» ICARE Accountancy Review = Innovative + Competent © Responsive mo ADVANCED FINANCIAL ACCOUNTING AND REPORTING Government Accounting 12.0 Government Accounting - General Fund 12.1 Basic Concepts in Government Accounting 12.2 Budget Process 12.3 Government Accounting Manual (GAM) 12.4 Journal Entries — Books of National Government Agency Source: CPALE BOA Syllabi Effective October 2022 DEFINITION OF GOVERNMENT ACCOUNTING Government accounting encompasses the processes of analyzing, recording, classifying, summarizing and ‘communicating all transactions involving the receipt and disposition of government funds and property, and interpreting the results thereof. (Sec. 109, Presidential Decree (P.D.) No. 1445) Objectives of Government Accounting ¥- To produce information concerning past operations and present conditions. Y To provide a basis for guidance for future operations, ¥ To provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of funds and property; and Y To report on the financial position and the results of operations of government agencies for the information of all persons concerned. (P.D. No. 1445, Sec. 110) GOVERNMENT ENTITIES CHARGED WITH ACCOUNTING RESPONSIBILITY > Commission on Audit (COA) Department of Budget and Management (DBM) Bureau of Treasury (BTr) Philippine Tax Collecting Agencies + Bureau of Internal Revenue (BIR) + Bureau of Customs (BOC) Commission on Audit (COA) > Has the exclusive authority to promulgate accounting and auditing rules and regulations. > Keeps the general accounts of government, supporting vouchers, and other documents. > Submits financial reports to the President and Congress. vvy Department of Budget and Management (DBM) ‘> DBM is responsible for the formulation and implementation of the national budget with the goal of attaining the nation’s socio-economic objectives. Bureau of Treasury (BTW) > The BTr functions under the Department of Finance (DoF) and is the cash custodian of the government. > The BTr is authorized to: > Receive and keep national funds and manage and control the disbursements thereof; and > Maintain accounts of financial transactions of all national government offices, agencies, and instrumentalities. Bureau of Internal Revenue (BIR) The BIR functions under the Department of Finance (DoF). > Its powers and duties shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts Bureau of Customs (BoC) > BoC is a Philippine government agency under the Department of Finance. > Itis responsible for: > Regulating and facilitating trade; > Assessment and collecting import duties and taxes; > Combating illegal trade and other forms of customs fraud; and Pace 1 of 10ICARE Accountancy Review = Innovative + Competent + Responsive > Devising and managing customs management systems for trade facilitation NATIONAL BUDGET The government's estimate of the sources and uses of government funds within a fiscal year. > This forms the basis for government expenditures. > The Philippine Constitution and other laws require government funds to be ut a national budget that is duly approved by legislation. >» Government accounting is primarily budgetary accounting > The formulation and eventual utilization of the national budget are summarized in the budget cycle. sd in accordance with ‘THE BUDGET CYCLE 1. Budget preparation 2. Budget legislation 3. Budget execution 4, Budget accountability Budget preparation > This phase starts with the Budget Call and ends with the President's submission of the proposed budget to the Congress. (1) Budget call ‘+ Atthe beginning of the budget preparation year, the DBM issues the National Budget Call to all government agencies. ‘+ The Budget Call contains the following Y Budget parameters (the next fiscal year’s targets and the agency's budget ceiling), and; Y Policy guidelines and procedures in the preparation and submission of agency budget proposals. (2) Budget hearings ‘+ Budget hearings are conducted after the agencies submit their budget proposals to the DBM. ‘+ Here, each agency defends its budget proposal before the DBM based on performance indicators on output target and absorptive capacity. + The DBM then deliberates on the budget proposals, makes recommendations, and consolidates the deliberated proposals into the National Expenditure Program (NEP) and Budget of Expenditures and Sources of Financing (BESF). ‘+ The DBM then submits the proposed budget to the President. (3) Presentation to the Office of the President + The proposed budget is presented by DBM to the President and Cabinet members. + After the President and Cabinet approve the proposed budget, the DBM prepares and finalizes the budget documents to be submitted to the Congress. + At this point, the proposed budget is referred to as the President's Budget. Budget Legislation + Known as the Budget Authorization Phase. + This starts upon the House Speaker's receipt of the President's Budget and ends with the President's enactment of the General Appropriations Act (GAA). (1) House deliberations - Upon receipt of the President's Budget, the House of Representatives conducts hearings to scrutinize the various agencies’ respective proposed programs and expenditures - The House of Representatives prepares the General Appropriations Bill (GAB). (2) Senate deliberations = The Senate conduets its own deliberations on the GAB. - Budget deliberations in the Senate formally start after the House of Representatives transmits the GAB. However, for expediency, hearings in the Senate start even as Representatives deliberations are ongoing (3) Bicameral deliberations = Once both houses of Congress have finished their deliberations, the Bicameral Committee is formed to harmonize any conflicts between the Representatives version of the GAB. Pace 2 of 10ICARE Accountancy Review = Innovative + Competent + Responsive = The harmonized GAB is submitted back to both Houses for ratification. After ratification, the final GAB is submitted to the President for enactment. (4) President's enactment - The President enacts the budget which is now known as the General Appropriations Act (GAA). Re-enacted budgets + When the GAA is not enacted before the fiscal year starts, the previous year's GAA is automatically re-enacted, This means that agency budgets for programs, activities, and projects remain the same. + Funding for programs or projects that have already been terminated is re-aligned for other expenditures. Budget Execution + This is the phase where the people's money is actually spent, + Assoon as the GAA is enacted, the government can implement its priority programs and projects. Budget Accountability. + Inthis phase, the DBM monitors the efficiency of fund utilization and conformance of actual results with planned targets. + The Budget Accountability Process: 1. Submission of Budget Accountability Reports 2. Performance Reviews 3. Audit of COA + The budget records and reports provide information in preparing the Statement of Comparison of Budget and Actual Amounts. GOVERNMENT ACCOUNTING MANUAL FOR NATIONAL GOVERNMENT AGENCIES (GAM for NGAs) > The GAM for NGAs was promulgated primarily to harmonize the government accounting standards with international accounting standards, particularly the International Public Sector Accounting Standards (IPSAS), >» The Philippine Government has adopted the IPSAS through the Philippine Public Sector Accounting Standards (PPSAS). > Date of effectivity: January 1, 2016. > The GAM for NGAs is promulgated by the Commission on Audit (COA) 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” Coverage of GAM for NGAs The GAM for NGAs provides the basic concepts to be used in > Preparing general purpose financial statements in accordance with the PPSAS and other finan reports as may be required by laws, rules, and regulations; and > Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations. BASIC ACCOUNTING AND BUDGET REPORTING PRINCIPLES The financial records and reports of government entities shall comply with the following: > Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules and regulations; Accrual basis of accounting; Budget basis for presentation of budget information in the financial statements; Revised Chart of Accounts prescribed by COA; Double-entry bookkeeping; Financial statements based on accounting and budgetary records; and Fund cluster accounting vv COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS Complete set of general purpose financial statements consists of: 1. Statement of Financial Position Pace 3 of 10ICARE Accountancy Review = Innovative + Competent + Responsive 2. Statement of Financial Performance 3. Statement of Changes in Net Assets/Equity 4. Statement of Cash Flows 5. Statement of Comparison of Budget and Actual Amounts 6. Notes to Financial Statements, comprising a summary of significant accounting policies and other explanatory notes: ELEMENTS OF THE FINANCIAL STATEMENTS > Assets > Liabilities > Equity > Revenue > Expenses BOOKS OF ACCOUNTS ‘The books of accounts of the National Government Entities consists of: » Journals > General Journal > Cash Receipts Journal » Cash Disbursements Journal > Check Disbursements Journal > Ledgers > General ledgers > Subsidiary ledgers GOVERNMENT REGISTRIES > The registries of government entities consist of: 1. Registries of Revenue and Other Receipts (RROR) 2. Registry of Appropriations and Allotments (RAPAL) 3. Registries of Allotments, Obligations, and Disbursements (RAOD) 4. Registries of Budget, Utilization, and Disbursements (RBUD) > The COA shall keep the general accounts of the Government and preserve the vouchers and other supporting documents. ACCOUNTING FOR BUDGETARY ACCOUNTS “No money shall be paid out of the Treasury except in pursuance of an appropriation by law.” Section 29 (1), Article VI of the 1987 Constitution > The above article lays down the legal basis for government accounting. Simply stated, no public fund may be spent if there is no law authorizing the payment of money and specifying the purpose for which the same will be spent. > Accordingly, it is said that accounting for budgetary accounts formally commences upon enactment of the General Appropriations Act (GAA), which contains the legal authorization to use public money for various programs, activities and projects of the national government. » The approved appropriations are, in turn, the bases of the Department of Budget and Management (DBM) for issuing allotments or the authority of government agencies to incur obligations or enter into commitments