The New Government Accounting System Manual

THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL

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For Local Government Units

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Chapter 1.

INTRODUCTION

Sec. 01. Objectives of the Manual. – The New Government Accounting System Manual presents the basic policies and procedures; the new coding system and chart of accounts; the accounting books, reports/forms and financial statements, and illustrative accounting entries to be adopted by all local government units effective January 1, 2002. The objectives of the Manual are to prescribe the following: a) b) c)

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

Sec. 02. Coverage. – This Manual shall be used by all local government units (LGUs).

• 4.

Chart of Accounts and Account Codes. A new coding structure and a new chart of accounts with a three-digit account numbering system shall be adopted.

5.

Books of Accounts. The Books of Accounts are as follows:

6.

Journals • • • •

Cash Receipts Journal (CRJ) Cash Disbursements Journal (CDJ) Check Disbursements Journal (CKDJ) General Journal (GJ)

7.

Ledgers • • • • • • • • • •

General Ledger (GL) Subsidiary Ledgers, where applicable for: Cash Receivables Inventories Investments Property, Plant and Equipment Liabilities Income Expenses

8.

All the above records shall be maintained by the accounting unit of the LGUs. However, treasurers and disbursing officers shall also maintain their respective cash records such as:

Sec. 03. 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 therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties". (underscoring supplied) Chapter 2.

BASIC FEATURES AND POLICIES

• • •

Sec. 04. Basic Features and Policies. – The new government accounting system has the following basic features and policies, to wit: 1.

2.

3.

Accrual Accounting. A modified accrual basis of accounting is used. Under this method, all expenses shall be recognized when incurred. Income shall be on accrual basis (e.g. Share from Internal Revenue Collections) except for transactions where accrual basis is impractical (e.g. Market Fees) or when other methods may be required by law. 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. As required under Sections 308, 309 and 310 of the Local Government Code, separate books shall be maintained for the General Fund, Special Education Fund and Trust Fund. Special Accounts in the General Fund. Special accounts in the General Fund complete with subsidiary ledgers, shall be maintained for the following: •

Public utilities and other economic enterprises;

Loans, interests, bonds issued, and other contributions for specific purposes; Development projects funded from the Share in the Internal Revenue Collections; and Such other special accounts which may be created by law or ordinance.

9.

Cashbook – Cash in Treasury Cashbook – Cash in Bank Cashbook – Cash Advances

The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD) daily and the Report of Accountability for Accountable Forms (RAAF) monthly.

10. Financial Statements. The following statements shall be prepared: • • •

Balance Sheet Statement of Income and Expenses Statement of Cash Flows

11. Notes to Financial Statements shall accompany the above statements. 12. Trial Balance. The two money-column trial balance shall be used. 13. Appropriations, Allotments and Obligations. Journal entry shall no longer be prepared to record the appropriations, receipt of allotments and incurrence of obligations. In lieu of this, separate registries shall be maintained by the Accounting Unit to control the appropriations, allotments and obligations for each of the four classes of expenditures, namely:

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• • • •

Registry of Appropriations, Allotments and Obligations – Capital Outlay (RAAOCO) Registry of Appropriations, Allotments and Obligations – Maintenance and Other Operating Expenses (RAAOMO) Registry of Appropriations, Allotments and Obligations – Personal Services (RAAOPS) Registry of Appropriations, Allotments and Obligations – Financial Expenses (RAAOFE).

14. Financial Expenses. Financial expenses such as bank charges, interest expenses, commitment fees and other related expenses shall be separately classified from Maintenance and Other Operating Expenses (MOOE). 15. 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 they take place except those purchased out of petty cash fund which shall be for immediate use and not for stock. Such case shall be charged immediately to the appropriate expense accounts. 16. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be computed using the moving average method. 17. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. The Accounting Unit shall maintain Supplies Ledger Cards by stock number and Property, Plant and Equipment Ledger Cards by category of assets. 18. 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 asset. Any related expenses incurred during the construction of the project, such as, license fees, permit fees, clearance fees, etc. shall be capitalized. 19. Public Infrastructures. Public infrastructures are assets for use of the general public, such as roads, bridges, waterways, railways, plazas, monuments, etc. A Registry of Public Infrastructures (RPI) shall be maintained according to classification to record all infrastructures for use of the general public. The following are the Registries to be maintained, classified by category of property, plant and equipment: • • •

Registry of Public Infrastructure – Bridges (RPIB) Registry of Public Infrastructure – Roads (RPIR) Registry of Public Infrastructure – Plazas, Monuments, etc. (RPIP)

20. During construction these infrastructures shall be recorded in the books under the account “Construction in Progress”. Upon completion, the completed asset shall be transferred to the account “Public Infrastructure”. At the end of the year, completed assets under “Public Infrastructure” shall be transferred to the respective registry. 21. Completed public infrastructures funded out of a loan shall, however, be retained in the books of accounts until the loan is fully paid.

22. A Summary of all Public Infrastructures (based on the different registries) shall be prepared annually and included in the Notes to Financial Statements. 23. Depreciation. The straight-line method of depreciation shall be used. A residual value equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start on the second month after purchase/completion of the property, plant and equipment. Public infrastructures shall not be charged any depreciation. 24. Reclassification of Obsolete and Unserviceable Assets, as well as Assets No Longer Used by the Agency to “Other Assets” Account. Assets declared by proper authorities as obsolete and unserviceable, including assets of the agency no longer used, shall be reclassified to “Other Assets” account from the corresponding inventory and property, plant and equipment accounts. 25. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set up for estimated uncollectible receivables. This will allow for a fair valuation of receivables. Allowance for Doubtful Accounts shall be provided only for trade receivables. 26. 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 shall be recorded under receivable accounts “Due From Officers and Employees” and “Receivables– Disallowances/Charges”, as the case may be. 27. Recognition of Liability. Liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received. 28. Interest Accrual. Whenever applicable and appropriate, interest income and/or expense shall be accrued and recognized in the books of accounts. 29. Accounting for Borrowings and Loans. All borrowings and loans incurred shall be recorded direct to the appropriate liability accounts. 30. Elimination of corollary and negative entries. The use of corollary and negative entries shall be stopped. Acquisition/Disposition of assets shall be debited/credited direct to the appropriate asset accounts. If an error is committed, a correcting entry shall be prepared to adjust the original entry.

Chapter 3. ACCOUNTING SYSTEM A. GENERAL ACCOUNTING PLAN Sec. 05. General Accounting Plan. – The General Accounting Plan shows the overall accounting cycle in the Local Government Unit. Transactions shall emanate from the different offices/departments of the local government units (LGUs). These offices/departments will provide/produce the source documents and other accounting forms leading to the perfection of the transaction, whether it be budgetary, collections or disbursements. The source documents and accounting forms shall be the basis for the preparation of reports by the Office of the Treasurer. The Office of the Accountant shall record the transactions to the registries or to the corresponding books of original entry. Posting to the books of final entry and

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preparation of the financial reports shall also be undertaken by the Office of the Accountant. The General Accounting Plan (Table 1) is presented as to the following type of transactions: 1) 2) 3) 4) B.

Appropriations, Allotments and Obligations Collections and Deposits Disbursements – a) By cash b) By check Miscellaneous and Other transactions

BUDGETARY ACCOUNTS

Sec. 06. Budgetary Accounts. – Budgetary accounts are composed of appropriations, allotments and obligations. Sec. 07. Accounting for Appropriations. – Appropriation refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes.

GENERAL ACCOUNTING PLAN (MS Excel file)

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The local sanggunian approves the annual budget thru the issuance of appropriation ordinance. On the first business day of the fiscal year, the entire annual budget of the local government unit shall be recorded in the Registry of Appropriations, Allotments and Obligations (RAAO). The appropriations, in the amounts approved by the legislative body and confirmed by the reviewing authorities, are recorded in the registries maintained by the accountant where they may be compared with the actual developments of the period. Budgetary reserves which are stand by appropriations ready for release in case of calamities, as well as supplemental budget are similarly recorded in the RAAO. In case the LGU is operating on a re-enacted budget, said re-enacted budget shall likewise be recorded in the registry. Once current budget is approved, the necessary adjustments shall be made in the registry. Separate registries shall be maintained for the four classes of expenditures per responsibility center, to wit: 1. 2. 3. 4.

Registry of Appropriations, Allotments (RAAOCO) Registry of Appropriations, Allotments Other Operating Expenses (RAAOMO) Registry of Appropriations, Allotments (RAAOPS) Registry of Appropriations, Allotments (RAAOFE)

and Obligations - Capital Outlays

Sec. 11. Accounting Procedures for Budgetary Accounts. – Summarized hereunder is the process in accounting for budgetary accounts: PROCESS a) Records in the appropriate RAAOs the approved appropriation per Appropriation Ordinance.

Office of the Accountant

b) Forwards the advice of allotments to the Office of the Accountant and returns the work plan to the concerned departments/ offices.

Office of the Budget Officer

c)

Office of the Accountant

Enters the allotments in the RAAOs.

and Obligations - Maintenance and and Obligations - Personal Services and Obligations - Financial Expenses

Sec. 08. Accounting for Allotments. – Allotment is the authorization issued by the Local Chief Executive (LCE) to a department/office of the LGU, which allows it to incur obligations, for specified amounts, within the appropriation ordinance. Allotments are released quarterly based on the Work and Financial Plan and Request for Release of Allotment. The Accountant, upon receipt of the Advice of Allotment, shall enter the allotment in the RAAOs. Sec. 09. Accounting for Obligations. – Obligations refer to the amounts committed to be paid by the LGU for any lawful act made by an accountable officer for and in behalf of the local government unit concerned. Obligations shall be taken up in the registries as they are incurred. For each obligation, the requesting department/office shall prepare the Allotment and Obligation Slip (ALOBS) signed by the department or office head as requesting official and forward this, together with the supporting documents, to the Budget Officer. The Budget Officer shall certify to the existence of appropriation that has been legally made for the purpose by signing the appropriate box in the ALOBS and assign the ALOBS number thereto. The Accountant shall review the ALOBS and certify as to obligation of the allotment by signing the appropriate box in the ALOBS. He shall also fill up the Status of Obligation. The Accountant shall record the amount of obligation in the RAAOs. Sec. 10. Adjustment of Obligations. – The Chief Accountant shall record paid disbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Any balance appearing in the ALOBS after full payment of obligations shall form part of unobligated allotment. The Chief Accountant shall adjust accordingly the amount of recorded obligations in the RAAO using the same ALOBS number as reference. At the end of each month, the Chief Accountant and the Budget Officer shall reconcile their records on allotments available for obligation.

PERSON / UNIT RESPONSIBLE

d) Prepares ALOBS based on disbursement vouchers/purchase requests and/or supporting documents. Signs the appropriate box for requesting office. Forwards the same to the Office of the Budget Officer.

Heads of departments/offices

e) Certifies the ALOBS as to the existence of appropriations based on the appropriation ordinance. Assigns ALOBS number and forwards the same to the Office of the Accountant.

Budget Officer

f) Certifies the ALOBS as to the obligations of allotments. Records the obligation in the appropriate column of the RAAOs and in the Status of Obligation portion (Obligation) of the ALOBS.

Chief Accountant

g) Records paid disbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Any balance appearing in the ALOBS after full payment of obligations shall form part of unobligated allotment. Adjust accordingly the amount of recorded obligations in the RAAOs.

Office of the Accountant

h) At the end of each month, reconcile records on allotments available for obligation.

Budget Officer and Chief Accountant

Sec. 12. Terminology and Classification. – A common terminology and classification shall be used consistently throughout the budget, the accounts and the financial reports.

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For this purpose, the following specific expenditures shall be recorded in the appropriate RAAOs: a. RAAOCO – • • • • • • • • • • • • • • • • b. RAAOPS – • • • • c. RAAOMO – • • • • • • • • • • • • •

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d. RAAOFE –

Investments outlay (e.g. stocks, bonds) Land, Land Improvements and Leasehold Improvements outlay Buildings and Other Structures outlay (e.g. school buildings, markets and slaughterhouses, hospital and health centers, etc.) Public Infrastructures outlay (e.g. parks, plaza, monuments, bridges etc.) Furniture and Fixtures outlay Work Animals outlay Breeding stocks Machineries and Equipment outlay (e.g. dump trucks, construction equipment, industrial machineries, technical and scientific equipment, etc.) Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars, vans, etc.) Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay Books outlay Ordnance outlay IT Equipment and Software outlay Other Property, Plant and Equipment outlay Reforestation Projects Arts, Archeological Specimen and Other Exhibits Salaries and Wages (e.g. regular pay, part-time pay, overtime and night pay, holiday pay, etc.) Allowances (e.g. PERA, hazard pay, RATA, etc.) Benefits (e.g. bonus, cash gifts, productivity, pension, etc.) Government Shares on Employees’ Contributions Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.) Livestock (e.g. swine, hogs, chicken, goats, etc.) Crops Supplies (e.g. office, medical, dental and laboratories, spare parts, gasoline and oil, etc.) Repairs and Maintenance Printing and Binding Travel Consultancy Light, Water and Gas Communication (e.g. telephone, telegraph, internet, postage, etc.) Auditing Services Other Services (e.g. janitorial, security, hauling, etc.) Extraordinary and Miscellaneous Expenses All other expenditures in the Chart of Accounts for MOOE, except depreciation, obsolescence, bad debts, loss on sale of assets, loss of assets, discount on Real Property Tax and Special Education Tax.

• • • • • C.

Bank Charges Interest Expenses Commitment Charges Other Financial Charges (e.g. underwriting fees, guarantee fees) Loan Amortization

INCOME/COLLECTIONS AND DEPOSITS

Sec. 13. Separation of Books and Depository Accounts. – Local accountants and treasurers shall maintain separate books and depository accounts, respectively, for each fund in their custody or administration. Sec. 14. Depository Accounts. – Local treasurer shall maintain depository accounts in the name of their respective local government units with banks, preferably government-owned, located in or nearest to their respective areas of jurisdiction. Earnings of its depository accounts shall accrue exclusively thereto. Sec. 15. Remittance of Government Monies to the Local Treasury. – Officers of the local government authorized to receive and collect monies arising from taxes, revenue, or receipts of any kind shall remit the full amount received and collected to the treasury of such local government unit which shall be credited to the particular account or accounts to which the monies in question properly belong. Sec. 16. Sources of Income of LGUs. – The main sources of income of LGUs are as follows: a. b. c.

