GOVERNMENT ACCOUNTING . Accounting Responsibilities.

AC 518 HAND-OUTS GOVERNMENT ACCOUNTING AND AUDITING

TNCR

The National Government of the Philippines The government is the largest financial organization in terms of assets, liabilities, capital, sources of income and items of expenditures. It is also the largest entity in terms of number and quality of personnel, facilities and instrumentalities, which are used to serve the social, political and economic needs of the nation. The government has as many departments, commissions or offices as necessary to be able to carry out its functions, like promotion of social welfare, development of national wealth, defense of the state from internal and external aggression, promotion of justice, promotion of trade and industry, general government and protection of private rights of the people. Government Accounting Defined(Section 109 of PD 1445) 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. Government accounting is a service activity. Three (3) types of governmental organizational units: •

National Government Unit(LGU) – are agencies that includes all departments, bureaus, offices, boards, commissions, councils state colleges and universities.

•

Local Government Unit(NGAs)- political subdivisions of the Philippines having substantial control over local affairs, consisting of provinces, cities, municipalities and barangays.

•

Government Owned or Controlled Corp(GOCC)- are agencies organized by law or pursuant to law, vested with functions relating to public needs whether government or propriety in nature, owned by the government directly or through its instrumentalities either wholly or, where applicable as in case of stock corporation, to the extent of at least fifty one % of its capital stock.

FUNCTIONS OF GOVERNMENT ACCOUNTING To provide quantitative information primarily financial in nature about the operations of the government, both national and local, to be used by the administration in making decisions for a more effective and efficient public service.

OBJECTIVES 1.To provide quantitative information concerning past operations and present conditions. 2.To provide a basis for guidance for future operations. 3.To provide for control of the account of public entities and officers in the receipt, disposition and utilization funds and properties, and 4.To report on the financial position and the result of the operations of the government agencies for the information of all persons concerned. Users of Government Accounting Information: 1. The General public or citizenry 2. The Governing and oversight bodies: The President, Cabinet, COA, Legislative Body. 3. The managers/administrators who are in-charge of carrying out the policy and daily conduct of government affairs. 4. The students of public finance 5. The resource providers of the government such as: • Donors or grantors • Lenders, suppliers and employees whose main concern is to know whether the government can pay its obligations to them.

DISTINCTIONS BETWEEN GOVERNMENT AND COMMERCIAL ENTERPRISES 1. Ownership - Private enterprises are owned by a relatively few stockholders, partners, or owners. The government represent the entire people in a given community. 2. Purpose - Private enterprises are organized primarily to make profits. The government is set up mainly to render service at lowest possible cost to its constituents.

3. Organization - The organization of a private enterprise is a succession of authority and responsibility starting from its stockholders who delegate them to a duly elected board of directors which in turn organize its own staff of officers in whom the responsibility of managing the affair of business is reposed. The responsibility and authority of a government entity in our system lies in Congress. 4. Financing - Private enterprise is supported for its finance primarily by the voluntary contribution from its members or stockholders which constitute as their share of capital or investment in the business. The government is vested the exclusive right to demand involuntary contributions from its constituent in the form of taxes. 5. Income - In private enterprise, the capital investment of stockholders are made to generate return in the form of profits for services rendered or good sold. The government which is organized primarily to render service, cannot make profits on the services it renders. To support the estimated annual cost of government, taxes are levied.

DISTINCTION BETWEEN GOVERNMENT AND COMMERCIAL ACCOUNTING 1.

Objective – CA – is geared towards income measurements aside from control of company resources, GA - is control of government funds to see to it that they are properly utilized and provide data to management for decision.

2. Basis of Accounting CA – either cash or accrual method is used but not a combination of both. GA - the modified accruals basis of accounting is used. 3.

Preparation of periodic reports – CA – Statement of Financial position, Statement of Cash Flows GA - Balance sheet, statement of income and expenses, statement of government equity and statement of cash flows.

4.

Control Mechanism – CA – none GA – Fund accounting, obligation accounting and CDC accounting

5.

Books of Accounts – CA - only one set is kept GA - two books are kept (a) Regular Agency (RA) Book and (b) National Government(NG) Books.

6.

As to accounts and transactions – CA - Nominal and Real Accounts are used. GA - includes budgetary accounts such as Appropriation, Allotments and Obligations are maintained.

7.

Source of Accounting practice and procedures – CA - dictated by nature of business and policies of management GA - laws, rules and regulations

Decision-making Process in Government The decision-making process in government is an important aspect of the environment of state accounting because accounting information is intended to be useful in making economic decisions and in making reasoned choices among alternative courses of action. The ultimate authority for decision-making in the Philippine government rests with the people. This authority is exercised through duly elected representatives, acting as agents of the people. It is the sovereign right of the people to change them if the authority is misused or abused. The President, as chief executive, formulates national policies, which specify the goals of government and determine the courses of action that the government should take in different aspects of public affairs.

On the basis of national policy, the President submits a budget to the legislative body for consideration and processed until approved and passed into a law.

At all levels of government, decision-making should comply with existing laws and regulations. Questions and issues involving the settlement of money claims, determination of dispute or settlement of a controversy on the issue as to legality and/or propriety of such claims are submitted for resolution to the COA in connection with the discharge of its audit function. Questions involving legal interpretation and/or application of law are submitted for decision to the courts. Salient Features of Government Accounting The financial resources of the Government are very limited. It relies heavily on collected taxes. This means that it has to operate through a system of fiscal and accounting controls. The following control mechanisms adopted as sub-systems of government accounting are not adopted in commercial accounting: • • •

Fund Accounting Obligation Accounting Cash Disbursement Ceiling (CDC) Accounting

Fund Accounting. A fund is a sum of money or other resources set aside for the purpose of carrying out specific activities or attaining certain objectives in accordance with specific regulations, restriction, and limitations. The two major classification of funds as to purpose for which they may be used: 1. General Fund – one which is generally available for all functions of the government. 2. Special Fund - one which, by legislative action, segregates specified revenues for limited purposes. Obligation Accounting. As a control mechanism of government accounting system, obligation accounting provides the ceiling of the maximum extent by which an agency can incur obligations or commit the resources of the government in the performance of its functions. With obligation accounting, an agency can operates only within the amount actually released to it by the DBM, which is within or covered by the amount approved appropriation. Obligation accounting refers to the accounting practice, procedures and techniques for recording obligations in the government. Cash Disbursement Ceiling Accounting. The cash disbursement ceiling accounting is another control mechanism of government accounting system. The cash operations of the government under the cash disbursement ceiling accounting are limited within the boundaries of the appropriations release to government agencies in the form of allotments, and any additional amount granted by the DBM to liquidate or pay existing valid obligation.

