Government Accounting 872

Government Accounting
Under Sec. 109 of Presidential Decree 1455, Government Accounting
encompasses the process of analyzing, recording, classifying, summarizing and
communicating all transactions involving the ,receipt and disposition of
government funds and property, and interpreting the results thereof.

_ The following are the Objectives of Government Accounting:

1. To produce information concerning past operations and present conditions;
2. To provide a basis for guidance for future operations;
3. To provide for control of the acts of public bodies and officers in the receipt,
disposition and utilization of funds and property; and
4. To report on the financial position and the results of operations of
government agencies for the information [Link] persons concerned.

The following Steps of Budgetary Process (Procedures):

1. [Link] - The procedure in the preparation of the national-
budget is regulated by law. It starts with the issuance ofa budget call by
the Department of Budget and management (DBM). Each department
secretary (including state universities and colleges) of the government
submits the agency estimated budget for the next fiscal year to DBM.

Upon receipt of DBM ofall budget estimates of different agencies, the DBM
bureaus then review the agency proposals and prepare recommendations.
The recommendations are then presented to an Executive Review Board
which is composed of DBM secretary and senior officials. Then it will be
deliberated to entail a careful prioritization of program and corresponding
support, vis-a-vis the priority agenda of the national government. The
deliberation investigates, revise, examine, assemble, coordinate and reduce
or increase the budget estimates prepared by each agency. Then, the DBM
will consolidate all the budgets to form the proposed government wide
budget to be submitted to the President of the Philippines and Cabinet for
further refinements or prioritization. After the President and Cabinet
approve the propose National Expenditure Plan, the DBM prepares and
finalizes the budget documents to be submitted to the Congress within 30
days before the opening of the regular session.

The budget preparation ends with the submission of the proposed national
budget (The President’s Budget) to Congress.

2. Budget Legislation (Authorization) - it starts upon receipt of the House

Speaker of the President’s Budget and ends with President’s enactment of
the Government Appropriation Act,

The President’s Budget is then assigned to the House of appropriation

Committee. Then, the Committee then schedules and conducts hearings on
the budgets of different departments and agencies and scrutinize their

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 Government Hecounting 873
respective programs and projects. After that, it will then craft the General
Appropriation Bill (GAB).

The Appropriation Committee will then sponsor, present and defend the
GAB in the plenary session. After the GAB is pepiyea in the second and
third reading, it will be forwarded to the Senate.

The Senate conducts its own committee hearings and plenary deliberations |
on the GAB.

After both the House of Representatives and Senate have finished their
deliberations, they will each constitute a panel of the Bicameral Conference
Committee. The committee tasks is to discuss and harmonize the
conflicting provisions of the House and Senate versions of the GAB to
produce a harmonized version of the GAB...

The Harmonized Version of GAB is submitted to both Houses, which will

then vote to ratify the GAB for submission to the President.

Budget Execution - this procedure begins with the issuance. of DBM’s

guidelines on the release and utilization of funds.

Each government agencies and departments are required to submit their

Budget Execution Documents (BEDs). The BEDs outline the agency plan
and performance targets which include physical and financial plan,
monthly cash program, estimate of monthly income, and list of obligations
that are not yet due.

The DBM prepares an Allotment Release Program (ARP) to set limits for
allotments issued to an agency to ensure that releases fit the approved
‘Fiscal program of the government.
The DBM issues a notice of cash allocation to different agencies to cover
their cash requirements for their projects and obligations. After expending
the government funds-of different agencies, they are required to account all
the funds to ensure that is used properly.

4; Budget Accountability - this procedure happens together with the Budget

Execution. The DBM monitors the efficiency and fund utilization, assess
the agencies' performance and provide evaluation and recommendations
which is used to set reforms and new policies.

Each government agency submits Budget Accountability Reports (BARs) on

a monthly and quarterly basis to show how their funds are utilized and its
corresponding physical accomplishments of the project.
eesecssmemeaecen

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 Government Accounting 874
The DBM then reviews the actual utilization of funds and physical
accomplishments shown in the BARs and compared it with the
predetermined plans.

The Commission of Audit (COA) audits the agencies used of government

funds. The DBM then uses the COA audit eapONe in confirming the
agencies’ performance.

The Government Accounting Manual (GAM) ‘

The Commission on Audit (COA) revised the New Government Accounting
System (NGAS) prescribed under COA Circular No. 2002-002 dated June 18,
2002 because of the recent developments brought about. by the Philippine
Public Financial Management Reforms and significant changes in the field of
accounting. -

Legal Basis
The GAM is prescribed by COA pursuant to Article IX-D, Section 2 par. (2) of
the 1987 Constitution of the Repubie Ge the Philippines which provides that:

“ The COA shall have the exclusive suihone: 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, unconscionable
expenditures, or uses of government funds and properties”.

Coverage
The manual presents the basic accounting policies and principles in accordance
with the Philippine Public Sector Accounting Standards (PPSAS) adopted thru
COA Resolution No. 2014-003 dated January 24, 2014 and other pertinent
laws, rules and regulations. It includes the Revised Chart of Accounts (RCA)
prescribed under COA Circular No. 2013-002 dated January 30, 2013, as
amended; the accounting procedures, books, registries, records, forms, reports,
and financial statements; and illustrative accounting entries. It shall be used by
all National Government Agencies (NGAs) in the:

a. preparation of the general purpose financial statements in accordance with

the PPSAS and other financial reports as may be required by laws, rules
_and regulations; and

b. reporting of budget, revenue and expenditure in accordance with laws,

rules and regulations.

Objectives of the Manual

The Manual aims to update the following:
a. standards, policies, guidelines and procedures in accounting for
government funds and property; -

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 Govemment Accounting, 875

b. coding structure and accounts; and

C. accounting books, registries, records, forms, reports and financial
statements.

Basic Government Accounting and Budget Reporting Principles

Each entity shall recognize and present its financial transactions and
operations conformably to the following:
a. generally accepted government accounting principles in accordance with
the PPSAS and pertinent laws, rules and regulations;
b. accrual basis of accounting in accordance with the PPSAS;
c. budget basis for presentation of budget information in ‘the financial
statements (FSs) in accordance with PPSAS 24;
d. Revised Chart of Accounts (RCA) prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records; and;
g. fund cluster accounting.

Comparison between NGAS and GAM

NGAS Manual GAM
1) Financial 4 Components of FS 6 Components of FS
Statements 1. Balance Sheet 1. Statement of Financial
Title 2. Statement ofIncome — Position
and Expenses. 2. Statement of Financial
3. Statement of. Performance
Government Equity [3. Statement of Changes
4. Cash Flow Statement in Net Assets /Equity
4. Statement of Cash
flows
5. Statement of
Comparison of Budget
and Actual Amounts
6. Notes to Financial
Statements
2) Chart of COA Circular 2004-008, COA Circular 2013 - 002
Accounts September 20, 2004 January 30, 2013;
COA Circular 2014-003
April 15, 2014;
COA Circular 2015-007
October 22, 2015
3) Unified None Compliant
Accounts Code
Structure
(UACS)
4) Books Regular Agency Book and | By Fund Cluster
Maintained National Government .
Book

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 Government ecounting 876
5): Estimated Prescribed by COA Management Prerogative
Useful Lives of ‘
PPE :
6) PPE Threshold | None ~ | P15,000 and above
7) Inventory Moving Weighted Average | Moving Weighted Average;
Costing | Specific Identification
8) Fund One Fund Concept Fund Clustering
. Maintenance e 01 — Regular Agency
Fund
e 02 - Foreign Assisted
_ Project Fund sae
e 03 — Special Accounts =
Locally
Funded/Domestic
Grants Fund
e 04 — Special Account —
Foreign Assisted/
Foreign Grants Fund
e 05 — Internally
Generated .
Fund/Retained Income
Fund
» 06 — Business Related
Fund/Revolving Fund
e 07 — Trust Receipts

-| 9) Cash Flows Direct Method Direct Method

10) Completed Derecognized Recognized
Public
Infrastructure
11) Statement of .
Financial
Position

Assets Without Distinction With Distinction (Current —

and Non-Current)

Liabilities Without Distinction With Distinction (Current

and Non-Current)
12) Statement of Form part of Income Not part of Revenue from
Financial current operation
Performance
Subsidies,
Transfers
13) Impairment None Recognized
loss

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Goverument A ecounting 877

—_

14) Adjustment Uses Prior Year’s Direct adjustment to

affecting adjustment account Equity 7
Government »
Equity
15) Income e Without Authority to Recorded by NGAs
Collection use-Blr -
e With Authority to use -
NGAs
16) Accounting for
Donation
e With
conditionality Income Liability
e Without :
conditionality Income - Revenue.
e With ;
Restriction Not Revenue
17) Monitoring of ' None Section C of Obligation
Obligation / Request and Status (ORS)
Payment a :
18) Residual Value 10% At least 5%
19) Maintenance | RAOPS, RAOMO, RAOCO, | RAOD (PS; MO; CO; FE)—
of Registries RAOFE _| RBUD (PS; MO; CO; FE)

RBU RAPAL (COA, GAS and

RAPAL (COA only) agencies)

Financial Reporting System for the National Government

The financial reporting system of the Philippine government consists of
_ accounting system on accrual basis and budget reporting system on budget
basis under the statutory responsibility of the NGAs, Bureau of the Treasury
(BIr), Department of Budget and Management (DBM), and the COA, as follows:
a. Each entity of the National Government (NG) maintains complete set of
accounting books ‘by fund cluster which is reconciled with the records of
cash transactions maintained by the BTr.
b. The Bir accounts for the cash, public debt and related transactions of the
NG.
c. Each entity maintains budget registries which are reconciled with the
budget records maintained by the DBM and the Government Accountancy
Sector (GAS), COA,
d. The COA, through the GAS:
1, maintains budget records showing the overall approved budget of the
NG and its execution/implementation; .

2. consolidates the FSs and budget accountability reports of all NGAs and
the BIr with COA’s records to come up with an Annual Financial
Et

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 Govemment 4eecounting 878

Report (AFR) for the NG as required in Section 4, Article [X-D of the

1987 Philippine Constitution; and
3. prepares other financial reports required by law for submission to
oversight agencies.