to spend government funds. > The appropriations, allotments, and obligations mainly constitute the budgetary accounts BUDGETARY ACCOUNTS Budgetary accounts consist of the following: 1. Appropriation — an authorization made by law or other legislative enactment, directing payment of goods and services out of government funds under specific conditions or for special purpose 2. Allotment — an authorization issued by the DBM to the government agency, which allows it to incur obligations, for specified amounts, within the legislative appropriation, 3. Obligation — a commitment by a government agency arising from an act of duly authorized official which binds the government to the immediate or eventual payment of a sum of money. FUND RELEASE DOCUMENTS According to GAM, the following are the fund release documents: Pace 4 of 10ICARE Accountancy Review = Innovative + Competent + Responsive 1. Obligational authority or Allotment > The following are documents which authorize the entity to incur obligations: a. General Appropriations Act Release Document (GAARD) = This serves as the obligational authority for the comprehensive release of budgetary items appropriated in the General Appropriations Act (GAA), b. Special Allotment Release Order (SARO) = This covers budgetary items under For Later Release (FLR) (negative list) in the entity submitted Budget Execution Documents (BEDs), subject to compliance of required documents/clearances. ¢. General Allotment Release Order (GARO) = This is a comprehensive authority issued to all national government agencies, in general, to incur obligations not exceeding an authorized amount during a specified Period for the purpose indicated therein 2. Disbursement Authority > The following documents authorized the entity to pay obligations: a. Notice of Cash Allocation (NCA) = This is the authority issued by the DBM to central, regional, and provincial offices and operating units to cover the cash requirements of the agencies through the issuance of Modified Disbursements System (MDS) checks, Authority to Debit Account (ADA) or other modes of disbursements. b. Non-Cash Availment Authority (NCAA) - This is the authority issued by the DBM to agencies to cover the liquidation of their actual obligations incurred against available allotments for availment of proceeds from loans/grants through supplier's credit/constructive cash. ©. Cash Disbursements Ceiling (CDC) = This is the authority issued by the DBM to the Department of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their income collected/retained by their Foreign Service Posts (FSPs) to cover their operating requirements, but not to exceed the released allotment to the said post. d. Notice of Transfer of Allocation (NTA) - This is the authority issued by the Central Office to its regional and operating units to cover their cash requirements through the issuance of Modified Disbursements System (MDS) checks, Authority to Debit Account (ADA) or other modes of disbursements. ACCOUNTING FOR REVENUES AND OTHER RECEIPTS FUNDAMENTAL PRINCIPLES OF REVENUE 1. All revenues of an entity shall be remitted to the National Treasury or in the duly authorized depository of the Government and shall accrue to the General Fund of the Government, unless otherwise specifically provided by law. 2. Allmoneys and property received by a public officer, acting in any capacity or upon any occasion, shall be accounted for as government funds and property, unless otherwise specifically provided by law. 3. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or funds other than the General Fund only when authorized by law. 4. A collecting officer shall immediately issue an official receipt (OR) upon collecting a payment of any nature. 5. Temporary receipts shall never be used to acknowledge the receipt of public funds. 6. Receipts of government funds shall be acknowledged in accordance with the law — indicating the receipt, from whom and on what account the fund was received. ACCOUNTING FOR DISBURSEMENTS AND RELATED TRANSACTIONS > The disbursement activities of the NGAs start from the receipt of NCA from the DBM. > The NCA received by the agency may be net of the amount of the taxes to be withheld by the agency, because of the TRA system. Page 5 of 10ICARE Accountancy Review = Innovative + Competent + Responsive ® The Disbursement System involves the preparation and processing of disbursement voucher, preparation and issuance of check; payment by cash; granting utilization; and liquidation/replenishment of cash advances. FUNDAMENTAL PRINCIPLES FOR DISBURSEMENT OF PUBLIC FUNDS (1) All government resources shall be used only in accordance with the law and only for public purposes. (2) Trust funds shall be used only for their specific purpose. (3) Fiscal responsibility shall be strictly shared by all those exercising authority over a government agency. (4) The use of government resources shall be approved by proper officials. (5) Claims against government funds shall be supported with complete documentation. (6) All laws and regulations applicable to financial transactions shall be faithfully adhered to, including generally accepted principles and practices of accounting, management and fiscal administration, provided that they do