Tax revenues, fees and charges Share from Internal Revenue Collections Share from National Wealth

The sources of income are further classified into general income accounts and specific income accounts. Sec. 17. General Income Accounts. – The following shall comprise the General Income Accounts applicable to LGUs: a. b. c. d. e. f. g. h. i. j. k. l.

Subsidy from Other LGUs Subsidy from Other Funds Subsidy from Special Accounts Sales Revenue Dividend Income Interest Income Gain on Sale of Securities Gain on Sale of Assets Sale of Confiscated Goods and Properties Foreign Exchange (FOREX) Gains Miscellaneous Operating and Service Income Fines and Penalties – Government Services and Business Operations m. Income from Grants and Donations Sec. 18. Specific Income Accounts. – The following major classification comprise the specific income accounts for LGUs: 1.

Property Taxes

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2. 3. 4.

Taxes on Goods and Services Other Taxes Other Specific Income

Sec. 19. Methods of Accounting for Income. – The following accounting methods shall be adopted in recording income:

a.

Accrual Method – Accrual method of accounting shall be used to record Share from Internal Revenue Collections in the books of accounts. Upon receipt of the Notice of Funding Check Issued from Department of Budget and Management (DBM), Share from Internal Revenue Collections shall be taken up as Due from NGAs and credited to Share from Internal Revenue Collections. However, Cash in Bank shall be debited upon receipt of Bank Credit Advice as to receipt of the Share from Internal Revenue Collections regardless of whether or not the Notice of Funding Check Issued has been received from DBM.

b.

Modified Accrual – Modified accrual method of accounting shall be used for real property taxes. At the beginning of the year, Real Property Tax Receivable and Special Education Tax Receivable shall be established. This is in view of the need to record in the books not mere income estimates from real property taxes but actual receivables from said taxes. However, to avoid appropriating uncollected revenues which might result to huge cash overdraft, the same shall be credited to Deferred Real Property Taxes Income/Deferred Special Education Tax Income. Real Property Tax Income/Special Education Tax Income shall be recognized upon receipt of collection.

c.

Cash Basis – Cash basis of accounting shall be used for all other taxes, fees, charges and other revenues. Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. – Real Property Tax Receivables/Special Education Tax Receivables shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certified list showing the name of taxpayers and the amount due and collectible for the year. Based on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the debit to Real Property Tax Receivable/Special Education Tax Receivable and crediting to Deferred Real Property Tax Income/Deferred Special Education Tax Income. Upon collection of Real Property Taxes from taxpayers, the account Deferred Real Property Tax Income/Deferred Special Education Tax Income shall be debited while the Real Property Tax Income due to the municipality is recognized/credited. The share of the Province and Barangay shall also be credited to Due to LGUs. Every end of the week, thereafter the Municipal Accountant shall furnish the Provincial Accountant with a summary of the JEVs showing the breakdown of the amounts Due to LGUs. The summary, which shall be supported with copies of the JEVs, shall be the basis of the Provincial Accountant to draw the JEV taking up the RPT Income. The account Due from LGU shall be debited and Real Property Tax Income credited.

At the end of the month, the Municipal Accountant shall likewise prepare the Abstract of Real Property Tax to facilitate the distribution of real property tax collection. A copy of the abstract shall be furnished the Provincial Accountant, for purposes of reconciliation with the weekly summary of JEVs. Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior to CY 2002. – Payment of delinquencies for real property taxes/special education taxes prior to CY 2002 shall be recognized as a direct credit to Real Property Tax Income/Special Education Tax Income account. Sec. 22. Discount on Real Property Tax/Special Education Tax. – Discounts for advance and prompt payment of Real Property Tax and the additional one percent (1%) tax accruing to the Special Education Fun shall be recognized in the year the taxes are due. Said discounts shall be apportioned to the concerned LGUs in accordance with the sharing prescribed for real property tax and additional one percent (1%) tax under the Local Government Code. Sec. 23. Fines and Penalties. – Fines and Penalties, either from tax revenue or other specific income, shall be recognized as income of the year it was collected. Fines and Penalties arising from real property taxes shall be distributed to concerned LGUs in accordance with the sharing prescribed under the Local Government Code for Real Property Tax and the additional one percent (1%) tax for the Special Education Fund. Sec. 24. Other Receipts. – Other receipts of the local government units shall be comprised of, but not limited to, the following: a. b. c. d.

Borrowings Sale of Property, Plant and Equipment Refund of Cash Advances Receipt of Performance/Bidders’ Bonds

Sec. 25. Borrowings. – Borrowings are proceeds of repayable obligations, generally with interest from the bank, national agency, another local government unit, and private sector. All borrowings incurred shall be recorded direct to the appropriate liability accounts. Upon receipt of the advice from the bank or lending agency informing the release of the proceeds, the Accountant shall draw a Journal of Entry Voucher taking up the transaction. Sec. 26. Sale of Property, Plant and Equipment. – Sale of property, plant and equipment refers to the proceeds from the sale of land, buildings, equipment, furniture and other similar property which are recorded in the books as Property, Plant and Equipment. The appropriate Property, Plant and Equipment account shall be credited upon transfer of ownership. Sec. 27. Refund of Cash Advances. – Cash advances for official travel shall be taken up as a receivable from the concerned official or employee. Refunds made shall be credited to the receivable account previously set up. Cash advances for salaries and wages shall be recorded as debits to the account Cash – Disbursing Officer. Any refund made shall be credited to this account. Sec. 28. Receipt of Performance Bonds. – Performance bond posted by contractor or supplier to guaranty full and faithful performance of the their work may be in the form of cash, certified check or surety. Performance bond in cash or certified check shall be acknowledged by the issuance of official receipt and recorded in the books by the Accountant drawing a JEV for the purpose. In case of surety bond, an acknowledgment receipt shall be issued by the authorized official.

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Sec. 29. Reporting for Collections and Deposits. – Collectors/tellers shall issue a receipt to acknowledge collections made. The receipt maybe in the form of prenumbered Official Receipts, or cash tickets and the like. At the close of each business day, these collectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four copies. The original and two copies, together with the duplicates of the official receipts issued, shall be submitted to the treasurer/cashier to whom the cash collected shall be turned over. The fourth copy of the RCD shall be retained by the collector/teller concerned. Barangay Treasurers deputized to collect taxes imposed by provinces, cities and municipalities shall follow the same procedures in turning over their collections to the treasurer/cashier concerned. In the case of collectors assigned to the field, where travel time from their places of assignment to the Treasurer’s Office is more than one day, turnover of collections shall be made at least once a week or as soon as the collections reach P5,000.00. Sec. 30. Verification of Collections and Accountable Forms. – The Treasurer/Cashier shall verify the Report of Collections and Deposits; check the statement of accountable forms as to initial balances on hand, receipts, issues and the ending balances on hand; make a physical count of the accountable forms remaining in the custody of the collector/teller and check the same against the new balances on hand column. He shall indicate his verification by affixing his signature at the back of the triplicate copy of the last official receipt issued. He shall count the money turned over to him and sign the certification and receipt portion of all copies of RCD. Sec. 31. Designation of Liquidating Officers. – The Treasurer may designate liquidating officers from among the collectors/tellers whenever necessary. a. Collector s/tellers shall turn over their collections to their designated liquidating officer. The RCD shall however be prepared in five copies, four copies to be submitted to the liquidating officer, the fifth copy to be retained by the collector/teller. b. The liquidating officer shall perform the procedures for the receipt and verification of collections turned over to him. He shall also accomplish the RCD in four copies to summarize the collections turned over to him by the collectors/tellers as well as his own collections. c. The liquidating officer shall turn over intact the cash collections to the Treasurer/Cashier together with the originals and two copies of the RCDs of collectors/tellers and the duplicates of the official receipts issued. The Treasurer/Cashier shall acknowledge receipt of the cash and all accompanying documents by signing all copies of the RCD of liquidating officer on the certification and receipt portion of the form. The fourth copy of the RCD of the liquidating officer and RCDs of collectors/tellers shall be retained by the liquidating officer. Sec. 32. Deposit of Collections. – The Treasurer/Cashier shall deposit intact all his collections as well as all collections turned over to him by the collectors/tellers with the authorized depository bank daily or not later than the next banking day. He shall record all deposits made in the cashbook and prepare the RCD.

The barangay treasurer shall deposit all collections intact with the city/municipal treasurer, or in a depository bank account maintained in the name of the barangay, within five (5) days from receipt thereof. Sec. 33. Deposit of Field Collections. – Collections by field collectors shall be remitted to the Cashier or designated liquidating officer of the field office of the LGU. When travel distance of the field office to the local treasury may expose government funds to the risk of loss while in transit, the Cashier or designated liquidating officer, upon authorization by the Treasurer, may deposit the collections in the authorized depository bank near the field office of the LGU. The procedures in reporting collections and deposits prescribed in this Chapter shall be observed. Sec. 34. Accounting for Collections and Deposits. – The Accountant shall determine the account classification of the collections covered by the RCD and the supporting papers submitted by the Treasurer/Cashier and shall accomplish the Journal Entry Voucher. The accountant shall also maintain the Abstract of Real Property Tax Collections to facilitate the distribution and remittance of the shares of the different government units concerned in the real property tax collections. Sec. 35. Receipts and Collection Process. – The following is a summary of the receipt and collection process in the LGU: PROCESS

PERSON / UNIT RESPONSIBLE

Receive payment from taxpayers/ creditors and issue Official Receipt (OR). Prepare Report of Collections and Deposits. Remit to the Liquidating Officer (if one is designated) or Treasurer.

Collector/Teller

Check remittances and verifies accountable forms of collectors/tellers. Consolidates collections and remits to the Treasurer/Cashier. Prepares RCD.

Liquidating Officer

Receive remitted collections, consolidates the same and prepares RCD. Records in the Cashbook – Cash in Treasury.

Treasurer

Deposit collections in the appropriate bank account per authorized depository bank. Records deposit in the Cashbook – Cash in Bank.

Treasurer

Forward RCD to Accounting Unit with copies of ORs and validated deposit slips.

Treasurer

Prepare Journal of Entry Voucher and record in the Cash Receipt Journal.

Accountant

Sec. 36. Pro–forma Accounting Entries. – The following are pro-forma accounting entries for income, collection and deposit:

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Particulars

Account Title

Acct . Cod e

Debit

Credi t

Particulars

Receipts from Markets Garbage Fees

INCOME 1. Real Property Tax – Basic A. Books of the Municipality

b. Deposit of Collections

a. Setting-up of RPT Receivable RPT = P1,000 RPT Sharing: Municipal - 40% Province - 35% Barangay - 25%

Real Property Tax Receivable Deferred Real Property Tax Income

b. Receipt of Payment

Cash in Treasury Real Property Tax Receivable

c. Distribution of Collection RPT Sharing: Municipal - 40% Province - 35% Barangay - 25%

Deferred Real Property Tax Income Real Property Tax Due to LGUs

d. Deposit of Collections

Cash in Bank – LCCA Cash in Treasury

110 101

100

e. Remittance of Share (Province)

Due to LGUs Cash in Bank – LCCA

431 110

35

f. Remittance of Share (Barangay)

Due to LGUs Cash in Bank – LCCA

431 110

25

B.

124

1,000

100

124 448 711 431

100 100

40 60

Debit

Credi t 90 10

110 101

100

1,000

100

a. Receipt of Notice of Funding Check Issued from the DBM and credit memo from the bank for Share from Internal Revenue Collections

Cash in Bank –LCCA Share from Internal Revenue Collections

110

b. Receipt of Notice of Funding Check Issued from the DBM for Share from Internal Revenue Collections

Due from NGAs Share from Internal Revenue Collections

130

746

1,000

1,000

746

1,000

4. Grants and Donations 100 35

a. Upon receipt of the Summary of the JEV from the Municipal Accountant

Due from LGUs Real Property Tax

b. Upon receipt of share

Cash in Bank – LCCA Due from LGUs

131 711

110 131

35

35

2. Operating and Service Income Cash in Treasury

101

100

a. Receipt of grants and donations in cash (Donations in kind shall be booked-up using the appropriate asset account)

Cash in Treasury Income from Grants and Donations

101

100

b. Receipt of grants and donations in kind Motor Vehicle: Original Cost P1,000 Less: Acc. Depn. 200 Book Value P 800

Motor Vehicles Invested Equity

218 537

800

(At the end of Year) Invested Equity

537

800

Government Equity

501

Cash in Bank –LCCA Loans Payable – Current, Domestic Bank Charges Interest Expenses

110

1,000

403 951 952

10 12

651

100

25

Books of the Province

a. Receipt of Income

Cash in Bank – LCCA Cash in Treasury

Acct . Cod e 783 772

3. Share from Internal Revenue Collections

1,000

448

101

Account Title

35

35

800

800

5. BORROWINGS a. Receipt of borrowed funds from bank Principal P1,000

1,000

8

Particulars

10 12

Bank Charges -

Account Title Cash in Bank –LCCA

Acct . Cod e 110

Debit

Credi t

b. Receipt of borrowed funds from other agency Principal P1,000 Interest Expense 6

Cash in Treasury Loans Payable – Current, domestic Interest Expenses

101

Cash in Bank – LCCA

110

c. Payment of loan amortization

Loans Payable – Current, Domestic Cash in Bank - LCCA

403 952

403 110

Account Title

Receipt of subsidy from General Fund Proper

Cash in Bank – LCCA Subsidy from Special

110

Accounts

606

22

Interest Expense-

Acct . Cod e

Particulars

Debit

Credi t

500 500

1,000 6

1,000

a. Cash Advance by an Officer for Local Travel 6

200

7. REFUND OF CASH ADVANCES

200

a. To take up the cash advance

Due from Officers & Employees Cash in Bank – LCCA

b. To take up refund of cash advance

Cash in Treasury Due from Officers & Employees

128 110

10

101

10

128

10

10

6. SUBSIDIES a. Subsidy from Other Funds (General Fund to Special Education Fund) GENERAL FUND BOOKS Transfer of subsidy to Special Education Fund (Aid to SEF to finance its projects)

Subsidy to Other Funds Cash in Bank – LCCA

897 110

500

500

SPECIAL EDUCATION FUND BOOKS Receipt of subsidy funds from Other funds

Cash in Treasury Subsidy from Other Funds

b. Cash Advance by a Disbursing Officer for Salaries and Wages a. To take up the cash advance

Cash – Disbursing Officers Cash in Bank – LCCA

b. To take up refund of cash advance

Cash in Treasury Cash – Disbursing Officers

101

500

101

10

107

10

10

605

500

a. To take up receipt of performance bond in cash

Cash in Treasury Performance/ Bidders/ Bail Bonds Payable

101

b. To take up deposit of performance bond

Cash in Bank – LCCA Cash in Treasury

110 101

50

c. To take up refund of performance bond

Performance/ Bidders/ Bail Bonds Payable Cash in Bank – LCCA

414

50

BOOKS OF GENERAL FUND PROPER Subsidy to Special Accounts Cash in Bank – LCCA

10

8. RECEIPT OF CASH BONDS

b. Special Accounts (subsidy from General Fund proper to Operation of Public Market)

Transfer of subsidy to Special Account

107 110

898 110

500

BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)

500

50

414

110

50

50

50

D. DISBURSEMENTS Sec. 37. Disbursements. – Disbursements refer to the settlement of government payables/obligations by cash or by check.