Objectives of General Purpose Financial Statements.

The objectives of general purpose financial statements (GPFSs) are to provide
information about the financial position, financial performance, and cash flows
of an entity that is useful to a wide range of users in making and evaluating
decisions about the allocation of resources. Specifically, the objectives of
general purpose financial reporting in the public sector are to provide
- information useful for decision-making, and to demonstrate the accountability
ofthe entity for the resources entrusted
to it.

_ Responsibility for Financial Statements.

The responsibility for the preparation of the FSs rests with the following:
a. for individual entity/department FSs — the head of the entity/department
central office (COf) or regional office (RO) or operating unit (OU) or his/her
authorized representative jointly with the head of the finance /accounting
division/unit; and
b. for department/entity FSs as:a_ single eauty - the head of the
entity/department COf jointly with the head of the finance unit.

Books of Accounts and Registries. The books of accounts and registries of the
NG entities consist of:°

Journals Ledgers Registries

1. General Journals 1. General Ledgers - 1. Registries of revenue
2. CashReceipts . 2. Subsidiary Ledgers | and Other receipts
Journal 2. Registries of
3. Cash Disbursements | Appropriations and
Journal Allotments
4. Check 3. Registries of
Disbursement Allotment,
Journal Obligations and
Disbursements
4. Registries of Budget,
Utilization and
Disbursements

¢ Registries of Revenue and Other Receipts shall be maintained the

Budget Division/Unit of NGAs to monitor the revenue and other receipts :
estimated/budgeted, collected and remitted/deposited.
¢ Registries of Allotments, Obligations and Disbursements. The Registries
of Allotments, Obligations and Disbursements (RAOD) shall be maintained
-by the Budget Division/Unit of agencies, to record allotments, obligations

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 Govemment Accounting 879
and disbursements. It shall show the allotments received for the year,
obligations incurred against the corresponding allotment-and the actual
disbursements made.

a. Registry of Allotments, Obligations and Disbursements-Personnel

Services (RAOD-PS) shall be used to record the allotments received,
obligations incurred and disbursements classified under PS.

b. Registry of Allotments, Obligations and Disbursements-

Maintenance and Other Operating Expenses (RAOD-MOOE) shall be
used to record the allotments received, obligations incurred and
disbursements classified under MOOE.

C. Registry of Allotments, Obligations and Disbursements-Financial

Expenses (RAOD-FE) shall be used to record the allotments received,
obligations incurred and disbursements classified under FE.

d. Registry of Allotments, Obligations and Disbursements-Capital

Outlays (RAOD-CO) shall be used to record the allotments received,
‘obligations incurred and disbursements classified under CO.

* Obligation Request and Status. The incurrence of obligations shall be

made through the issuance of Obligation Request and Status (ORS). The
ORS shall be prepared by the Requesting/Originating Office supported by
valid claim documents like DVs, payrolls, purchase/job orders, itinerary of
- travel, etc.

e Registries of Budget, Utilization and Disbursements. The Registries of

Budget, Utilization and Disbursements (RBUD) shall be used to record the
approved special budget and the corresponding utilizations and
disbursements charged to retained income authorized under R.A. 8292 for
SUCs and other retained income collection of a national government agency
with similar authority, Revolving Funds and Trust Recine /Custodial
Funds.

a. Registry of Budget, Utilization and Disbursements-Personnel

Services (RBUD-PS) shall be used to record the budget utilizations and
disbursements classified under PS.

b, Registry of Budget, Utilization and Disbursements-Maintenance

and Other Operating Expenses (RBUD-MOOE) shall be used to record
the budget utilizations and disbursements classified under MOOE.

c. Registry of Budget, Utilization and Disbursements-Financial

Expenses (RBUD-FE) shall be used to record the budget utilizations
and disbursements classified under FE.

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 Govemment Accounting 880

d. Registryof Budget, Utilization and Disbursements-Capital Outlays

(RBUD-CO) shall be used to record the budget utilizations and
disbursements classified under CO.

. Responsibility Center Code Structure. Each NGA shall be assigned a

responsibility center code defined as organization code in the UACS Manual.
For monitoring revenue and expenses, additional three digit codes for the
agency’s major offices /departments shall be appended to the organization code.
The. organization code and the agency’s major offices /departments’ code ‘shall
consist of 15 digits as follows:

00 0000000 000

in
==
Organization
Department
Agency

Lower
~ Level/Operating— , ee
Unit eas
Additional Code
for Major
Office /Dept.

Example: National Government of the Commission on Audit

31 900 - 0000000 . O00

Oo
Organization t .
COA Z ,
Agency (none)

Central Office
National
Government
- Sector —

Revenue and Other Receipts

a. Accrual of revenue to the General Fund (GF) - Unless otherwise
‘specifically provided by law, all revenue -(income). accruing to the
departments, offices and agencies by virtue of the provisions of existing
laws, orders and regulations shall be deposited in the NT or in the duly
authorized depository of the Government and shall accrue to the General
Fund of the Government.

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Goverment Accounting 881

b. Special, Fiduciary and Trust Funds. Receipts shall be recorded as
revenue of Special, Fiduciary or Trust Funds. (TF) or Funds other than the
GF, only. when authorized by law and following such rules and regulations
as may be issued by the Permanent Committee consisting of the Secretary
of Finance as Chairman, and the Secretary of the Budget and the
Chairman, Commission on Audit, as members.

The Sources of Revenue and Other Receipts

The revenue received by NGAs may arise from exchange and non-exchange
transactions.

Revenue from Exchange Transactions. Revenues received by the NGAs from

exchange transactions shall be measured at fair value of the consideration
received or receivable and are derived from the following:
a. Sale of goods or pe He of services to third parties or to other NGAs.
Examples are:
1. Service Income- Permit Fees, Registration Fees, Registration Plates, Tags
and Stickers Fee, Clearance and Certification Fees, Franchising Fees,
Licensing Fees, Supervision and Regulation Enforcement Fees, Spectrum
Usage Fees, Legal Fees, Inspection Fees, Verification and Authentication
Fees, Passport and Visa Fees, Processing Fees and Other Service Income;
_and

2. Business Income - School Fees, Affiliation Fees, Examination Fees,

Seminar/Training Fees, Rent /Lease Income, Communication Network Fees,
Transportation System Fees, Road Network Fees, Waterworks System Fees,
Power Supply System Fees, Seaport System Fees, Landing and Parking
Fees, Income from Hostels/Dormitories and Other Like Facilities,
Slaughterhouse Operation, Income from Printing and Publication, Sales
Revenue, Hospital Fees, Share in the Profit of Joint Venture and Other ~
Pusiness Income.

b. Use by other entity of assets yielding interest, royalties and dividends or

similar distributions. Examples are:

1. Interest income - charges for the use of cash |or cash equivalents, or
amounts due to the entity;
2. Royalties~ fees paid for the use of entity’s assets such as trademarks,
patents, software, and copyrights; and
3. Dividends- share of the National Government from the earnings of its
capital/equity investments in Government-Owned or Controlled
Corporations (GOCCs) and other entities.

Revenue from Non-Exchange Transactions. Revenue of the NGAs from non-

exchange transactions are derived mostly from taxes, gifts and donations, goods
in kind and fines and penalties. The cash basis of accounting shall be applied
by all government agencies in the recognition of revenue from non-exchange

b
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 Government pbccounting 882
transaction until a reliable model of measurement of this revenue is developed.
Therefore, [Link] the corresponding revenue or liability that arises from
non-exchange transaction shall be recognized when collected or when these are
measurable and legally collectible. Examples:
' a. Taxation revenue shall be determined at a gross amount. It shall not be
reduced for expenses paid through the tax system.
b. Gifts and donations, other than services in kind shall be recognized as
assets and revenue when it is probable that the future economic benefits or
service potential will flow to the entity and shall be measured at fair value.
c. - Goods in-kind received without conditions shall be recognized as revenue
immediately.-
d. Donation in cash orin kind shall be recognized as revenue.

Most NGAs derive revenues from transactions where they receive resources and
provide no or [Link] directly in return. These are as follows:

a. Tax Revenue (individual, corporation, property, goods and services and

others). .
\

b. Fines and Penalties (tax revenue, service income and business income).

c. Shares, Grants and Donations (shares from national wealth, share from
PAGCOR/PCSO, share from GOCCs, Income from grants ‘and donation in
cash and iin kind)

d. Revenue from non-exchange transactions may also arise when, in respect

‘ of an inflow of resources from a non-exchange transaction, the entity
satisfies a present obligation recognized as a liability which may be as.
follows:
1.. Trust Liabilities — Customers’ Deposits Payable and Guaranty/Security
Deposits Payable
2. Deferred Credits— Deferred Finance Lease Revenue and Other Deferred
Credits
3. Unearned Revenue —Investment Property and Other Unearned Revenue

Disbursements
The different modes of disbursements are as follows:
(a) Checks (MDS or commercial checks),
(b) Cash (out of cash advance granted to authorized Disbursing Officer),
(c) Advice to debit the account,
(d) Tax remittance advice,
(e) Working Fund/CDC, and
(f) Direct payment method,

Disbursements by Check. Checks shall be drawn only on duly approved

Disbursement Voucher (DV) or Payroll, These shall be used for payment of
regular expenses which cannot be conveniently nor practically paid using the

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 Govcwmment Accounting 883
ADA or not authorized to be paid using the Petty Cash Fund or advances for
operating expenses. 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 as follows:

a. Modified Disbursement System Checks: -. are checks issued by

government agencies chargeable against the account of the Treasurer of the
_ Philippines, which are maintained with different MDS-GSBs.

b. Commercial Checks- are checks issued by NGAs chargeable against the

Agency Checking Account with GSBs. These shall be covered by
income /receipts authorized to be deposited with AGDBs.