Accounting Responsibility - Under PD 1445, accounting responsibility for all government funds and property is entrusted, immediately and primarily, to the head of the government agency or office. It is the duty of the head of the agency to take reasonable steps to minimize, if not to avoid the risk of losses, defalcations and other types of irregularities in the utilization of all government resources (to safeguard the resources of the government under his custody) and periodic reporting to concern authorities. His responsibility, however, is supervised by higher authorities and government bodies. The officer in possession or custody of government funds or property by reason of his duties are accountable for the safekeeping thereof. As such, he shall be properly bonded. The Head of the agency is made immediately and primarily responsible for all government funds and property pertaining to his agency. Secondary responsibility is made to rest on the persons entrusted with the actual possession or custody of the funds or property. They are the accountable officers and are immediately responsible to the agency head. The imposition of primary responsibility on the agency head for government funds and property is in keeping with the concept of fiscal responsibility which now lodge with agency head. The head of the agency shall exercise the diligence of a good father or a family in supervising accountable officers to prevent the incurrence of loss of government funds and property, otherwise, he shall be jointly and solidarily liable with the person primarily accountable thereof. Although supervisory work of government accounting is vested upon to the Commission on Audit, accounting responsibilities in the government, by virtue of the provision of the Constitution of the Philippines, laws, Presidential Decrees and other issuances, are shared primarily by the Commission on Audit(COA), Department of Budget and Management, (DBM), Department of Finance (Bureau of Treasury) and government agencies. The Commission on Audit serves as the external auditor of the government agencies. It is a constitutional office and its mandates are provided in Section 2, Art. IX-D of the 1987 Constitution of the Philippines. The COA examine, audit and settle all accounts pertaining to revenues or receipts and expenditures or uses of government funds and property, keeps the general accounts of the national government , prescribes the standard chart of accounts, promulgates accounting rules and regulations and exercise technical supervision over the accounting functions of each agency. The office is mandated by the Constitution to submit to the President and the legislative body within the time frame fixed by law, an annual audit report of the government, its subdivision, agencies and instrumentalities including government owned or controlled corporations and recommend measures necessary to improve efficiency and effectiveness.

The DBM is responsible for the design, preparation, and approval of the accounting systems of government agencies, determines the accounting and other item of information needed to monitor budget performance and assess effectiveness of the agency operation. It prescribes the forms, schedules of submission and other component of reporting system

needed to accomplish and submit the required information. It acts on agencies’ recommendations for the modification or changes to prescribed systems for procedures to effect simplicity and/or meet the requirements of the peculiarities of the agencies concerned. It approves the Agency Budget Matrix and issues the allotments to agencies in accordance with the approved budget and issues Notice of Cash Allocation. The Bureau of Treasury (BTr) performs banking function for the national government. It receives and keeps government funds, controls the disbursements thereof and maintain accounts of the financial transactions of national government agencies. It is required to prepare and submit to the COA and other fiscal activities, a daily statements of cash receipts, disbursements and fund balances in the National Treasury. The National Government Agencies (NGAs) consist of various organizational units such as departments, bureaus, commissions, boards, offices, tribunals, councils, institutions, state colleges or universities and establishments. These agencies are required to establish and maintain a system of accounting for their financial resources and operation in accordance with pertinent rules and regulations. Accounts should be kept in such details as is necessary to meet the need of agency management and furnish information to fiscal and control agencies such as COA, DBM and BTr. Relationship between Accountability, Responsibility and Authority Accountability is the obligation of a public officer/employee to answer for the responsibility conferred on him/her. It is her Responsibility to respond to the concerns of individuals or groups, the public he/she is to serve, within the overall context of his/her obligations for which he/she has the appropriate Authority. In government, authority is often used interchangeably with the term "power". However, their meanings differ: while "power" is defined as 'the ability to influence somebody to do something that (s)he could not have done', "authority" refers to a claim of legitimacy, the justification and right to exercise that power. Accountability Requirements From Public Officer/Employees Section 1 of PD 1445 provides:”It is the declared policy of the State that all government resources shall be managed, expended and utilized in accordance with law and regulations and safeguard against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to see to it that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned.” This declaration articulates the concern of the state for the safekeeping of the public’s resources. It focuses on how the resources shall be handled by those given the public trust to manage, spend or use such resources.

Pursuant to this policy the State requires from public officers and employees the following: 1. Compliance with laws and regulations Laws and rules Agency policies Agency manuals of operations; and Provisions of contracts, MOA 2. Safeguarding of government resources from loss and waste 3. Achieving goals and objectives Assertions of Compliance with Accountability Requirements When public officers and employees submit to the Commission their transactions, accounts, financial reports and statements and other performance and operation reports, they are asserting or claiming that they have complied with the foregoing accountability requirements. What is Assertions? Assertion is the expressed or implied representation by management that is reflected in their transactions, accounts, financial statements, records, reports and that they are claiming that they have complied with the accountability requirements of the state policy. Assertions on Compliance with Laws and Rules When expenditures, disbursements, receipts and collections are reported to the appropriate authorities, management is making claim that so much amount has been disbursed or so much amount have been collected in payment of goods and services received or rendered in accordance with laws, rules, applicable policies and practices. Assertion on Resources Duly Safeguarded

When the agencies issue their financial reports and statements they are asserting the following:

1. Existence or Occurrence - This deals with whether assets or liabilities of the audited agency actually exist at a given date, and whether recorded transactions have occurred during the given period.

2. Completeness – This deals with whether all transactions and accounts that should be presented in the financial statements are included.

3. Rights and Obligations - This deals with whether assets are actually owned by the agency and liabilities are the obligation of the agency at a given date.

4. Valuation or Allocation - This deals with whether or not the asset, liability, revenue and expenses 5.

components have been included in the financial statements at appropriate amounts. Presentation and Disclosure – This deal on whether particular components of the financial statements are properly classified, described and disclosed.

Assertions on Achievement of Goals and Objectives (Performance or Value for Money Accountability) When the agencies prepare and submit to proper authorities their reports on the performance of an activity or a project, the agency is asserting that they used and managed the resources for that activity or project in an economical, efficient and effective manner. Performance of government entities is measured from the point of view of economy, efficiency and effectiveness. Economy refers to the reasonableness of cost incurred. Measuring economy will determine whether the agency has been performing at the least possible cost or under the terms most advantageous to the government. Efficiency refers to the relationship between goods or services produced and resources used to produce them. The measurement of efficiency involves the determination of whether an agency is managing or utilizing its resources in an efficient manner as well as establishing the causes of any inefficiencies, including inadequacy in management information systems, administrative procedures or organizational structure. Effectiveness is concerned with the relationship between the outputs and the goals of the agency. Measuring effectiveness will determine whether the desired results are achieved, whether the objectives set by the agency are met, and whether the agency has considered alternatives that yield desired results at a lower cost. Generally Accepted (State) Accounting Principles Accounting principles are propositions, a general law or rule adopted, which on the basis of reasons, demonstrated usefulness and general acceptance as the best way of carrying out the function and achieving the objectives of financial accounting. Objectives: 1. Guide the accountants in identifying, measuring and communicating financial accounting information; 2. Assure proper reporting and reasonable degree of uniformity and comparability among the financial statements of different government entities; and 3. Provide auditors with the framework for making judgment about the fairness of financial statements on the basis of some uniform standards. Significant differences in principles between state accounting and commercial accounting: 1. Government activities are non-profit oriented; 2. State accounting places greater emphasis on accountability, stewardship and control; and 3. State accounting is based on laws, rules and regulations. A principle is generally accepted if it has substantial authoritative support. There are two sources of support: primary and secondary sources

Primary sources: 1.