not contravene existing laws and regulations, AUTHORITY TO DISBURSE/PAY An entity can make disbursements only after it has received disbursement authority, based on the following: Notice of Cash Allocation (NCA) Notice of Transfer of Allocation (NTA) Tax Remittance Advice (TRA) Non-Cash Availment Authority (NCAA) Cash Disbursement Ceiling (CDC) eaegn ACCOUNTING FOR NOTICE OF CASH ALLOCATION Notice of Cash Allocation (NCA) is the authority issued by the DBM to central, regional, and provincial offices and operating units to cover the cash requirements of the agencies through the issuance of Modified Disbursements System (MDS) checks, Authority to Debit Account (ADA) or other modes of disbursements. » The NCA specifies the maximum amount of withdrawal that an entity can make from a government bank for the period indicated » No MDS check/ADA shall be issued without the NCA. > The total of MDS checks/ADA issued shall not exceed the total NCA received. » The Collecting officer shall not issue an Official Receipt for the receipt of NCA. MODES OF DISBURSEMENTS The different modes of disbursements are as follows (a) Checks (MDS checks or commercial checks) (b) Cash (out of cash advance granted to authorized Disbursing Officer) (c) Advice to debit the account (ADA) (d) Tax remittance advice (TRA) (e) Working fundiCash Disbursement Ceiling (CDC) (f) Direct payment method isbursements by check » Checks shall be drawn only on duly approved Disbursement Voucher (DV) or Payroll. » Checks issued shall be reported and recorded in the books of accounts whether released or unreleased to the respective payees. There are two types of checks being issued by government agencies a. Modified Disbursement System Checks — checks issued by government agencies chargeable against the account of the Treasurer of the Philippines. b. Commercial Checks — checks issued by NGAs chargeable against the Agency Checking Account with Government Servicing Banks (GSBs). These shall be covered by income/receipts authorized to be deposited with Authorized Government Depository Banks (AGDBs) Disbursements by Cash All cash payments shall be covered by duly approved disbursement vouchers/payrolis/petty cash vouchers. Note: For government er 5, the capitalization threshold for PPE is P15,000. Cash Disbursements Ceiling (CDC) This is the authority issued by the DBM to the Department of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their income collectediretained by their Foreign Service Posts (FSPs) to cover their operating requirements, but not to exceed the released allotment to the said post. Pace 6 of 10ICARE Accountancy Review = Innovative + Competent + Responsive = bursements through Direct Payment Method This type of disbursement should be covered by a Non-Cash Availment Authority (NCAA), Capitalization threshold for PEs Semi-expendable property — machinery, equipment, furniture and fixtures and similar items that are not capitalized as PPE because their costs are below the P15,000 capitalization threshold for PPE. DISCUSSION QUESTIONS 1 Itis defined as the process of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property, and interpreting the results thereof. A. National Government B. Government auditing C. Government accounting D. Government budgeting What is the title of the revised government accounting system for national government agencies which is effective starting January 1, 2016? ‘A. New Government Accounting System (NGAS) B. Government Accounting Manual for National Government Agencies (GAM for NGAs) C. Revised Government Accounting System for National Government Agencies (RGAS for NGAs) D. Current Government Accounting System (CGAS) Which of the following financial statements is required to be presented by a government entity but is not toa business entity? A. Statement of Financial Position B. Statement of Cash Flows C. Statement of Comparison of Budget and Actual Amounts D. Statement of Changes in Equity Itis a statement of estimated receipts and estimated expenses of the government, which serves as basis for a General Appropriations Act. A. Statement of financial position B. Statement of operations C. National government budget D. Local government budget All disbursements of government entities must be in conformance with the law and the A. National budget B. COA audit findings C. PPSASs D. PFRSs What is the correct sequence of the phases of the government budget process? 1 Budget Legislation ll, Budget Accountability Il, Budget Preparation IV. Budget Execution AMA IV, I B. Ul, IV, 1, I Cc. IV, LI D. Ut, 1, IV The budget process begins with the issuance of budget call by the DBM. This is under which of the following budget cycle phase? A. Budget Preparation B. Budget Legislation C. Budget Execution D. Budget Accountability It involves the formulation of estimates of revenues and expenditures by the Executive Department and Agencies. A. Budget Preparation B. Budget Legislation Pace 7 of 10ICARE Accountancy Review = Innovative + Competent + Responsive = 10. "1 12. 13. 14, 15. 