CHAPTER 1

Overview of Government Accounting

Introduction

‘’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 there of.’’

The objectives of government accounting are:

a) To produce information concerning past operations and present conditions;

b) To provide a basis for guidance for future operations;

c) To provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of
funds and property; and
d) To report on the financial position and the result of operation of government agencies for the information of
all persons concerned.

 Like the accounting for business entities, government accounting is also a process of producing
information that is useful in making economic decisions. Government accounting, however, places
greater emphasis on the following:

a. Sources and utilization of government funds; and

b. Responsibility, accountability and liability of entities entrusted with government funds and properties.

 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 includes expenditures on programs, projects, unanticipated
losses from calamities and the like.

Responsibility. Accountability and Liability over Government Funds and Property.

Responsibility over Government Fund and Property

1. Government resources shall be utilized efficiently and effectively in accordance with the law. The head of a
government agency is directly responsible in implementing this policy and is primarily 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.

2. All those who are exercising authority over a government agency shall share fiscal responsibility.

Accountability over Government Funds and Property.

1. A government officer entrusted with the possession of government resources is responsible for the
safekeeping there for in accordance with the law. Every accountable officer shall be properly bonded.

2. The transfer of government funds from one officer to another shall, except as allowed by the law, be made
only after the authorization of the COA. The transfer shall be properly documented in an invoice and receipt.

Liability over Government Funds and Property

1. The unlawful use of government resources shall be the personal liability of the employee found to be directly
responsible there for.
2. Every accountable officer shall be liable for all losses resulting from the unlawful use or negligence in the
safekeeping of government resources.

3. No accountable officer shall be relieved from liability merely because he has acted under the direction of a
superior officer in unlawfully utilizing the government resources entrusted to him, unless before that act, he has
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 secondarily liable.

4. An accountable officer shall immediately notify the COA for any loss of government funds unforeseen events
(force majeure) within 30 days. Failure to do so will relieve the officer of liability.

Accounting responsibility
the following offices are charged with government accounting responsibility:
a. Commission on Audit (COA)
b. Department of Budget and Management (DBM)
c. Bureau of Treasury (BTR)
d. Government agencies

Commission on Audit (COA)

The Commission on Audit (COA)
a. Has the exclusive authority to promulgate accounting and auditing rules and regulations.
b. Keeps the general accounts if the government, supporting vouchers, financial report to the president and
congress.
c. Submits financial reports to the President and Congress.

Department of Budget and Management (DBM)

The Department of Budget and Management (DBM) is responsible for the formulation and implementation of
the national budget with the goal of attaining the nation’s socio-economic objectives.

Bureau of Treasury (BTR)

the Bureau of Treasury (BTR) functions under the Department of Finance and is the cash custodian of the
government. the BTR is authorized to:
a. Receive and keep national funds and manage and control the disbursements there of: and
b. Maintain accounts of financial transactions of all national government officer, agencies and instrumentalities.

Government Agencies
Government agency 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 the government.

The government agencies are responsible in directly implementing the projects of, and performing the
functions delegated by, the government.
Each agency (entity) shall maintain accounting books and budget registries which of the COA and DBM.
Government agencies are required by law to have accounting units/ divisions/ departments.

Financial Reporting System of the National Government

> Entity – refers to a government agency, department or operating/field unit.
> Financial Reporting – Is the process of preparation, presentation and submission of general-purpose
financial statement and other reports. The objective of financial reporting is to provide information about the
entity that is useful to users for accountability purposes and decision-making.

The GAM for NGAs

An ‘’old’’ government accounting system had been used for about five decades before it was replaced by the
New Government Accounting System (NGAS) in 2002. However, on January 1, 2016, the NGAS was replaced
by the Government Accounting manual for National Government Agencies (GAM for NGAs).

Legal basis

The GAM for NGAs is promulgated by the Commission on Audit (COA) based on the authority conferred to it
by the Philippine Constitution:

Coverage
The GAM for NGAs provides the basis concepts to be used in:
a. Preparing general purpose financial statement in accordance with the Philippine Public Sector
Accounting Standards (PPSAA) and other financial reports as may be required by laws, rules and
regulations; and
b. Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.