Pronouncement of the Commission on Audit - COA is mandated by the Philippine Constitution to promulgate accounting rules and regulations to facilitate the keeping and enhance the informational value of the accounts of the government.

2.

Provision of law - Sec. 112 of the PD 1445 provides that generally accepted accounting principles should be observed in government accounting entities a provided they do not contravene existing laws and regulations.

Secondary source: From the pronouncements and issuances by other government agencies. The Government Auditing Code of the Philippines requires that each government agency shall record its financial transactions and operations in conformance with the generally accepted accounting principles and accordance with pertinent laws and regulations. The principles to be followed by government entities includes the following: 1.

The accounts of the agency shall be kept in such detail and at the same time be adequate to furnish the information needed by fiscal or control agencies of the government.

2.

The highest standard of honesty, objectivity and consistency shall be observed in the keeping of accounts to safeguard against inaccurate or misleading information.

3.

The government accounting system shall be on double-entry basis with the general ledger in which all financial transactions are recorded, Subsidiary record shall be kept where necessary.

4.

The Chart of Accounts has three-digit coding system and provides for responsibility accounting.

5.

The Chart of Accounts categorizes Personal Services, Maintenance and Other Operating Expenses and Financial Expenses as Expenses, obligation charged to capital outlay are recorded to appropriate asset accounts when the liability and the payment are taken-up.

6.

Matching Principles, The principle that requires the matching of revenues and expenses is adopted. Modified accrual method is used Depreciation accounting for property, plant and equipment using the straight line method is followed. Allowance for doubtful accounts is taken up. Dormant accounts are transferred o a separate registry, Asset method is followed for prepaid expenses.

7.

On financial statement: 1.

Fairness of presentation – this refer to the overall propriety of disclosing financial information. Full disclosures in financial aspects requires observance of the standards of reporting.

2.

Compliance – the report shall be in accordance with prescribed government requirements and international accounting standard of reporting. Timeliness – all needed reports shall produced promptly to be of maximum usefulness.

3. 4.

Usefulness – financial reports shall be carefully designed to present information that is needed and useful to reports users.

8.

Obligation accounting is modified, allotments and obligations are no longer journalized. Separate registries are maintained to control these accounts and the appropriation.

9.

All lawful expenditures and obligation incurred during the year shall be taken up as accounts of that year.

MANUAL ON THE NEW GOVERNMENT ACCOUNTING SYSTEM For National Government Agencies ACCOUNTING POLICIES Sec. 1. OBJECTIVES OF THE MANUAL. The New Government Accounting System (NGAS) Manual presents the basic policies and procedures; the new coding system; the accounting systems, books, registries, records, forms, reports, and financial statements; and illustrative accounting entries to be adopted by all national government agencies effective January 1, 2002. The objectives of the Manual are to prescribe the following: a. b. c. d.

Uniform guidelines and procedures in accounting for government funds and property; New coding structure and chart of accounts; Accounting books, registries, records, forms, reports and financial statements; and Accounting entries.

Sec. 2. COVERAGE. This Manual shall be used by all national government agencies. Sec. 3. LEGAL BASIS. This Manual is prescribed by the Commission on Audit pursuant to Article IX-D, Section 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 therefore, 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 FEATURES AND POLICIES Sec. 4. BASIC FEATURES AND POLICIES. The NGAS has the following basic features and policies, to wit: a.

Accrual Accounting. A modified accrual basis of accounting shall be used. Under this method, all expenses shall be recognized when incurred and reported in the financial statements in the period to which they relate. Income shall be on accrual basis except for transactions where accrual basis is impractical or when other methods required by law.

b.

One Fund Concept. This system adopts the one fund concept. Separate fund accounting shall be done only when specifically required by law or by a donor agency or when otherwise necessitated by circumstances subject to prior approval of the Commission.

c.

Chart of Accounts and Accounts Codes. A new chart of accounts and coding structure with a threedigit account numbering system shall be adopted. (See Volume III, The Chart of Accounts) Books of Accounts. All national agencies shall maintain two sets of books, namely:

d.

Regular Agency (RA) Books. These shall be used to record the receipt and utilized of Notice of Cash Allocation (NCA) and other income/receipts which the agencies are authorized to use and to deposit with Authorized Government Depository Bank (AGDB) and the National Treasury. These shall consist of journals and ledgers, as follows: Journals * Cash Receipts Journal (CRJ) * Cash Disbursement Journal (CDJ) * Check Disbursement Journal (CkDJ) * General Journal (GJ) Ledgers * General Ledgers (GL) * Subsidiary Ledgers (SL) for: * Cash * Receivables * Inventories * Investments * Property, Plant and Equipment * Construction in Progress * Liabilities * Income * Expenses National Government (NG) Books. These shall be used to record income which the agencies are not authorized to use and are required to be remitted to the National Treasury.

These shall consist of: * Cash Journal (CJ) * General Journal (GJ) * General Ledger (GL) * Subsidiary Ledger (SL) With the implementation of the computerized agency accounting system, only the General Journal shall be used together with the ledgers by both books. e. Financial Statements. The following statements shall be prepared: * Balance Sheet * Statement of Government Equity * Statement of Income and Expenses * Statement of Cash Flows Notes to Financial Statements shall accompany the above statements. f.

Two-Money Column Trial Balance. The two - money column trial balance showing the account balances shall be used.

g.

Allotment and Obligation. Obligation accounting is modified to simplify procedures in the incurrence and liquidation of obligations and the recording of the budgetary accounts (allotments and obligations incurred and liquidated). Separate registries shall be maintained to control the allotments and obligations for each of the four classes of allotments, namely: * Registry of Allotments and Obligation - Capital Outlay (RAOCO) * Registry of Allotments and Obligations - Maintenance and Other Operating Expenses (RAOMO) * Registry of Allotments and Obligations - Personal Services (RAOPS) * Registry of Allotments and Obligations - Financial Expenses (RAOFE)

h.

Notice of Cash Allocation (NCA). The receipts of NCA by the agency shall be recorded in the books as debit to account "Cash-National Treasury, Modified Disbursement System (MDS)" and credit to account "Subsidy Income from National Government". (Refer to the latest issuance by DBM as regards to releases of NCA)

i.

Financial Expenses. Financial expenses such as bank charges, interest expenses, commitment charges and other related expenses shall be separately classified from Maintenance and Other Operating Expenses (MOOE).

j.

