Government Accounting - 2018

Edition
Punzalan and Cardona
Chapter 1 – Nature and Scope of NGAS
Questions & Answers:
1. Define government accounting.
Answer: Pursuant to Section 109 of PD 1445,
government accounting is the one which
“encompasses the process of analyzing, recording,
classifying, summarizing and communicating all
transactions involving the receipt and disposition
of government fund and property and interpreting
the result thereof.”
2. Enumerate the objectives of the government
accounting according to Section 110, Presidential
Decree 1445.
Answer: Section 110, Presidential Decree 1445 sets
down the following objectives of government
accounting:
a. To produce information concerning past
operations and present conditions;

b. To provide a basis for guidance for future

operations;
c. To provide for control of the acts of public
bodies and offices in the receipt, disposition
and utilization of funds and property; and
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d. To report on the financial position and the

results of operations of government agencies
for the information and guidance of all
persons concerned.
3. Explain briefly the purposes of creating the Public
Sector Accounting Standards Board (PSASB).
Answer: Primarily, the Public Sector Accounting
Standards Board (PSASB) was created in 2008 under
COA Resolution No. 2008-12 dated October 10, 2008,
in order to formulate and implement public sector
accounting standards and establish linkages with
international bodies, professional organizations and
academe on accounting related fields on financial
management, Accordingly, the PSASB shall assist the
commission in formulating and implementing
Philippine Public Sector Accounting Standards
(PPSAS).\
4. Explain the processes of developing the Philippine
Public Sector Accounting Standards (PPSAS).
Answer: The following are the processes and other
considerations in developing the Philippine Public
Sector Accounting Standards (PPSAS):
a. Applicability of IPSAS.
Existing IPSAS were assessed to determine
the applicability of the provisions in the
Philippine setting as bases in the
development of PPSAS.
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b. Exposure draft of PPSAS.
The PSASB issues exposure drafts of all
proposed PPSAS for comment by interested
parties including COA officials and auditors,
agency finance personnel, oversight
agencies, professional organizations,
academe and other stakeholders. The PSASB
sets a reasonable time to allow interested
parties to consider and comment on its
proposals. The PSASB evaluates all
comments received on exposure drafts and
makes such modifications, where
appropriate.
c. Fundamental issues.
Where an accounting principle or a significant
element of a disclosure requirement
contained in IPSAS is considered to be in
conflict with the Philippine laws, rules and
regulations, this would be regarded as a
fundamental issue and the accounting
principle or disclosure requirement may be
changed.
d. Statutory authority.
Where the international standard deviates
from the Philippine regulatory or legislative
environment, Philippine application guidance
shall be issued accordingly.

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e. Disclosure requirements.
Disclosure requirements may be amended
when the amendments are regarded as being
significant for improving fair presentation of
the matter.
f. PPSAS numbering.
The PPSAS is assigned the same number as
the IPSAS to maintain the link. Where a
PPSAS is developed and there is no IPSAS
equivalent, the standard will be assigned a
number in a series of PPSAS starting with
101. When IPSASB subsequently issues the
equivalent standard as an IPSAS, the 100
series PPSAS will be withdrawn and reissued
as a PPSAS with the IPSAS number. Standards
of PPSAS have equal authority regardless of
the numbering used.
g. Financial reporting issues not dealt with by
IPSAS.
Where issues related to financial reporting
emerged, researches were done and a
discussion document prepared based on
other relevant accounting standards not in
conflict with Philippine laws.
h. Submission of draft to PSASB for
consideration of COA.

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 Where there are significant changes or
unresolved issues associated with an
exposure draft, the PSASB may decide to re-
expose a proposed PPSAS.
i. If considered appropriate, focus group
discussions will be held to obtain further
opinions on issues identified by the exposure
process.
5. What are the government offices primarily charged
with accounting responsibility? Explain their
respective responsibility.
Answer: The offices charged with the accounting
responsibility are the Commission on Audit (COA),
the Department of Budget and Management (DBM),
the Bureau of Treasury (BTr), and the government
Agencies.
Commission on Audit
The Commission on Audit (COA) keeps the
general accounts of the government,
promulgates accounting rules and regulations,
and submits to the President and Congress,
within the time fixed by law (not later than the
last day of September each year – Section 41,
PD 1445), an annual report of the government,
its subdivisions, agencies and
instrumentalities, including government-owned
or controlled corporations.

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As mandated by Article IX-D, Section 2 par.

(2)of the 1987 Constitution of the Philippines,
to wit: “The Commission on Audit shall have
exclusive authority, subject to the limitation 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 Illegal, irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures, or uses of government funds
and properties,” the Commission on Audit
revised the previous government accounting
system.
Pursuant to the COA, DBM and DOF Joint
Circular No. 2013-1 dated August 6, 2013,
Unified Accounts Code Structures (UACS), the
consistency of account classification and
coding structures with the Revised Chart of
Accounts shall be the responsibility of the COA.
As mandated by Article IX-D Section 2 par. (2) of the
1987 Constitution of the Philippines, the Commission
on Audit shall have exclusive authority, subject to the
limitation in this Article, to define the scope of its
audit and examination, establish the techniques and
methods required therefore, and promulgate
accounting and auditing rules and regulations,
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 including those for the prevention and
disallowance of:
1. IRREGULAR EXPENDITURES signify that the
expenditure is incurred without adhering to established
rules and regulations, procedural guidelines, policies,
principles and practices that have gained recognition in
law; incurred without conforming to or observing
prescribed usages or rules of discipline, established
pattern, course, mode of action, behaviour or conduct.

Cases considered irregular uses of government

funds include the following:
a. Payment of salaries, allowances and other forms of
additional compensation such as:
1. Honoraria and other forms of allowances such as per
diems, representation allowance, Christmas bonus, gift
checks paid to Department Secretaries, Undersecretaries,
Assistant Secretaries or their alternates as members of
governing boards of collegial bodies as these partake of
the nature of additional compensation/ remuneration
proscribed under the Phil. Constitution (GR #s147392,
156982, 138489);
2. Payment of allowances and per diems to BOD, Secretariat
and other officers of GOCC subsidiaries that were
acquired through Proclamation 50;
3. Payment of additional benefits to officials/employees/BOD
of GOCCs based on issuances of the Department
Secretary to which the GOCC is attached;
4. Payment of EMEs (Emrgency Meeting Expenses) to
members of the BOD;
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5. Honoraria granted to special committees which are

performing functions inherent in the regular functions of
the agency;
6. Honoraria granted to private individuals sitting as
members of special committee/s of a government agency
without authority or approval from proper authorities
(DBM/OP);
7. Honoraria/RATA granted to members of committee/s in
regional/district offices in violation of Section 4, Budget
Circular No. 2003-5)
8. Honoraria paid to members of the BAC/TWG in excess of
the rates provided in DBM Circular 2004-5A and for
procurement activities pertaining to contracts not yet
awarded to winning bidder;
9. Grant of loyalty/service awards to employees not in
accord with the requirements of CSC MEMO Circ. No. 42
(GR142760);
10. Payment of CNA cash benefits/signing bonuses to
members of governing boards and non-organic personnel
and those occupying managerial positions higher than a
division chief and payment to rank and file in excess of
P5,000.00;
11. Grant of honoraria for performing functions inherent in
the regular function of the government personnel/official;
12. Grant of RATA and other benefits to OGCC lawyers
rendering legal assistance to GOCCs in the absence of
three concurring conditions required under EO 878 (COA
Dec. 2006-030);
13. Payment of COLA and other allowances deemed
integrated in the salary (GR#153266);