9

Typical transactions for which disbursements are made are as follows: 1. 2. 3. 4.

Personal Services Maintenance and Other Operating Expenses Capital Outlay Financial Expenses

Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and paid either by check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an integral part of the DV. Sec. 38. Certification on Disbursements. – Disbursements from the general fund shall require the following certifications on the DV: 1.

Certification and approval of vouchers and payrolls as to validity, propriety and legality of the claim (Box A of DV) by the head of the department or office who has administrative control of the fund concerned. In case of temporary absence or incapacity of the department head or chief of office, the officer next-in-rank shall automatically perform his function and shall be fully responsible therefor.

2.

Necessary documents supporting the disbursement vouchers and payrolls as certified to and reviewed by the Accountant. (Box B of DV)

3.

Certification that funds are available for the purpose by the Local Treasurer. (Box C of DV)

Sec. 39. Approval of Disbursements. – Approval of disbursements by the Local Chief Executive (LCE) himself shall be required whenever local funds are disbursed, except for regularly recurring administrative expenses such as: payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services, remittances to government creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the DBM and others, where the authority to approve may be delegated. Disbursement vouchers for expenditures appropriated for the operation of the Sanggunian shall be approved by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as the case may be. Sec. 40. Payments by Check. – Checks shall be drawn only on duly approved disbursement vouchers. It shall be drawn by the local Treasurer and countersigned by the local Administrator. In case of temporary absence or incapacity of the aforesaid officials, these duties shall devolve upon their immediate assistants. In the case of municipalities where no Administrator has been appointed, checks shall be countersigned by the municipal Mayor. In case, however, of expenditures appropriated for the operation of the Sanggunian, checks drawn shall be countersigned by the provincial Vice Governor, the city Vice Mayor, or the municipal Vice Mayor, as the case may be. Sec. 41. Recording Check Disbursements in the Cashbooks. – All checks issued including cancelled checks shall be recorded chronologically in the Cashbook – Cash in Bank. Sec. 42. Release of Checks. – The Treasurer shall release the check only to the payee or his duly authorized representative. For purposes of releasing checks, the Treasurer shall maintain a Check Register where all checks issued shall be recorded chronologically and where the claimants shall be required to acknowledge receipt thereof.

Sec. 43. Reporting of Checks Issued. – The checks released to claimants shall be reported in the Report of Checks Issued (RCI) which shall be prepared daily by the Treasurer for each fund. It shall be submitted to the Accountant for preparation of Journal of Entry Voucher based on individual checks issued and recording in the Check Disbursements Journal. Sec. 44. Check Disbursement Process. – The steps in disbursements through issuance of check is shown below: PROCESS

PERSON / UNIT RESPONSIBLE

a. Gather supporting documents, and approved ALOBS, prepare DV and forward to Head of Department.

Concerned Office

b. Sign Box A of DV and submit to the Accounting Unit.

Supervisor/Head of Department

c. Check completeness of documents, assign number to DV, sign Box B and forward to Treasurer.

Accounting Unit

d. Verify claim, certify cash availability (Box C) and forward to approving officer.

Treasurer

Note: If funds are not available, return to Accountant for recording in the books as Accounts Payable (AP). For AP, JEV shall be prepared by Accounting Unit and JEV number reflected in the DV. JEV for AP is recorded in General Journal. Accountant retains copy of DV and forwards to Treasurer. e. Approve transaction (Box D) and forward DV to Cashier.

Local Chief Executive or authorized approving officer

f. Prepare, sign check and forward check with DV to countersigning officer.

Treasurer

g. Countersign check and forward to Accountant for preparation of the Accountant’s Advice of Local Check Disbursements.

Administrator/ ViceMayor for the Local Sanggunian Disbursements

h. Prepare Accountant’s Advice of Local Check Disbursements and submit to

Accountant

10

PROCESS bank. Return DV, check and supporting documents to Cashier/Treasurer.

PERSON / UNIT RESPONSIBLE

i. Record check in the Check Register and release check to claimant. Record disbursement in Cashbook – Cash in Bank. Prepare Report of Checks Issued. Forward RCI with DV and supporting documents to Accounting Unit.

Treasurer

j. Prepare the JEV based on individual checks/voucher; sign “Prepared By” portion (approved by Chief Accountant), and record JEV in the Check Disbursements Journal. Post monthly to the General Ledger/Subsidiary Ledgers.

Accounting Unit

k. Forward RCI, DV, supporting documents and JEV to the Office of the Auditor.

Accountant

Sec. 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be maintained under the imprest system. The fund shall be sufficient for the nonrecurring, emergency and petty expenses of the LGU for one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amount received. The official receipt shall be attached to the PCV. Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be prepared for the fund, recorded in the RAAO and obligated as Other Expenses. Payments out of the fund shall be made through the use of PCVs duly supported by official receipts and other required documents. Each PCV shall not exceed Php1,000.00.

Sec. 45. Payments in Cash. – Disbursements by cash shall be made from a cash advance drawn and maintained in accordance with COA rules and regulations. Cash payments shall be made only on duly approved payrolls/disbursement vouchers. Cash advances, by regular and special disbursing officers shall be recorded through a debit to Cash – Disbursing Officers and a credit to Cash in Bank – Local Currency, Current Account (LCCA).

A Disbursement Voucher shall be prepared for replenishments of the petty cash fund during the year duly supported by a list/summary of PCVs, the PCVs and its supporting documents. ALOBS shall be prepared for each replenishment and recorded in the RAAO based on actual expenses incurred. At the end of the year, the petty cash fund shall be fully liquidated by preparing a Report of Disbursement supported by the list/summary of PCVs, the PCVs and its supporting documents. The ALOBS setting up the fund at the beginning of the year shall be cancelled. Another ALOBS shall be prepared taking up the liquidation and recorded in the RAAO based on the actual expenses incurred. Unused cash shall be returned to the Treasurer who shall issue an Official Receipt to acknowledge the amount returned. A new Cash Advance for Petty Cash Fund shall be set up in the ensuing year. Sec. 49. Cash Disbursement Process. – Disbursement process for payment of salaries and wages out of cash advances is as follows: PROCESS

PERSON / UNIT RESPONSIBLE

a)

Processing of Payrolls to be paid by cash is the same as that of steps (a) to (e) for check disbursements.

Concerned offices

b)

Office of the Treasurer

Sec. 47. Cash Advances for Travel. – Cash advances for travel shall be recorded as debit to the account Due from Officers and Employees and a credit to Cash in Bank – Local Currency, Current Account.

Gather duly certified and approved payrolls to be paid out of cash advance. Prepare DV for cash advance corresponding to the net amount of payroll/s. Sign Box A of DV and submit to the Accounting Unit.

c)

Accounting Unit

For liquidation of travel where the amount of cash advance is equal to or more than the travel expenses incurred, the Liquidation Report form shall be prepared by the officers/employees concerned and submitted to the accounting unit as basis for preparation of the JEV to record liquidation. In case the amount of cash advance is less than the travel expenses incurred, a Disbursement Voucher shall be prepared to liquidate the previous cash advance and serve as a claim for reimbursement of the deficiency in amount.

Check completeness of documents/ previous cash advance liquidated, assign number to DV, sign Box B and forward to Approving Officer.

d)

Approves DV and forward to Treasurer for preparation of checks.

Local Chief Executive

Sec. 46. Reporting of Cash Disbursements. – To account for cash disbursements, from regular and special cash advances, the Accountable/Disbursing Officer shall prepare the Report of Disbursements and submit the original and duplicate copy with vouchers/payrolls/petty cash vouchers to the Accountant. He shall ensure that receipt of the report and supporting documents, are properly acknowledged by the Accountant. The Accountant shall verify the report including the completeness of the supporting documents, prepare the Journal of Entry Voucher (JEV) and record the transaction in the Cash Disbursements Journal.

11

PROCESS e)

PERSON / UNIT RESPONSIBLE

Prepare and sign check, and forward check with DV to countersigning officer.

Treasurer

f)

Countersign check and forward to Accountant for preparation of Advice.

Administrator

g)

Prepare Accountant’s Advice of Local Check Disbursements and return DV, check and supporting documents to Cashier/Treasurer.

Accountant

h)

Encash check and pay claimants. Record disbursement in Cashbook – Cash Advances.

Treasurer/ Disbursing Officer

i)

Return unused cash to the Treasurer/ Cashier. An official receipt (OR) shall be issued by the Treasurer/Cashier to acknowledge the return of unused cash and indicate check no. of cash advance granted on the face of OR. Record the refund as credit to cash advance and attach OR to the Cashbook – Cash Advances.

Disbursing Officer

Prepare Report of Disbursement, attach paid payrolls/ supporting documents and copy of OR for unused cash advance returned to Treasurer/Cashier. Sign "Certified Correct” portion of Report of Disbursement and submit to Accounting Unit.

Disbursing Officer

Prepare JEV to record the liquidation of cash advance. Record JEV in the Cash Disbursements Journal (CDJ). Post monthly to the General Ledger/ Subsidiary Ledger.

Accountant

Forward Report of Disbursement and supporting documents including JEV to the Office of the Auditor.

Accountant

j)

k)

l)

Property, plant and equipment acquired through purchase shall include all costs incurred to bring it to the location necessary for its intended use, like transportation, freight, installation costs, etc. In the books of accounts, the purchase is immediately recorded as asset. Property, plant and equipment to be constructed may be classified as agency assets and public infrastructures. Agency assets are those to be used by the LGU concerned, like buildings, while public infrastructures are those to be used by the general public. The construction period theory shall be used in recording both types of assets. This means that expenses such as license fees and bonus paid to contractor for completing the work ahead of schedule, etc. during the construction period shall be added to the total cost of the project. However, liquidated damages charged to the contractor for delayed completion should be deducted from the total cost. During the construction period, agency assets and public infrastructures shall be taken up in the books as "Construction in Progress” with the appropriate asset classification. As soon as the project is completed, the Construction in Progress for agency asset is closed to the appropriate asset account. For public infrastructures funded out of regular income, the Construction in Progress account is transferred to the Public Infrastructures account upon completion. At the end of the year, the latter account is closed to the Government Equity and the asset is recorded in the Registry of Public Infrastructures (RPI). However, completed public infrastructures funded out of a loan shall be closed to the Government Equity account only upon full payment of the loan. A disclosure of public infrastructures completed funded from loans shall be made in the Notes to Financial Statements. Sec. 51. Purchase of Supplies. – Purchase of supplies and materials for stock regardless of whether or not they are consumed within the accounting period shall be recorded as assets using the Inventory account following the Perpetual Inventory Method (refer to Chapter 7 – Supplies or Property). However, supplies and materials purchased out of the Petty Cash Fund for immediate use or for emergency shall be taken up as expenses. Sec. 52. Pro-forma Accounting Entries. – Pro-forma accounting entries for disbursement transactions are shown below:

Particulars 1.

Account Title

Acct . Cod e

Debit

Credit

Payment through Cash Advances

a. Cash advance for personal services

Sec. 50. Purchase or Construction of Property, Plant and Equipment. – Property, plant and equipment include land and land improvements, buildings, equipment, motor vehicles, books, machineries, ordnance, etc. and public infrastructure. These are charged against appropriations/allotments for capital outlay when obligated.

Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000 Additional Compensation, and P3,000 Personnel Economic Relief Allowance (PERA). 1. Grant of cash advance for payroll

Cash – Disbursing Officers Cash in Bank – LCCA

2. Liquidation of cash

Salaries and Wages

107 110

21,000

21,000

12

Particulars advance for payroll

Account Title – Regular Pay PERA Additional Compensation Withholding Taxes Payable GSIS Payable PAG-IBIG Payable Cash – Disbursing Officers

Acct . Cod e 801 804

Debit 18,000 3,000

805

5,000

Credit

410 411 412

2,000 1,500 1,500

107

21,000

Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance Contributions and P1,500 PAG-IBIG Contributions. 3. Government share for life and retirement insurance and PAGIBIG Contributions

Life and Retirement Insurance Contributions PAG-IBIG Contributions GSIS Payable PAG-IBIG Payable

817

1,500

818 411 412

1,500

1,500 1,500

For establishment of fund, Enter obligation in RAAOMO as Other Expenses for P6,000 Petty Cash Fund Cash in Bank – LCCA

105 110

6,000

6,000

Traveling Expenses – Local Office Supplies Expenses Office Equipment Maintenance Other Expenses Cash in Bank – LCCA

831

500

Traveling Expenses – Local

4,000

Credit 5,000

4. Return of unused Petty Cash Fund.

Cash in Treasury Petty Cash Fund

101 105

1,000

128 110

1,000

831

900

1,000

c. Cash advance for travel

1. Grant of cash advance

Due from Officers and Employees Cash in Bank – LCCA

2. Liquidation of cash advance during the current year (assuming only P900 was utilized and P100 was refunded)

Traveling Expenses – Local Due from Officers and Employees

849

2,500

882 950 110

1,000 800

831

1,000

128

1,000

900

Adjust RAAOMO for refund of cash advance of P100 Cash in Bank – LCCA Due from Officers and Employees

110

100

128

100

2. Payment by Check a. Maintenance and Other Operating Expenses Enter obligation in RAAOMO for rent P3,000 1. Payment of rent

Rent Expense Cash in Bank – LCCA

841 110

3,000

3,000

4,800

Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling Expenses of P1,000. 3. Liquidation at year end

849 105

Debit

Cancel RAAOMO for setting up of petty cash fund at the start of the year and refund for a total of P6,000.