Perpetual Inventory of Supplies and Materials. Supplies and materials purchased for inventory purpose shall be recorded using the perpetual inventory system. Regular purchases shall be coursed thru the inventory account and issuances thereof shall be recorded as the take place except those purchased out of Petty Cash Fund which shall be charged directly to the appropriate expense accounts.

k.

Valuation of Inventory. Cost of ending inventory of supplies and materials shall be computed the moving average method.

l.

Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. For appropriate check and balance, the Accounting Units of agencies, as well as the Property Offices, shall maintain Supplies Ledger Cards/Stock Cards by stock number and Property, Plant and Equipment Ledger Cards/Property Cards by category of property, plant and equipment, respectively.

m.

Construction of Assets. For assets under construction, the Construction Period Theory shall be applied for costing purposes. Bonus paid to the contractor for completing the work ahead of time shall be added to the total cost of the project. Liquidated damages charged and paid for by the contractor shall be deducted from the total cost of the project. Any related expenses incurred during the construction of the project, such as taxes, interest, license fees, permit fees, clearance fee, etc. shall be capitalized, and those incurred after the construction shall form part of operating costs.

n.

Registry of Public Infrastructures/Registry of Reforestation Projects. For agencies that construct public infrastructures, such as roads, bridges, waterways, railways, plaza, monuments, etc., and invest on reforestation projects, a Registry of Public Infrastructures (RPI). Registry of Reforestation Projects (RRP) shall be maintained for each specific infrastructures/reforestation project. A Registry of Public Infrastructures - Summary shall be maintained for each classification of projects. Examples are: * Registry of Public Infrastructures - Bridges (RPIB) * Registry of Public Infrastructures - Roads (RPIR) * Registry of Public Infrastructures - Parks (RPIP) A Schedule of Public Infrastructures/Reforestation Projects shall be prepared at year-end and included in the Notes to Financial Statements.

o.

Depreciation. The straight-line method of depreciation shall be used. Depreciation shall start on the second month after purchase of the property, plant and equipment, and a residual value equivalent to ten percent of the purchase cost shall be set-up. Public infrastructures/reforestation projects as well as serviceable assets that are no longer being used shall not be charged any depreciation.

p.

Reclassification of Assets. Serviceable assets no longer being used shall be reclassified to "Other Assets" account and shall not be subject to depreciation. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set up for estimated uncollectible trade receivables to allow for their fair valuation.

q.

r.

Elimination of Contingent Accounts. Contingent accounts shall no longer be used. All financial transactions shall be recorded using the appropriate accounts. Cash shortages and disallowed payments, which become final and executory, shall be recorded under receivable accounts "Due From Officer and Employees" or "Receivables-Disallowances/Charges", as the case may be.

s.

Recognition of Liability. Liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received.

t.

Interest Accrual. Whenever practical and appropriate, interest income and/or expense shall be accrued and recognized in the books of accounts.

u.

Accounting for Borrowings and Loans. All borrowings and loans incurred shall be recorded to the appropriate liability accounts.

v.

Elimination of corollary and negative journal entries. The use of corollary and negative journal entries shall be stopped. Acquisition/Disposition of assets shall be debited/credited to the appropriate assets accounts. If an error is committed, correcting entry to adjust the original entry shall be prepared.

w.

Petty Cash Fund. The Petty Cash Fund shall be maintained under the imprest system. As such, all replenishment shall be directly charged to the expense account and at all times, the Petty Cash Fund shall be equal to the total cash on hand and unreplenished expenses. The Petty Cash Funds shall not be used to purchase regular inventory/items for stock.

x.

Foreign Currency Adjustment. Cash deposits in foreign currency and outstanding foreign loans shall be computed at the exchange rate prescribed by the Bangko Sentral ng Pilipinas at balance sheet date. The total cash deposits and foreign loans payable shall be adjusted at the end of each month and any gain or loss on foreign exchange shall be recognized. The subsidiary ledger for foreign currency obligations shall reflect appropriate foreign currency in which the loan is payable. The liability shall be expressed both in the foreign and local currency.

ACCOUNTING SYSTEM Sec. 5 General Accounting Plan. The General Accounting Plan (GAP) shows the overall accounting system of a government agency/unit. It includes the source documents, the flow of transactions and its accumulation in the books of accounts and finally their conversion into financial information/data presented in the financial reports. The following accounting systems are: a. Budgetary Accounts System; b. Receipts/Income and Deposits System; c. Disbursement System; and d. Financial Reporting System Budgetary Accounts System - The Budgetary Accounts System encompasses the processes of preparing the Agency Budget Matrix (ABM), monitoring and recording of allotments received by the agency from the DBM, releasing of Sub-Allotment Release Order (SARO- to Regional Offices (RO) by Central Office (CO), issuance of SubSARO to operating units (OUs) by the RO and recording and monitoring obligations. Budgetary Accounts - Consist of the appropriations, allotments and obligations. Appropriations refer to the authorization made by law or other legislative enactment for payments to be made with funds of the government under specified conditions and/or for specified purposes. Appropriations shall be monitored and controlled through registries and control worksheets by the DBM and COA, respectively. Agency Budget Matrix (ABM) - The ABM refers to a document showing the disaggregation of agency expenditures into components like, among others, by source of appropriation, by allotment class and by need of clearance. THE NATIONAL BUDGET Government budget defined A government budget is a plan for financing the government activities of a fiscal year prepared and submitted by responsible executive to a representative body whose approval and authorization are necessary before the plan can be executed. It is more than mere estimate or statement of receipts and expenditures; it is a definite proposal to be approved or rejected. Basically, budgeting is planning and controlling. Careful plans for the future should be laid and those who direct the operation of the government must be held strictly responsible for carrying out the plan. Purposes of budgeting: 1. Establish in advance the objective or end result of the budget period. 2. Provides the means of coordinating the activities of the various sub-divisions and departments of the business. 3. Provide a period-to-period basis of comparison to show whether the plan is being realized and if not realized indicate when changes must be made if current objectives are to be obtained. 4. To serve as basis for orderly management of public finances. Fundamental Principles of Fiscal Operations Budget activities are governed by legal provisions/fundamental principles relating to the financial transactions and operations of the government. The principles, as provided for by law are: 1. No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority; 2. Government funds or property shall be spent or used solely for public purposes; 3. Trust funds shall be available and may be spent only for the specific purpose of which the trust was created; 4. 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; 5.

Disbursements or disposition of government funds and property shall invariably bear the approval of the proper officials;

6.

Claims against government funds shall be supported with complete documentation;

7. 8.

All laws and regulations applicable to financial transactions shall be faithfully adhered to; and Generally accepted principles and practices of accounting as well as of sound management and fiscal administration shall be observed, provided they do not contravene existing laws and regulations.