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 14. Grant of food basket allowance/rice subsidy/health care
allowance/health care insurance in the absence of a law
authorizing the same;
15. Premiums paid for the personnel accident insurance of
officers and employees of GOCCs in the absence of a
prior authority from the OP and DBM;
16. Payment of CNA cash incentive/benefit to rank and file
employees where the conditions for determining
“savings” per PSLMC and DBM regulations are not met;
17. Payment of salaries and wages wherein signatures per
logbook vary with those in the payroll/DTR; or
unauthorized payment to person/s other than the payee;
18. Payment of personnel services out of financial subsidy to
LGUs;
19. Overtime pay for services/tasks that can be undertaken
during regular hours;
b. Hiring of private lawyers: 1) by GOCCs/NGAs to handle
cases and legal matters without the prior written authority
from the OGCC/Solicitor General as the case maybe and the
prior written concurrence of COA; or 2) by LGUs except in
cases where the city/ municipality is the party adverse to the
provincial government or to another component city or
municipality;
c. Hiring of consultants and contractuals to perform functions
that will exercise control and supervision over regular
employees (CSC Memo Circ. # 26);
d. Attorney’s fees to lawyers holding plantilla positions;
e. Payment of rental contracts for service vehicles covering a
continuous period of more than 15 days in the absence of a
prior authority from the DBM, appropriation and CAF;

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f. Payment for deliveries of goods without passing the

required quality test such as that of the Bu. of Plant Industry,
in case of seeds;
g. Acceptance of a (infrastructure) project not constructed in
accordance with plans and specs and with noted deficiencies;
h. Release of funds to NGOs/Pos for money market
placement/time deposit/investments;
i. Use of funds (intended for specific purpose) for purposes
other than its original intent unless realignment thereof is
authorized/approved by proper authorities; release of funds in
the form of assistance to unauthorized beneficiaries
j. Media advertisements for anniversaries/publicity
propaganda (except when the nature of agency’s mandate
requires such and those required for the issuance of agency
guidelines/rules/regulations, conduct of public bidding,
dissemination of important public announcements);
k. Grant of cash advance for no specific purpose;
l. Donations, contributions, grants and cash gifts, except
when such activity is undertaken in pursuit of the mandate of
the donor-agency (AO 103, dated 31 Aug. 2004)
2. ILLIGAL EXPENDITURES pertain to those incurred in
violation of the law and its IRR.
Illustrative cases include the following payments:
1. Contracts awarded under an alternative mode of
procurement for items that should have been subject of public
bidding;
2. Award of contracts to bidders who fail to meet the
minimum amounts required to be put up at the time the bids
were submitted;
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3. Deliveries of equipment that do not conform to specs per
PO/contract and bid invitation;
4. Communication equipment without the purchaser’s and
dealer’s permit from the National Telecommunications
Commission (RA 3846 on Radio Control Law)
5. Purchases from Jobbers/middlemen (government
purchases shall be with reputable manufacturers/ licensed
distributors)
6. Payment of claims awarded not strictly in accord RA 9184
and its IRR;
7. Payment for contracts which has no prior
approval/authorization of the local Sanggunian (RA9160);
8. Payment of compensation or benefits to government
personnel not in accord with provisions of existing laws such as
the following:
a) Additional retirement benefits beyond that allowed under
existing laws
b) Hazard pay to health workers/personnel not assigned in
establishment not specifically mentioned in Section 21,
R.A.7305 and without proof of exposure to public health
hazards for at least 50% of working hours
c) Hazard allowance to employees not engaged in the
delivery of health or health related services such as the
social insurance group
9. Use of public funds for private purpose such as:
Widening/repair/improvement of roads (in private subdivisions)
ownership for which had not been formally turned over to the
government
10. Entering into a contract, amount for which is over and
beyond existing approved appropriations/not covered by an
appropriation law;
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11. Transportation allowance paid to officials with assigned or

using government vehicle
12. Entering into a contract without the covering certificate of
availability of funds signed/issued by the Chief Accountant,
even if the contract is signed by said Chief Accountant as
witness (GR151373-74, 17 Nov. 2005);
13. Grant of cash advance with no specific purpose
14. Expenses for foreign travel of officials/employees
(including uniformed/DILG/DND) who are due to retire within
one (1) year after the completion of said travel. (GAA
provision);
15. Grant of EME in excess of amounts authorized under
existing LRRs;
16. Overpricing of goods/services purchased.;
17. Grant of Xmas bonuses, cash gift and other benefits to
consultants, members of governing boards who are not
organic personnel of the government agency;
18. Grant of amelioration allowance /similar benefits to private
employees of service contractors (AO No. 365, GR #157001)
3.EXCESSIVE EXPENDITURES signify incurrence of
unreasonable expenses at immoderate quantity and/or
exorbitant price; expenses that exceed what is usual or
proper such as the following:
a) Grant of cash advance in excess of estimated
budget/requirement;
b) Supplies and materials including fuel inventory in
quantities exceeding the normal three-month requirement,
except for circumstances authorized by law;

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c) Grant of cash advance for intelligence fund in excess of
one-month requirement except in emergency cases which
should not exceed the three-month requirement;
d) Release of funds to NGOs/Pos in excess of approved project
requirements;
e) Inclusion of unnecessary items/materials/equipment in an
infrastructure contract (i.e. motor vehicle, computers, etc)
resulting in increase project costs;
f) Procurement and distribution of seeds to farmers in excess
of requirements (as per study on requirements per hectare);
g) Overpricing of purchases in excess of current/prevailing
market price by 10%;
h) Repair of equipment at a cost exceeding 30% of the
current market price of the same/similar item;
i) Provision of more than one (1) unit mobile phone for each
entitled official which should not be lower than Division Chief
rank;
j) Provision of more than one (1) unit desktop/laptop/other
electronic gadget to officials entitled thereto;
k) Procurement of items in excess of the requirements
specially those with near/short expirations dates such as
vaccines, medicines, seeds, fertilizers, pesticides, etc.;
l) Installation of materials/items in excess of requirements or
in places where there is no need for the same/with already
existing installations that additional item/s result to
redundancy (such as installation of camera/s with existing
functional items);
m) Continuous extension of services of foreign consultant/s
for relatively simple supervisory work during the final stages
of the project, tasks which can be undertaken by local
consultant/s or the implementing agency itself (GR101370);
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4.Unnecessary expenditures pertain to those that cannot

pass the test of prudence or the diligence of a good father of
a family, thereby denoting non-responsiveness to the
exigencies of the service; they are not supportive of the
implementation of the objectives, goals and
mission/mandate of a government agency; incurrence of
expenditure not dictated by the demands of good
governance; not essential to or can be dispensed with
without incurring loss or damage to property; such as:
a) Hiring of public relations companies;
b) Creation/continued operation of subsidiary/ies that
duplicate the functions of the parent government agency;
c) Release of funds as financial assistance to civic
organizations/non- profit corporations/ foundations;
d) PR expenses of insurance corporations with its
members when its insurance services are compulsorily
required;
e) Hiring of consultants for functions included in the
plantilla positions such as those of the
procurement/financial/media consultants;
f) Hiring of consultants for services not aligned to the
mandate of the agency;
g) Repeated renewal of consultancy services over and
above agency requirements;
h) Purchase of high-end/expensive models/brands of
electronic gadgets (phones/ cell phones/desktops/laptops,
etc.);
i) Construction of structures/buildings/procurement of
equipment not really needed/not put to use/not