Disbursements by Cash. Cash disbursements constitute payments out of cash

advances granted to the regular and special disbursing officers for personal
services, petty expenses and MOOE for field operating requirements. All cash
payments shall be covered by duly approved DVs/payrolls/petty cash vouchers
(PCWs). The cash advances may be granted to the cashiers/disbursing
officers /officials and employees to cover the following: salaries and wages,
travels, special time-bound undertakings and petty operating expenses. The
granting and liquidation of cash advances shall be governed by. the following
existing COA niles and regulations and other pertinent issuances

Disbursements through List of Due and Demandable Accounts Payable-

Advice to Debit Account. The use of LDDAP-ADA as a mode of settlement of
accounts payable due the creditors/payees of all NGAs and their OUs was
prescribed under DBM Circular Letter No. 2013-16 dated December 23, 2013
which implemented the ExMDPS, amended by DBM Circular Letter Nos. 2013-
16A and 2013-16B dated February. 6, 2014 and February 25, 2014,
respectively.

Disbursements through Tax Remittance Advice. The Tax Remittance Advice ©

(TRA) refers to a serially-numbered document prescribed by the DBM that
should be used by the NGAs in the remittance of withheld taxes on funds
coming from DBM. With the inclusion of all NGAs among the taxpayers who are |
mandated [Link] the Electronic Filing and Payment System (eFPS) under the
Bureau of Internal Revenue Regulations No. 1-2013 dated January 23, 2013,
the TRA is accomplished on-line which is called the Electronic TRA (éTRA). The
€TRA is certified correct by the Chief Accountant/Head of Accounting
Division/Unit and approved by the Head of Agency/Authorized Official, and
used to record the remittance of taxes withheld to the BIR. The same document
shall be the basis for the BIR and the BTr to draw a JEV to record the tax
collection and deposit in their respective books of accounts. The JEV shall be
recorded in the GJ.

Disbursements by Foreign-based Government Agencies. CDC is an

authorization issued by the DBM to DFA and other agencies with foreign posts

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 Goverment Accounting 884
to utilize their collections retained by their Foreign Service Posts (FSPs) to cover
operating requirements, but not to exceed the released allotment to the said
post. (National Budget Circular No. 535 dated December 29, 2011).

Disbursements through Direct Payment Method. This type of disbursement

should be covered by an NCAA. This mode of disbursement is made through the
JEV issued by the BTr to the availing/implementing agency to record payment
of goods and services made directly by the lending institution to the supplier or
contractor. The JEV shall be recorded in the GJ. .

Fund Release Documents.

With the adoption of the UACS and the Performarice-Informed Budgeting (PIB),
the following are the fund release documents: i
a. Obligational Authority or Allotment - the-following are the documents
which authorize the entity to incur obligations:
1. General Appropriations Act Release Document (GAARD) - serves as
the obligational authority for the comprehensive release of budgetary
items appropriated in the GAA, categorized as For Comprehensive
Release (FCR).

2. Special Allotment Release Order (SAROQO) - 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. Releases of allotments for Special Purpose
Funds (SPFs) (e.g., Calamity Fund, Contingent Fund, E-Government
Fund, Feasibility Studies Fund, International Commitments Fund,
Miscellaneous Personnel Benefits Fund and Pension and Gratuity |
Fund) are also covered by SAROs.

3. General Allotment Release Order (GARO) - is a comprehensive

authority issued to all national government agencies, in general, to
-incur obligations not exceeding an authorized amount during a
specified period for the purpose indicated therein. It covers
automatically appropriated expenditures common to most, if not all,
agencies without need of special clearance or approval from competent
authority, i.e. Retirement and Life Insurance Premium.

b. Disbursement Authority
- the following documents authorize the entity to
. pay obligations and payables:
1. Notice-of Cash Allocation (NCA) - authority issued by the DBM to
central, regional and provincial offices and operating units to cover the
cash requirements of the agencies;

2. Non-Cash Availment Authority (NCAA) - authority issued by the DBM

to agencies to cover the liquidation of their actual obligations incurred
against avdilable allotments for availment of proceeds from
loans/grants through supplier’s credit/constructive cash;

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 Govemment Accounting 885

3. Cash Disbursement Ceiling (CDC) - authority issued by 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
[Link] exceed the released allotment to the said post; one

4. Notice of Transfer of Allocation - authority issued By the Central

Office to its regional and operating units to cover the latter’s cash
requirements.

The Philippine Public Sector Accounting Standards (PPSAS)

The objective of PPSAS is to set out the recognition, measurement, présentation
and disclosure requirement for financial reporting in the Philippine
Government.

Bases of PPSAS
a. Pronouncement jasned: by IPSASB ‘IPSASs), IASB, PICPA, International
Organization of Supreme Audit Institutions and others.
b. Relevant factors, including best accounting practices and
c. Capacity of agencies to comply with PPSAS

Bane of PPSAS |
a. PPSASs set out requirements dealing with transactions and other seit in
s general purpose financial reports
b. PPSASs are designed to apply to the general purpose fvanedal reports of all
public sector entities other than Government Business Enterprises (GBEs).
c. Applies to all NGAs, LGUs and GOCCs not classified as GBEs ©

PPSAS consists of: : -

* International Public Sector Accounting Standards (IPSASs) (Accrual Based
IPSASs per 2012 Handbook) developed by IPSASB and published by the
International Federation of Accountants (IFAC), and
* Philippine Application Guidance (PAG)

PPSAS SUMMARY- PHASE 1 For Implementation in 2014

A. PPSAS I - Presentation of Financial Statements
a. The financial statements shall be presented under Scorual basis except
for transactions otherwise accounted for as required by law.
b, Financial statements shall be presented in comparative for all amounts
reported in the FS and for all relevant narrative and descriptive
information.
B. PPSAS 2 - Cash Flow Statement
Objective — To set overall considerations for the:
a. Provisions of information about changes in cash and cash equivalents
by means of cash flow statements

L.
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 Government Accounting 886

b. Classifies cash flows during the period from operating, investing and
financing activities
Features:
a. Cash flows for operating’ activities are reported using the direct
method.
b. Cash flows exclude movements between items that constitute cash or
cash equivalents
c. Investing and financing transactions that do not require the use of cash
shall be excluded from the cash flow statement, but they shall be
separately disclosed :

C. PPSAS 3 - Accounting Policies, GhAnREE. in Accounting Estimates and

Errors
The-effect of changes in estimate is aeaanied for by including it in the net
income or comprehensive income as appropriate in:
a. The period of change if the change affects that period only.
b. The period of change and future periods if the change affects both.

D. PPSAS 4- The Effects of Changes in Foreign Exchange Rates

The translation should be done for foreign currency items into functional
currency and the initial recognition and measurement record the spot
exchange rate.

E. PPSAS 5- Borrowing Costs

a. Borrowing costs shall be charged to expenses in the period when they
are incurred. (Benchmark treatment)
b. Borrowing costs directly attributable to the acquisition, construction, or
production ofa qualifying asset shall be capitalized as part of the cost
of that asset. (Allowed Alternative Treatment)
c. For borrowing costs pertaining to loans borrowed by the National
Government (NG) which are recorded by the Bureau of the Treasury,
the benchmark treatment shall be used. However for loans borrowed
directly by the NGAs and LGUs, the allowed alternative treatment shall
' be used. ~

F. PPSAS 6- Consolidated and Separate Financial Statement

a. Prescribes requirements for preparing and presenting consolidated FS
for an economic entity under the accrual basis of accounting.
b. A controlled entity is an entity controlled by another entity, known as
the controlling entity. .
c. Balances, transactions, revenue and expenses between entities within
the economic entity are eliminated in full.

G. PPSAS 8 - Interests in Joint Ventures

a. The key characteristic
of a joint venture is a binding arrangement
whereby two or more parties are committed to undertake an nativity
that is subject to joint control.

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 Government Accounting 887

b. Joint ventures may be classified as jointly controlled operations,

jointly controlled assets and jointly controlled entities. Different
accounting treatments apply for each type of joint venture.

H. PPSAS - 9 Revenue from Exchange Transactions

It applies to revenue arising from the following exchange transactions and
events:
« The rendering of services.
« The sale of goods, and.
« The use of others of entity assets yielding interest, royalties. and
dividends.

The revenue shall be measured at the fair value of the consideration

received or receivable.

I. PPSAS 12-Inventories
a. The Inventories are measured at the lower of cost and net realizable
value.
b. If acquired through a non-exchange transaction, their cost shall be
measured as their fair value as at the date of acquisition.
c. Cost is determined on weighted average basis
d. Write- downs to net realizable value are recognized as an expense.
Reversals arising from an increase in net realizable value are recognized
as reduction of the inventory expense in the period in which they occur

J. PPSAS 13- Leases

Lease is classified as a Finance lease if:
(a) The lease transfers ownership of the asset to the eas by the end of
the lease term.
(b) The lessee has the option to purchase the asset at a price that is
expected to be sufficiently lower than the fair value.
(c) The lease term is for the major part of the economic life of the asset.

Operating lease does not transfer substantially all the risks and rewards
incidental to ownership of the asset.

K. PPSAS 14- Events After the Reporting Date

* Adjusting events after the reporting date - events that provide
evidence of conditions that existed at the reporting date.
« Non-Adjusting events after the reporting date - those that are
indicative of conditions that arose after the reporting date.

An entity shall disclose:

* The date its financial statements were authorized for issue, and
«= Who gave that authorization
aaa

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 Goverment Accounting 888
L. PPSAS 16-Investment Property
" Investment property - is property tland or a building or part of a
building, or both) held to earn rentals for capital appreciation, or both,
rather than for:
a) Use in the production or supply of goods or services, or for
administrative purposes; or
b) Sale in the ordinary course of operations.
« Investment Property- Shall be measured initially at cost. If acquired
‘ through non-exchange transaction- Fair value as at date of acquisition.

M. PPSAS 17 - Property, Plant and Equipment

* The initial recognition of PPE is at cost, its cost is its fair value as at the
date of acquisition.
* Infrastructure assets are accounted as PPE
= The carrying amount ofan item of property, plant and equipment shall
be derecognized:
a) On disposal; or
b) When no future economic benefits or service potential is aepected from
its use or disposal.