The Budget as the Framework of the Accounts The budget is an estimate of the proposed expenditures for specified purposes and period, and embodies the means of financing them during the same period. It provides the means for controlling the estimated amounts to be raised as well as the proposed amounts to be spent for specified objects. It is a program that guides all activities relating to collections and expenditures; It is the framework of the accounts by which the transactions affecting such collections and expenditures shall be recorded; thus, the proper classification of income and expenditures should be reflected in the accounts so that recorded data may give adequate support to future budget estimates. Linkage Between Government Budgeting and State Accounting A close linkage exists between government budgeting and state accounting. The accounting system provides the essential information needed to make resource allocation decisions, monitor budgetary performance, and assess the effectiveness of operations. The budget provides the framework within which transactions should be recorded, classified and summarized in the accounting system to permit comparison of actual results with budgeted standards. A substantial output of the accounting system pertains to accountability reports needed to monitor performance in the execution and accountability phases of the budgetary process. The content, form, and other requirements of such reports are prescribed by the DBM. The Commission on Audit issues rules and regulations that may be applicable when the reporting requirements affect accounting functions. Kinds of Budgets 1.

2.

As to Nature a. Annual Budget – a budget which covers a period of one year. It is the basis of an annual appropriation. b.

Supplemental budget – a budget which purports to supplement or adjust a previous budget which is deemed inadequate for the purpose for which it is intended. This is the basis for a supplemental appropriation.

c.

Special budget – a budget of special nature and generally submitted in special forms on account of the fact that itemizations are not adequately provided in the Appropriation Act or that amounts are not at all included in the Appropriations Act.

As to Basis a. Performance Budget – a budget emphasizing the programs or services conducted and based on functions, activities and projects which focus attention upon the general character and nature of the work to be done, or upon the services to be rendered, rather than the things to be acquired, such as personal services, supplies and equipment. It is management-oriented measures actual or estimated results in the basis, terms of benefits accruing to the public and their costs. b.

3.

Line-Item Budget – a budget the basis of which are the objects of expenditures such as salaries and wages, travelling expenses, freight, supplies, materials and equipments, tec.

As to Approach and Technique a. Zero-Based Budgeting – a process which requires systematic consideration of all programs, projects and activities with the use of the defined ranking procedures. In ZBB, activities are analyzed and presented in “decision packages” or key budgetary inclusions. The term “zero-base” refers to the yearly analysis, evaluation and justification of each activity, project or program, starting from a “zero” performance and budgeting level. ZBB does not accept the prior year’s budget as a starting point for analysis. The analysis of the levels of funding and performance as well as the expected impact of the objectives at each level will give enough leeway for management to decide whether to eliminate entirely a low priority to make way for a new one or to cut back the performance and funding level of the program to permit another to expand. b.

Incremental Approach – a budget where only additional requirements need justification. It focuses on analysis of incremental changes in the budget and may be done within the context of performance and program budgeting.

c.

Capital Budgeting Approach - a budgeting technique which consists of a two-tiered strategy, as follows: c.1 Setting a baseline budget that will correspond to the minimum level of operating requirements at which each agency of the national government will be able to perform its basic functions; and c.2 Prioritization of the allocable balance (i.e. what is left of the budget ceiling after deducting the baseline budget) among the proposed projects and programs of agencies.

Agency baseline – refers to the cost of performing regular agency functions, including an allowance for inflation, but excluding the cost of non-recurring programs and projects. Government-wide baseline – refers to the budget impact of decisions or policies enunciated by the government that require priority funding. These items are not traditionally reflected in the individual budgets of agencies but are shown as a lump sum to be distributed later on the basis of prescribed rules or procedures.

Examples a. b. c. d. e.

are: Proposed salary adjustment Miscellaneous personnel benefits, including retirement benefits Mandatory allocations to local governments Projected level of support to GOCCs Estimated provisions for contingencies due to calamity, foreign exchange fluctuations and other adjustments

FAPs baseline – refers to the budgetary requirements, of ongoing programs/projects with foreign financial assistance. Priority Program/Project Fund - the remaining balance after deducting the baseline budget requirements of the national government. National Budget System The National Budget System consists of the methods and practices of the government for planning, programming and budgeting. It shall include the adoption of sound economic and fiscal policies and the execution of the programs and projects geared towards the accomplishment of political, economic and social objectives. Its primary concern is the availability and use of money to provide the services required or expected from the government. Legal Basis of the Budget System The legal basis of the current national budget system is the Budget Reform Decree or PD No. 1177. The first premise of the Budget Reform Decree is that the national budget is an instrument for development and as such requires careful design and implementation of budget preparation, legislation, execution and accountability. What is a national budget? A national budget is the government’s estimate of its income and expenditures. It is the financial translation of the program and projects that best promote the development of the country. It is what the government plans 1) to spend for its programs and projects and 2) where the money will come from. It is based on what the government thinks it will spend during the year and the sources of what it hopes to have as funds either from the revenues or from borrowings with which to finance such expenditure. On what is our national budget spent? Our national budget is allocated for the implementation of various programs and projects, the operation of government offices, payment of salaries of government employees and payment of public debts. These expenditures may be looked at in terms of expense class, sector, implementing unit of government and region.

Expenditures by expense class show how much is provided for: 1.

Current operating expenditures – appropriations for the purchase of goods and services for the conduct of normal government operations within a budget year (e.g. salaries, maintenance and other operating expenses, interest payments etc.)

2.

Capital outlays – appropriations for the purchase of goods and services the benefits of which extent beyond the budget year and which add to the assets of government including investments in the capital stock of government owned-or controlled corporations.

3.

Net Lending – net advances by the national government for the servicing of government guaranteed corporate debt and loans outlays by the national government to government corporations; and

4.

Debt amortization – contribution to the sinking fund which is utilized for principal repayment of our loans.

Why does the government borrow from foreign sources? Why can’t it make do with what is collected locally. Our government has to provide for the requirements of capital outlays projects such as roads and bridges, that are important to the attainment of our development objectives. In effect, capital outlays are investments for continuous economic activities and for future expansions. They generate local production and income. Relying only on domestic or local resources to finance such projects will limit our government’s capacity to provide these needed support. If the government takes too large a share of domestic resources, local private demand will have less for their own projects and activities. As a result, credit will be tight, interest charges will be high and prices of goods and services will go up. The absence of a long-term domestic capital market and the limited savings in the country, moreover, render the domestic resources insufficient to finance the enormous requirements of development. By borrowing from foreign sources, the government takes advantage of long-term loans which are readily available abroad with lower interest rates in international capital markets.

It should be emphasized that our national government uses borrowing proceeds solely to finance carefully selected capital projects supportive of the country’s development goals. Wisely chosen and efficiently implemented, these projects are expected to build up the productive capacity of our economy and eventually pay back the loans obtained.