Objective
The GAM for NGAs aims to update the following:
a. Standards, policies, guidelines and procedures in accounting for government funds and property;
b. Coding structure and accounts; and
c. accounting books, registries, records, forms, reports and financial statements.

Basic Accounting and Budget reporting Principles

The financial record and reports of government entities shall comply with the following.

1. Philippine Public Sector Accounting Standards

2. Accrual basis of accounting
3. Budget basis
4.Revised Chart of Accounts
5. Double entry bookkeeping
6. Financial statements based on accounting and budgetary records
7. Fund cluster accounting

Qualitative Characteristics of Financial Reporting

Information reported shall meet qualitative characteristics.

Qualitative characteristics are the attributes that makes information useful to users.

Components of General-Purpose Financial Statements

General Purpose Financial Statement 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.

The complete set of general-purpose financial statements consists of:

a. Statement of Financial Position

b. Statements of Financial Performance
c. Statements Changes in Net Assets/Equity
d. Statements of Cash Flows
e. Statements of Comparison of Budget and Actual Amounts; and
f. Note to the financial Statements, comprising a summary of significant accounting policies and other
explanatory notes.

Recognition of Asset
An asset is recognized when:
a. it is probable that future economic benefits will flow to the entity; and
b. the asset has a cost or value (e.g., fair value) that can be measured reliably.

Liabilities – are present obligation 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 – is the residual interest in the assets of the entity after deducting all its liabilities.

Revenue – is the gross inflow of economic benefits or service potential during the reporting period when those
inflows result in an increase in net asset/equity, other than increases relating to contributions from 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 decreases in net assets/equity, other
than relating to distributions to owners.

CHAPTER 2

THE BUDGET PROCESS

The National Budget

Government accounting is primarily budgetary accounting. Government accounting does not only aim to
provide information on past event and transaction but also budget information in accordance with PPSAS 24.

The Budget Cycle

the budget cycle has four phases, namely:

1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Budget Accountability

Budget Preparation
The budget preparation in the Philippines uses “bottom-up” approach. Under “bottom-up” budgeting, several
parties participate in the budget preparation, starting from the lowest to the highest levels of the government.
Government agencies are also tasked to increase the participation of citizen-stakeholders in the budget
preparation.

Incremental budgeting vs Zero-based budgeting

The current year’s budget is formulated based on the previous year’s budget, which is just adjusted for any
variances experienced in the past. Presumably, the proposed programs and expenditures in the previous year
are automatically approved in the current year.

The current year’s budget is formulated without regard to the previous year’s budget. Government agencies
are required to justify their current year’s proposed programs and expenditures, irrespective of whether these
are new or carried over from the previous year.
1. Budget call – The budget preparation starts when the Department of Budget and Management (DBM)
issues a Budget Call to all government agencies. The budget call contains, among others things, the next fiscal
year’s targets, the agency’s budget ceiling, and other guidelines in the completion and submission of agency
budget proposals.

2. Budget hearings – are conducted after the agencies submit their budget proposals. Each agency defends
its budget proposal before the DBM. The DBM deliberates on the budget proposals, makes recommendations,
and consolidates the deliberated proposals into the National Expenditure program (NEP) and Budget of
Expenditures and Sources of Financing (BESF). The DBM then submits the proposed budget to the President.

3. Presentation to the Office of the President – The president and Cabinet members review the proposed
budget. After the President approves the proposed budget, the DBM finalizes the budget documents to be
submitted to the Congress. At this point, the proposed budget is referred to as the “President’s Budget.”

Budget Legislation

Government funds shall only be spent in pursuance of an appropriation made by law. Therefore, due process
must be undertaken to legalize the proposed budget.

4. House Deliberation - Upon receipt of the President’s Budget, the House of Representatives conducts
hearings to scrutinize the various agencies’ respective proposed programs and expenditures. Thereafter, the
House of Representatives prepares the General Appropriations Bill (GAB).