N.. PPSAS 19-— Provisions, Contingent Liabilities and Contingent Assets

A provision shall be recognize only when:
* Apast event has created a present legal or constructive obligation.
» An outflow of resources to settle the obligation is probable, and
« There is a reliable estimate of the obligation

Contingent Liability arises when there is:

a. Possible obligation to be confirmed by a future event that is outside the
control of the entity; or
b. A present obligation may, but probably will not require an outflow of
resources, or
c: Areliable estimate cannot be made.

Contingent liabilities. require disclosure only (no recognition). If the

possibility of outflow is remote, then no disclosure

Contingent asset arises when the inflow of economic benefits or service

potential is probable, but not virtually certain, and occurrence depends on
an event outside the control of the entity.

Contingent assets require disclosure only (no recognition). If the

realization of revenue is virtually certain, the related asset is not a
contingent asset and recognition of the asset and related revenue is
appropriate.

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 Government Accounting 889
O. PPSAS 20- Related Party bisolbsurse:
Related Parties are parties that control or have significant influence over
~ the reporting’ entity and parties that are controlled or Significantly
influenced by the reporting entity. :
It requires disclosure of: ~
a. Relationship involving control, even when there have been no
transactions in between;
b. Related party transactions; and
c. Management compensation .

P. PPSAS 21-Impairment of Non-Cash- Generis Assets |

1. Cash- generating assets- are assets held with the primary objective of
generating a commercial return.
2. Non-cash- generating assets- are assets other than cash- -generating
assets. :
'

= A non-cash-generating asset is impaired when the carrying amount of .

the asset exceeds its recoverable service amount.
«= An impairment loss shall be recognized immediately in surplus or
deficit.
« After the recognition of an impairment lass, the depreciation charge for
the asset shall be adjusted i in future periods.

Q. PPSAS 23 -— Revenue from Non- Bvehanige Transactions (Taxes and

Transfers)

Non- Exchange transactions

Examples:
(a) Taxes; and
(b) Transfers (whether cash or non-cash)
« An asset acquired through a non-exchange transaction shall initially be
measured as its fair value as at the date of acquisition.
* An entity shall recognize an asset in respect of taxes when the taxable
event occurs and the asset recognition oritpria: are met.

R. PPSAS 24 - Breseniation of Budget Information in Financial Statements

PPSAS 24 requires:
1. Presentation of budget Sitomiation in the financial statements when
‘the reporting entity is publicly accountable for its budget.
2. Disclosure of an explanation of the reasons for material differences
‘between the budget and actual amounts,
To ensure that the public sector entities discharge their accountability
obligations and enhance the transparency of their financial statements.

_- §. PPSAS 26 -Impairment of Cash Generating Assets

Cash Generating Assets (CGA)- assets held with the primary objective of
generating a commercial return,

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 Government Accounting 890

An impairment loss of a cash-generating asset - is the amount by which

the carrying amount of an asset exceeds its recoverable amount.

T.. PPSAS 27 —- Agriculture

Agricultural activity- management by an entity of the biological assets for
sale, or for distribution at no charge or for a nominal charge or for
conversion into agricultural produce or into additional biological assets.

U. PPSAS 28- Financial Instruments Presentation

Prescribes principles for classifying and presenting financial instruments as
liabilities or net assets/equity, and for offsetting financial assets and
liabilities.

V. IPSAS 29 - Financial Instruments: Recognition and Measurement

Prescribes principles for recognizing, derecognizing and measuring financial
assets and financial liabilities.

W. IPSAS 30 - Financial Instruments: Disclosure

Prescribe disclosures that enable financial statement users to evaluate the
significance of financial instruments to an entity, the nature and extent of
their risks, and how the entity manages those risks.

X. PPSAS 31 - Intangible Assets

Intangible Asset is an identifiable non-monetary asset without physical
' substance.

An intangible asset, whether purchased or self- created, is recognized if:

1. Itis probable that the future economic benefits or service potential that
are attributable to the asset will flow to the entity and
2. The cost or fair value of the [Link] be measured reliably.

All research costs are charged to expense when incurred.

Y. PPSAS 32 - Service Concession Arrangements: Grantor

1. Service concession arrangement - sets performance standards,
mechanism for adjusting prices, and arrangements for arbitrating
disputes.
2; The service concession assets are turned over to the grantor,

The Grantor
1. Shall recognize liability when it recognizes a service concession asset
2. The Initial measurement- same amount as the asset adjusted by any
- consideration given by the grantor or the operator or from the operator
to the grantor.
3. The operator is compensated for its service over the period of the
"service concession arrangement. S

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TE
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Government Accounting 891

—_—_—_
EEouerTReamereren

Phase 2 - For Implementation in 2015

1. PPSAS 18- Segment Reporting
2. PPSAS 22 - Disclosure of Information about the General Government
Sector
3. PPSAS 25- Employee Benefits

Deadlines on Submission of Reports

A. Provincial Offices
and Operating Units Statement/Report Deadline
Trial Balances (TBs) and 10 days after the
Monthly | Supporting Schedules (SSs) end of the month
10 days after the
Quarterly -TBs, FSs and SSs end of the quarter
On or before Jan. 20
Year-end TBs, FSs and SSs of the following year
B. Regional/Branches
Offices
Trial Balances (TBs) and 10 days after the
Monthly Supporting Schedules (SSs) end of the month
TBs, FSs and Supporting 10 days after the
Quarterly Documents (SDs) end of the quarter
_|-Onor before Jan. 31
Year-end -TBs, FSs and SSs of the following year
C. Central/Head/Main |
Offices
Trial Balances (TBs) and 10:days after the
Monthly Supporting Schedules (SSs)_ end of the month
10 days after the
Quarterly TBs, FSs and SSs end of the quarter
February 14 of the
Year-end TBs, FSs and SSs : following year

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 Goverment 4becounting 892

EXERCISES

Problem 1: It 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.
a. Government auditing ' _-¢, Government accounting
b. Government reporting d. Government analyzing

Problem 2: What is the title of the revised government accounting system for
national government agencies which will be effective starting January 1, 2016?
a. Government Accounting Manual (GAM)
b. New Government Accounting System (NGAS) -
c. Philippine Government Accounting System (PGAS)
d. National Government Accounting Manual (NGAM)

Problem 3: The Government Accounting Manual aims to update the following,

except sath be '
a. standards, policies, guidelines and procedures in accounting for
government funds and property AIS
b. coding structure and accounts.
c. accounting books, registries, records, forms,.reports and financial
statements. -
d. scope and objectives of audit.

Problem 4: This budget process begins with the issuance of budget call by the
DBM:
a. Budget Preparation c. Budget Execution
b. Budget Legislation d. Budget Accountability

Problem 5: It involves the formulation of estimates of revenues and

expenditures by the Executive Departments and Agencies.
a. Budget Preparation c. Budget Execution
‘ b. Budget Legislation d. Budget Accountability

Problem 6: It is the implementation of the national budget by different agencies

and departments and release of allotments,
a. Budget Preparation c. Budget Execution
’b. Budget Legislation d, Budget Accountability

Problem 7: 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 the initially approved
work targets and a summary of list of checks issued which is submitted on a
monthly basis.
a. Budget Preparation - ¢, Budget Execution
b. Budget Legislation _ d. Budget Accountability

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 Government Accounting 893

Problem 8: It is the enactment of the. appropriation bill into law.

a.
‘
Budget Preparation . C, Budget Execution
b. Budget Legislation d. Budget Accountability

Problem 9: It is an authorization issued by the DBM to NGAs to iricur

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 c. Approved Budget
b. Allotment : d. Obligation

Problem 10: It is the authorization made by a legislative body to allocate funds

for purposes specified by the legislative or similar authority.
a. National Budget c. Appropriation
b. Allotment d. Approved Budget

For Problems 11- 13

Problem 11: The approved appropriation of Department XYZ for 2022 ‘was
P3,600,000. 85% of this appropriation was allotted by the Department of
Budget and Management (DBM) accompanied with Notice of Cash allocation
(80%) of the allotment. During the year, the amount of obligations incurred was
equivalent to 90% of the NCA but only 70% of these obligations were ae by .
checks.

What is the entry to record the incurrence of obligation?

a. No entry, Posting to appropriate Registries of Budget, Utilization and
Disbursements (RBUD)
- b. No entry, Posting to appropriate Obligation Request and Status (ORS)
-c. No entry, Posting to appropriate Registry of Allotments, Obligations and
- Disbursements (RAOD)
d. No entry, Posting to appropriate Registries of Appropriations and
Allotments (RAPAL)

Problem.12: What writ be the entry of the DOH upon receipts of Notice of Cash
Allocation?
a. Cash-Collecting Officer P2,448,000 and Credit Cash-MDS, Regular
P2,448,000.
b. Cash-MDS, Regular P2,448,000 and Credit Cash- Collecting Officer
P2,448,000
c. Cash-MDS, Regular P2,448,000 and Credit Subsidy from National
Government P2,448,000
d. No entry, Posting to appropriate Registries of Appropriations and
Allotments (RAPAL)

Problem 13: What is the entry to recognize the reversion of unused Notice of
Cash Allocation?