3. For amount refunded where official receipt was issued

Enter obligation in RAAOMO for Office Supplies P2,500, Travelling Expenses P500, Office Equipment Maintenance P1,000 and Other Expenses of P800. 2. Replenishment of petty cash fund during the year

Account Title Office Supplies Expenses Petty Cash Fund

Enter obligation in RAAOMO for Travel of P1,000

b. Petty Cash Fund

1. Release of cash advance for petty cash fund miscellaneous expenses

Particulars

Acct . Cod e

Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet of P2,000 2. Payment of utilities (MERALCO and PLDT)

Electricity Telephone/Telegrap h and Internet Cash in Bank – LCCA

835

1,500

837 110

2,000

3,500

13

Particulars

Account Title

Acct . Cod e

Debit

Credit

Enter obligation in RAAOMO for training and seminar expenses of P1,000 3. Payment of seminar fee

Training and Seminar Expenses Cash in Bank – LCCA

833 110

1,000

1,000

Particulars

Account Title Cash in Bank – LCCA

Acct . Cod e 110

3. Remittance of taxes withheld

Withholding Taxes Payable Cash in Bank – LCCA

410 110

80,000

Public Infrastructure Construction in Progress – Roads, Highways and Bridges

243

800,00 0

Government Equity Public Infrastructures

501 243

Enter obligation in RAAOFE for bank charges of P300 1. Bank charges upon receipt of bank statement

Bank Charges Cash in Bank – LCCA

951 110

300

Interest Expenses Cash in Bank – LCCA

952 110

400

2. Receipt of office equipment

222 110

6,000

Note: Using the JEV for the above transactions, the public infrastructures shall be recorded in the Registry of Public Infrastructures.

6,000

d. Construction of Roads by Contract – Enter obligation in RAAOCO for P800,000 for construction of road. 1. Payment of first Construction in billing for 50% Progress – Roads, accomplishment Highways and Bridges 232 400,00 0 Withholding Taxes Payable 410 40,000 Cash in Bank – LCCA 110 360,000 2. Payment of second billing 100% accomplishment

Construction in Progress – Roads, Highways and Bridges

232

Withholding Taxes Payable

410

800,000

400

No entry Office Equipment Cash in Bank – LCCA

232

5. To transfer completed roads to Registry of Public Infra- structures at the end of the year

c. Office Equipment – Enter obligation in RAAOCO for P6,000 for purchase of equipment 1. Issuance of PO to dealer

80,000

300

Enter obligation in RAAOFE for interest expense of P400 2. Interest Expense

Credit 360,000

If funded from regular agency income – 4. To take up roads completed

b. Financial Expenses

Debit

800,00 0

800,000

If funded from a loan – 6 To record completed roads

At year end,upon full payment of laon –

Public Infrastructures Construction in Progress – Roads, Highways and Bridges

243

Government Equity Public Infrastructures

501 243

800,00 0

232

800,000 800,00 0

800,000

e. General Repair/Construction of Building by Administration 1. Approval of the project P1M

No entry

Enter obligation in RAAOCO for P600,000 for construction materials 400,00 0 40,000

14

Acct . Cod e

Particulars 2. Issue PO for building materials: Lumber, nails, cement, sand and gravel, paints, etc. = P600,000

Account Title

3. Payment for construction materials received

Construction Materials Inventory Withholding Taxes Payable Cash in Bank – LCCA

4. Issuance of materials P590,000

Construction in Progress – Agency Assets

230

Construction Materials Inventory

156

156 410 110

Debit Credit No Entry

600,00 0

Account Title Payable Cash in Bank – LCCA

2. Remittance of withholding tax

Withholding taxes Payable

410

Cash in Bank – LCCA

110

60,000 540,000

200,00 0

Credit 200,000 1.8M

200,000

Enter obligation in RAAOCO for P600,000 for land and P400,000 for building

590,00 0 590,000

5. Cash advance granted to Disbursing Officer for payroll

Cash – Disbursing Officers Cash in Bank – LCCA

107 110

350,00 0

6. Liquidation by Disbursing Officer of paid payroll

Construction in Progress – Agency Assets

230

380,00 0

350,000

107

350,000

410

8. Accomplishment Report approved by the LCE

Buildings Construction in Progress – Agency Assets

204

Land Building Withholding Taxes Payable Cash in Bank – LCCA

2. Remittance of withholding tax

Withholding Taxes Payable Cash in Bank – LCCA

1. Payment of delivered spare parts

30,000

110

201 204 410 110 410 110

100,00 0

100,000 900,000

100,000

Spare Parts Inventory Withholding Taxes Payable Cash in Bank – LCCA

155

2,500

410

250

110

2,250

30,000 i. Enter obligation in RAAOMO for purchase of office supplies

970,00 0

230

970,000

1. Payment of office supplies delivered

f. Acquisition of Land

Office Supplies Inventory Withholding Taxes Payable Cash in Bank – LCCA

149 410 110

Enter obligation in RAAOCO for P2million for purchase of land

j. Fund Transfers

1. Payment made for land purchased

Enter obligation in RAAOMO for subsidy to LGU – XYZ

201

600,00 0 400,00 0

Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts 30,000

Withholding Taxes Payable Cash in Bank – LCCA

1. Payment of the land and building (assessed value of land is P600,000) for P1,000,000

h. Purchase of Inventories

410

7. Remittance of withholding tax

Land Withholding Taxes

Debit

g. Land and Building

Enter obligation in RAAOCO for P380,000 for labor

Withholding Taxes Payable Cash – Disbursing Officers

Particulars

Acct . Cod e 410 110

2M

3,000 300 2,700

15

Particulars 1. Cash assistance to LGU –XYZ

Account Title Subsidy to Local Government Units Cash in Bank – LCCA

Acct . Cod e 895 110

Debit 30,000

Credit 30,000

k. Enter obligation in RAAOMO for subsidy to SEF 1. Cash transfer to SEF as subsidy

Subsidy to Other Funds Cash in Bank – LCCA

897 110

10,000

10,000

l. Enter obligation in RAAOMO for grants and donation to Trust Fund 1. Cash transfer to Trust Fund as counterpart LGU funds.

Grants and Donations Cash in Bank – LCCA

889 110

500,00 0

500,000

E. MISCELLANEOUS TRANSACTIONS Sec. 53. Miscellaneous Transactions. – Miscellaneous transactions refer to transactions that are unique and not recurring in the ordinary course of operations of the government. These transaction types seldom take place or ideally should not happen at all. The following maybe considered miscellaneous transactions: 1. 2. 3. 4. 5. 6.

Loss of Cash and Property Accountability Cash Overage Dishonored Check Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check Settlement of Suspensions/Disallowances/Charges Refund of Overpayments

Sec. 54. Loss of Cash and Property. – Loss of cash and property may be due to malversation, theft, robbery or other causes. Cash shortage discovered during cash examination conducted by auditors is reported through the Report of Cash Examination within ten (10) working days from the completion of examination pursuant to COA Memorandum No. 84-373A. The auditor issues an audit report in case of shortage in property accountability. As soon as a shortage is definitely established, the Auditor shall issue a memorandum pertaining thereto and the Accountant shall draw a Journal of Entry Voucher to take up the shortage as a receivable from the accountable officer concerned. In case of loss of property due to other causes (theft, force majeure, fire, etc.), a report thereon shall be prepared by the accountable officer concerned for purposes of requesting relief from accountability. No accounting entry shall be made but the loss shall be disclosed in the notes to financial statements pending result of request for relief from accountability.

Sec. 55. Grant of Relief from Accountability. – When a request for relief for shortages or loss of funds is granted, a copy of the decision shall be forwarded to the Chief Accountant who shall draw a JEV to record the transaction. The loss shall be debited to the Loss of Assets account and credited to the appropriate receivable account. In case the request for relief is denied, immediate payment of the shortage shall be demanded from the accountable officer. Restitution shall be acknowledged by the issuance of an official receipt. In case the request for relief from accountability for loss of property caused by fire, theft, force majeure or other causes is granted, a copy of the decision shall likewise be forwarded to the Chief Accountant for the preparation of the JEV. The loss shall be debited to the Loss of Assets account and credited to the appropriate asset account. If request for relief from accountability is denied, the loss shall be taken up as a receivable from the accountable officer/persons liable and shall be credited to the appropriate asset account. Sec. 56. Cash Overage. – In case the cash examination disclosed cash overage, as determined by the auditor, the amount shall be forfeited in favor of the government and an official receipt shall be issued by the collector/teller. The cash overage shall be taken up as Other Specific Income. Sec. 57. Dishonored Checks. – A check is said to be dishonored when upon its being duly presented for payment, such payment is refused or cannot be obtained. Upon receipt of the debit memo and the dishonored check(s) from the bank, constructive cancellation of the official receipt covering the dishonored check shall be immediately effected by the Treasurer on the copy in his possession. The Treasurer shall immediately photocopy the dishonored checks and record as credit in the Cashbook–Cash in Bank and cancel payment in the taxpayer’s index card. He shall also notify the collector/teller of the dishonor and the cancellation of the official receipt. The collector/teller shall note the cancellation in the triplicate copies of the receipt. The Treasurer shall then inform the Auditor who shall effect the cancellation in the duplicate copy of official receipt, in case the same has already been submitted for audit. The Treasurer shall forward the debit memo and the photocopy of the dishonored checks to the Accountant. The Accountant shall cancel the official receipt if still in his possession. He shall prepare the Journal of Entry Voucher (JEV) taking up the dishonored check by crediting the Cash in Bank account and debiting the appropriate income account. In case of dishonor of check payments for Real Property Tax (RPT) or Special Education Tax (SET), the RPT/SET Receivables and corresponding Deferred RPT/SET Income shall be restored. The accounts Due to LGUs, RPT Income, Cash in Bank and RPT Discount shall be adjusted accordingly. He shall furnish the Treasurer with a copy of the duly approved JEV. The Treasurer shall record the JEV number in the Cashbook-Cash in Bank as reference in the entry effecting the cancellation of the dishonored check. Sec. 58. Cancellation of Lost Check Issued. – A check is considered lost when it is misplaced, waylaid or left behind inadvertently/negligently by the payee or holder in due course or by the custodian/carrier thereof and after diligent search cannot be found or located; or when it is lost due to fortuitous event, theft or robbery. Upon submission of sworn statement from the payee that a check issued by the LGU is lost, the treasurer shall immediately notify the bank concerned for the stoppage of payment. He shall forward the sworn statement to the accountant who shall prepare the JEV to cancel the payment made. Copy of the JEV shall be furnished the treasurer as basis for him to debit the amount in the Cashbook – Cash in Bank.

16

Sec. 59. Spoiled and Stale Checks. – Checks may be cancelled when they become spoiled or stale. A check is considered spoil when, it is torn, mutilated, defaced or with erasures/errors affecting the genuineness of any material information contained therein. It is stale, if it has been outstanding for over six months from date of issue or as prescribed by the depository bank. At least one month before a check becomes stale, the Treasurer shall send a written notice to the payee of the existence of the check. A spoiled or stale check shall be marked cancelled on its face and reported as follows:

1.

For spoiled checks which are immediately cancelled and for which the Report of Checks Issued (RCI) has not yet been prepared, the cancelled check shall be attached to the RCI and reported chronologically with the other checks issued and the word “Cancelled” shall be indicated on the report. 2. For stale checks which have been unclaimed and thus, the original DV and supporting documents are still with the Treasurer, the cancelled check shall be presented in the RCI after the last check issued for the period indicated in the report. The original DV and supporting documents shall be returned to the Accountant who shall prepare a JEV to record the transaction as Accounts Payable. 3. For checks which became spoiled or stale in the hands of the payee and which require replacement, a new check may be issued upon submission of the spoiled or stale check to the Treasurer. A certified copy of the DV shall be requested from the Auditor for presentation to the Administrator/Local Chief Executive who shall countersign the check. The cancelled check shall be reported and attached to the RCI prepared at the period of cancellation. The replacement check shall also be reported chronologically in the RCI.

Particulars

Account Title

Acct . Cod e

Debit

Credi t

1. Cash Shortage a. Cash shortage of the of the Disbursing Officer To take up cash shortage

Due from Officers and Employees Cash – Disbursing Officers

128

50

107

50

b. Cash Shortage of the Treasurer To take up cash shortage

Due from Officers and Employees Cash in Treasury

128 101

50

50

2. Grant of Relief from Accountability for Loss of Government Funds To record the loss of fund by a Disbursing Officer (allegedly thru theft ) = P50

Due from Officers and Employees Cash – Disbursing Officers

To take up relief from accountability

Loss of Assets (current year) or Prior Years’ adjustments (prior years) Due from Officers and Employees

128

50

107

948

50

50

Sec. 60. Suspensions, Disallowances and Charges. – Disallowances and charges shall be taken up in the books of accounts only when they become final and executory. The Accountant shall prepare the Journal of Entry Voucher (JEV) to take up the Receivable – Disallowances and Charges and credit the appropriate expense account for the current year or prior years’ adjustment if pertaining to expenses of previous years.

3. Cash Settlement in case of denial of Request for Relief from Accountability

Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash in Treasury and crediting the Receivable – Disallowances and Charges account.