5. Senate Deliberation- The Senate conducts its own deliberations on the GAB. These normally start after the
Senate receives the GAB from the house of Representatives. However, for expediency, hearings in the Senate
start even as Representative deliberations are on going.

6. Bicameral Deliberations- After deliberations in both houses are finished, a committee called the Bicameral
Conference Committee is formed to harmonize any conflicts between the Representative and Senate versions
of the GAB.
The harmonized GAB (Bicam’ version) is submitted back to both Houses for ratification. After ratification, the
final GAB is submitted to the President for enactment.

7. President’s enactment- The President enacts the budget, which is now known as the General
Appropriations Act (GAA). Before enactment though, the President may exercise his veto power as conferred
to him under the Philippine Constitution.

The approved Budget

Is the expenditure authority derived from appropriation laws, government ordinances, and other decisions
related to the anticipated revenue or receipts for the budgetary period. The approved consists of the following.

 Appropriation – is the authorization made by a legislative body to allocate funds for purposes
specified by the legislative or similar authority.

1. New General Appropriations – are annual authorizations for incurring obligations during a specified
budge year, as listed in the GAA.
2. Continuing Appropriations – are the authorizations to support obligations for a specific purpose or
project, such as multi-year constructions projects which require the incurrence of obligation even
beyond the budget year.
3. Supplemental Appropriations – are additional appropriations authorized by law to augment the
original appropriations which proved to be insufficient for their intended purpose due to economic,
political or social conditions supported by a Certification of Availability of Funds from the BTr.
 4. Automatic Appropriations – are the authorizations programmed annually or for some other period
prescribed by law which do not require periodic action by Congress.
5. Unprogrammed Funds – are standby appropriations authorized by Congress in the annual GAA.
6. Retained Income/Funds – collections which are authorized by law to be used directly by agencies
concerned for their operation or specific purposes.
7. Revolving Funds – receipt derived from business –type activities of departments/agencies which are
authorized by law to be constituted as such and deposited in an authorized government depository
bank.
8. Trust Receipts – receipts by any government agency acting as trustee, agent or administrator for the
fulfilment of some obligations or conditions.

Budget Execution

This is the phase where government funds are spent.

8. Release guidelines and BEDs - the DBM issues guidelines on the release and utilization of funds while the
various agencies submit their Budget Execution Documents (BEDs). A BED summarizes an agency’s fiscal
year plans and performance target. It includes the following:
a. Physical and financial plan,
b. Monthly cash program,
c. Estimate of monthly income, and
d. List of obligation that are not yet due and demandable.

The following are the major recipients of the budget:

1. National Government Agencies – include all agencies within the executive, legislative, and judicial
branches of government, e.g., commissions, department, Land Bank of the Philippines, Social Security
System, etc.
2. Local Government Units (LGUs) – (a) autonomous regions, (b) province and cities independent from a
province, (c) component cities (cities which are part of a province ) and municipalities, and (d)
barangays.
3. Government Owned and Controlled Corporation (GOCCs) – corporations that are owned or controlled,
directly or indirectly, by the government and vested with functions relating to public needs.

9. Allotment - the Allotment release program (ARP) to set the limit for allotment release during the upcoming
year. This is used as a control device to ensure that releases conform to the national budget. It also means a
portion of an appropriation or special fund set aside to cover expenditures and encumbrances for a certain
period or purpose.

The following are the documents used in releasing allotments to government agencies:

1. General Appropriations Act Release Document (GAARD)- serves as the obligational authority for the
comprehensive release of budgetary items appropriated in the GAA, categorized as For
Comprehensive Release.

2. Special Allotment Release Order (SARO)- covers budgetary items under For Later Release (negative
list) in the entity’s submitted Budget Execution Documents/ (BEDs),

3. General Allotment Release Order (GARO)- is a comprehensive authority issued to all national
government agencies, in general, to incur obligations not exceeding an authorized amount during a
specified period for the purposes indicated.
10. Incurrence of Obligation - government agencies incur obligations which will be paid by the government,
e.g., entering into contracts, hiring of personnel; purchase of supplies, etc.