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 completed/could not be properly maintained/operations
not sustained;
j) Construction of housing units not
distributed/awarded/disposed within considerable period
of time as evidenced by the deterioration of the units;
k) Replacement of serviceable structure/equipment
l) Continuous repair of vehicles and equipment
considered beyond economic repair as evidenced by
frequent breakdowns/unseviceability after repair;
m) Construction of roads/bridges left uncompleted for a
number of years;
n) Construction of structures/buildings without any
intended purpose; using a structure/building/assets other
than the intended purpose may also be an indication that
the acquisition of the same is not necessary;
5.Extravagant expenditures signify those incurred
without restraint, judiciousness and economy; they exceed
the bounds of propriety being immoderate, prodigal,
lavish, luxurious and injudicious such as the following:
a) Rental of expensive halls/rooms in plush/luxury
hotels/restaurants for purposes of holding office
meetings/functions, except for government sponsored
international conventions, meetings and the like;
b) Procurement of luxury vehicles except when allowed by
LRRs;
c) Grant of exorbitant bonuses/allowances/fringe benefits;
d) Installation of highly sophisticated outdoor signs, billboards
and neon signs advertising a government agency/office,
except for banks, trading agencies, hotels, buildings for
culture and arts;

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e) Installation of luxurious building furnishings except those

intended for showcase, trade and commerce, promotion of
arts and culture and for use of foreign dignitaries;
f) Hiring of expensive transport service when there are
available public conveyances except in meritorious cases
and justified circumstances;
g) Purchase of wines, liquors, cigars, cigarettes except when
served in state functions and government sponsored
international conference/conventions;
h) Out of town meetings/conferences despite availability of
venue/s within office premises/locality;
i) Hiring of expensive vans, cars, aircrafts when there are
available ordinary public conveyances, except in
meritorious cases/justified by prevailing circumstances;
j) Installation of highly sophisticated outdoor signs,
billboards, neon signs, etc., advertising the entity, except
for banks, trading entities, hotels or venues for culture
and arts;
k) Lavish celebrations of Christmas, anniversaries, and other
special occasions.
6.Unconscionable expenditures pertain to expenditures
acquired in unreasonable and immoderate price or quantities,
and which no reasonable person/person in his right mind would
incur/make, nor would a fair and honest man would accept as
reasonable; those incurred without considering ethical and moral
standards. Illustrative cases are the following payment of
expenditures:
1. Live-in seminars in five-star hotels with significant number
of participants and unreasonable length of time;

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2. Excessive and unreasonable retirement benefits, bonuses,
allowances and fringe benefits;
3. Release of significant amounts to NGOs/Pos without the
justification/evaluation on the necessity of the project, needs
of intended beneficiaries, reasonableness of project
requirements, etc.
4. Granting loans to unqualified borrowers and borrows
unlikely to payback the loans;
5. Hiring of personnel who previously opted to retire/be
separated from the service as a result of rationalization, within
five (5) from such retirement/separation from service (DBM
Circ. No. 2010-3 & pertinent CSC regulations);
6. Reimbursement of expenses for unauthorized attendance
in conferences/meetings/official functions
Or uses of government funds and properties.
Pursuant to the COA, DBM and DOF Joint Circular No.
2013-1 dated August 6, 2013, Unified Accounts
Code Structures (UACS) (will be discussed in detail
in Chapter 3), the consistency of account
classification and coding structures with the Revised
Chart of Accounts (will be discussed in detail in
Chapter 4) shall be the responsibility of COA.
PSASB shall assist COA in formulating and
implementing Philippine Public Sector Accounting
Standards (PPSAS). The PPSAS shall apply to all
apply to all National Government Agencies (NGAs),
Local Government Units (LGUs) and Government-
Owned and/or Controlled Corporations (GOCCs) not
considered as Government Business Enterprises
(GBEs), in which case, the Philippine Financial

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Reporting Standards (PFRS) and relevant standards

issued by the Financial Reporting Standards Council,
Board of Accountancy, and Professional Regulation
Commission shall apply.
Accounting rules and regulations pertaining to cash
operations, collections, remittances and
disbursements, including public borrowings, are
issued by the Commission on Audit (COA), jointly or
with the concurrence of the DOF and DBM.
GOVERNMENT BUSINESS
ENTERPRISE (GBE)
CHARACTERISTICS:
1. An entity with the power to contract
in its own name;
2. Has been assigned the financial and
operational authority to carry on a
business;
3. Sells goods and services, in the
normal course of business, to other
entities at a profit or full cost
recovery;
4. Not reliant on continuing government
funding to be a going concern (other
than purchase of outputs at arm’s
length); and
5. Controlled by a public sector entity.

Department of Budget and Management

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Pursuant to Section 2, Chapter 1, Title XVII,
Book IV of the Administrative Code of the
Philippines (EO 292), “The Department of
Budget and Management shall be responsible
for the formulation and implementation of the
National Budget with the goal of attaining our
national socio-economic plans and objectives.
The Department shall be responsible for the
efficient and sound utilization of government
funds and revenues to effectively achieve the
country’s development objectives.”
And, as provided by the Joint Circular No. 2013-
1 dated August 6, 2013, Unified Accounts Code
Structures (UACS), the validation and
assignment of new codes for funding source
organization, sub-object codes for expenditure
items shall be the responsibility of the DBM. In
addition, the validation and assignment of new
program, activity, project codes shall be
decided jointly by the proponent agency and
DBM.
Bureau of Treasury
Under the Revised Administrative Code, the
Bureau of Treasury, as one of the operating
bureaus of the Department of Finance is
authorized to:
1. Receive and keep national funds, manage
and control the disbursements thereof; and

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2. Maintain accounts of financial transactions

of all national government offices, agencies
and instrumentalities.
Thus, the Bureau of Treasury shall control and
monitor the Notice of Cash Allocation (NCA)
released by the Department of Budget and
Management; as well as the bank transfers it
makes in replenishing its Modified
Disbursement System (MDS) accounts.
According to the Joint Circular No. 2013-1
dated August 6, 2013, Unified Accounts Code
Structures (UACS), the consistency of accounts
classification and coding standards with the
Government Finance Statistics (GFS) shall be
the responsibility of Department of Finance -
BTr.
National Government Agencies
Departments, bureaus, offices and other
instrumentalities of the National Government,
including the Congress, the Judiciary, the
Constitutional bodies, state colleges and
universities, and other self-contained
institutions and hospitals are required by law
to have accounting
units/divisions/departments, which are to be of
the same level with other
units/divisions/departments in the agency and
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 under the direct supervision of the Head of the
Agency. Accounting personnel shall (1.)
maintain and keep current the accounts of the
agency, (2.) provide advice on the financial
condition and status of the appropriations and
allotments of the agency as its Head may
require, and (3.) to develop and conduct
procedures designed to meet the needs of
management. They shall perform the aforesaid
duties in accordance with existing laws, rules,
regulations, procedures and comply with the
reporting requirements of the Commission on
Audit, the Department of Finance and the
Department of Budget and Management.