To take up payment/settlement

Suspensions in audit and settlement thereof shall not be recorded in the books of accounts. Sec. 61. Pro-forma Accounting Entries. – The following the are pro-forma accounting entries for miscellaneous transactions:

128

Cash in Treasury Due from Officers and Employees

101

Cash in Treasury Other Specific Income of LGU

101

50

50

128

50

4. Cash Overage To take up cash overage discovered during cash examination

792

50 50

5. Dishonored Checks

17

Particulars

Account Title

Acct . Cod e

Debit

Credi t

From payment of real property tax in the current year or prior year Upon receipt of advice of dishonored check and cancellation of Official Receipt

Receipt of refund/settlement

Real Property Tax Receivable Deferred Real Property Tax Income

124

Particulars When the disallowance becomes final and executor

50

448

50

Due to LGUs Real Property Tax Income Cash in Bank – LCCA

431

30

711 110

20

Cash in Treasury Real Property Tax Receivable

101

50

124

50

50

6. Lost/Destroyed/Stale/Obsolete Checks Check issued in the current/prior year for replacement Check cancellation

Cash in Bank – LCCA Accounts Payable

110 401

50

Replacement

Accounts Payable Cash in Bank – LCCA

401 110

50

50

Settlement of disallowance

Cash in Treasury Receivables – Disallowances/ Charges

Debit

138

10

533 101

Credi t

10 10

138

10

c. Settlement of Charges c.1 Recording of charges which collection were made in the current year When the charge becomes final and executory – Underpayment of Franchise Tax Amount Paid - P 100 Should be 110 Charge 10

Receivables – Disallowances/ Charges Franchise Tax

138 724

10

101

10

10

50 Settlement

7. Disallowances and Charges a.

Account Title Receivables – Disallowances/ Charges Prior Years’ Adjustments

Acct . Cod e

Cash in Treasury Receivables – Disallowances/ Charges

138

10

Recording of disallowance for current year’s transaction

When the disallowance becomes final and executory – Overpayment of Office Supplies Amount paid - P100 Should be 90 Difference 10 Settlement of Disallowance

c.2 Recording of charges which collection were made in the prior year Receivables – Disallowances/ Charges Office Supplies Expense

Cash in Treasury Receivables – Disallowances/ Charges

138 849

101

When the charge becomes final and executory

10 10

Settlement

10

138

b. Recording of disallowance for prior year’s transaction

10

Receivables – Disallowances/ Charges Prior Years’ Adjustments Cash in Treasury Receivables – Disallowances/ Charges

138

10

533 101 138

10 10 10

8. Refund of Overpayment

18

Particulars

Account Title

Acct . Cod e

Debit

128

10

Credi t

a. Overpayment taken up as receivable To record overpayment of salaries and wages (When overpayment is ascertained)

Due from Officers and Employees Salaries and Wages – Regular Pay

To record refund of overpayment

Cash in Treasury Due from Officers and Employees

b.

F.

801

101

10

10

128

10

Refund of overpayment not taken up as receivable

Refund of overpayment of Salaries and Wages – Regular Pay during the current year

Cash in Treasury Salaries and Wages – Regular Pay

To take up refund of over – payment in the ensuing year

Cash in Treasury Prior Years’ Adjustments

101

10

801

101 533

10

Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed. Prepaid expenses expire either with the passage of time (e.g. rent) or through use and consumption (e.g. supplies). The adjusting entry for prepaid expenses is a debit to the expense account and a credit to the asset account. Examples are rent, supplies, etc. Acquisition of productive facilities is viewed essentially as long term prepayments, hence, periodic adjusting entries for depreciation are included in this category. For depreciation, the entry is a debit to depreciation expense and a credit to accumulated depreciation. The depreciable or estimated life for different types of agency assets are presented in Table 2 (Annex 7). Unearned revenues are recorded as a liability when received and considered earned upon rendition of service (e.g. tuition fees) or the passage of time (e.g. advance payment of real property taxes). The adjusting entry for unearned revenues is a debit to a liability account and a credit to revenue account. Illustrative accounting entries:

Particulars

Account Title

1. Report of supplies utilized for P2,000.

Office Supplies Expense Office Supplies Inventory

2.

10 10

Application of advance RPT for P2,500.

Deferred Credits to Income Real Property Tax

Acct . Cod e

Debit

849

2,000

149

440 711

Credi t

2,000

2,500

2,500

ADJUSTING AND CLOSING ENTRIES

Sec. 62. Adjusting Entries. – Adjusting entries are accounting journal entries made in order to ensure that revenues and expenses are recorded in the period when they are earned or incurred following the revenue recognition and the matching principles.

Sec. 65. Accruals. – Accruals are revenues earned and expenses incurred in the current accounting period that have not yet been recorded. Adjusting entries for accruals are required to record revenues earned and expenses incurred in the accounting period.

Adjusting entries are required every time financial statements are prepared. The use of the adjusting entries makes it possible to report on the Balance Sheet the appropriate assets, liabilities and equity accounts at the statement date and the Statement of Income and Expenses the net income/(loss) for the period.

Adjusting entry for accrued revenues is a debit to a receivable account and a credit to an income account. Examples are interest, share from internal revenue collections covered by notice of funding checks issued, etc.

Sec. 63. Types of Adjusting Entries. – There are two types of adjusting entries: a. b.

Prepayments; and Accruals

Sec. 64. Prepayments. – Prepayments are expenses paid or revenues received before they are incurred or earned. Adjusting entries for prepayments are required at the statement date to record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period. Subcategories of prepayments are prepaid expenses and unearned revenues.

Adjusting entry for accrued expenses is a debit to the appropriate expense account and a credit to a payable account. Examples are accrued salaries, bad debts, etc. For bad debts, the entry is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts. Illustrative accounting entries:

Particulars

Account Title

1. Receipt of the Notice of Funding Check Issued for the

Due from NGAs Share from Internal Revenue

Acct . Cod e

Debit

130

20,000

746

Credi t

20,00

19

Particulars December Share from Internal Revenue Collections for P20,000.

2. Unpaid salaries and wages of employees, at end of accounting period, P50,000.

Account Title Collections

Salaries and Wages – Regular Pay Due to Officers & Employees

Acct . Cod e

801

Debit

Credi t 0

50,000

428

50,00 0

Sec. 66. Closing Journal Entries. – Closing journal entries are the accounting entries prepared to reduce all balances of the nominal accounts to zero at the end of the accounting period in order to prepare the accounts for the next accounting period. The procedure followed in the reduction of the balances is called the closing process. The closing process is as follows: 1. 2. 3. 4. 5. 6.

Debit all revenue accounts balances and credit the total to the Income and Expense Summary account. Credit all expense accounts balances and cost of goods sold and debit the total to the Income and Expense Summary account. Debit the credit balance of the Income and Expense Summary account and credit the amount in the Retained Operating Surplus account, in case of a net income. Credit the debit balance of the Income and Expense Summary account and debit the amount in the Retained Operating Surplus account, in case of a net loss. Debit all credit balances of the intermediate accounts and debit the total to the Government Equity account. Credit all debit balances of the intermediate accounts and credit the total to the Government Equity account.

Illustrative accounting entries:

Particulars

Account Title

1. To close the Revenue accounts to the Income and Expense Summary account.

Real Property Tax Share from Internal Revenue Collections

Business Taxes & Licenses Registration Fees Income and Expense Summary

Particulars

Account Title

2. To close the Income and Expense Summary to Retained Operating Surplus account.

Income and Expense Summary Retained Operating Surplus

3.

Retained Operating Surplus Government Equity

To close the Retained Operating Surplus to Government Equity account.

Acct . Cod e

Debit

532

5,670

534

534 501

Credit

5,670

5,670

5,670

Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS AND STATEMENTS Sec. 67. Trial Balance. – Trial balance is a list of all the general ledger accounts and their balances at a given time. The accounts are listed in the order in which they appear in the ledger, with the debit balances in the left column and credit balances on the right column. Sec. 68. Purpose of the Trial Balance. – The trial balance is prepared: a. b. c.

To prove the mathematical equality of the debits and credits after posting; To uncover errors in journalizing and posting; and As basis for the preparation of the financial statements.

Sec. 69. Procedures in the Preparation of the Trial Balance. – The procedures in trial balance preparation shall be:

Acct . Cod e

Debit

711

100

746

10,000

Sec. 70. Pre-Closing Trial Balance. – The pre-closing trial balance is the trial balance prepared from the general ledger accounts after the adjusting journal entries have been journalized and posted. This is also termed as adjusted trial balance.

723 761

50 20

Monthly pre-closing trial balance for each fund shall be submitted not later than the twentieth day after the end of the month. It shall be supported by the Status of Appropriations, Allotments and Obligations, for both the current and continuing appropriations.

532

a. Credit

10,170

b. c.

List the account titles and their debit/credit balances based on the accounts and amount reflected in the general ledger; Total the debit and credit columns; and Prove the equality of the two columns.

These reports shall be submitted to the following:

20

To facilitate the preparation of the interim financial statements, the use of the worksheet is recommended.

COA Unit Auditor – Original copy Local Sanggunian – 1 copy Local Treasurer – 1 copy Local Accountant – 1 copy The trial balance at the end of the quarter shall also be supported by a schedule of subsidiary ledger balances of the controlling accounts in the General Ledger and an additional copy shall be submitted to the COA Regional Office thru the Unit Auditor. Sec. 71. Status of Appropriations, Allotments and Obligations. – The status of appropriations, allotments and obligations is a schedule prepared showing the appropriation, allotments and obligations of each function, program project and activity (See Annex 1). Separate schedules shall be prepared for current appropriation and for continuing appropriations using the following column headings: Function/Program/ Project/ Activity

Appropriation s

Allotmen t

Obligatio n

Unobligat ed Balance

Sec. 72. Post-closing Trial Balance. – Post-closing trial balance is the trial balance prepared at the end of the year after the closing entries are journalized and posted in the general ledgers. In the Post-closing Trial Balance, all the nominal accounts (revenue, expense and intermediate) are closed and the real accounts (assets, liability and equity) are shown with balances. It shall be submitted not later than the fourteenth day of February after the end of the calendar year with the following supporting schedules: a. b.

c.

Status of Appropriations, Allotments and Obligations; Subsidiary Schedule of General Ledger account balances; and Summary of Public Infrastructures (Annex 8).

The post-closing trial balance with supporting schedules shall be distributed as follows: COA Central Office thru the Unit Auditor COA Regional Office COA Unit Auditor Local Chief Executive Local Sanggunian Local Treasurer Local Accountant

– 1 copy – 1 copy – 1 copy – 1 copy – 1 copy – 1 copy – 1 copy

Sec. 73. Interim Reports. – Interim reports are financial statements required to be prepared at any given period or at a financial reporting period shorter than a full financial year, without closing the books of accounts. The following interim financial statements and the Notes to Financial Statements shall be prepared and submitted quarterly: a. b. c.

Balance Sheet; Statement of Income and Expenses; and Statement of Cash Flows

The interim reports shall be prepared employing the same accounting principles used for annual reports. Adjusting entries shall be prepared for the interim period.

Sec. 74. Worksheet. – A worksheet is the accountants informal device for accumulating and sorting information needed for the financial statements. It is a columnar sheet of paper used to adjust the account balances and prepare the financial statements. The use of the worksheet facilitates the end-of-period accounting and reporting process. Also, it helps accountants prepare the financial statements on a more timely basis. The following worksheet format shall be used: Name of LGU Worksheet As of ____________, 20_____ Accounts

Trial Balance

Adjustment s

Adjusted T/B

Title

Dr.

Dr.

Dr.

Cod e 1. 2. 3. 4. 5.

6.

Cr.

Cr.

Cr.

Statement of Income & Expenses Dr. Cr.

Balance Sheet Dr.

Cr.

Account title and code columns show the account titles/codes of the general ledger accounts. Trial balance column reflects amounts obtained from the general ledger balances. Adjustment columns are the adjustments effected for the prepayments and accruals. Adjusted trial balance shows the balances of all the accounts after the adjustment at the end of the accounting period. Statement of Income and Expenses shows all the debit and credit items in the adjusted trial balance for all the income and expense accounts. The difference between the income and expenses shall be reflected as Net Income/Loss to be extended to the credit column of the Balance Sheet. Balance Sheet show all the debit and credit items in the adjusted trial balance of all the asset, liability, equity and intermediate accounts affecting directly the Government Equity account.

Sec. 75. Statement of Management Responsibility for Financial Statements. Statement of Management Responsibility for Financial Statements (Annex 2) shows the agencies’ responsibility for the preparation and presentation of its financial statements. The statement shall be signed by the Chief Accountant and the Head of the Agency or his authorized representative. It shall form an integral part of the financial statements, all of which shall be transmitted to the concerned agencies. Sec. 76. Year-end Financial Statements. – Local accountants shall prepare at the end of the year the following financial statements for each fund: a. b. c.

Balance Sheet; Statement of Income and Expenses; and Statement of Cash Flows

The Chief Accountant shall likewise prepare the consolidated financial statements for all funds and the Notes to the Financial Statements.

21

Sec. 77. Balance Sheet. – The Balance Sheet (Annex 3) shows the financial condition of the agency at a specific date. It presents information on the assets, liability and the government equity of the agency. Sec. 78. Statement of Income and Expenses. – The Statement of Income and Expenses (Annex 4) shows the income and expenses of the agency at the end of a particular period. It presents the detailed information of the income and expenses recognized during the period covered. Sec. 79. Statement of Cash Flows. – The Statement of Cash Flows (Annex 5) shows the agency’s cash activities. It reports cash receipts and cash payments and net change in cash resulting from operating, investing and financing activities of an agency during a period, in a format that reconciles the beginning and ending cash balances. Sec. 80. Notes to the Financial Statements. – The Notes to the Financial Statements (Annex 6) are the accountant’s means of amplifying or explaining the items presented in the main body of the statements. These are explanatory notes on the accounts and/or accounting policies which will give additional information value to the financial statements. In the Notes, the accountant is expected to report the economic substance rather than the legal form of the transactions and to make adequate disclosure. The Notes to Financial Statements include the following: 1.

Summary of significant accounting policies adopted and followed by the reporting entity;

2.

Narrative descriptions or detailed analyses of amounts shown on the face of the balance sheet, statement of income and expenses and statement of cash flows;

3.

Customary or routine disclosure – which are information about measurement bases of important assets, restrictions on assets, contingent assets/liabilities, important long term commitments not recognized in the body of the statements, etc.;

4.

Disclosures of changes in accounting principles- changes in accounting principles, practices or methods of applying them; and

5.

Disclosures of subsequent events – disclosure of events that affect the agency directly and that occur between the date of, or end of the period covered by, the financial statements and date of completion of the statements are necessary; if knowledge of the events might affect the interpretation of the statements, even though the events do not affect the propriety of the financial statements themselves.