1. Notice of Cash Allocation (NCA)- authority issued by the DBM to central, regional and provincial
offices and operating units to cover their cash requirements.
2. Notice of Transfer of Allocation- authority issued by an agency’s Central Office to its regional and
operating units to covers the latter’s cash requirements.
3. Non-Cash Availment Authority- authority issued by the DBM to agencies to cover the liquidation of
their actual obligations incurred against available allotments for availment of proceeds from
loans/grants through supplier’s credit/constructive cash
4. Cash Disbursement Ceiling- authority issued by the DBM to agencies with foreign operations

11. Disbursement Authority - the DBM issue disbursement authority to the government agencies. This is the
point where government agencies obtain access to the government funds

Budget Accountability

This phase occurs concurrently with the Budget Execution phase. As the budget is being executed, it is
regularly monitored to determine the conformance of actual result with planned targets.

12. Budget Accountability Reports – government agencies are required to submit the following
accountability reports:

a. Monthly Report of Disbursement- show the disbursements of the entity during the month, classified
according to the type of disbursement authority. This report is submitted to the COA and DBM within 30
days after the end of each month.

b. Quarterly Physical Report of Operation- shoes the agency’s physical accomplishment in a given
quarter vis-à-vis its physical targets.
c. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances- shows the
agency’s authorized appropriations, allotments received, obligation incurred, disbursements made and
the balances of unreleased appropriations, unobligated allotments, and unpaid obligations.
d. Summary of Appropriations, Allotments, Obligations, Disbursement and balance by Object of
Expenditures- similar to ‘c’ above but provides details of expenditures (e.g., salaries and wages,
traveling expenses, etc.)
e. List of Allotments and Sub-Allotments-shows the allotments received by the agency from the DBM
and the sub-allotments issued by the agency’s Central Office or Regional Office to lower operating
units.
f. Statement of Approved Budget, Utilization, Disbursements and Balances- this report is prepared
by agencies that have authority to use their revenue.
g. Summary of Approved Budget, Utilizations, Disbursements and Balance by Object of
Expenditures- similar to ‘f’ above but provides details of expenditures.
h. Quarterly Report of Revenue and Other Receipts –shows the actual revenues and other receipts
remitted to the BTr and deposited in authorized government depository banks in a given quarter.

13. Performance reviews – The DBM and COA perform periodic reviews of the agencies’ performance and
budget accountability and report to the President.

14. Audit – the COA audits the agencies.

Responsibility Accounting
is a system of providing cost and revenue information over which a manager has direct control of. This enables
the evaluation of a manager’s performance based only on matters that are directly under control. Therefore,
budget deviation can be readily attributed to the managers accountable therefore.

Responsibility accounting requires the identification of responsibility centers and the distinction between
controllable and non-controllable coats.

>Responsibility center – is a part, segment, unit or function of a government agency, headed by a manager,
who is accountable for a specified set of activities.

>Controllable costs – a cost is considered controllable at a given level of managerial responsibility if the
manager has the power to incur it within a given period of time.

>Non-controllable costs – are costs incurred indirectly and allocated to a responsibility level.

Chapter 3
The Government Accounting Process

Introduction

The government accounting process comprises the activities of analyzing, recording, classifying, summarizing
and communicating transactions involving the receipt and disposition of government funds and property,
and interpreting the results there of. This process is similar to that of a business entity, except that it
incorporates budgetary controls, such as recording in the budget registries and preparing budget accountability
reports.

WHAT ARE THE BOOKS OF ACCOUNTS AND REGISTRIES IN GOVERNMENT?

Books of Accounts and Registries

The books of accounts and registries of government entities consist of:

1. Journals
a. General Journal
b. Cash Receipts Journal
c. Cash Disbursements Journal
d. Check Disbursements Journal
2. Ledgers
a. General Ledgers
b. Subsidiary Ledgers
3. Registries
a. Registries of Revenue and Other Receipts (RROR)
b. Registry of Appropriations and Allotments (RAPAL)
c. Registries of Allotments, Obligations and Disbursements (RAOD)
d. Registries of Budget, Utilization and Disbursements (RBUD)

Budget Registries
1. Registries of Revenue and Other Receipts (RROR) – used to monitor the budget amounts, actual
collections and remittances of revenue and other receipts.