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 Government Accounting 894

a. Debit Subsidy from national Government P905,760 and Credit Cash-MDS,

- Regular P905,760
b. Debit Subsidy from national Government P1,542,240 and Credit Cash-
MDS, Regular P1,542,240
c. Posting to -appropriate- Registry of Allotments, Obligations and
Disbursements (RAOD),
d. Debit Subsidy from National Government P905,760 and Credit Cash--
: Treasury/Agency Deposit, Regular P905,760

Problem 14: The Department of Health (DOH) receives a total appropriation of

PSOOM per GAA for year 2020. The Department of Health received an allotment
from Department of Budget and Management for Capital Outlay P230M;
Maintenance and other Operating Expenses P75M;.and Personal Services
P100M. 3

What will be the entry of DOH for the receipt of allotment from the DBM?
a. Debit Cash-MDS, Regular P500M and Credit Subsidy from National
Government P500M.
b. Debit Cash-MDS, Regular P405M and Credit Subsidy from National
- Government P405M.
c. No entry, Posting to appropriate Registry of Allotments, Obligations and
Disbursements (RAOD) P405M
d. No entry, Posting to appropriate Obligation Request and Status (ORS)
P405M

Problem 15: Agency X establishes a Petty Cash Fund Amounting to P20,000 on

January 1, 2020. The following expenses paid are: Traveling expenses P8,000;
Office. and Supplies expenses P5,000; Fuel and Oil and Lubricants expenses
P2,000. What is the entry to record the return of unused Petty Cash Fund upon
retirement, resignation and termination of the Petty Cash Custodian? —
a. Debit Petty Cash Fund P5,000 and Credit Cash-MDS, Regular P5,000
b. Debit Cash Collecting officer P5,000 and Credit Petty Cash Fund P5,000
c. Debit Traveling, Office Supplies and Fuel Expenses P15,000 and Credit
Cash-MDS, Regular P15,000
d. Debit Cash Collecting Officer P5,000 and Credit Cash-MDS, regular P5,000

Problem 16: On November 1, the collecting officer of DOLE collected last

month billing for permit fees amounting to P120,000, On November 10, DOLE
remitted the P120,000 to the Bureau of Treasury. What is the journal entry to
record the remittance to Bureau of Treasury?
a. Debit Cash-Collecting Officer P120,000 and Credit Cash-Treasury/Agency
Deposit, Regular, P100,000
b. Debit Cash-Collecting Officer P120, 000 and Credit Accounts Receivable
P120,000
c. Debit Cash-Treasury/Agency Deposit, Regular P120,000 and Credit Cash-
Collecting Officer P120,000

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 Goverment Accounting 895

d. Debit Cash-Treasury/Agency Deposit, Regular P120,000 and Credit

Accounts Receivable P120,000.

For Problems 17- 24

Problem 17: DMCI constructed a building intended tb earn rent income for
Agency X. The Contract Price of the project is P11,200,000, inclusive of VAT,
payable in two progress billings. Advance payment to DMCI is 15% of the
contract price while the retention fee is 10% of the progress billing. Agency X
receive cash of P500,000 from the contractor as performance bond. The
performance bond is deposited to the account of the Bureau of Treasury
through Authorized Government Depository Bank.

What is the journal entry of Agency X upon receipt of performance bond from
DMCI?
a. Debit Cash-Treasury/Agency Deposit, Trust P500,000 and Credit Guaranty
Security Deposits Payable P500,000
b. Debit Cash-Collecting Officers P500,000 and Credit Cash-Treasury/Agency
Deposit, Trust P500,000 Collecting Officers P500,000
c. Debit Cash- Collecting Officers P500, 000 and Credit Guaranty/Secunty
Deposits Payable P500,000
d. Debit Cash-Treasury/Agency Deposit, Trust P500,000 and Credit Cash-
Collecting Officers P500,000

Problem 18: What is the journal entry to record the advances to contractor
(mobilization of fee of 15%)?
a. Debit Advances to Contractor P1,680,000 and Credit Cash-
Treasury/Agency, Regular P1,680,000,
b. Debit Construction in Progress-Building P1,680,000 and Credit Cash- MDS,
Regular P1,680,000.
c. Debit Guarantee Deposit P1,680,000 and Credit Cash-MDS, Regular
P 1,680,000.
d. Debit Advances to Contractor Pl ,680,000 and Credit Cash-MDS, Regular;
MDS P1,680,000.

Problem 19: What is the journal entry to aad the first progress billing for
50% completion?
a. Debit Construction in Progress-Building P5,600,000 and Accounts Payable
P5,600,000
b. Debit Construction in Progress-Building P5,600,000 and Credit Advances
to Contractors P1,680,000 and Accounts Payable P3,920,000.
c. Debit Accounts Receivable P5,600,000 and Credit Progress Billing
P5,600,000
d. Debit Construction in Progress-Building P5,600,000 and Credit Advances
to Contractor 1,680,000 and Credit Cash-MDS, Regular P3,920,000

f
f
E

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 Govemment rbccounting 896

Problem 20: What is the journal entry to record the payment of first progress
billing?
a. Debit Accounts Payable P3,920, 000 and Credit Guarantee Deposit
: P560,000 Cash-MDS, Regular P3,360,000
b. Debit Accounts Payable P5,600,000 and Credit Cash-MDS, Regular
P5,600,000 ‘
c. Debit Accounts Payable P3,920,000 and Credit Due to BIR, P350,000 and
Credit Cash-MDS, Regular P3,570, 000
d. Debit Accounts Payable P3,920,000 and Credit Guarantee Deposit
P560,000; Due to BIR P350,000 and Cash-MDS, Regular P3,010,000

Problem 21: What is the journal entry to record the constructive receipt of Tax
Remittance Advice (TRA) of National Government Agency (NGA)?
a. Debit Cash-MDS, Regular P350,000 and Credit Subsidy from National
Government P350,000
b. Debit Cash-Collecting Officer P350, 000 and Credit Subsidy from National
Government P350,000
S Debit Cash-Tax Remittance Advice P350,000 and Credit Subsidy from
National Government P350,000
a. Debit Cash-Tax Remittance Advice P350,000 and Credit Gash: MDS,
Regular P350,000

Problem 22: What is the journal entry to record the constructive remittance of
withholding tax through Tax Remittance Advice (TRA)?
a. Debit Cash-Tax Remittance Advice P350,000 and Credit Subsidy from
National Government P350,000
b. Debit Cash-Tax Remittance Advice P350,000 and: Credit Cash-MDS,
Regular P350,000
c. Due to BIR P350,000 and Credit Cash-Tax Remittance Advice P350,000
d. Due to BIR P350,000 and Credit Cash-MDS, Regular P350,000.

Problem 23: What is the journal entry of Agency X to recognize in the

Investment Property based on the certificate of acceptance?
a. Guarantee Deposit Payable P1,120,000 and Investment Property-Building
P10,080,000 and Credit Construction in Progress-Building P11,200,000
b. Investment Property-Building P11,200,000 and Credit Construction in
Progress-Building P10, 080, 000 and Credit Guarantee/Security Deposit
P1,120,000.
Progress Billings P11, 200, 000 and Credit Construction in Progress-Building
.P11,200,000
Investment Property-Building P11,200,000 and Credit Construction in
Progress-Building P11,200,000.

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 Govemment Accounting 897
Problem 24:.What is the journal entry of BIR upon constructive receipt of tax
remitted by. Agency X on the first billing?
a. Debit Due to BIR P350,000 and Credit Tax Remittance Advice P350,000
b. Debit Due to BIR P350,000 and Credit VAT P350,000
c. Cash Collecting Officer and Credit Cash Tax Remittance Advise P350,000
d. Due to BIR P350,000 and Credit Cash-MDS, Regular P350,000

For Problems 25 26
Problem 25: On December 1, the eillesting diiver of the Bureau of Immigration
collected immigration tax of P100,000 and Travel tax of P10,000. On December
5, the agency remitted the collection to the Bureau of Treasury. What is the
entry to record the collection of immigration and travel tax?
a. Cash-Collecting Officer P110,000 and Credit Immigration Tax P100,000
and Travel Tax P10,000.
b. Cash-Collecting Officer P110,000 and Credit Cash-Treasury/Agency
deposit, Regular P110,000
c.. Debit Cash-Treasury/Agency Deposit, Regular P110,000 and Credit
Immigration Tax P100,000 and Travel Tax P10,000.
d. Debit Cash-Treasury/Agency Deposit, Regular P110,000 Credit Cash- -
Collecting Officer P10,000.

Problem 26: Assuming the tax was directly deposited thru Authorized Agent
Banks. What is the journal entry to-record collection/remittance of income to
Bir through Authorized Agent Banks?
a. Debit Cash-Collecting Officer 110,000 and Credit Immigration tax P100,000
and Travel tax P10,000
b. Debit Cash-Treasury/Agency Deposit, Regular P110,000 and Credit
Immigration tax P100,000 and Travel tax P10,000
c. Debit Cash-Treasury/Agency Deposit, Regular P110,000 and Credit Cash-
Collecting Officer P110,000
d. Debit Cash-Collecting Officer P110,000 and Credit pecans Receivable
P110,000

Problem 27: What is the journal entry of Bureau of Treasury to record the
constructive receipt of remittance of taxes by Agency X through Tax Remittance .
Advice (TRA)?
a. Debit Due to BIR P350,000 and Credit Tax Remittance Advice P350,000
b. Debit Tax Remittance Advice P350,000 and Credit Cash-Treasury/Agency,
Regular P350,000
¢. Debit Subsidy to National Government Agency P350,000 and Credit Cash-
Tax Remittance Advice P350,000
d. Cash-Tax Remittance Advice P350,000 and Credit Subsidy to National
Government Agency P350,000

Problem 28: Which of the following closing entries in the accounting book of
Department of Tourism is incorrect if the following data are provided by its chief
accountant?