Chapter 5. SPECIAL FUNDS A. ACCOUNTING FOR SPECIAL EDUCATION FUND Sec. 81. Special Education Fund. – The Special Education Fund (SEF) consist of the proceeds of one percent (1%) tax on the assessed value of real property in

addition to the basic real property tax, which a province or city, or a municipality within the Metropolitan Manila Area, may levy and collect. Sec. 82. Application of Proceeds of the Additional One Percent (1%) Special Education Fund Tax. – (a) The proceeds of the additional one percent (1%) real property tax accruing to special education fund shall be automatically released to the local school boards. (b) In case of provinces, the proceeds of the special education fund shall be divided equally between the provincial and municipal school boards. (c) Said proceeds shall be allocated as determined and approved by the local school boards concerned only for the following purposes: 1. Operation and maintenance of public schools; 2. Construction and repair of school buildings, facilities and equipment; 3. Educational research; 4. Purchase of books and periodicals; and 5. Sports development. (Article 363 of the IRR of the Local Government Code) Sec. 83. Special Education Fund Budget. – The Local School Board shall determine in accordance with the criteria set by DECS, the annual supplementary budgetary needs for the operation and maintenance of public schools within the province, city, or municipality as the case maybe, and the supplementary local cost of meeting such needs, which shall be reflected in the form of an annual school board budget corresponding to its share of the proceeds of the special levy on real property constituting the special education fund and such other sources of revenue as the Local Government Code and other laws or ordinances may provide. (Article 184(b)(1) of the IRR of the Local Government Code) The division superintendent, city superintendent, or district supervisor, as the case maybe, shall prepare the budget of the school board concerned. Such budget shall be supported by programs, projects and activities of the school board for the ensuing fiscal year. A majority of all the members shall be necessary to approve the budget. (Article 184(f) of the IRR of the Local Government Code) The annual school board shall give priority to the following: 1. 2. 3.

Construction, repair and maintenance of school buildings and other facilities of public elementary and secondary schools; Establishment and maintenance of extension classes when necessary; and Holding of sports activities at the division, district, municipal, and barangay levels.

Sec. 84. Basis of Recording Special Education Tax – Special Education Tax Receivables shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, the Treasurer shall furnish the Chief Accountant with a duly certified list of the name of taxpayers and the amount due and collectible for the year. Based on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the Special Education Tax Receivables. Sec. 85. Delinquencies for Special Education Tax prior to CY 2002. – Payment of delinquencies for special education taxes prior to CY 2002 shall be recognized as a direct credit to Special Education Tax Income account.

22

Sec. 86. Collection Procedures for the Special Education Tax. – The additional one percent (1%) tax on real property shall be collected simultaneously with the basic real property tax. A single official receipt shall be issued for both taxes, indicating therein the amount paid for the basic tax and the additional one percent tax. However, the collecting officer shall prepare separate reports of collections for the two taxes. Further, the proceeds of the additional one per cent tax shall be deposited in a separate depository account. Procedures for the turn over of collections, frequency of deposit of collection with the bank, preparation of report of collections, verification of collections and accountable forms, preparation of report of accountability for accountable forms as well as consolidation of reports of accountable forms shall be the same as that prescribed for collections in the General Fund. Sec. 87. Separate Cashbooks for Special Education Fund. – The Treasurer and/or the concerned accountable officers shall maintain separate cashbooks for the SEF which shall be in accordance with the prescribed format. Sec. 88. Separate Registries, Books of Accounts, and Financial Reports for Special Education Fund. – The Chief Accountant shall maintain separate registries for appropriation, allotment and obligations and books of accounts for SEF. He shall likewise prepare separate financial reports such as the Trial Balance, Balance Sheet, Statement of Income and Expenses, Statement of Cash Flows and supporting schedules, to be submitted within the prescribed timeframe. For disbursements, separate set of JEVs shall also be prepared which shall be numbered in accordance with the prescribed codes. Sec. 89. Preparation and Control of ALOBS for Special Education Fund. – The Allotment and Obligation Slips (ALOBS) pertaining to the fund shall be prepared and signed by authorized official of the requesting department or office. This shall be forwarded to the Budget Officer who, based on the approved school board budget, shall verify the existence of appropriation for the proposed expenditure. He shall certify the ALOBS to that effect and number the same in accordance with the prescribed codes. This shall then be forwarded to the Chief Accountant who shall certify as to obligations of allotments and shall record the same in the appropriate Registry of Appropriations, Allotments and Obligations (RAAO). The ALOBS shall form an integral part of the disbursement voucher/payroll and the certifications of the local budget officer and the accountant thereon shall serve as their certification of the disbursement as required by law. Sec. 90. Certification as to Cash Availability. – The Treasurer shall certify as to cash availability for the fund in the Disbursement Voucher and Purchase Request. For infrastructure projects undertaken by contract, the Treasurer shall also certify as to cash availability in the contract. This certification shall serve as the required certification under the law. Sec. 91. Disbursement Procedures. – Disbursement procedures including the reports to be submitted by the accountable officer concerned are the same as those for the General Fund. However, disbursements shall be approved by the Local Chief Executive concerned as co-chairman of the local school board. The division/city superintendent of schools or the district supervisor concerned, as the case maybe, shall certify vouchers or payrolls as to validity, propriety, and legality of the claim involved.

stock cards shall be maintained by the Accounting Unit and the General Services Officer or the Treasurer, as the case maybe. Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the fund shall be prepared. Sec. 93. Pro-forma Accounting Entries. – Pro-forma accounting entries for the fund, follows: SPECIAL EDUCATION FUND (SEF)

Account Title

Acct . Cod e

1. Set-up Special education Tax

Special Education Tax Receivable

125

Receivable Total Receivables – P500,00 0 Provincial Share – P250,00 0

Deferred Special Education Tax Income

449

2. Collection of Special Education Tax – P200,000.

Cash in Treasury Special Education Tax Receivable

Computation of Shares of LGUs in RPT – 50% of

Deferred Special Education Tax Income

449

P200,000 for Provincial

Special Education Tax

713

Share

Due to LGUs

431

3. Deposit of collections with authorized depository bank

Cash in Bank – LCCA Cash in Treasury

110 101

200,00 0

4. Remittance of share to Province ( Special

Due to LGUs (Province)

431

100,00 0

Cash in Bank – LCCA

110

I.

Particulars

Education Tax) – P100,000

101 125

Debit

Credit

500,00 0 500,00 0

200,00 0

200,00 0

200,00 0 100,00 0 100,00 0

200,00 0

100,00 0

Sec. 92. Inventory Process. – The perpetual inventory method and the moving average method shall likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and reports for the holding of inventory shall also be followed. However, separate perpetual inventory records and

23

I. Particulars 5. Receipt of allotment for – Allotment Class: Personal Services P50,000 MOOE 20,000 Capital Outlay 30,000 Total P100,000

Account Title Memo entry in Registry of Appropriations , Allotments and Obligations (Personal Services– (RAAOPS, MOOE – RAAOMO, Capital Outlay – RAAOCO)

6. Obligation for PS – Salaries of teachers for extension class – P30,000

Memo entry in RAAOPS

7. Grant of cash advance for payroll

Cash Disbursing Officers Cash in Bank – LCCA

8. Payment of Salaries Salaries per Payroll P 30,000 Less: Deductions – (Personal Share) Life & Ret. P 2,850 Pag-ibig 600

Salaries and Wages – Regular Pay Cash – Disbursing Officers Withholding Taxes Payable

PhilHealth 500 W/holding Tax 1,050 5,000 Net Pay per Payroll P25,000

GSIS Payable PAG-IBIG Payable

9. Remittance of salary deductions

Withholding Taxes Payable GSIS Payable PAG-IBIG Payable PHILHEALTH Payable

PHILHEALTH Payable

Cash in Bank – LCCA 10. Obligation for Government Share: Life & Ret. Ins.

Acct . Cod e

Debit

107 110

25,000

801

30,000

Credit

25,000

107

25,000

410

1,050

411 412

2,850 600

413

I.

Particulars Contributions P2,850 Pag-ibig Contributions 600 PhilHealth Contributions 500 Total P3,950

Account Title

11. Payment of Government Share

Life & Retirement Insurance Contributions PAG-IBIG Contributions PHILHEALTH Contributions Cash in Bank – LCCA

12. Obligation of Traveling Expenses – P500

Memo entry in RAAOMO

13. Grant of cash advance

Due from Officers & Employees Cash in Bank – LCCA

14. Liquidation of cash advance

Traveling Expenses – Local Due from Officers & Employees

Acct . Cod e

Debit

817

2,850

818

500

819 110

600

128 110

500

831

480

128

Credit

3,950

500

480

500

410 411 412

1,050 2,850 600

413 110

500

5,000

15. Adjustment of obligation of travel.

Memo entry in RAAOMO

16. Refund of cash advance

Cash in Treasury Due from Officers & Employees

101

17. Deposit of cash refund

Cash in Bank – LCCA

110

Cash in Treasury

101

18. Obligation of bill

Memo entry in

Memo entry in RAAOPS

20

128

20 20 20

24

I. Particulars received from MERALCO

Account Title RAAOMO

19. Payment of MERALCO bill – P800

Electricity Cash in Bank – LCCA

20. Obligation for the purchase of Office Supplies – P500

Memo entry in RAAOMO

21. Payment of office supplies

Office Supplies Inventory Withholding Taxes Payable Cash in Bank – LCCA

Acct . Cod e

Debit

Credit

Accounts 835 110

800

800 2. Closing of Expense Accounts

149

Memo entry in RAAOCO

23. Payment of equipment with Invoice/Delivery Receipt

Office Equipment Withholding Taxes

222

Payable Cash in Bank – LCCA

410 110

24. Receipt of fund transfer from General Fund thru bank

Cash in Bank – LCCA Subsidy from Other Funds

110

20 480

30,000

3. Closing of Income and Expense Summary 3,000 27,000 4. Closing of Retained Operating Surplus

5,000

605

5,000

Adjusting Entries:

Closing Entries :

Account Title Special Education Tax Subsidy from Other Funds Income and Expense Summary Income and Expense Summary Salaries & Wages – Regular Pay Life & Retirement Insurance Contributions PAG-IBIG Contributions PHILHEALTH Contributions Traveling Expenses – Local Electricity Depreciation–Office Equipment

500

410 110

22. Obligation of Equipment per Purchase Order – P30,000

1. Depreciation of Equipment using the Straight Line Method: Equipment : Life Amount 5 yrs. P6,000

I. Particulars 1. Closing of Income

Income and Expense Summary Retained Operating Surplus

Acct . Cod e 713 605

Debit 100,0 00 5,000

532

532

Credit

105,000

41,23 0

801

30,000

817

2,850

818

600

819

500

831 835

480 800

922

6,000

532

63,77 0

534

Retained Operating Surplus

534

Government Equity

501

63,770

63,77 0

63,770

B. TRUST FUND Depreciation–Office Equipment Accumulated Depreciation – Office Equipment

922 322

6,000 6,000

Sec. 94. Definition of Trust Fund. – Trust Fund shall consist of private and public monies which have officially come into the possession of the local government or of a local government official as trustee, agent or administrator, or which have been received as a guaranty for the fulfillment of some obligation. A trust fund shall only be used for the specific purpose for which it was created or for which it came into the possession of the local government unit. Sec. 95. Receipts Accruing to the Trust Fund. – Grants and donations coming from foreign funding institutions, other levels of government and private

25

institutions/individuals for specific projects/purpose shall accrue to the Trust Fund. Equity of the LGU on projects under a trust agreement shall also accrue to the Trust Fund. These receipts shall be credited to the Project Equity account. Loans of LGUs for income generating projects from the Municipal Development Fund Office (MDFO) requiring counterpart funding from LGUs shall not be recorded in the Trust Fund but as a Special Account in the General Fund. Sec. 96. Collection Procedures for the Trust Fund. – Cash collections for the Trust Fund shall be acknowledged through the issuance of an official receipt. Procedures for the turn over of collections, frequency of deposit of collection with the bank, preparation of report of collections, verification of collections and accountable forms, preparation of report of accountability for accountable forms as well as consolidation of reports of accountable forms shall be the same as that prescribed for collections in the General Fund. In case of receipt of funds through the bank, the Accountant shall draw a JEV based on the bank credit memo. Sec. 97. Project Expenditures. – The construction period theory shall apply for expenditures on infrastructure projects of the Trust Fund. For other projects, expenditures shall be debited to the appropriate expenditure account. Expenditures shall be closed to Project Equity account at year-end or upon project completion, whichever comes first. Sec. 98. Separate Cashbooks for Trust Fund. – The Treasurer and/or the concerned accountable officers shall maintain separate cashbooks for the Trust Fund which shall be in accordance with the prescribed format. Sec. 99. Separate Books of Accounts and Financial Reports for Trust Fund. – The Chief Accountant shall maintain separate books of accounts for Trust Fund. He shall likewise prepare separate financial reports such as the Trial Balance, Balance Sheet, Statement of Cash Flows and supporting schedules, to be submitted within the prescribed timeframe. Sec. 100. Disbursements within Trust Agreement/Approved Budget. – Disbursements from trust funds shall be in accordance with the specific purpose stated in the trust agreement/approved budget between the trustor and trustee (LGU) as certified by the Chief Accountant. The certification on the DV as to existence of funds held in trust shall serve this purpose. Sec. 101. Certification and Approval of Disbursements from Trust Funds. – Disbursements from the Trust Fund shall require: a. b. c. d.

Certification and approval of vouchers and payrolls as to validity, propriety and legality of the claim involved by the department/ office head concerned; Certification as to existence of funds held in trust and completeness and propriety of supporting documents by the Accountant; Certification as to cash availability by the Treasurer; and Approval by the Administrator of the fund.

Sec. 102. Disbursement Process. – Disbursements from the Trust Fund shall be as follows: a.

Disbursement by check

PROCESS

PERSON / UNIT RESPONSIBLE

1.

Gather supporting documents, prepare DV/payroll and forward to Head of Department.

Concerned Office

2.

Sign Box A of DV and submit to the Accounting Unit.

Supervisor/Head of Department

3.

Check completeness of documents and verify existence of funds held in trust, assign number to DV/Payroll, sign Box B and forward to Treasurer.

Accounting Unit

4.

Verify claim, certify cash availability (Box C) and forward to approving officer.

Treasurer

5.

Approve transaction (Box D) and forward DV to Cashier.

Local Chief Executive/ Administrator of the Fund

6.

Prepare and sign check and forward check with DV to countersigning officer.

Treasurer

7.

Countersign check and forward to Accountant for preparation of the Accountant’s Advice.

Administrator

8.

Prepare Accountant’s Advice of Local Check Disbursements and return DV, check and supporting documents to Cashier/Treasurer.

Accountant

9.

Issue check to claimant. Record disbursement in Cashbook – Cash in Bank. Prepare Report of Checks Issued (RCI), forward RCI with DV and supporting documents to Accounting Unit.