6. Enumerate the registries of the National

Government Agencies (NGAs) as provided by the
Government Accounting Manual (GAM).
Answer: Under the new accounting system, the
government agencies shall maintain the following
registries:
a. Registry of Revenue and Other Receipts –
Summary (RRORS).
This summary shall be kept by the Budget
Division/Unit for each fund cluster
maintained by the entity

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b. Registry of Revenue and Other Receipts –

Regular Agency and Foreign Assisted
Projects Fund (RROR-RA&FAP).
This registry shall be maintained by the
Budget Division/Unit of the entity for the
following fund clusters: 1.) Regular Agency
Fund; and, 2.) Foreign Assisted Project fund.
c. Registry of Revenue and Other Receipts –
Special Account Locally Funded/Domestic
Grants Fund and Special Account Foreign
Assisted/Foreign Grants Fund (RROR-
SADFGF).
This registry shall be maintained by the
Budget Division/Unit of the entity for the
following fund clusters: 1.) Special Account -
Locallly Funded/Domestic Grants Fund; and,
2.) Special Account – Foreign
Assisted/Foreign Grants Fund.
d. Registry of Revenue and Other Receipts –
Internally Generated Funds (Off-Budgetary
Funds – Retained Income Funds)/Business
Related Funds (RROR-IGF/BRF).
This registry shall be maintained by the
Budget Division/Unit of the entity for the
following fund clusters: 1.) Internally
Generated Funds (Off-Budgetary – Retained
Income Funds); and, 2.) Business Related
Funds.

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e. Registry of Revenue and Other Receipts –
Trust Receipts/Inter-agency Transferred
Funds (RROR-TR/IATF).
This registry shall be maintained by the
Budget Division/Unit of the entity for the
Trust Receipts/Inter-agency Transferred
Funds.
f. Registry of Appropriation and Allotments
(RAPAL).
This registry shall be maintained by fund
cluster by the Budget Division/Unit of each
entity to ensure that allotment releases are
within the authorized appropriation.
Separate registry shall be maintained for
prior year’s appropriations.
g. Registry of Allotments, Obligations and
Disbursements – Personnel Services (RAOD-
PS).
This registry shall be maintained by the
Budget Division/Unit by Appropriation Act,
fund cluster, by Major Final Output (MFO) or
Program/Activity/Project (PAP) for personnel
services.
h. Registry of Allotments, Obligations and
Disbursements – Maintenance and Other
Operating Expenses (RAOD-MOOE).

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This registry shall be maintained by the

Budget Division/Unit by Appropriation Act,
fund cluster, by Major Final Output (MFO) or
Program/Activity/Project (PAP) for
maintenance and other operating expenses.
i. Registry of Allotments, Obligations and
Disbursements – Financial Expenses (RAOD-
FE).
This registry shall be maintained by the
Budget Division/Unit by Appropriation Act,
fund cluster, by Major Final Output (MFO) or
Program/Activity/Project (PAP) for financial
expenses.
j. Registry of Allotments, Obligations and
Disbursements – Capital Outlays (RAOD-
CO).
This registry shall be maintained by the
Budget Division/Unit by Appropriation Act,
fund cluster, by Major Final Output (MFO) or
Program/Activity/Project (PAP) for capital
outlays.
k. Registry of Budget, Utilization and
Disbursements – Personnel Services (RBUD-
PS).
This registry shall be maintained by the
Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program
Activity/Project (PAP) for personnel services.
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l. Registry of Budget, Utilization and
Disbursements – Maintenance and Other
Operating Expenses (RBUD-MOOE).
This registry shall be maintained by the
Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program
Activity/Project (PAP) for maintenance and
other operating expenses.
m. Registry of Budget, Utilization and
Disbursements – Financial Expenses (RBUD-
FE).
This registry shall be maintained by the
Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program
Activity/Project (PAP) for financial expenses.
n. Registry of Budget, Utilization and
Disbursements – Capital Outlays (RBUD-CO).
This registry shall be maintained by the
Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program
Activity/Project (PAP) for capital outlays.
o. Registry of Allotments and Notice of Cash
Allocation (RANCA)
This registry shall be maintained by the
Accounting Division/Unit to determine the
amount of allotments not covered by NCA
and to monitor available NCA.
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p. Registry of Allotments and Notice of Transfer

of Allocation (RANTA)
This registry shall be maintained by the
Accounting Division/Unit to determine the
amount of allotments not covered by NTA
and to monitor available NTA.
7. What are the basic accounting and budget
reporting principles under GAM?
Answer: The following are the basic accounting and
budget reporting principles as provided by GAM:
a. Generally accepted government accounting
principles in accordance with the PPSAS and
pertinent laws, rules and regulations.
COA Resolution No. 2014-003 dated January 24,
2014 prescribed the adoption of twenty five (25)
Philippine Public Sector Accounting Standards
(PPSASs) effective January 1, 2014. These
PPSASs were based on International Public
Sector Accounting Standards (IPSASs) which
were published in the 2012 Handbook of
International Public Sector Accounting
Pronouncements of the IPSASB.
b. Accrual basis of accounting in accordance with
the PPSAS.
Accrual basis means a basis of accounting
under which transactions and other events are
recognized when they occur, and not when cash
26
 or its equivalent is received or paid. Thus, the
transaction and events are recognized in the
accounting records and recognized in the
financial statements of the periods to which
they relate. The elements recognized under
accrual accounting are assets, liabilities, net
assets/equity, revenue, and expenses.
c. Budget basis for presentation of budget
information in the financial statements in
accordance with PPSAS 24.
IPSAS 24, Presentation of Budget Information in
Financial Statements, requires a comparison of
budget amounts and the actual amounts arising
from execution of the budget to be included in
the financial statements of entities that are
required to, or elect to, make publicly available
their approved budget/s, and for which they are,
therefore, held publicly accountable. It also
requires disclosure of an explanation of the
reasons for material differences between the
budget and actual amounts.
d. Revised Chart of Accounts prescribed by
Commission on Audit.
The Commission on Audit as member of the
International Organization of Supreme Audit
Institutions (INTOSAI) is encouraged to adopt
relevant International Accounting Standards.
The IPSASB of the International Federation of
Accountants which promulgates the IPSASs,
27
28