BUDGET PROCESS How is the government budgeting undertaken? Government budgeting is undertaken using a process that consists of four (4) phases, namely: 1) budget preparation 2) budget legislation or authorization 3) budget execution or implementation 4) budget accountability or review Budget Preparation This process starts with the determination of budgetary priorities and activities guided by our national development plan, within the ceilings or constraints imposed by available revenues and borrowing limits and inclusion of amounts needed for approved priorities and activities into the expenditure levels. The Development Budget Coordinating Committee (DBCC) determines the overall expenditure levels, the revenue projections, the deficit levels and the financing plan. The DBCC submits these to the Cabinet and to the President for approval. The DBCC is composed of the Budget Secretary as Chairman and the Economic Planning Secretary, the Bangko Sentral ng Pilipinas and the Finance Secretary as members. It is assisted by an Executive Technical Board. Once approved, the DBM issued a Budget Call, a document reminding the different agencies in the government to prepare their respective budgets in accordance with approved overall budget ceilings and parameters. Upon receipt of the budget call, the agencies are also expected to have already started conducting their own internal budget consultations to firm up and to fit in their departmental plans and priorities for the specific year with the overall sectoral development strategy of government, as laid down in the Medium Term Development Plan. DBM hold consultations with agencies to set indicative expenditure ceiling of department or agencies as set by DBCC to be used in preparation of official budget estimates to avoid. minimize bloated agency budget proposal Agencies issue guidelines to their regional offices which are expected to conduct regional budget hearings with RDC and NGO. In this hearing, programs, plans and priorities in the regions are reviewed which will be incorporated in the budget proposal. The regional offices submit their RDC – approved budget to their respective head offices in Manila which, in turn, collate all the regional budget proposals submitted by their different regional offices all over the Philippines and consolidate these into a single agency budget proposal of the department. The DBM conducts consultation-workshops with RDCs and department heads on their criteria for the allocation of the agency budget to their regional offices. The intention is to ensure that

the regional distribution of the national budget is consistent with the development plans and directions of the regions. This is in line with the allied policies of decentralization and creating greater popular participation in government concerns. The DBM then undertakes a series of review activities to evaluate the merits of the budget proposals and determine the areas where possible cuts could be made. The objective is to make the overall expenditure level consistent with that determined by the DBCC and approved by the President. Budget Legislation or Authorization The President submits the overall budget that he/she approved to Congress in the form of a detailed Expenditure Program (National Expenditure Program) accompanied by the Budget of Expenditures and Sources of Financing, The President’s Budget Message and the Regional Allocation of the Expenditure Program. In Congress, the proposed budget goes first to the House of Representatives, which assigns the task of initial budget review to it Appropriations Committee. The House Committee summons the different national agencies of the government to explain and to justify their budget. The proposed budget is then presented to the House Body as a bill (Gen. Appropriations Bill). From the House of Representatives, the budget bill goes to the Senate and is referred to the Senate Finance Committee. The Senate Finance Committee, likewise, asks the various agencies to explain their respective budgets as contained in the budget bill. It then proposes amendments to the House Budget Bill to the Senate Body for approval. To thresh out differences and arrive at a common version, a conference committee is created composed of members coming from both houses.

Once a common budget bill has been approved by both houses voting separately, it is submitted to the President for signing into law. It then known as a General Appropriations Act., which mandates the DBM, as the staff arm of the President to execute or implement the expenditures program. Budget Execution or Implementation This is the operational aspect of budgeting. After the President signs the GAA into law, the DBM requires the different agencies of government to prepare the Agency Budget Matrix (ABM) to be accompanied by the Annual Cash Program. The allotment (based on the ABM) is the authority of the government agency to incur obligations and enter into contract. It is possible that sometimes the allotment is issued for the funding of projects even if these will take one year to finish. This is done to enable the agency to enter into contracts and begin the projects. However, pursuant to DBM Circular Letter #2008-11, the releases of Notices of Cash Allocation (NCAs) is being modified.

NCAs to cover regular requirements of agencies shall be comprehensively released with a monthly breakdown of NCA requirements of the agency receiving NCA directly from DBM. Basis of releases is the Monthly Cash Program (MCP), a budget execution document, reflects the monthly disbursement requirement of OUs. All NCAs programmed and credited for the month whether part of the comprehensive release or constituting the additional NCA releases, shall be valid only until the last working day of the said month, thus, any un utilized NCA corresponding to the book balance (net of outstanding checks) shall automatically lapse at the end of that month. DBM shall provide the MDS-GSB and agency concerned, a monthly schedule of the NCA releases, ex. Monthly NCA requirement of the agency. Upon receipt of the NCA, the MDS-GSB shall ensure that the amount programmed for the month, if there is any, shall be credited immediately to the Regular MDS accounts of the agency. Thereafter, the NCA requirements for the subsequent months shall be credited on the first working day of the month consistent with the schedule to be provided by DBM. The NCA specifies the maximum amount of withdrawal that an agency can make from the government servicing bank for the period indicated. DOF and DBM will meet every month to confirm or adjust the estimated cash availability and the program of NCA releases. In the event that cash balance of the government reaches a level where the budget cost cannot be met, DBM implements the across-the-board budget reduction. (Refer to the National Budget Circular #528 for the guidelines of NCA Releases for FY 2011) Budget Accountability This refers to the evaluation of actual performance and initially approved work targets. Obligation incurred, personnel hired and work accomplished are compared with the plans and targets submitted by the agencies at the time that their respective budgets are prepared. This work is entrusted with the DBM and COA. Budget accountability is concerned with tracking and monitoring of actual expenditures, revenue, assets and liabilities of the government and is carried out largely through the accounting function. It consists of the periodic reporting by agencies of their performance, top management review of government activities and the fiscal and policy implications, and the actions of the COA in assuming the fidelity of officials and employees in the handling of receipts and expenditures.

Accounting for budgetary accounts Budgetary accounts consists of the appropriations, allotments and obligations. Appropriations refers to an authorization made by law or other legislative enactment, directing the payment of goods and services out of government funds under specified conditions or for special purposes. Allotment is the authorization issued by the DBM to the agency, which allows it to incur obligations for specified amounts, within the legislative appropriation. In order that the appropriation may be released, the agency, in consultation with the DBM, is required to prepare and to submit the Agency Budget Matrix (ABM), the official document used as the basis in the release of the obligational authority. This is prepared by appropriation/financing sources to support expenditures to be made during the year broken down by allotment class/expenses. The ABM shall contain, among others, the following information:

a. The amount to be released categorized under “Not Needing Clearance” column, and b. The amount that will be released through the issuance of Special Allotment Release Order (SARO) categorized under “Needing Clearance” column including continuing appropriations based on the Statement of Allotments, Obligations and Balances (SAOB).