Treasurer

10. Prepare the JEV based on individual checks/voucher; sign “Prepared By” portion (approved by Chief Accountant), and record JEV in the Check Disbursements Journal. Post monthly to the General Ledger/Subsidiary Ledgers

Accounting Unit

11. Forward RCI, DV, supporting documents and JEV to the Office of the Auditor for final custody and post audit.

Accountant

26

PROCESS

b.

PERSON / UNIT RESPONSIBLE Payments through cash advances

For payments through cash advances, procedures 1 to 5 for check disbursement shall be followed. The rest of the procedures shall be the same as that of the General Fund. Sec. 103. Inventory Process. – The perpetual inventory method and the moving average method shall likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and reports for the holding of inventory shall also be followed. However, separate perpetual inventory records and stock cards shall be maintained by the Accounting Unit and the General Services Officer or the Treasurer as the case maybe. Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the fund shall be prepared. Sec. 104. Pro-forma Accounting Entries for Trust Funds. – Accounting entries for typical transactions under the trust funds are as follows:

Particulars 1.

Account Title

Acct . Cod e

II. III. Debi t

b. Issuance of check with approved DV for payment to contractor upon receipt of first billing – 50% accomplished

Cash in Bank – LCCA Project Equity 502-01 P2,500,000

Construction in Progress – Roads, Highways & Bridges Withholding Taxes Payable Cash in Bank – LCCA

c. Submission of statement of disbursements to grantor d. Issuance of

110 502

232 410 110

2,500,00 0

1,000,00 0

No entry

Construction in

Account Title Progress – Roads, Highways & Bridges Withholding Taxes Payable Cash in Bank – LCCA

e. Transfer of completed construction to Public Infrastructure

Public Infrastructures Construction in Progress – Roads, Highways & Bridges

f. Remittance of taxes w/held

Withholding Taxes Payable Cash in Bank – LCCA

g. Purchase of equipment

Construction and Heavy Equipment Withholding Taxes Payable Cash in Bank – LCCA

232 410 110

243

II. III. Debi t 1,000,00 0

Credit

100,000 900,000

1,000,00 0

232

1,000,00 0

Credit

Receipt of grant from NGA

a. Receipt of grant direct to bank from NGA for: a. Construction of road – P2M b. Purch ase of constr uction Equipment – P500,000

Particulars check with approved DV for payment to contractor upon receipt of second billing – 100% accomplished

Acct . Cod e

2,500,00 0

100,000 900,000

h. Payment of withholding tax

Withholding Taxes Payable Cash in Bank – LCCA

i. Submission of full liquidation to grantor and transfer of completed road and equipment to GF for LGU use

Project Equity Public Infrastructures Construction and Heavy Equipment

410 110

200,000

212

500,000

410 110

50,000 450,000

410 110

50,000

502 243

2,500,00 0

212

200,000

50,000

2,000,00 0 500,000

Note: Under the GF books, completed infrastructure project shall be recorded in the Registry of Public Infrastructures with the TF JEV No. as basis. The transferred equipment shall be recorded as follows: General Fund Public 243 2,000,00 Books: Infrastructures 0 Construction and Heavy Equipment 212 500,000

27

Particulars

Account Title Invested Equity

Acct . Cod e 537

II. III. Debi t

Credit 2,500,00 0

At the end of the year: a. Closing of Invested Equity to Government Equity

Invested Equity Government Equity

537 502

2,500,00 0

b. Transfer of Public Infra- structure to RPI

Government Equity Public Infrastructures

502 243

2,000,00 0

2.

2,500,00 0 2,000,00 0

II. III. Debi t

230

500,000

Particulars c. Issuance of check with approved DV for payment to contractor for Construction of Building, 50% accomplished.

Account Title Construction in Progress – Agency Assets Withholding Taxes Payable Cash in Bank – LCCA

d. Remittance of withholding tax

Withholding Taxes Payable Cash in Bank – LCCA

410 110

50,000

e.

Cash – Disbursing Officers Cash in Bank – LCCA

107 110

170,000

803

200,000

410 110

Credit

50,000 450,000

50,000

Receipt of grant with counterpart fund from LGU

a. Project budget as agreed upon between grantor and LGU for project: Grantor Building 1.2M Equipment . 3M LGU Funded Office supplies -1M Salaries of project Personnel - . 4M Total 2M b.

Acct . Cod e

Receipt of funds from foreign funding institution thru national government agency

Issuance of check with approved DV for cash advance on salaries and wages of project administrative personnel

f. Liquidation of Cash Advances

Cash in Bank – LCCA Project Equity 502-01 1,500,000 502-02 500,000

110 502

2,000,00 0

2,000,00 0

Note: Entry in LGU General Fund books shall be – Grants and Donations Cash in Bank – LCCA

889 110

500,000 500,000

g.

Remittance of tax withheld

Salaries and Wages – Casual/ Contractual Withholding Taxes Payable Cash – Disbursing Officers

170,000

410

30,000

107

170,000

Withholding Taxes Payable Cash in Bank – LCCA

410 110

30,000

h. Issuance of check with approved DV for purchase of supplies and materials

Office Supplies Inventory Cash in Bank – LCCA

149 110

100,000

i. Issuance of office supplies

Office Supplies Expenses

849

60,000

30,000

100,000

28

Particulars

j. Purchase of IT equipment

k.

Remittance of withholding tax

l. Issuance of check for installation of equipment End of Year m.Closing. of expenses to Project Equity

Succeeding year n. Issuance of check with approved DV for payment to contractor for Construction of Building – 100% accomplished.

Account Title Office Supplies Inventory IT Equipment and Software Withholding Taxes Payable Cash in Bank – LCCA Withholding Taxes Payable Cash in Bank – LCCA

IT Equipment and Software Cash in Bank – LCCA

Project Equity 502-02 P260,000 Salaries and Wages – Casual/ Contractual Office Supplies Expenses

Construction in Progress – Agency Assets Withholding Taxes Payable Cash in Bank – LCCA

o. Remittance of withholding tax

Withholding Taxes Payable Cash in Bank – LCCA

p. Transfer of construction in progress to

Property Plant and Equipment – Building

Acct . Cod e

II. III. Debi t

149

215

215 110

502

Account Title Construction in Progress – Agency Assets

25,000 225,000

q. Issuance of check for cash advance on salaries and wages

Cash – Disbursing Officers Cash in Bank – LCCA

107 110

170,000

25,000

r. Liquidation of salaries and wages

Salaries and Wages – Casual/Contractual

803

200,000

250,000

25,000

50,000

50,000

260,000

803

200,000

849

60,000

230

410 110

204

70,000 630,000

70,000

1,200,00

70,000

Withholding Taxes Payable Cash – Disbursing Officers

s. Remittance of withholding tax

Withholding Taxes Payable Cash in Bank – LCCA

t. Issuance of office supplies

Office Supplies Expenses Office Supplies Inventory

End of Year u. Closing of expenses to Project Equity

700,000

410 110

II. III. Debi t 0

Particulars property, plant and equipment account

60,000

410 110

410 110

Credit

Acct . Cod e

Project Completion v. Transfer of building and equipment to the General Fund as follows:

General Fund Books:

230

1,200,00 0

170,000

410

30,000

107

170,000

410 110

30,000

849

40,000

149

Project Equity Salaries and Wages – Casual/ Contractual Office Supplies Expenses

502

Project Equity Building IT Equipment and Software

502 204

Building

204

IT Equipment and

Credit

30,000

40,000

240,000

803

200,000

849

40,000

1,500,00 0

215

1,200,00 0 300,000

1,200,00 0

29

Particulars

At end of year:

Account Title Software Invested Equity

Acct . Cod e 215 537

Invested Equity

537

Government Equity

501

Chapter 6.

II. III. Debi t 300,000

1,500,00 0

Credit 1,500,00 0

1,500,00 0

SPECIAL ACCOUNTS

Sec. 105. Special Accounts in the General Fund. – Local government units shall maintain special accounts in the General Fund for public utilities and other economic enterprises, loans, interests, bond issues, and other contributions for specific purposes; and development projects funded from the share of the local government concerned from the internal revenue collections and development of national wealth and such other special accounts which may be created by law or ordinance. Sec. 106. Objectives for the Maintenance of Special Accounts. – Accounting procedures for the operation of the special accounts are adopted in order to: a. Determine whether the income generated by the public utilities or economic enterprises are sufficient to meet their respective operating costs.

SPECIAL ACCOUNT

SUB-CODE

Electric, Light and Power System Telephone System Toll Roads, Bridges and Ferries Transportation System Hospital School Sports Center Recreational Center Housing Projects Convention/Conference Center Parking Space Ice Plant Cemetery 20% Development Fund 80% Share from Energy Sources Share from Development of National Wealth Loans Interests Bond Issues

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Sec. 109. Profit from Operation. – Profits or income derived from the operation of public utilities and other economic enterprises, after deduction of the cost of improvement, repair and other related expenses of the public utility or economic enterprises concerned, shall first be applied for the return of the advances or loans made therefor, any excess shall form part of the general fund of the local government unit concerned. Sec. 110. Reporting. – At the end of the year, post-closing trial balance shall be prepared for each special account. Also, the following financial statements shall be prepared: a. b. c.

b. Provide adequate information as to the assets, liabilities and equity of each special account.

Balance Sheet Statement of Income and Expenses Statement of Cash Flows

Sec. 107. Special Accounts Subsidiary Ledger. – Special accounts shall be maintained through the use of complete subsidiary ledger. In case the local government unit maintains a number of the same economic enterprise, each shall have its own set of subsidiary ledger (e.g. 8 markets - 8 subsidiary ledgers for the market).

These reports shall form part of the schedules of the General Fund trial balance.

Sec. 108. Sub-codes for the Special Accounts. – The following shall be the subcodes for the special accounts:

Transaction

Acct. Code

a. Receipt of Share from IRC for P100,000. Cash in Bank – LCCA

110

SPECIAL ACCOUNT

SUB-CODE

General Fund Proper Market Operation Slaughterhouse Operation Waterworks System

01 02 03 04

Sec. 111. Pro-forma Accounting Entries.

Cash in Bank –LCCA P80,000

(01)

(18) 20,000 Share from Internal Revenue Collections (IRC)

746

Debit

Credit

100,00 0

100,000

30

Transaction Share from IRC 80,000

(01) (18)

Acct. Code

Debit

Credit

20,000

b. Receipt of collections for P148,500. Distribution: RPT- Basic 58,500 (net of 10% discount) Market fees 40,000 Bus. Tax 50,000 Cash in Treasury (01)

Discount on RPT

(01)

6,500 RPT Receivable RPT Receivable 65,000 Business Taxes & Licenses Business Taxes & Licenses 50,000 Receipts from Markets Receipts from Markets 40,000

Office Supplies Inventory

101

Cash in Treasury 108,500 Cash in Treasury 40,000 Discount on RPT

148,50 0

(02) 937

(01) (01) (02)

Acct. Code

Transaction Less: Withholding tax 1,000 Net 19,000

0

6,50

124

65,000

723

50,000

783

40,000

Office Supplies Inventory (01) Office Supplies Inventory 10,000 Office Supplies Inventory 2,000 Cash in Bank – LCCA Cash in Bank - LCCA 7,600 IV. Cash in Bank - LCCA 9,500 Cash in Bank - LCCA 1,900 Withholding Taxes Payable 400 500 100

149 8,000 (02)

Debit

Credit

20,00 0

(18) (01)

110

19,000

410

1,000

(02) (18)

Withholding Taxes Payable

(01)

Withholding Taxes Payable

(02)

Withholding Taxes Payable

(18)

f. Report of Utilization of Office Supplies c. Requisition of Office Supplies for the following: Operation of Market P10,000 Programs under the 20% Dev. Fund 2,000 Office of the Treasurer 8,000

Operation of Market No accounting entry

3,000 1,000

2,000

Office of the Treasurer 20% Dev. Fund

Office Supplies Expenses d. Obligation of the requested supplies.

Entry in the RAAOMO

Office Supplies Expense

(01)

Office Supplies Expense

(02)

Office Supplies Expense 1,000 Office Supplies Inventory

(18)

3,000 e. Payment of Office Supplies for the following: Operation of Market P10,000 Programs under the 20% Dev. Fund 2,000 Office of the Treasurer 8,000 Total 20,000

849

2,000

3,000 2,000 1,000

149

Office Supplies Inventory

(01)

Office Supplies Inventory

(02)

Office Supplies Inventory

(18)

0

6,00

6,000

31

Acct. Code

Transaction

Request for procurement of office equipment of the following offices. Office of the Accountant

Debit

Credit

g.

Office of the Market Master

No accounting entry 5,000 4,000

Transaction Subsidy to Special Accounts

Acct. Code 898

Subsidy to Special Accounts (01) 12,000 Cash in Bank – LCCA

110

Cash in Bank – LCCA 12,000

l. h. Obligation of the requested equipment

Entry in the RAAOCO

222

Office Equipment (01) 4,800 Office Equipment (02) 4,000 Withholding Taxes Payable

Receipt of the transferred funds. Cash in Bank – LCCA

410

Chapter 7.

110

12,0 00

606

12,000

SUPPLIES OR PROPERTY

ACCOUNTING FOR SUPPLIES OR PROPERTY

Withholding Taxes Payable (01) 240 Withholding Taxes Payable (02) 200 Cash in Bank – LCCA

0

8,80

440

Sec. 112. Definition of Supplies or Property. – Supplies or property include everything, except real property, which may be needed in the transaction of public business or in the pursuit of any undertaking, project or activity, whether in the nature of equipment, furniture, stationery, materials for construction or personal property of any sort, including non-personal or contractual services such as the repair and maintenance of equipment and furniture, as well as trucking, hauling, janitorial, security, and related services. ( Sec. 356c of the LGC) Sec. 113. Classification of Supplies or Property. – Supplies or property shall have the following classification:

110

Cash in Bank – LCCA

(01)

4,560

Cash in Bank – LCCA

(02)

3,800

Obligation of Subsidy to the Operation of the Market from the GF Proper for P12,000

k. Transfer of the funds for P12,000.

12,000

Subsidy from Special Accounts (02) 12,000

Payment of the procured equipment:

Office of the Accountant 4,800 Office of the Market Master 4,000 Gross 8,800 Withholding Tax 440 Net 8,360 Office Equipment

j.

Credit

(01)

Cash in Bank – LCCA (02) 12,000 Subsidy from Special Accounts i.

Debit 12,00 0

8,360

Entry in the RAAOMO

a.