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 | Govermment Abecouuting 898
Total Income, aside from SING P1,598,000
Total expenses 791,652
Total Subsidy Income from National Government 1,181,882

a. Income account other than SING 1,598,000

Revenue and Expense Summary account 1,598,000
b. Revenue and Expense Summary account 791,652
Expense account 791,652
c. Subsidy Income from National Govetiiient 1,181,882
Revenue and Expense Summary Account 1,181,882
d. Revenue and Expense Summary Account 1,988,230
Accumulated Surplus / (Deficit) 1,988,230
e. Ordinary shares 3,931,534 \
Share prémium y a 3,931,534

Problem 29: On January 1, 2020, an NGA granted a loan amounting to

P500,000
to an LGU with annual-interest of 6%. On December 30,2020, The
LGU made a partial payment of P100,000. What is the journal entry of NGA to
record the loan granted to LGU? °
a. Debit Loan Receivable-LGU P500, 000 and Credit Cash in Bank-Local
Currency, Current Account P500,000
b. Debit Loan Receivable- LGU P500,000 and Credit Cash-MDS, Rewalar
P500,000
c. Debit Loan Receivable-LGU P500, 000 and Credit Cash-Treasury/Agency
- Deposit/Trust P500,000 :
d. Debit Loan Receivable-LGU P500,000 and Credit Subsidy from National
Government P500,000 :

Problem 30: The Department of Works and Highways obtained a loan from
foreign bank to finance the construction of roads in Metro Manila amounting to
$5 Billion. What is the journal entry of the Bureau of Treasury to record the
receipt of loan proceeds based on the credit advised from BSP?
a. Debit Cash in Bank-Local Currency, BSP $5B and Credit Loan Payable-
Foreign $5B
b. Debit Cash in Bank-Local -Currency, BSP $5B and Credit Cash-
Treasury/Agency deposit, Foreign $5B
c. Debit Cash in Bank-Foreign-Currency, BSP $5B and Credit Loan. Payable-
Foreign $5B
d. Debit Cash in Bank-Foreign Currency .$5B and Credit Subsidy from
National Government

Problem 31: On January 25, 2020, the Department of Agriculture purchased

- Pl Million worth of rice from farmers for sale to customers. On February 2, the
rice were sold for P1,200,000 with a 10% discount to rice dealers. What is the
entry of Department of Agriculture to record the sale of rice on February 2?
a. Debit Merchandise Inventory P1,200,000 and Credit Cost of Goods Sold
P1,200,000

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 Goverment Accounting 899

b. Debit Cash-Collecting Officers P1,080,000 and Sales Discounts P120,000

and Credit Sales Revenue P1,200,000.
c. Cash-MDS, Regular 1,080,000 and Sales Discounts P120,000 Hane Credit
Sales Revenue P1,200,000.
da. Debit Cash-Treasury/Agency Deposit and Sales Discounts P120,000 and
- Credit Sales Revenue P1,200,000. 4

Problem 32: Agency A received an i titiconditional donation of a piece of land

with a fair value of P2,000,000. What is the journal entry to recognize the
receipt of donated land?
a. Debit Land P2,000,000 and Credit Contribution Revenue P2,000,000
b. Debit Land P2,000,000 and Credit Income from Grants and Donation in
Kind P2,000,000
c. Debit Investment Property, Land P2,000,000 and Credit Income from
Grants and Donation in Kind P2,000,000
d. Debit PPE P2,000, 000 and Credit Contribution Revenue P2,000,000

Problem 33: An agency purchased a agricultural machine on account at

P200,000, with credit terms of 2/10, n/30. What is the journal entry to record -
the purchase of machine on account?
a. Debit Agricultural and Forestry Equipment P200, 000 and Credit Accounts
Payable P200,000
b. Debit Agricultural and Forestry Equipment-P196,000 and Credit Accounts
Payable P196,000
c. Debit PPE P200,000 and ‘Credit Accounts Payable’ P200, 000
d. Debit PPE P196,000 and Credit Accounts Payable P 196,000

Problem 34: An agency purchases %a photocopying machine for cash with the
following costs:
Invoice Price 45,000
Delivery Cost 3,000
Installation Cost 1,500
Test runs Cost 1,000
Less: WTAX 3,140
Net Amount 47,360

What is the journal entry to record the purchase of photocopying machine?

a. Debit Office Equipment P50,500 and Credit Due to BIR P3,140 and Credit
Cash-Treasury/Deposit, Regular P47,360
b. Debit Office Equipment P50,500 and Crédit Due to BIR P3,140 and Credit
Cash-MDS, Regular P47,360
c. Debit Office Equipment P50,500 and Credit Due to BIR P3,140 and Credit
Cash-Disbursing Officer P47,360
d. Debit Office Equipment P50,500 and Credit Due to BIR P3, 140 and Credit
Cash in Bank-Local Currency P47,360

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 Govemment Accounting 900
For Problems 35 - 37
Problem 35: During 2020, Agency ABC transferred cash of P300,000 to Agency
QRS for a land beautification project. Subsequently, Agency ABC received a
report from Agency QRS about the project. What is the journal entry of mepney
ABC to record the transfer of funds?
a. Debit Due from ABC P300,000 and Credit Cash, MDS, Regular P300,000.
b. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-
Collecting Officers P300,000.
c. Debit Cash Collecting Officers P300,000 and Credit Due to ABC P300,000
d. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-
Collecting Officers P300,000.

Problem 36: What is the journal entry of Agency QRS to record the turnover of
the land improvement to Agency ABC? ..
a. Debit Due to ABC P300,000 and Credit PPE Account P300,000
b. Debit PPE Account P300,000 and Credit Due from QRS P300,000.
c. Debit Due to ABC P300,000 and Credit Cash-Collecting Officer P300, 000
Debit Cash Collecting Officer P300,000 and Credit Due from QRS P300,000

Problem 37: What is the journal entry of QRS upon receipt of inter-agency
fund transfer?
a. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-
Collecting Officers P300,000. _
b. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-
Collecting Officers P300,000.
c. Debit Cash-Collecting Officer P300,000 and Credit Due to ABC P300,000
d. Debit Cash Collecting Officer P300, 000 and Credit Cash- MDS, Regular
P300,000 2

Problem 38: What is the journal entry to record the receipt of grants and -
donations of cash from foreign eeeiey mSticauons deposited to the Bureau of
Treasury (BTr)?
a. Debit Cash in Bank-Foreign Currency, Savings Account and Credit Income
from Grants and Donations in Cash
b. Debit Cash-Treasury/Agency Deposit and Credit Income from Grants and
Donations in Cash
.c. Debit Cash Collecting Officer and Credit Income from Grants and
- Donations in Cash
d. Debit Cash-MDS, Regular and Credit Income from Grants and Donations in
Cash -

For Problems 39 - 40
Problem 39: The Department of Foreign Affairs remitted P300,000 cash to the
Bureau of Treasury from its various collections. What is the journal entry of
Department of Foreign Affairs to record the remittance of collections [Link] BIr?

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 Government rbccounting 901
a. Debit Cash in Bank, Local Currency-BSP and Credit Cash-Treasury
/Agency Deposit, Regular
b. Debit Cash Treasury/Agency Deposit, Regular and Credit Cash in Bank,
Local Currency-BSP
c. Debit Cash-Treasury/Agency Deposit, Regular and Credit Cash- -Collecting
Officer
d. Debit Cash in Bank, Local Currency-BSP and Credit Cash- -Collecting Officer

Problem 40: What is the journal entry of the Bureau of Treasury (BTr) to record
the receipt of remittance of income of Department of Finance?
a. - Debit Cash in Bank, Local Currency-BSP and Credit Cash-Collecting Officer
b. Debit Cash in Bank, Local Currency-BSP and Credit Cash-Treasury
/Agency Deposit, Regular
c. Debit Cash-Treasury/Agency Deposit, Regular and Credit Cash-Collecting
Officer
d. Debit Cash Treasury/Agency Deposit, Regular ad Credit Gaak in Bank,
Local Currency-BSP .

For Problems 41 - 43 |
Problem 41: Agency A was granted a cash advance for the travelling expenses
of its Department Heads to attend a convention in Davao in the amount of
P500,000.
The Department fears submitted the liquidation report and supporting
documents of cash advances and refunded P20,000 of the excess cash
advances.

What is the journal entry to record the grant of cash advances?

a. Debit Advances to Officers and Employees P500, 000 and Credit Cash
Disbursing Officer P500,000 .
b. Debit Cash Disbursing Officer P500,000 and Credit Cash-MDS, Regular
P500,000
c. Advances to Officers and employees P500,000 and Credit Cash-MDS,
Regular P500,000
d. Cash-Collecting Officers P500,000 and Credit Advances to Officers and
Employees P500,000

Problem 42: What is’ the journal entry to record the liquidation of cash
advances upon receipt of liquidation report [Link] documents?
a. Debit Travel Expenses-Local P450, 000 and Credit Advances to Officer and
Employees P450,000
b. Debit Travel Expenses-Local P450,000 and Credit Cash-Disbursing Officers
P450,000 .
c. Debit Cash-Disbursing Officers P450,000 and Credit Advances to Officer
and Employees P450,000
d. Debit Advances to Officers and Employees P450,000 and Credit Cash-
Collecting Officer P450, 000 ’
;

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 Govomment rbccountlag 902

Problem 43: What is the journal enery to record the refund of excess cash
_, advance for travel?
a. .Cash-MDS, Regular P50,000 and Credit Advances to Officers and
Employees P50,000
b. Debit Cash-Collecting Officers P50,000 and Credit Advances to Officers and
Employees P50,000 t
c. Debit Cash-Disbursing Officer P50,000 and Credit Advances to Officers and
Employees P50,000
d. Debit Advances to Officers and Employees 50,000 and Credit Travel
Expenses P50,000

For Problems 44-45 .

