4 Income
5 Expenses
 CODING SCHEME
2. The account code structure consists of eight (8) mandatory digits as follows:
0-00-00-00 0

Account Group

Major Account Group

Sub-Major Account Group

General Ledger Account

General Ledger Contra Account
 CODING SCHEME
Coding of Assets without Contra Accounts shall be as follows:
Example:
Cash Collection Officer 0-01-01-01 0

Asset

Cash & Cash Equivqlents

Cash on Hand

Cash-Collecting Officers
General Ledger Contra-Accounts
 CODING SCHEME
Coding of Assets with Contra Accounts shall be as follows:
Allowance for Impairment-
Accounts Receivable 0-01-01-01 0

Asset

Receivables

Loans and Receivable Account

Accounts Receivable
Allowance for Impairment-
Accounts Receivable
THANK YOU..