Expendable supplies or property – referring to articles which are normally consumed in use within one year or converted in the process of manufacture or construction, or those having a life expectancy of more than one year but which shall have decreased substantially in value after being put to use for only one year. Examples are stationery, fuel, spare parts. Expendable supplies forms part of the maintenance and operating expenses of the LGU.

b.

Non-expendable supplies or property – referring to articles which are not consumed in use and ordinarily retain their original identity during the period of use, whose serviceable life is more than one year and which add to the assets of the government. Examples are furniture, fixtures, transport equipment and other equipment. Non-expendable supplies or property are proper charges to capital outlay of the LGU.

32

c.

Non-personal services – includes, but is not limited to repairing, cleaning, redecorating, and furnishing of necessary repair parts or other supplies as part of the services performed. Examples are contractual services like trucking, hauling, janitorial, security and related services. Non-personal services are proper charges to maintenance and operating expenses of the LGU.

Receipt/ Invoice No. RIS No.

Sec. 114. Perpetual Inventory Method. – Purchase of supplies and materials for stock, regardless of whether or not they are consumed within the accounting period, shall be recorded as inventory following the perpetual inventory method. Under the perpetual inventory method, an inventory control account is maintained in the General Ledger on a current basis. In addition, detailed inventory records are maintained for each inventory item.

Delivery Receipt/ Invoice No.

Regular purchases shall be coursed thru the inventory account and issuances thereof shall be recorded as they take place, except those purchased out of the petty cash fund which shall be for immediate use and for stock in which case shall be charged immediately to the appropriate expense accounts. The Chief Accountant shall maintain the perpetual inventory records comprising of Supplies Ledger Cards (SLC) for each commodity/stock, Property, Plant and Equipment Ledger Card (PPELC) for each category of plant, property and equipment and Work, Other Animals and Breeding Stocks Ledger Card (WOABSLC) for each type of livestock. Such ledger cards shall contain the details of the property, plant and equipment and livestock account in the inventory control account in the general ledger. The General Services Officer or the Municipal Treasurer, as the case maybe shall likewise maintain stock cards and property cards for supplies; property, plant and equipment; and work animals in their custody to account for the receipt and disposition of the same. The balance per stock card/property cards should always reconcile with the ledger cards of the accounting unit. They should also reconcile with other property records like Acknowledgement Receipt for Equipment (ARE). Sec. 115. Moving Average Method. – The moving average method of costing shall be used for costing inventories. This is a method of calculating cost of inventory on the basis of weighted average on the date of issue. The Chief Accountant shall compute the inventory cost monthly using the method. Illustrative calculation of inventory using this method is as follows: Ball pen Reference Beg. Balance per actual inventory Delivery Receipt/ Invoice No. RIS No.

Delivery

Date

Received

Issued

Jan. 1 Jan 12

200 @ P10 400 @ 12

Jan. 16 Jan.

Balance

4,80 0

600 @ 11.33 500 @ 11.3 3

300

5,66 5

100 @ 11.35

P2,00 0 6,80 0 1,13 5

26

@ 11

3,3 00

Jan. 29

Jan. 30

200 @ 11.0 9 100 @ 12

1,20 0

2,21 8

11.09

4,43 5

200 @11.0 9 300 @ 11.39

2,21 7 3,41 7

(On Jan. 12, the new unit cost of P11.33 was found by dividing P6,800, the total cost, by 600, the number of units at hand. Then on Jan. 16, the peso balance, P1,135 represented the previous balance P6,800 less P5,665, the cost assigned to the 500 units issued on this date. New unit costs were calculated on Jan. 26 and 30 when additional units were acquired. ) Sec. 116. Requisition Procedures. – (a) Requirement of Requisition - Any order for supplies shall be filled by the provincial general services officer, the city general services officer, or the municipal treasurer, as the case maybe, for any office or department of the LGU concerned only upon written requisition. (b) Forms to be used - Requisitions shall be accomplished using the following forms: (1) and (2)

Requisition Issue Slip (RIS) - for supplies carried in stock; Purchase Request (PR) - for supplies not carried in stock.

(c) Preparation of Requisition - At the beginning of the year, the Office of the General Services Officer (GSO) or the Municipal Treasurer, as the case maybe, shall prepare a PR for supplies and materials needed for the quarter based on the approved Annual Procurement Program. Subsequent requisition from stock shall be made by the head of office or department needing the supplies. A Supplies Availability Inquiry (SAI) shall be used to inquire as to availability of supplies needed from the Office of the Chief Accountant. If supplies are available, the RIS shall be prepared and submitted to the GSO/Local Treasurer for the issuance of supplies. If the supplies needed are not available from stock, a PR shall be prepared. The head of office or department needing the supplies shall certify as to their necessity for official use and shall specify the project or activity where the supplies or property are to be used. (d) Certification on Allotment and Obligation Slip (ALOBS) - Every PR must be accompanied by an ALOBS showing the certification of the local budget officer and the local accountant, that an appropriation therefore exists; and that the estimated amount of such expenditure has been obligated. The Local Treasurer shall certify as to cash availability in the purchase request. (e) Approval of Requisitions - Approval of requisitions by the head of office or department concerned who has administrative control of the appropriation against which the proposed expenditure is chargeable is deemed sufficient, except in case of requisition for supplies to be carried in stock which shall be approved by the local chief concerned.

400 @

33

Sec. 117. Issuance of Purchase Orders or Contract. – Immediately after the LGU has performed all the required procedures adopting a particular mode of procurement, a purchase/letter order or contract shall be issued. The date when the purchase/letter order was received by the supplier or contractor shall be indicated clearly.

PROCESS approved annual procurement program, at the beginning of the year and of each subsequent quarters.

The purchase order or contract shall be released only to, and signed for by, the awardee or his duly authorized representative.

b. Prepare ALOBS covering the requisition under the PR.

Sec. 118. Acceptance and Inspection of Purchases. – Deliveries of items purchased by the local government units shall be accepted first by the general services officer or municipal treasurer as the case maybe before inspection. Inspection of purchases shall be made by the authorized inspector/s for conformity with specification in the order. Acceptance and inspection shall be made using the Acceptance and Inspection Report (AIR).

Office of the GSO or the Municipal Treasurer or the office authorized to prepare the same.

c. Approve ALOBS and the PR.

The Budget Officer and the Chief Accountant, for the ALOBS; and the Local Chief Executive and the Local Treasurer, for the PR.

Sec. 119. Property Records to be Maintained. – The General Services Officer or the Local Treasurer, as the case maybe, shall number each type of supplies and maintain Stock Cards per stock number. He shall likewise maintain Property Cards per category of property, plant and equipment.

d. Prepare Purchase Order.

GSO/Local Treasurer

e. Approve Purchase Order.

Local Chief Executive

f.

GSO/Local Treasurer

Deliveries of supplies or property shall be immediately recorded in the property records on the basis of the AIR and other supporting documents. The AIR and other supporting documents shall be forwarded to the Chief Accountant for the preparation of the DV and recording of deliveries in the appropriate ledger cards. Sec. 120. Recording of Deliveries of Supplies or Property in the Books of Accounts. – The Chief Accountant shall maintain Supplies Ledger Cards per stock number; Property, Plant and Equipment Ledger Cards for each category of assets; and Real Property Ledger Cards for land. Upon receipt of the AIR and other supporting documents, the Chief Accountant shall record the deliveries in the appropriate ledger cards. Upon completion of the disbursement process pertaining thereto the Chief Accountant shall prepare the JEV taking up the in the books the procurement made. Thereafter, the Chief Accountant shall reconcile the JEV with the appropriate ledger cards. Sec. 121. Reporting on Issuance of Supplies/materials. – The General Services Officer or the Local Treasurer, as the case maybe, shall consolidate weekly the RIS for which supplies and materials were issued using the Summary of Supplies and Materials Issued (SSMI). The SSMI together with the original copy of the RIS shall be submitted to the Chief Accountant, who shall compute cost of supplies issued and ending inventory using the moving average method. Based on the SSMI, a JEV shall be prepared to record the expenditures using appropriate expenditure accounts. Sec. 122. Inventory Process. – The following is the general process to be followed in the control of inventory: PROCESS a.

Prepare Purchase Request (PR) for supplies and materials needed for the quarter based on the

PERSON / UNIT RESPONSIBLE Office of the General Services Officer (GSO) or the Municipal Treasurer as the case maybe.

Receive delivered items, prepare Acceptance and Inspection Report (AIR) and signs acceptance portion.

PERSON / UNIT RESPONSIBLE

g. Inspect items, and signs inspection portion of the AIR.

Property Unit/LGU Inspector

h. Record delivered items in the stock/property cards. Prepare Disbursement Voucher (DV), sign box A and forward the same with the delivery receipt/invoice/ appropriate documents to Accounting Unit.

GSO/Local Treasurer

i. Record delivered items in Supply Ledger Card/Property, Plant and Equipment Ledger Card/Work, Other Animals and Breeding Stocks Ledger Card, on the basis of the AIR. Process DV and follow disbursement process. Prepare JEV. Reconcile JEV with the entries in the ledger cards recorded on the basis of

Accounting Unit

34

the AIR.

PROCESS

PERSON / UNIT RESPONSIBLE

concerned not later than July 31 and January 31 of each year for the first and second semesters, respectively. Physical count of property, plant, and equipment by type shall be made annually and reported on the Report on the Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to the Auditor concerned not later than January 31 of each year.

j. Prepare Stock Availability Inquiry (SAI) and forward to Accounting Unit.

Requisitioning Unit

k. Verify records, requisitioning unit.

Accounting Unit

advise

Sec. 125. Disposal of Supplies or Property. - Disposal procedures shall be in accordance with applicable rules and regulations on supply and property management in local government units. The Waste Materials Report (WMR) and the Inventory and Inspection Report of Unserviceable Property (IIRUP) shall be used . Sec. 126. Pro–Forma Accounting Entries. – The following are the pro-forma accounting entries for supplies or property:

Particulars l. Prepare Requisition and Issue Slip (RIS) and forward to Property /Supply Unit.

Requisitioning Unit

m. Release supplies/equipment and record issuance in the stock cards/property cards.

GSO/Local Treasurer

n. Consolidate RIS for which supplies and materials were issued and prepare the Summary of Supplies and Materials Issued (SSMI) and forward to Accounting Unit.

GSO/Local Treasurer

o. Prepare JEV on the basis of SSMI, and record withdrawals in Supply Ledger Cards (SLC).

1. Supplies and Materials 1.1 Spare parts (enter Obligation in Issuance of the RAAOMO- P100) PR for spare parts Spare Parts Inventory Record delivery of Accounts Payable items and charge invoice, if procurement is on credit Accounts Payable Payment of Withholding Taxes Invoice Payable Cash in Bank – LCCA

Accounting Unit

Sec. 123. Receipts of Issuance. – All issuances of supplies or property shall be properly receipted using the forms prescribed under applicable rules and regulations on supply and property management in local government units. For transfer of equipment, the Acknowledgement Receipt for Equipment (ARE) shall however be used. Sec. 124. Inventory of Supplies or Property. – The local chief executive shall require periodic physical inventory of supplies or property. Physical count of inventory items by type shall be conducted semestrally and reported in the Report of the Physical Count of Inventories (RPCI). This shall be submitted to the Auditor

Account Title

If Procurement is on Cash

Spare parts worth P50 used for repairs of motor vehicles. 1.2

Office Supplies -

Spare Parts Inventory Withholding Taxes Payable Cash in Bank – LCCA Motor Vehicles Maintenance Spare Parts Inventory

Acct . Cod e

Debit

155 401

100

401

100

410 110 155

100

80

20

100

410 110 878 155

Credit

80 50

20

50

(Enter obligation in

35

Particulars Issuance of PR for office supplies P100. Record delivery of items and charge invoice, if procurement is on credit. Payment of Charge Invoice

If procurement is on cash basis

Account Title the RAAOMO-P100)

Acct . Cod e

Debit

Credit

2.1 Office Supplies Inventory Accounts Payable

Accounts Payable Withholding Taxes Payable Cash in Bank – LCCA

Office Supplies Inventory Withholding Taxes Payable Cash in Bank – LCCA Office Supplies Expenses Office Supplies Inventory

149

100

401

401

100

410 110

149

849

Accountable Forms Issuance

of PR for accountable forms Procurement on a cash basis

100 80

al of supplies

Withdraw office

2. Equipment

Accountable Forms Expenses Accountable Forms Inventory

Debit

Credit

(Enter obligation in RAAOCO-P20,000) Office Equipment Accounts Payable

222 401

Accounts Payable Withholding Taxes Payable Cash in Bank – LCCA

401

20,000 20,0 00

410 110

20,000

2,000 18,000

20

100

149

100

2.2

Issuance of PR for Furniture and Fixture P20,000 Record Charge Invoice and delivery of item

148

Account Title

Payment of delivered Equipment

(Enter obligation in the RAAOMO – P100.00) Accountable Forms Inventory Withholding Taxes Payable Cash in Bank – LCCA

Record charge invoice and Delivery of item.

20 80

410 110

Office Equipment Issuance of PR for Office Equipment -P20,000

100

Withdrawal of Office Supplies for office use. 1.3

Particulars

Acct . Cod e

Payment of delivered furniture and fixture

100

410 110

(Enter Obligation in RAAOCO-P20,000) Furniture and Fixtures Accounts Payable Accounts Payable Withholding Taxes Payable Cash in Bank – LCCA

224 401

20,000

401

20,000

410 110

20,000

2,000 18,000

20 80 3. Non-Personal Services

848 148

100 100

3.1 Security Services Issuance of contract for security services P120,000

(Enter obligation in the RAAOMOP120,000) Security and Janitorial

858

10,000

36

Particulars Receipt of monthly Billing- P10,000 Payment of monthly billing 3.2 Plumbing Services Signing of contract for Plumbing Services – P120,000 Receipt of monthly billing – P10,000

Account Title Services Accounts Payable Accounts Payable Withholding Taxes Payable Cash in Bank – LCCA

Acct . Cod e 401 401

Debit

Credit 10,000

10,000

410 110

1,000 9,000

(Enter obligation in the RAAOMOP120,000) General Services Accounts Payable

857 401

10,000

Accounts Payable Withholding Taxes Payable Cash in Bank – LCCA

401

10,000

410 110

10,000

1,000 9,000

Payment of Monthly Billing

37