Problem 44: As per audit conducted, the auditor found out that there is a cash
overage which cannot be explained by the Disbursing Officer amounting to
P1,000. What is the journal entry to record the forfeiture of cash overage of the
Disbursing Officer?
a. Debit Cash-Collecting officer P1,000 and Credit Cash-Disbursing Officer
P1,000
b. Debit Cash-Collecting Officer P1,000 and Credit Cash- Treasury/Agency
' Deposit, Regular P1,000
Cc. Debit Cash-MDS’P1,000 and Credit GastiDiehurine Officer P1,000
d. Debit Cash Collecting Officer P1,000 and Credit Miscellaneous Income
P1,000

Problem 45: What is the joumal entry to record the rernittance of forfeited cash
overage to BIr?
a. Debit Subsidy from National Government P1,000 and Credit Cash-MDS,
Regular P1,000
mw: * Debit-Treasury/Agency Deposit, Regular P1,000 and Credit Cash-Collecting
Officer P1,000
c. Debit in Bank-Local, BSP P1,000 and Credit Cash-Collecting Officer P1,000
d. Debit Cash-MDS, Regular P1,000 and Credit Cash-Collecting officer P1,000

Problem 46: As per audit, the auditor found out that that there is a cash
shortage which cannot be explained by the Collecting Officer amounting to
P2,000. What is the journal entry to record the cash shortage of Collecting
Officer?
a: Debit Subsidy from National Government P2,000 and Credit Cash- MDS,
Regular P2,000
b. Debit Cash-Collecting Officer P2,000 and Credit Cash- Treasury/Agency
Deposit, Regular P2,000
- ¢ Debit Cash Collecting Officer P2,000 and Credit Miscellaneous Income
P2,000
_d. Debit Due from Officers and Employees P2, 000 and Credit Cash-Collecting
Officer P2,000

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 Goverment Aecounting 903
For Problems 47- 51
Problem 47: The accountant of DOST provided the following information
regarding the salary of the agency for the month of April:
Salary and Wages 8,000,000
PERA 2,000,000
Total 10,000,000
Less: Salary Deductions
WTAX 400,000
Life and Retirement Premiums 200,000
Pag-ibig Premiums 50,000
PhilHealth premiums > 30;000
GSIS Salary loan. 60,000
‘Employees' Association 10,000
Net Amount. 9,250,000
Advances for Payroll 9,250,000
Cash --MDS, Regular 9,250,000
II. Due to Officers and Employees 9,250,000
Advances for Payroll 9,250,000
III Cash in Bank - Local Currency Account ~ 9,250,000
Cash - MDS, Regular 9,250,000

Due to Officers and Employees 9,250,000

- Cashin Bank- Local Cun Account ~ 9,250,000
Salary and Wages 8,000,000
PERA 2,000,000
WTAX 400,000
Life and Retirement Premiums 200,000
Pag-ibig Premiums ~ 50,000
PhilHealth Premiums 30,000
GSIS Salary loan 60,000
Employees' Association 10,000
Due to Officers and Employees 9,250,000
What is the journal entry to grant cash advances to cover the payment of
salaries and wages of employees?
a. I cI]
b. III d. V

Problem 48: What is the journal entry to recognize payment of salaries and
wages through ATM?
a. ] c. IV
b. II d. III

Problem 49: What is the journal entry to recognize expenses to set up payable
to Officers and Employees upon approval of salaries and wages regular? |

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 Goverment Accounting 904
a. V C.J II
b. IV . d. I

Problem 50: What is the journal entry to record the liquidation of payroll fund?
a. Debit Advances for Payroll P9,250,000 and Credit Due to Officers and
Employees P9,250,000.
bd. Debit Advances for Payroll P10,000,000 and Credit Due to Officers and
Employees P10,000,000.
Cc Debit Due to Officers and Employees P9,250,000 and Credit Advances for
Payroll P9,250,000
d. Debit Due to Officers and Employees P10,000,000 and Credit Advances for
Payroll P10,000,000.

Problem 51: What is the journal entry to record the remittance of salary
deductions [Link] individual checks issued to GSIS, PHIC, HDMF and
Employees’ Association? ©
a. ‘Due to GSIS 260,000 .
Due to Pag-Ibig 50,000
Due to Philhealth 30;000
Other Payables 10,000
Cash-MDS, Regular 350,000
Due to GSIS 60,000
Due to Pag-Ibig 50,000
Due to Philhealth 30,060
Other Payables 10,000
Cash in Bank-Local Currency Account 150,000
Due to GSIS -60,000
Due to Pag-Ibig 50,000
Due to Philhealth 30,000
_ Other Payables 10,000
Cash-MDS, Regular 150,000
Due to GSIS = 260,000
Due to Pag-Ibig 50,000
Due to Philhealth 30,000
Other Payables 10,000
Cash in Bank-Local Currency Account 350,000

For Problems 52 - 54
Problem 52: The NG received a foreign grant: deanna to P10 million for the
construction of a railroad system. Under the terms of the grant, the
construction project shall be completed within a period of two years from the
receipt of the grant, otherwise, the money shall be returned to the grantor. The
money can only be used as stipulated and the NG is required to include a note
in the financial statement detailing how the money was spent. The Department
of Public Works and Highways (QRS) will be the implementing entity.

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 Government Accounting 905
What is the journal entry to record the receipt of grant in the books of the
Bureau of Treasury (BTr)?
a. Debit Cash in Bank, Foreign Currency Savings Deposit P10M and Credit
Income from Grants and Donations P10M.
b. Debit Cash-Collecting Officer P1OM and Credit Income from Grants and
Donations P10M.
c. Debit Cash in Bank, Foreign Currency Savings Depecit P10M and Credit
Loans Payable P10M.
Debit Cash-Collecting Officer P10M and Credit Ondinaty Share, UN WHO
P10M.
Problem 53: What is the journal entry of the Implementing Agency - QRS on
the receipt of the notice of cash allocation for the construction of railroad?
a. Debit Cash - MDS, Regular P10M and Credit Subsidy from National
: Government P10M |
b. . Debit Cash —- MDS, Special P10M and-Credit Subsidy from National
Government P10M
c. Debit Cash in Bank-Local Currency, Savings Account P10M and Credit-
Treasury/Agency Deposit, Special Account.P10M
d. Debit Cash-Treasury/Agency Deposit P10M and Credit TEU ARED SS
Deposit, Special Account Pi0M
Problem 54: What is the journal entry of Implementing agency- QRS on the
purchase of construction materials and payment for labor for the construction
of a railroad system amounting to P10,000,000?
a. Subsidy from National Government P10M and Credit Cash in Bank — Local
Currency, BSP P10M
‘b. Debit Construction in Progress - Infrastructure Assets P10M and Credit
Cash Disbursement System (MDS), Special Account P10M.
c. Debit Construction in Progress - Infrastructure Assets P10M and Credit
~ Cash in Bank - Local Currency, BSP P10M
d. Subsidy from National Government P10M and Credit Cash Disbursement
System (MDS), Special Account P10M.
Problem 55: On June 1, 2020, an office equipment was purchased at P100,
000 and has an estimated useful life of 5 years and a 10 % residual value. The
said equipment was available for use on June 19, 2020. The journal entry on
June 30, 2020 to record the depreciation expense of the equipment would be:
a. Debit Depreciation expense P18,000 and Credit Accumulated Depreciation
P18,000
b. Debit Depreciation expense Pl, 500 and Credit Accumulated Depreciation
P1,500
c. Debit Depreciation expense P1,667 and Credit Accumulated Depreciation
P 1,667
d. No Entry
For Problems 56- 57
Problem 56: On April 1, The collecting officer of Department of Foreign Affairs
collected P100,000 for passports and visa fees. On April 10, the Department of

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 Government Accounting I06

Finance remitted the P100,000 to the Bureau of Treasury. What is the journal
entry to record the collection of passports and visa fees?
a. Debit Cash- Treasury/Agency Deposit, Regular and Credit Passport and
Visa Fees P100,000
b. Debit Cash- Treasury/Agency Deposit, Regular P100,000 and Credit Cash-
Collecting Officer P100,000, ;
c. Debit Cashin Bank- Local Currency Current Account P100,000 ioe Credit
Cash Collecting Officers P100,000.
d. Debit Cash ——— Officers P100,000 and Credit Passport and Visa Fees
P100,000.

Problem 57: What is the journal entry to recognize the deposit of collection to
authorized servicing bank? Z
a. Debit Cash-Treasury/Agency Deposit, Regular P100, 000 and Credit Cash-
Collecting Officer P100,000.
b. Debit Cash-Treasury/Agency Deposit, Regular P100,000 and Credit
~ Passport and Visa Fees P100,000. i
C. Debit Passport and Visa Fees P100, ,000 and Credit Cash- Collecting Officer
P100,000.
d. Debit Cash-Collecting Officer P100,000 and Credit Cash-Treasury/Agency
Deposit, Regular P100,000.

Problem 58: An entity spent P5,600,000 (inclusive of VAT} in acquiring its new
software package from outside party at the beginning of the year. Such software
shall be installed and used to speed up processing the entity’s operations. The
useful life of the software is determined to be 10 years and no real value
_ was assigned to it.
The journal entry to record the purchase ofa software package
a.. Computer Software 5,600,000.
Cash-MDS, Regular : 5,600,000
b. Computer Software 5,600,000
Cash Disbursing Officer 5,250,000
Due to BIR 350,000
c. Computer Software 5,600,000
Cash-Treasury/Agency Deposit 5,000,000
Due to BIR 600,000
-d. Computer Software <5 5,600,000
Cash-MDS§, regular 5,250,000
Due to BIR 350,000

Problem 59: On August 1, DOST received a Non-Cash Availment, Authority

(NCAA): from DBM amounting to P500,000, The journal entry to: record the
receipt of the NCAA is:

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 Goverment Accounting 907
a. Debit Cash-Collecting Officer P500,000 and Credit Subsidy from National
Government P500,000.
b. Debit Accounts Payable P500, 000 and Credit Subsidy from National
- Government P500,000.
c. Debit Cash-MDS, Regular P500,000 and Credit Subsidy from National
Government P500,000
d. Debit Cash-MDS Regular P500,000 and Credit Cash-Treasury/Agency
Deposit, Regular P500,000.

For Problems 60 - 62
Problem 60: On January 2, ABC receives a Notice of Cash Allocation for
Regular Agency Fund from DBM amounting to P5,000,000.
The journal entry to record the receipt of NCA.
a. Debit Cash-MDS, Regular P5 EO LORO and Credit Cash-Treasury/Agency
Deposit, Regular P5,000,000. -
b. Debit Cash-MDS, Regular P5 000, 000 Bt Credit Notice of Cash Allocation
P5,000,000
c. Debit Cash-MDS, Regular P5,000,000 and Credit Subsidy from National
Government P5,000,000.
d. Debit Cash-Collecting Officer P5,000,000 and Credit Subsidy from N ational
Government P5,000,000..

Problem 61: Assuming ABC received a Notice of Cash Allocation forSpecial

Account in General Fund, the journal entry would be:
a. Debit Cash-MDS, Special Account P5,000,000 and Credit Cash-
Treasury/Agency Deposit, Special Account P5,000,000.
b. Debit Cash-MDS, Special Account P5,000,000 and Credit Subsidy from
National Government P5,000,000
c. Debit Cash-MDS, Special Account P5,000,000 and Credit Notice of Cash
Allocation, Special Account P5,000,000
d. Cash-Collecting Officer P5,000,000 and Credit Subsidy from National
Government P5,000,000.