acknowledges the right of governments and

national standards-setters to establish their
respective accounting standards and guidelines
for financial reporting in their jurisdictions. And
to provide new accounts for the adoption of the
PPSAS which were harmonized with the IPSAS to
enhance the accountability and transparency of
the financial reports, and ensure compatibility of
financial information, the COA revokes COA Cir.
No. 2004-008 and the COA Circular No. 2013-
002 dated January 30, 2013, Adoption of the
Revised Chart of Accounts for National
Government Agencies, is adopted.
Furthermore, COA issued Circular No. 2014-003,
dated April 15, 2014, Implementing Rules and
Guidelines on the Conversion from the
Philippine Government Chart of Accounts under
the NGAS to the Revised Chart of Accounts for
National Government Agencies; and Circular No
2015 – 007, dated October 22, 2015, Prescribing
the Government Accounting Manual for Use of
All National Government Agencies.
e. Double entry bookkeeping
It is a system of bookkeeping where every
journal entry to account requires a
corresponding and opposite entry to a different
account. In the double-entry accounting system,
two accounting entries are required to record
each accounting transactions. Recording of a
28
 debit amount to one or more accounts and an
equal credit amount to one or more accounts
results in total debits being equal to total credits
for all accounts in the general ledger.
f. Financial statements based on accounting and
budgetary records.
The objectives of general purpose financial
reporting in the public sector should be to a)
provide information useful for decision making,
and b) to demonstrate the accountability of the
entity for the resources entrusted to it, by:
a) Providing information about the sources,
allocation, and uses of financial resources;
b) Providing information about how the entity
financed its activities and met its cash
requirements;
c) Providing information that is useful in
evaluating the entity’s ability to finance its
activities and to meet its liabilities and
commitments;
d) Providing information about the financial
condition of the entity and changes in it,
and;
e) Providing aggregate information useful in
evaluating the entity’s performance in
terms of service costs, efficiency and
accomplishments;
8. Explain briefly the Fund Cluster Accounting.

29
30

Answer: Fund cluster refers to an accounting

procedure for recording expenditures and revenues
associated with a specific activity for which
accounting records are maintained and periodic
financial reports are prepared.

9. How would the general purpose financial reporting

in the public sector provide useful information for
decision making and demonstrate the
accountability of the government agency?
Answer: COA Circular No. 2015-002 dated March 9,
2015, Supplementary guidelines on the preparation
of financial statements and other reports, the
transitional provisions on the implementation of the
PPSAS, and other coding structures, provides that for
the purpose of preparing the Annual Financial Report
and the Annual Audit Reports, all National
Government Agencies (NGAs) shall submit to the
COA Auditors and the Government Accountancy
Sector (GAS), COA, the detailed financial statements
and trial balances consolidated by the fund cluster as
follows:
a) Regular Agency Fund
b) Foreign Assisted Projects Fund
c) Special Accounts – Locally
Funded/Domestic Grants Fund
d) Special Accounts – Foreign Assisted/Foreign
Grants Fund
e) Internally Generated Funds
f) Business Related Funds

30
 g) Trust Receipt/Inter-agency Transferred
Funds (IATF)
The objectives of general purpose financial reporting
in the public sector should be to provide information
useful for decision making, and to demonstrate the
accountability of the entity for the resources
entrusted to it, by:
a. Providing information about the sources,
allocation, and uses of financial resources;
b. Providing information about how the entity
financed its activities and met its cash
requirements;
c. Providing information that is useful in
evaluating the entity’s ability to finance its
activities and to meet its liabilities and
commitments;
d. Providing information about the financial
condition of the entity and changes in it;
e. Providing aggregate information useful in
evaluating the entity’s performance in terms
of service costs, efficiency and
accomplishments.
10. Enumerate and explain the concept of
responsibility accounting.
Answer: The following are the concepts of
responsibility accounting:
1. Responsibility accounting involves
accumulating and reporting data on revenues
and costs on the basis of the manager’s
31
32

action, who has authority to make the day-to-

day decisions about the items;
2. Evaluation of a manager’s performance is
based on the matters directly under his
control;
3. Responsibility accounting can be used at
every level of management in which the
following conditions exist:
a. Cost and revenues can be directly
associated with the specific level of
management responsibility;
b. Costs and revenues are controllable at the
level of responsibility with which they are
associated; and
c. Budget data can be developed for
evaluating the manager’s effectiveness in
controlling the costs and revenues.
4. The reporting of costs and revenues under
responsibility accounting differs from
budgeting in two aspects:
a. A distinction is made between controllable
and non-controllable costs.
1. A cost is considered controllable at a
given level of managerial responsibility
if that manager has the power to incur it
within a given period of time. It follows
that all costs are controllable by top
management because of the broad
range of its activity, and fewer costs are
32
 controllable as one moves down to lower
level of management responsibility
because of the manager’s decreasing
authority.
2. Non-controllable costs are costs incurred
indirectly and allocated to a
responsibility level.
b. Performance reports either emphasize or
include only items controllable by
individual manager.
5. A responsibility reporting system involves the
preparation of a report for each level of
responsibility. Responsibility reports usually
compare actual costs with flexible budget
data. The reports show only controllable
costs and no distinction is made between
variable and fixed costs.
6. Evaluation of a manager’s performance for
cost centers is based on his ability to meet
budgeted goals for controllable costs.

33
34

7. Answers to Multiple Choice (Chapter 1)

1. C
This is the definition of government accounting
pursuant to Section 109 of PD 1445.
2. D
The government offices charged with the
government accounting responsibility are:
a. Commission on Audit
b. Department of Budget and Management
c. Bureau of Treasury
d. National Government Agencies
3. A
Under the Revised Administrative Code, the
Bureau of Treasury, as one of the operating
bureaus of the Department of Finance is
authorized to:
1. Receive and keep national funds, manage
and control the disbursements thereof; and
2. Maintain accounts of financial transactions
of all national government offices, agencies
and instrumentalities.

4. B
The Commission on Audit based on the authority
granted under Section 2(2), Article IX-D of the
1987 Constitution of the Republic of the
Philippines prescribed the New Government
Accounting System.
5. D
34
 Per COA Cir. No. 2013-002 dated January 30, 2013
effective January 1, 2014, the account code
structure consists of eight (8) mandatory digits,
which is composed of the following: Account
Group: one digit; Major Account Group: two digits;
Sub-Major Account Group: two digits; General
Ledger Accounts: two digits; and GL Contra
Accounts: one digit.
6. A
The books of original entry or journals, shall be
used to record in time sequence, financial
transactions and information presented in duly
certified and approved accounting documents. The
basis for recording in the journals shall be the
Journal Entry Voucher (JEV).
7. C
The receipt of Notice of Cash Allocation is recorded
in the Regular Agency books representing the
agency’s subsidy from the national government.
8. A
The DBM, DOF-BTr, and COA are collectively
responsible for the UACS. Specifically, validation
and assignment of new codes for funding sources,
organization, sub-object codes for expenditure
items shall be the responsibility of DBM;
consistency of account classification and coding
structure with the Revised Chart of Accounts shall
be the responsibility of COA; consistency of
account classification and coding standards with
35
36

the Government Finance Statistics shall be the

responsibility of DOF-BTr; and validation and
assignment of new Program, Activity, Project
Codes shall be decided jointly by the proponent
agency and DBM.
9. D
See explanation in No. 8.
10. B
See explanation in No. 8.
11. B
The PPSAS shall be applied to National
Government Agencies, Local Government Units,
and Government-Owned and/or Controlled
Corporations not considered as Government
Business Enterprises, where the Philippine
Financial Reporting Standards (PFRS) and relevant
standards issued by FRSC, BOA, and PRC shall
apply.
12. C
The Public Sector Accounting Standards Board
was created in 2008 under COA Resolution No.
2008-12 dated October 10, 2008 to assist the
commission in formulating and implementing
public sector accounting standards and establish
linkages with international bodies.
13. B
This is the instruction provided by GAM for
Registry of Appropriations and Allotments (RAPAL).