An Annual Cash Program, which shall provide cash to finance the programs reflected in the ABM and the prior year’s accounts payable, is also submitted with the ABM. Upon approval of the total comprehensive release by the DBM, it will be released to the agency. For request “Non-Needing Clearance”, the Notice of Cash Allocation (NCA) is issued as requested. Pursuant to the Tax Remittance Advice (TRA) system as provided in Joint Circular No. 1-200 of the DOF, DBM and COA dated January 3, 2000, the NCA released to the agency is reduced by the amount of the taxes withheld to be remitted by the DBM for the Agency thru the TRA based on the request of the agency duly supported by the Summary of Taxes Withheld (STW). Control and Recording of Appropriations, Allotments. Obligations and the NCA The COA does not journalize the appropriations. The control of the release of allotments and the NCA shall be made by the DBM and the BTr, thru the registries that they shall maintain. The Agency shall also monitor the allotments and the obligations it incurs in the registry that it shall also maintain. The agency shall journalize the NCA it receives as debit to Cash-National Treasury-MDS and credit to Subsidy Income from the National Government. In effect it identifies the share of the agency in the income of the National Government.

Records of the DBM Upon the approval and issuance of the ABM and the SARO, the DBM shall enter the pertinent data on releases for each government agency in the Registry of Appropriations and Allotments (RAPAL). The DBM shall maintain the Registry of Allotments and NCA (RANCA) for the allotments and the NCA issued to the agency. The RANCA shall be the control and monitoring record of the DBM and shall furnish the BTr a copy of the NCA. Records of the BTr Upon receipt of the NCA from DBM, the BTr shall enter it in the Registry of NCA and Replenishment (RENREP). It shall also enter the transfer of cash from its bank account(s) to the appropriate MDS account. Records of the Agency Upon receipt of the approved ABM and ARO, the Budget Officer shall record the allotment to the respective registries through the Allotment and Obligation Slips (ALOBS). Although the agency will not journalize its appropriation and allotments, it shall maintain four registries for the obligations it incur: Registry of Allotment and Obligations – Capital Outlay (RAOCO) Registry of Allotment and Obligations – Maintenance and Other Operating Expenses (RAOMO) Registry of Allotment and Obligations – Personal Services (RAOPS) Registry of Allotment and Obligations – Financial Expenses (RAOFE) Recording of Allotments Upon receipt of the approved ABM and ARO, it shall be recorded in the respective registries through the Allotment and Obligation Slips (ALOBS). Separate registries shall be maintained for the four classes of Program/Project/activity(PPA). Accounting of Obligations: Obligation refers to a commitment by a government agency arising from an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum of money. The agency is authorized to incur obligations only in the performance of activities which are in pursuits of its functions and programs authorized in appropriation acts/laws within the limit of the ARO. The Head of the Requesting Unit shall prepare the Obligation Request (ObR) or Budget Utilization Request (BUR) and Disbursement Voucher. He shall certify on the necessity and legality of charges to appropriations/allotment under his direct supervision as well as the validity, propriety and legality of supporting documents. The Head of the Budget Unit shall certify the availability of allotment and obligations incurred in the ObR or budget and utilization in the BUR. Obligations shall be taken up in the registries maintained by the Budget Unit through the ALOBS prepared/processed by the office. The Budget Officer verifies the completeness of the documents. If complete, then prepares the ALOBS. Verifies the availability of the allotment based on the RAOs. If no allotment is available, returns the documents to the office concerned, if there is an available balance of allotment to cover the obligations, prepares the ALOBS and record in the appropriate RAOs. The obligation is recognized and will be entered in the appropriate RAO when the obligation is incurred as evidenced by the approved ALOBS. Obligations shall be posted in the “Obligation Incurred” column of the RAOs to arrive at the balance of allotment still available at a given period. There is no need to prepare a new ALOBS for corrections/adjustments made by the accounting unit after the processing of the claims but before payment is made.

Adjustment in the RAOs shall be effected thru a positive entry (if additional obligation is necessary) or a negative entry (if reduction) in the Obligation Incurred column. The Head of the Accounting Unit, for contract or purchase order, shall certify the availability of funds based on the ObR or BUR duly certified by the Budget Officer and certify the availability of cash and completeness of supporting documents in the DV. The Head of the Accounting Unit shall also prepare the Daily Cash Position Report to be submitted to the Head of the Agency. ` A new ALOBS for the following adjustments of obligations as negative entries in the Obligation Incurred column shall be made: 1. 2. 3.

Refund of cash advance granted during the year; Overpayment of expenses during the year; Disallowances/charges which become final and executory

To support the negative entries, a certified copies of OR for the overpayment/refunds shall be furnished to the Budget Unit. The Accountant shall credit “Cash-National Treasury-MDS” each time a payment is made charged against the NCA and debit the specific account being paid for, either asset or expense account.

Illustrative Entry: a. Receipt of Allotment

b. Incurrence of obligation

Posting in the allotment column to the respective Registries. Posting in the obligation column of the RAO’s Ex. RAOPS for PS obligations or expenditures

Notice of Cash Allocation(NCA) specifies the maximum amount of withdrawal that an agency can make from the National Treasury through the issuance of MDS checks or other authorized mode of disbursement. This is issued by DBM based on the Annual Cash Program or as requested and prescribed under the Modified Disbursement System (MDS).

Upon receipt of the NCA, the accountant shall record in the books as: Cash-National Treasury, MDS 106 Subsidy Income from National Government 631

XX XX

Income/Collections and Deposits System This system covers the processes of acknowledging and reporting income/collections, deposits of collections with Authorized Government Depository Bank (AGDB) or through the AGDB for the account of the Treasurer of the Philippines, and recording of collections and deposits in the books of accounts of the agency. The sources of income and collections made by Agency are: 1. Taxes 4. Borrowings 2. Operating and Service Income 5. Miscellaneous Receipts 3. Grants and Donations Methods of Accounting for Income: 1. Accrual Method – used when income is realized (earned) during the accounting Period regardless of cash receipt. Account Receivable is set up and the general or specific income accounts according to nature and classification are credited.

2.

Modified Accrual – income of an agency is recorded as “Deferred Credits to Income” and the appropriate receivable account is debited. The income account is recognized upon receipt of collection and the “Deferred Credits to Income” account is adjusted accordingly.

3.

Cash Basis - shall be used for all other taxes, fees, charges and other revenues where accrual method is impractical. The income account is credited upon collection of the cash or its equivalent.

All collecting officers shall deposit intact all their collections with AGDB daily or not later than the next banking day and shall record all the deposits made in the Cash Receipts Record. Only National Government Agencies shall maintain two sets of books: 1. Regular Agency books – this shall be used to record the regular transactions of the agency like the receipt and utilization of Notice of Cash Allocation (NCA), and collections of income and other receipts which the agency are authorize to use. This shall consist of journals and ledgers, as follows: Journals: Cash Receipts Journal (CRJ) Cash Disbursement Journal (CDJ) Check Disbursement Journal (CkDJ) General Journal (GJ)

Ledgers: General Ledger (GL) Subsidiary Ledgers (SL) 2.