2. Registries of Appropriations and Allotments (RAPAL) – used to monitor appropriations and allotment.
This is to ensure that allotment will not exceed appropriations.
3. Registries of Allotments, Obligations and Disbursements (RAOD) – used to monitor the allotment
received, obligation incurred against the corresponding allotment, and the actual disbursements made. This is
to ensure that obligations incurred will not exceed allotments while actual disbursements will not exceed the
obligations incurred. Separate RAOD shall be maintained for each object of expenditure.

WHAT ARE THE OBJECTS OF EXPENDITURES?

A. PERSONAL EXPENDITURES
B. Maintenance and Other Operating Expenses (MOOE)
C. FINANCIAL EXPENSE
D. CAPITAL OUTLAYS

Object of Expenditures

a. Personal Service (PS) – pertain to all types of employee benefits, e.g., salaries, bonuses, allowances,
cash gifts, etc.
b. Maintenance and Other Operating Expenses (MOOE) – pertain to various operating expenses other
than employee benefits and financial expenses, e.g., travel, utilities, supplies, etc.
c. Financial Expenses (FE) – pertain to finance cost, e.g., interest expense, bank charges, etc. Financial
expenses also include losses on foreign exchange transactions.
d. Capital Outlays (CO) – pertain to capitalizable expenditures, e.g., expenditures on the construction of
public infrastructures, acquisition costs of Equipment etc.

4. Registries of budget, Utilization and Disbursements (RBUD) – used to record the approved special
budget and the corresponding utilizations and disbursements charged to retained income. Separate RBUDs
are also maintained for each object of expenditure, i.e., (a) RBUD-PS; (b) RBUD-MOOE; (c) RBUD-FE; and (d)
RBUD-CO.

Keeping of the General

The COA shall keep the general accounts of the Government and preserve the vouchers and other supporting
documents.

Basic Recordings

Appropriation
Entity A (a government agency) receives its GAA consisting of the following:

Personal Services (PS) 100,000

Maintenance and Other Operating Expenses (MOOE) 60,000
Capital Outlays (CO) 200,000
Total appropriation for the current year 20x1 360,000

Allotment
Entity A receives its allotment from the DBM consisting of the following:

Personal Services (PS) 90,000

Maintenance and Other Operating Expenses (MOOE) 40,000
Capital Outlays (CO) 170,000
total allotment 300,000

Incurrence of Obligation
Obligations Request and Status (ORS)
Obligations shall be incurred through the issuance of Obligation Request and Status (ORS). The Requesting
Office shall prepare this document, supported by valid claim documents like disbursement vouchers, payrolls,
purchase/job orders, itinerary of travel, etc.

Government Entity Business Entity

 Obligation – is an act of a duly  Obligation is another term for

authorized official which binds the liability.
government to the immediate or
eventual payment of a sum of
money. Obligation maybe referred
to as a commitment that
encompasses possible future
liabilities based on current
contractual agreement.

Disbursement Authority – Notice of Cash Allocation (NCA)

Entity A receive Notice of Cash Allocation (NCA) from DBM amounting to ₱200,000, net of tax.

This time a journal entry shall be made in the accounting books because the financial statement
elements of the entity are now affected, i.e., increase in cash and increase in revenue. The entry is as follows:

This registry used to monitor the NCA are the following:

Date Cash-Modified Disbursement System (MDS), Regular 200,000

Subsidy from National Government 200,000

To recognize receipt of NCA from DBM

a. Registry of Allotment and Notice of Cash Allocation (RANCA) – used to determine the amount of
allotment not covered by NCA and to monitor the available balance of NCA.

b. Registry of Allotment and Notice of Transfer of Allocation (RANTA) – used to determine the amount of
allotments not covered by Notice of Transfer of Allocation (NTA) and to monitor the available balance of NTA.

I. JOURNALS
a. General Journal – used to record transactions not recorded the Special Journals.

Special Journals:
b. Cash Receipts Journal – used to record the Report of Collection and Deposit and Cash Receipts Register
of collecting officers.