36
14. A
This is the instruction provided by GAM for
Registry of Allotments, Obligations and
Disbursements for Personnel Services (RAOD-PS).
15. A
This is the instruction provided by GAM for Budget
Utilization Request Status (BURS).
16. C
This is the definition of Fund Cluster accounting.

Chapter 2 – Unified Accounts Code Structure

(UACS)
Questions & Answers
1. What are the key elements of the Unified
Accounts Code Structure (UACS)? Explain
each element briefly.
Answer: The key elements of UACS are as
follows:
1. Funding Source Codes
It is a six-digit code to reflect the Financing
Source, Authorization, and Fund Category.
However, per Joint Circular No. 2014-1 dated
November 7, 2014, the 6-digit Funding
Source Code was enhanced by adding
another two digits code for the Fund Cluster
for purposes of accounting, banking, and
reporting; thus, it becomes eight digits.
2. Organization Codes
37
38

It is a twelve-digit code to reflect the

Department, Agency and Sub-Agency or
Operating Unit/Revenue Collecting Unit. The
first two digits (1st and 2nd) represent the
Department Code. The next three digits (3 rd
to 5th) are for the Agency Code. The next
seven digits (6th to 12th) are for Operating
Unit Classification Code.
3. Location Codes
Location code is a nine-digit code composed
of Region, Province, City/Municipality, and
Barangay. Region code is a two-digit code
(1st and 2nd) that identifies a specific region.
Province code is a two-digit code (3 rd and
4th) that identifies the province. Municipality
code is a two-digit code (5th and 6th) that
generally defines the relative alphabetical
sequence of municipalities within the
province. Barangay code is a three-digit
code (7th to 9th).
4. Major Final Output (MFO)/Program, Activity
and Project (PAP) Codes
As provided by Joint Circular No. 2013-1
dated August 6, 2013, it is a nine-digit code
comprised of Program, MFO, 1st Level
Activity, and 2nd Level Activity. The first digit
is for Program. The next two digits (2nd and
3rd) are for the MFO. The next two digits (4th
and 5th) are for 1st Level Activity. And, the

38
 next four digits (6th to 9th) are for the 2nd
Level Activity.
However, this was enhanced by Joint
Circular No. 2014-1 dated November 7,
2014 by including a three-digit code for
Sector Outcomes and a two-digit code for
Horizontal Outcomes as prefix. Also
included is another digit for the last
category of MFO/PAP to ensure that there is
sufficient number of code values bringing
this to five digits (from 5-digit code). In
total, this key element is now composed of
15 digits.
5. Object Codes
It is a ten-digit code composed of the first
eight digits (1st to 8th) are for COA Chart of
Accounts Object, and the next two digits (9 th
and 10th) are for Sub-Object. If
disaggregation is necessary, sub-object
codes shall be used to show the breakdown
of selected assets, income and expenses.
Otherwise, two zeros will be used.
2. Explain the purpose of UACS.
Answer: The objective or purpose of UACS is to
establish the accounts and codes needed in reporting
the financial transactions of the National Government
Agencies. It provides a framework for identifying,
aggregating and reporting financial transactions in
budget preparation, execution, accounting and
39
40

auditing. The key purpose of the UACS is to enable

the timely and accurate reporting of actual revenue
collections and expenditures against budgeted
programmed revenues and expenditures.
3. Enumerate the reporting requirements that will be
best served by UACS.
Answer: Reporting requirements that will be best
served by the UACS include:
1. Financial reports as required by the DBM and
COA.
2. Financial statements as required by the Public
Sector Accounting Standards Board of the
Philippines.
3. Management reports as required by the
executive officials/heads of departments and
agencies; and
4. Economic statistics consistent with the
Government Finance Statistics (GFS) Manual
2001.
4. What are the sources of account descriptions and
codes in the UACS object coding elements?
Answer: The sources of account descriptions and
codes in the UACS object coding elements includes
the following:
1. The codes from the COA Revised Chart of
Accounts prepared for accrual basis financial
reporting.
2. The addition of some sub-object codes; and

40
 3. Additional expenditure accounts designed for
cash basis budgeting, such as those of capital
outlays.
5. Enumerate descriptions and codes of Fund Cluster
as provided by Joint Circular No. 2014-1 dated
November 7, 2014.
Answer: The Fund Cluster Code Values, as provided
by Joint Circular No. 2014-1, were as follows:
Fund
Cluster Fund Cluster Description
Code
01 Regular Agency Fund
02 Foreign Assisted Project Fund
03 Special Accounts – Locally
Funded/Domestic Grants Fund
04 Special Accounts – Foreign
Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts
6. Discuss the significance of the enhancement of
Sector and Horizontal Outcomes as provided by
Joint Circular No. 2014-1 dated November 7, 2014.
Answer: As provided by Joint Circular No. 2014-1,
dated November 7, 2014, MFO/PAP Codes is now a
15-digit code due to enhancement. The significance
of this enhancement is to provide the ability to track
budgets to the sector outcomes, thus, a 3-digit code
41
42

for the Sector Outcomes was added as a prefix of the

MFO/PAP Codes. And to provide the tagging of the
horizontal outcomes, another 2-digit code was
added, for Horizontal Outcomes, next to Sector
Outcomes,
7. What is a municipality identifier?
Answer: The Municipality Identifier is a four-digit
number that defines the identity of the municipality.
It is the core of the national standard geographic
system, and is composed of the Province Code,
followed by Municipality Code; therefore, the
municipality identifier not only identifies the
municipality but also the province to which it
belongs. An added feature of the municipality
identifier is its independence from the Region Code.
Regardless of the region, the municipality identifier
for a certain town remains the same as long as it is
part of that province.
8. Explain the transitory measure to allow
government agencies/operating units sufficient
time in the familiarization of the UACS codes.
Answer: According to the National Budget Circular
No. 554, “Conversion of Codes to Conform to the
UACS,” as a transition measure to allow Government
Agencies/Operating Units sufficient time in the
familiarization of the UACS codes, the DBM shall still
reflect the previous codes alongside the UACS codes
in the release documents. However, all National
Government Agencies and Operating Units are
42
authorized to make the necessary conversion of the
appropriate codes, particularly on the funding source
and organization codes, to conform to the prescribed
UACS codes. In case of any discrepancy noted in the
indicated UACS codes per SARO/NCA vis-à-vis the
UACS Manual, the codes per UACS Manual shall be
adopted by the agency concern.
Answers to Multiple Choice (Chapter 2)
1. A
Funding Source Code is an eight-digit code to
reflect the Fund Cluster Source, Financing Source,
Authorization, and Fund Category. The first two
digits are for Fund Cluster which was included as
prefix due to enhancement by Joint Circular No.
2014-1 dated November 7, 2014. The next digit is
for Financing Source. The next two digits are for
Authorization. And the last three digits are for the
Fund Category
2.D
Location code is a nine-digit code composed of
Region, Province, City/Municipality, and Barangay.
3. D
Organization Codes is a twelve-digit code to reflect
the Department, Agency and Sub-Agency or
Operating Unit/Revenue Collecting Unit.
4. D

43
44

For purposes of UACS, Constitutional Offices, the

Judiciary and the Legislature are categorized as
department-level entities.