National Government books – this shall be used to record collections, which the agency cannot use but are required to be remitted to the Bureau of the Treasury. These shall consist of the following: Cash Journal General Journal General Ledger Subsidiary Ledger

Receipt and Collection Process 1. 2. 3. 4. 5.

The Collecting Officer (CO)receives payment from creditors and issues Official Receipt. The CO records collections in Cash Receipt Record. The CO deposits collections. The CO records deposit in Cash Receipt Record. The CO prepares the Report of Collections and Deposits and forwards to accounting unit with copies of official receipts and validated Deposit Slips. 6. The accounting unit prepares Journal Entry Voucher (JEV) and records in the Cash Receipts Journal. Types of collections as to authority to use: 1. Without authority to use. 2. With authority to use. 3. Authority with limitations 4. Income from sale of equipment. 5. Grants and donations intended for agency use. 6. Miscellaneous collections. Illustrative Accounting Entries:

A.

Without Authority to Use (NG Bks) As a general rule, all revenues regardless of amount and frequency of collection are to be remitted to the National Treasury. Such income shall be recorded in a separate books of accounts NG Books. 1.

Receipt of cash payment of hospital fees Cash – collecting officers Due to National Treasury Hospital fees 596

2.

102 411 xxx

xxx

411

xxx

xxx

Remittance to the treasury Due to National Treasury Hospital fees 596 xxx Cash-collecting officers

102

xxx

B.

With Authority to Use (RA Bks) For agencies which are authorized to use income for their operations, the collections shall be recorded as income in the Regular Agency (RA) books 1.

Collection of prior year’s receivables Cash- collecting officers Accounts Receivables

2.

102 121

xx xx

Issuance of bill for the rent of an office space. Accounts Receivables Rent/Lease income

111 574

xx xx

3, Record collection of rent payment. Cash – collecting officer Accounts Receivable 3.

xx

122 102

xx xx

Release of NCA by DBM after request is be made to the Bu of Treasury to use the deposited collections as augmentation of MOOE. Cash-National Treasury, MDS Due from National Treasury

5.

xx

Record deposit in the bank. Due from National Treasury Cash – collecting officer

4.

102 111

106 122

xx xx

Record disbursement for the repair (use of income). Repairs and Maintenance -Buildings and other Structures 804 Cash-National Treasury, MDS 106

6.

xx xx

Cash from another agency to implement its project (Inter-agency Transferred Funds). Under existing regulations, the collections made by an Implementing Agency (IA) of cash from a source agency (SA) to implement the latter’s project shall be remitted by the recipient agency, the IA, to the BTr. The IA shall request the necessary NCA from the DBM)

6.a Receipt of the check from the SA. Cash – collecting officers Due to Other NGAs( SA)

102 416

xx xx

6.b Remittance of cash to the BTr Due from National Treasury Cash-collecting officers

131 102

xx xx

6.c Receipt of NCA from DBM Cash-National Treasury, MDS 106 Due from National Treasury

xx 131

xx

6.d Purchase of technical equipment Technical & Scientific Machinery And Equipment 226 Cash-National Treasury, MDS 106 6.e

xx xx

Submission of liquidation report to the SA. Due to Other NGAs Technical and Scientific Machinery & Equipment

416 226

xx xx

If there is still a balance or refund of fund balances of completed projects.

Due to Other NGAs Cash-National Treasury, MDS

C.

416 108

xx xx

Authority with Limitations If the authority is subject to the limitation that any excess shall be remitted to the National Treasury, such collections for seminar and convention fees, the collections shall be recorded in the NG books. The expenses shall be journalized, the balance/excess to be remitted to the National Treasury. 1.

Record collection of (ex.)seminar fees. Cash – collecting officer Seminar/Training fees

2.

xx xx

Record deposit of collection. Cash in Bank – Local Currency Cash – collecting officer

3.

102 622

111 102

xx xx

Record payment of expenses. Office supplies expense Cash in Bank – Local Currency 111

755

xx xx

To close the balance or unused income in RA and transfer to NG Bks. Seminar/training fees 622 Cash in Bank–Local Currency 111

xx xx

4.

Record transfer in the NG Bks the unused collections.

5.

Cash – collecting officer 102 xx Due to NT 411 ( Seminar/Training fees 622- xx Record remittance of excess to the Bu of Treasury through bank. Due to NT (Seminar/training fees 622 xx) Cash – collecting officer

411

xx

xx

102

xx

Income from Sale of Equipment Proceeds from the sale of non-serviceable, obsolete and other unnecessary equipment, including cars, vans and the like, may be requested for appropriation to purchase a new one and for the repair and maintenance of existing vital equipment. It should be noted that the purchase of cars and vans is subject to the prior authority required under the existing rules. Illustration: The Agency A of the national government sold a non-serviceable car with the following information: Cost Accumulated depreciation Sales Price

P500,000 250,000 300,000

The proceeds from sale were accordingly remitted to the National Treasury through the bank. The agency received Special Allotment Release Order (SARO) in the amount of P500,000 for the purchase of a new car with Notice of Cash Allocation (NCA) in the amount of P450,000, net of withholding tax of P50,000. After approval of the purchase order issued, the motor vehicle was delivered and accordingly, paid in full, net of withholding tax. The said tax was afterwards remitted to the Bureau of Internal Revenue through a Tax Remittance Advice (TRA).

To record sale of motor vehicle. Cash – collecting officer 102 300,000 Accumulated DepreciationLand Transport Equipt 314 250,000 Land Transport Equipment 214

500,000

Gain on Sale of Asset

623

50,000

Record Remittance of collection to the NT through the bank: Gain on Sale of Asset Government Equity Cash – Collecting Officer

623 471 102

50,000 250,000 300,000

Receipt of SARO for the request to purchase a new one: Record in the RAOCO under the Allotment Received column. Record the NCA received: Cash – NT, MDS 107 Subsidy Income from NG 631

450,000 450,000

To record obligation in the RAOCO: Post the amount of obligation in the Obligation Column of the RAOCO. To record accounts payable for the motor vehicle delivered: Land Transport Equipment Accounts Payable

214 500,000 401

500,000

To record full payment of obligation: Accounts Payable Due to BIR Cash – NT, MDS

401 500,000 412 107

50,000 450,000

To record remittance of withholding tax through TRA. Due to BIR Subsidy Income from National Government

412 631

50,000 50,000

EXERCISES: 1. VSMMC received an inter-fund transfer from DOH, Region 10, to implement a medical mission program in the amount of P200,000. The funds was intended to purchase the needed equipments. The project ended with a fund balance of P15,000 and was returned to the source agency together with the liquidation report and turn-over of equipments. 2. The Bureau of Plant Industry conducted a seminar regarding “Horticulture”. The agency collected a total amount of P100,000, which was deposited with the agency depository bank and paid the following expenses of the seminar: Office Supplies, P25,000; Rent, P 20,000; and Printing and Binding, P7,000. The excess of the amount collected was appropriately remitted to the NT.