Problem 62: Assuming ABC received a Notice of Cash Allocation for Trust
Receipts Fund, the journal entry would be:
a. Cash-Collecting Officer P5,000,000 and Credit Subsidy from National
Government P5,000,000,
b. Debit Cash-MDS, Trust P5,000,000 and Credit Subsidy from National
Government P5,000,000.
c. Debit Cash-MDS, Trust P5,000,000 and Credit Notice of Cash Allocation,
Trust P5,000,000.
d. Debit Cash-MDS, Trust P5,000,000 and Credit Cash-Treasury/Agency
Deposit, Trust P5,000,000.

Problem 63: Entity A purchased a land for capital appreciation at a cash price
of P1,000,000. Professional fees and transfer taxes totaling to P50,000 were
also paid. The journal entry includes:
——
eee

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 Government rbccounting 908
Debit Investment Property. of P1,000;000
Debit Professional fees and Transfet taxes P 50,000
Roop
Credit Cash-MDS, Regular P1,050,000
Credit Cash-Disbursing Officer P1,050,000

Problem 64: A is authorized to print accounting manuals for sale to other

NGAs. Assume that on July 16, 2014, Entity A sold accounting manuals on
account with a list price of P100,000 less trade discounts of 10%, 10% and 5%.
How much is the invoice price of the merchandise?
a. P100,000 c. P76,950
b. P90,000 d. P75,000

Problem 65: A land was donated to Entity A with a condition that a school
building will be constructed to operate as an elementary school for 20 years.
The land has a fair value of P950,000 at thé time of donation. The building has
a residual value of 5% and an estimated useful life of 20 years. Building was
available for use on June 1, 2014. The journal entry would be:
a. Debit Land P950,000 and Credit Cash-MDS, Regular P950,000 -
b. Debit Land P950,000 and Credit Other Deferred Credits P950,000
c. Debit Land P950,000 and Credit Income from Grants and Donations in
Kind P950,000
d. Debit Land P950,000 and Credit Construction in Progress P950,000

Problem 66: Using problem 65, assume that the school building constructed
by administration costing P8,000,000 has been inspected and accepted by
Entity A. The journal entry to record the school building constructed ae
completed would be:
a. Debit School Beene P8,000,000 and Credit Cash-MDS, —e
P8,000,000
b. Debit Construction in Progress- School Bldg. P8,000,000 and Credit Cash-
MDS, Regular P8,000,000
c. Debit School Building P8,000,000 and Credit Construction in Progress —
School Bldg. P8,000,000
d. Debit Construction in Progress- School Bldg. P8,000,000 and Credit Cash-
MDS, Trust P8,000,000

For Problems 67 - 68
Problem 67: XY agency has the following data for the year:
Personal Services (PS) 650,000
Financial Expenses (FE) 750,000
Maintenance and Other Operating Expenses (MOOE) 1,000,000
Capital Outlay (CO) 2,000,000
Total 4,400,000

- The entry to record the receipt of General Appropriation Act (GAA) is:
a. No entry

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 Goverment Accounting 909
b. Posting to Registry of Appropriation and Allotment (RAPAL) and Registries
of Allotment, Obligation and Disbursement (RAOD).
Cc. Posting to Registry of Appropriation and Allotment (RAPAL)
d. Posting to Registry of Appropriation and Allotment RAPAL and Obligation
Request and Status (ORS)
Problem 68: The entry to record the receipt of allotment from DBM is:
a. Posting to Registry of Appropriation and Allotment (RAPAL) and Registries
of Allotment, Obligation and Disbursement (RAOD).
bb: Posting to Registry of Appropriation and Allotment RAPAL and Obligation
Request and Status (ORS) >
=
Cash - Modified Disbursement System, Regular © 4,400,000
Subsidy from National Government 4,400,000
d. Posting to Obligation Request and Status (ORS)
Problem 69: On December 1, Agency F na F establish a petty cash for
maintenance and other operating expenses amounting to P15,000. On
December 27, the agency received a request to replenish the petty cash fund for
the following expenses:
_ Office Supplies 8,000
Transportation fares 1,500
Utilities 2,000
The journal entry on January 1 is: .
a. No Entry ~
b. Posting to RAOMO
c. Petty Cash Fund 15,000
Cash - MDS, Regular 15,000
d. Petty Cash Fund 15,000
Subsidy from National Government . 15,000

Problem 70: The journal entry to record the replenishment of petty cash fund:
o Office Supplies Expense 8,000 ;
Transportation fares 1,500
Utilities Expense 2,000
Petty Cash Fund > 11,500

Office Supplies Expense 8,000

Transportation fares 1,500
Utilities Expense 2,000 -
Cash - MDS, Regular 11,500

Cash - Collecting Officer 3,500

Petty Cash Fund 3,500
PettyCashFund 11,500
.Cash - MDS, Regular 11,500

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 Govemment Accounting 910

Problem 71: Assume the following are the unreplenished expenses at

December 31 are Office supplies P300 and Transportation fares P700. The
journal entry to record the unreplenished petty cash at the end of the year:
a: Debit Office Supplies P300 and Travelling Expenses P700; Credit Petty
Cash Fund P1,000.
b. Debit Office Supplies P300 and Travelling Expenses P700; Credit Cash -
MDS, Regular P1,000.
c. Debit Cash - MDS, regular'P1,000; Credit Petty Cash Fund P1,000
d. No entry as,

Problem 72: Entity A constructed a building by administration with total costs

of P1,048,000, consisting of construction materials [inclusive of VAT]; labor
costs and various overhead expenses amounting to P448,000; P350,000 and
P250,000, respectively. The journal entry to recognize the payment -of
construction materials would be:
a. Construction in Progress - Investment Property, Bldg. 448,000
Construction Materials Inventory 448,000
b. Construction Materials Inventory 448,000
Due to BIR 24,000
Cash-MDS, Regular . 424,000

c. Accounts Payable ~ 448,000

Cash - MDS, Regular 448,000
d. Accounts Payable | . 424,000
Due to BIR 24,000 .
Cash - MDS, Regular 448,000

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 Goverment Accounting 911
Problem 12 The NCA specifies the maximum amount of withdrawal that an
entity can make from a government bank for the period indicated. The
Collecting Officer shall not issue an official receipt (OR) for the receipt of
NCA,
Problem 13 For NGAs receiving subsidies from the national government in the
form of NCA, adjusting journal entry shall be made for the reversion of the
unused or unutilized NCA at the end of the accounting period.
Problem 15 The Petty Cash Fund (PCF) to be set up shall be sufficient for the
recurring petty operating expenses of the agency for one month. It shall be
maintained using the Imprest System. All replenishments shall be directly
charged to the expense account and at all times, the PCF shall be equal to the
total cash on hand and the unreplenished expenses. The PCF shall be
replenished as soon as disbursements reach at least 75% or as needed. .

Problem 17 Receipts of performance bond posted by a contractor or supplier to

guaranty full and faithful performance of their contract. It may be in the form of
cash or certified checks.

Problem 19 ; "
Contract Price P11,200,000 x 50% = P5,600,000 — P1,680,000 = P3,920,000

Problem 20
Accounts Payable 3,920,000
Less: Guarantee Deposit (10% x 5,600,000) ~ 560,000
Withholding
VAT of 5% (5.6M/1.12 = 5,000,000 x 5%) . 250,000
WTAX on gov't payments to supplier of services (SM x 2%) 100,000
Net Payment 3,010,000

Problem 22 Tax Remittance Advice refers to a serially-numbered document

prescribed by the DBM that should be used by the NGAs in the remittance of
withheld taxes on funds coming from DBM. This form is being distributed by
the BIR to be accomplished by the NGAs. The same shall be duly certified by
the Chief Accountant and approved by the Head of the concerned NGA or his
duly authorized representative, and attached to every withholding tax return
filed as payment for taxes withheld. This shall be the basis for the BIR and the
Bureau of the Treasury (BTr) to record the tax collection in their respective
books of accounts.
Problem 33 When an asset is acquired on account subject to a cash discount,
the cost of the asset is equal to the purchase price, includingimport duties and
non-refundable purchase taxes, after deducting trade discounts and rebates.
Problem 34 PPE acquired through cash purchase shall initially be recognized
at cost which includes cash paid plus all costs incurred in bringing the asset to
the location necessary for its intended use such as delivery, installation costs,
. €tc. These are recognized
in the books of accounts as PPE after inspection and
acceptance of delivery.

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 Goverment Accounting 912

Problem 45 Cash overage discovered by the Auditor that cannot be

satisfactorily explained by the Disbursing Officer shall be forfeited in favor of
the government and an official receipt shall be issued by the Collecting
Officer/Cashier. The cash overage shall be taken up as Miscellaneous Income.
Cash shortage which is not restituted by the Disbursing Officer despite demand
in writing by the Auditor shall be taken up as receivable from the Disbursing
Officer.
Problem 55 Depreciation of an asset begins when it is available for use such as
when it is in the location and condition necessary for it to be capable of
operating in the manner intended by management. For simplicity and to avoid
proportionate computation, depreciation shall be for one month if the PPE is
available for use on or before the 15th of the month. However, if the PPE is
available for use after the 15th of the month, depreciation
Problem 63 The journal entry [Link] the purchase of land would be:

Investment Property - 1,050,000

Cash-MDS, Regular aT 1,050,000
Problem 64 Computation of invoice price ; -
List Price 100,000
Less: 10% x 100,000 10,000

Less: 10% 90,000 9,000

Total 81,000
Less: 5% x 81,000° - 4,050
Invoice Price : 76,950

Problem 65 Where a PPE is acquired through donation with conditions or

restrictions, a liability account shall be recognized until the conditions or
restrictions have been fulfilled.

When the condition.

is already fulfilled, the journal would be:
Other Deferred Credits 950,000
Income from Grants and Donations in Kind 950,000

Problem 72 |
Construction Materials Inclusive of VAT 448,000
Less: Withholding VAT of 5% [448,000/1.12 = 400,000 x 5%] . 20,000
- | WTAXon gov't payments to supplier of goods [1% x 400,000] 4,000
Cash Payments 424,000
=——

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