5. B
A program is an integrated group of activities that
contributes to an agency or department’s
continuing objective. Examples include: General
Administration and Support, Support to
Operations, and Operations.
6. C
For purposes of the UACS, an agency is an entity
under a department whose budget is directly
released to the latter, and may include the
summation of all budgets of sub-agencies listed
under it, if any.
8. B
In order to harmonize budgetary and accounting
code classification that will facilitate the efficient
and accurate financial reporting of actual revenue
collections and expenditures compared with
programmed revenues and expenditures, the Joint
Circular No. 2013-1 dated August 6, 2013, the
Department of Budget and Management (DBM),
Commission on Audit (COA), Department of
Finance (DOF), and Bureau of Treasury (BTr) jointly
developed the Unified Accounts Code Structure
(UACS).
9. B

44
 Province is a political corporate unit of
government which consists of a cluster of
municipalities, or municipalities and component
cities. It serves as a dynamic mechanism for
developmental processes and effective
governance of local government units within its
territorial jurisdiction.
10. B
This is the definition of General Fund provided by
GAM.
11. D
This is the definition of New General
Appropriations provided by GAM.

45
46

Chapter 3 – The Revised Chart of Accounts

Questions & Answers
1. Define and discuss the underlying reason why a
chart of accounts is prescribed in New Accounting
System.
Answer: The chart of accounts provides the
framework within which the accounting records are
constructed. It is defined as a list of general ledger
accounts consisting of real and nominal accounts.
The chart of accounts is prescribed for use by all
national government agencies and local
government units. The description of all the
accounts and the instructions as to when these are
to be debited and credited are provided to achieve
uniformity in the recording of government financial
transactions.
2. Discuss why the Revised Chart of Accounts in COA
Circular No. 2013-002 dated January 30, 2013 was
created.
Answer: The Commission on Audit as member of the
International Organization of Supreme Audit
Institutions (INTOSAI) is encouraged 1)to adopt
relevant International Accounting Standards. And
2)to provide new accounts for the adoption of the
Philippine Public Sector Accounting Standards
(PPSAS) which were harmonized with the IPSAS to
enhance the accountability and transparency of the
financial reports, and ensure compatibility of
46
financial information, the COA recognizes the need to
revise the existing NGAS Chart of Accounts
prescribed in COA Cir. No. 2004-008 dated
September 20, 2004. 3)The Commission also
recognizes the need for uniform accounts to be used
in the national government accounting and budget
systems to facilitate the preparation of harmonized
financial and budget accountability reports.
Accordingly, the COA revokes COA Cir. No. 2004-008
and the Revised Chart of Accounts in Circular No.
2013-002 dated January 30, 2013 is adopted.
3. What are the five (5) classifications of expenses in
the Revised Chart of Accounts in COA Circular No.
2013-002 dated January 30, 2013? Give the sub-
major account group classifications.
Answer: Per COA Circular No. 2013-002 dated
January 30, 2013, Revised Chart of Accounts, the
expense accounts are classified into:
1. Personnel Services:
a. Salaries and wages
b. Other Compensation
c. Personnel Benefit Contributions
d. Other Personnel Benefits
2. Maintenance and Other Operating Expenses:
a. Traveling Expenses
b. Training and Scholarship Expenses
c. Supplies and Materials Expenses
d. Utility Expenses
e. Communication Expenses
47
48

f. Awards/Rewards and Prizes

g. Survey, Research, Exploration and
Development Expenses
h. Demolition/Relocation and
Desilting/Dredging Expenses
i. Generation, Transmission and
Distribution Expenses
j. Confidential, Intelligence,
Extraordinary Expenses
k. Professional Expenses
l. General Services
m. Repairs and Maintenance
n. Financial Assistance/Subsidy
o. Taxes, Insurance Premiums and Other
Fees
p. Labor and Wages
q. Other Maintenance and Operating
Expenses
3. Financial Expenses:
Financial Expenses
4. Direct Costs:
a. Cost of Goods Manufactured
b. Cost of Sales
5. Non-Cash Expenses:
a. Depreciation
b. Amortization
c. Impairment Loss
d. Losses

48
4. Enumerate the five (5) account code structure of
the Revised Chart of Accounts consisting of eight
(8) mandatory digits. Explain briefly.
Answer: COA Circular No. 2013-002 provides that the
accounts code structure consists of eight (8)
mandatory digits, as follows:
1. Account Group – This represents the
accounts classification as to Assets,
Liabilities, Equity, Income and Expenses.
2. Major Account Group – This represents
classification within the account group; e.g.,
for asset major accounts: Cash and Cash
Equivalent, Investment, Receivables, etc.
3. Sub-Major Account Group – This represents
classification within the major account group;
e.g., for Cash and Cash Equivalent: Cash on
Hand, Cash in Bank – Local Currency, Cash in
Bank – Foreign Currency, etc.
4. General Ledger Accounts – This represents
the accounts to be presented in detailed
financial statements; e.g., Cash-Collecting
Officer, Petty Cash, etc. This is composed of
two segments: the first two digits from the
left is the general ledger code, and the last
digit is reserved for contra accounts, like:
Allowance for Impairment, Accumulated
Depreciation, etc.

49
50

5. General Ledger Contra-Accounts – Contra-

accounts are shown as reduction from the
related accounts, and this includes, among
others, Allowance for Impairment,
Accumulated Depreciation, etc. as shown in
the preceding item (General Ledger
Accounts).

50
 6. Answers to Multiple Choice (Chapter 3)
1. B
Codes are assigned to account groups to facilitate
location of accounts in the general and subsidiary
ledgers, to provide systematic arrangement and
classification of accounts and facilitate preparation
of financial reports.
2. A
Major account group represents classification
within the account group; e.g. for assets major
account: cash and cash equivalents, investments,
receivables, inventories, investment property, etc.
3. A
Cash and cash equivalent is a major account
group. Asset is an account group. Petty cash is a
general ledger account.
4. A
Due from Non-government Organization/People’s
Organization is other receivables. Due from
Bureaus and Due from Central Office are intra-
agency receivables.