16. V7. C. Budget Execution D. Budget Accountability Its the enactment of the appropriation bill into law. A. Budget Preparation B. Budget Legislation C. Budget Execution D. Budget Accountability Once the President enacts the national budget into law, it is now known as the A. General Appropriations Bill B. General Appropriations Act C. General Allocations Act D. President's Budget It is the implementation of the national budget by different agencies and departments and release of allotments. Budget Preparation Budget Legislation Budget Execution Budget Accountability pomp It involves the reporting of actual performance against plans or targets, and which involves monitoring of agency budgetary performance; comparison and evaluation of actual performance with initially approved work targets and a summary of list of checks issued which is submitted on a monthly basis. A. Budget Preparation B. Budget Legislation C. Budget Execution D. Budget Accountability Which of the following best describes the Notice of Cash Allocation (NCA)? Itis a form of legislative authorization in the allocation of funds for specified purposes. Itis a form of authorization to a government agency to incur obligations on behalf of the government. Itis a form of authorization to a government agency to make disbursements out of government funds. It is a notice received from the Congress that cash is allocated for the payment of planned expenditures. com> Disbursements by government entities are most commonly made through ‘A. Modified Disbursement System (MDS) Checks B. Cash C. Petty Cash Fund D. Credit Card Which of the following government bodies is tasked in keeping the general accounts of the government, supporting vouchers, and other documents? ‘A. Commission on Audit (COA) B. Department of Budget and Management (DBM) C. National Government Agencies (NGAs) D. Congress The account “Subsidy from National Government" is a(n) A. Asset account B. Liability account C. Revenue account D. Capital account A cash authority issued periodically by the DEM to the operating units of government agencies to cover their cash requirements? a. Cash Disbursement Ceiling ©. Notice of Cash Allocation b. Cash release Program d. Non- Cash Availment Authority Pace 8 of 10ICARE Accountancy Review = Innovative + Competent + Responsive 18, It specifies the maximum amount of cash that can be withdrawn by a government agency. A. Notice of Cash Appropriation B. Notice of Cash Allocation C. Notice of Allowable Withdrawals D. Notice of Maximum Withdrawals 19. It is an authorization issued by the DBM to NGAs to incur obligations for specified amounts contained in a legislative appropriation in the form of budget release documents. It is also referred to as Obligational, Authority. a. Appropriation ©. Approved Budget b. Allotment d. Obligation 20. Itis the authorization made by a legislative body to allocate funds for purposes specified by the legislative or similar authority a. National Budget . Appropriation b. Allotment d. Approved Budget 21. On January 4, Agency TIN receives a Notice of Cash Allocation for Regular Agency Fund from DBM amounting to P2,500,000. The journal entry to record the receipt of NCA is, ‘A. Cash -MDS, Regular 2,500,000 Cash — Treasury/Agency Deposit 2,500,000 B. Cash - MDS, Regular 2,500,000 Subsidy from National Government 2,500,000 C. Cash - Collecting Officer 2,500,000 Subsidy from National Government 2,500,000 D. Cash - Collecting Officer 2,500,000 Cash — Treasury/Agency Deposit 2,500,000 22. What is the journal entry to recognize the reversion of unused Notice of Cash Allocation as per GAM for NGAs? ‘A. Debit Cash — National Treasury, Regular and Credit Subsidy Income from National Government B. Debit Subsidy Income from National Government and Credit Cash — National Treasury, Regular C. Debit Cash — Modified Disbursement System (MDS), Regular and Credit Subsidy from National Government D. Debit Subsidy from National Government and Credit Cash — Modified Disbursement System (MDS), Regular For the next two items: ‘On November 1, 2018, the collecting officer of the Bureau of Immigration collected immigration tax of P200,000 and Travel tax of P20,000. On November 5, 2018, the agency remitted the collection to the Bureau of Treasury (TP) 23. Whatis the journal entry to record the collection of immigration and travel tax? ‘A. Cash Collecting Officer 220,000 Immigration Tax 200,000 Travel Tax 20,000 B. Cash -TreasuryiAgency Deposit, Regular. 220,000 Immigration Tax 200,000 Travel Tax 20,000 C. Cash -Treasury/Agency Deposit, Regular 220,000 Cash — Collecting Officer 220,000 D. Cash - Collecting Officer 220,000 Cash ~ Treasury/Ageny Deposit, Regular 220,000 24, What is the journal entry to record the remittance to BTr? A. Cash = Collecting Officer 220,000 Page 9 of 10,a , ICARE Accountancy Review Poy Sa Innovative + Competent + Responsive = Immigration Tax 200,000 Travel Tax 20,000 B. Cash — Treasury/Agency Deposit, Regular 220,000 Immigration Tax 200,000 Travel Tax 20,000 C. Cash - Treasury/Agency Deposit, Regular 220,000 Cash — Collecting Officer 220,000 D. Cash - Collecting Officer 220,000 Cash — Treasury/Agency Deposit, Regular 220,000 25. Entity Z, a government entity, purchases furniture and fixtures amounting to P12,000. Entity Z would most likely record the purchase as A. Property, Plant and Equipment B. Inventory Held for Consumption C. Inventory Held for Manufacturing D. Semi-Expendable Property END OF HANDOUT Page 10 of 10