> Report of Collection and Deposit (RCD) – prepared by a collecting officer to report his/her collections and
deposits to an Authorized Government Depository Bank (AGDB).

> Cash Receipts Register (CRReg) – used by field offices without a complete set of books to record their
cash collections and deposits in the books of their mother unit (central/regional/division office).
c. Cash Disbursements Journal – used to record the cash disbursements of the Disbursing Officer.

d. Check Disbursement Journal – used to record the check disbursements of the Disbursing Officer.

II. LEDGERS

a. General Ledger – summarizes all transactions recorded in the journals. Accounts in the general ledger
are arranged according to their sequence in the Revised Chart of Accounts.
b. Subsidiary Ledger – show details of each control account in the general ledger.

Disbursement
Employees have rendered services and are now entitled to compensation.

Journal entries shall be made because the financial statement elements of the entity are affected, i.e.,
increase in expenses and increase in liability/decrease in cash. The recordings are as follows:

a. Set up of payable to officers and employees upon approval of payroll.

Salaries and Wages 35,000

Personal Economic
Relief Allowance (PERA) 5,000
Gross Compensation 40,000
Withholding Tax (10,000)
GSIS (2,000)
Pag-IBIG (2,000)
Phil health (1,000)
total Deductions (15, 000)
Net 25,000

Date Salaries and Wages Regular 35,000

Personal Economic Relief Allowance (PERA)
Due to BIR 5,000
Due to GSIS 10,000
Due to Pag-IBIG
2,000
Due to PhilHealth
2,000
Due to Officers and Employees
1,000
To recognize payable to officers and employees
upon approval of payroll. 25,000

b. Posting of payable to the Section C of ORS

c. Grant of Cash Advance for payroll

Date Advances for Payroll 25,000

Cash-Modified Disbursement
 System (MDS), Regular 25,000

To recognize grant of cash advance

for payroll

e. Liquidation of Payroll Fund

Date Due to Officers and Employees 25,000

Advance for Payroll 25,000

To recognize Liquidation of Payroll Fund

Remittance of Amounts With held

Entity A remits the ₱15,000 withheld to the government agencies. The breakdown is re-provided below:

Withholding tax 10, 000

GSIS 2,000
Pag-IBIG 2,000
PhilHealth 1,000
Total Deduction 15,000

Remittance of Withholding Tax

Tax Remittance Advice (TRA)

The Tax Remittance Advice (TRA) is used to recognize:

a. In the books of government agencies, the constructive remittance of taxes withheld to the Bureau of
Internal Revenue (BIR) or customs duties withheld to the Bureau of Customs (BOC), and the
constructive receipt of NCA for those taxes and customs duties
b. In the books of the BIR and BOC, the constructive receipt of tax revenue and customs duties; and
c. In the books of the BTr, the constructive receipt of the taxes and customs duties remitted.

Date Cash-Tax Remittance Advice 10,000

Subsidy from National Government 10,000

To recognize the constructive receipt of

NCA for TRA
The
remittance
Date Due to BIR 10,000
of the tax
Cash-Tax Remittance Advice 10,000 withheld is
recorded
To recognize the constructive remittance of as follows:
taxes withheld to the BIR through TRA Books of
Entity A

The TRA is recorded by the other government agencies as follows:

Books of BIR Books of BTr

Cash- TRA……………….10,000 Subsidy to NGAs………10,000

Income Tax……………………...10,000 Cash- TRA…………………10,000

To recognize constructive receipt of taxes To recognize constructive receipt of

remitted by National Government Agencies remittance of taxes by NGAs through TRA
(NGAs) through TRA

Remittance to GSIS, Pag-IBIG & PhilHealth

Date Due to GSIS 2,000

Due to Pag-IBIG 2,000

Due to PhilHealth 1,000

Cash- Modified Disbursement 5,000

System (MDS), Regular

To recognize remittance to GSIS, Pag-IBIG and

PhilHealth

The Obligation Request and Status (ORS) and the RAOD-PS are updated for the payment above.