5. A
Other receivables are other receivables. Due from
GOCC and Due from LGU are inter-agency
receivables.

6. A

51
52

Labor and wages account is used to record the

cost incurred for labor and wages, which include
labor payroll paid for projects undertaken by
administration, for agricultural activities involving
hired labor, student wages, etc. This account is
presented as Maintenance and Other Operating
Expenses in the Revised Chart of Accounts.
7. A
Investment account is a major account group.
Cash in bank – local currency is a sub-major
account group. Treasury bills account is a general
ledger account.
8. B
Liabilities account is an account group. Loans and
receivables account is a sub-major account group.
Sinking fund is a general ledger account.
9. C
Financial assets held for trading is a general
ledger account. Allowance for impairment –
investment in treasury bonds account is a general
ledger contra account. Investment is a major
account group.
10. A
The basis for coding the object classification in the
COA Revised Chart of Accounts is accrual
accounting, which requires transactions to be
recorded in the period when they occur (and not
when cash or its equivalent is received or paid).
Thus, the transactions and events are recorded in
52
the accounting records and recognized in the
financial statements of the periods to which they
relate.

53
54

Chapter 4 – Accounting for Budgetary Accounts

Questions & Answers
1. What is the General Accounting Plan of
government agencies/units? Enumerate and
explain the accounting systems in the NGAS-
National.
Answer: The General Accounting Plan (GAP) shows
the overall accounting system of a government
agency/unit. It includes a) the source documents,
b) the flow of transactions and its accumulation in
the books of accounts and c) finally the conversion
into financial information/data presented in the
financial reports.
The following are the accounting system:
1. Budgetary Accounts System
The budgetary accounts system
encompasses the processes of preparing the
budget released document (formerly known
as Agency Budget Matrix, but was replaced
by 2014 General Appropriations
Act starting 2014), monitoring and recording
of allotments received by the agency from
the Department of Budget and Management,
releasing of Sub-Allotment Advices (SAAs) to
Regional Offices (RO) by the Central Office
(CO), issuance of SAAs/LAAs to Operating
54
 Units (OU) by the Regional Office, and
recording and monitoring of obligations.

2. Receipts/Income and Depository System

This system covers the processes of
acknowledging and reporting
income/collections, deposits of collections
with Authorized Government Depository Bank
(AGDB) or through the AGDB for the account
of Treasurer of the Philippines, and recording
of collections and deposits in the books of
accounts of the agency. All collecting officers
shall deposit intact all their collections, as
well as collections turned over to them by
sub-collectors/tellers, with their AGDB daily or
not later than the next banking day. They
shall record all deposits made in the Cash
Receipts Record. At the end of each business
day, the collecting officers shall accomplish
the Report of Collections and Deposits (RCD).
3. Disbursement System
Disbursements constitute all cash paid out
during a given period either in currency
(cash) or by check. It may also mean the
settlement of government
payables/obligations by cash or by check. It
shall be covered by Disbursement Voucher
(DV)/Petty Cash Voucher (PCV) or Payroll. The
Disbursement System involves the
55
56

preparation and processing of disbursement

voucher, preparation and issuance of check;
payment by cash; granting, utilization, and
liquidation/replenishment of cash advances.
4. Financial Reporting System
Generally, there are eight steps in the
accounting cycle: analyzing the transactions,
journalizing the transactions, posting the
journal entries, preparation of trial balance,
adjusting the accounts, closing the accounts,
preparation of the financial statements, and
reversing the accounts. Under the New
Government Accounting System, financial
reporting includes the preparation and
submission of trial balances, financial
statements and other reports needed by
fiscal and regulatory agencies. The sub-
systems are as follows: (1.) preparation and
submission of trial balances and other
reports; and (2.) preparation and submission
of financial statements.
2.Explain the National Budget.

Answer: The National (Government) Budget is a plan

for financing the government activities for a fiscal
year prepared and submitted by responsible
executive to a representative body whose
approval and authorization are necessary before

56
the plan can be executed. It is a definite proposal
of estimate or statement of receipts and
expenditures that may be approved or rejected.
As such, it should present a detailed
demonstration of the revenues and expenditures
of the government for the past and ensuing years,
and should furnish not only definite information
regarding the general character, purpose and
amount of government expenditures, but also
detailed data regarding the cost entailed in
maintaining particular units of organization and in
performing particular units of organization and in
performing particular activities. In other words, it
is the financial blueprint of a country’s
development plan.

To strengthen the link between planning and

budgeting and to simplify the presentation of the
budget, the DBM introduced, in the preparation of
the proposed National Budget for FY 2014, a new
approach to budgeting. Through National Budget
Memorandum (NBM) No. 117, the DBM introduced
Performance-Informed Budgeting (PIB), which will
ensure that public resources are managed more
efficiently and with the greatest degree of
discipline by re-directing funds to programs that
would be responsive to the needs of the people
especially those in regions beset by poverty.
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58

3. Enumerate and explain the different kinds of

budget.
Answer: Under the new accounting system, the
different kinds of budget are:
1. As to Nature
a. Annual Budget – a budget which covers a
period of one year. It is the basis of an annual
appropriation.
b. Supplemental Budget – a budget which
supplement or adjust a previous budget
which is deemed inadequate for the purpose
it is intended. It is the basis for a
supplemental appropriation.
c. Special Budget – a budget of special nature
and generally submitted in special forms on
account that itemizations are not adequately
provided in the Appropriation Act or that the
amounts are not at all included in the
Appropriation Act.
2. As to Basis
a. Performance Budget – a budget emphasizing
the program or services conducted and
based on functions, activities, and projects,
which focus attention upon the general
character and nature of work to be done, or
upon the services to be rendered.

58
 b. Line-Item Budget – a budget the basis of
which are the objects of expenditures such
as: salaries and wages, traveling expenses,
freight, supplies and materials, equipment,
etc.
3. As to Approach and Technique
a. Zero-Based Budgeting – a process which
requires systematic consideration of all
programs, projects and activities with the use
of define ranking procedures. In this
approach, activities are analyzed and
presented in “decision packages” or key
budgetary inclusions.

b. Incremental Approach – a budget where only

additional requirements need justifications. It
focuses analysis of incremental changes in
the budget and maybe done within the
context of performance and program
budgeting.
4. Discuss briefly the budget process/cycle.
Answer: The Budget Process/Cycle:
1. Budget Preparation
This covers estimation of government revenues,
the determination of budgetary priorities and
activities within the constraints imposed by
available revenues and by borrowing limits, and
the translation of approved priorities and
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60

activities into expenditure levels. Estimates are

prepared by the various government agencies,
reviewed and finalized by the President of the
Philippines, and then submitted to the
Legislative Department as basis for the
preparation of the annual Appropriation Act.

The budget preparation begins with the

issuance of a “budget call” by the Department
of Budget and Management. To ensure that the
National Budget is enacted on time, the DBM,
under the Aquino Administration, has
established a new tradition of beginning the
Budget Preparation phase earlier. Under the
new Budget Preparation Calendar, the Budget
Call is issued in December, unlike in the past
where it was issued in April; and the submission
of the President’s budget a day after the State
of the Nation Address, in contrast to earlier
practice where it is submitted to Congress
within 30 days from the opening of every
regular session.
2. Legislative Authorization
It is the second phase of the budget process
relative to the enactment of the General
Appropriation Bills based on the budget of
receipts and expenditures submitted by the
President of the Philippines. This phase starts
upon the receipt of the President’s Budget by
the House Speaker and ends with the
60
President’s enactment of the General
Appropriation Act.
The House of Representatives, in plenary,
assigns the President’s Budget to the House
Appropriations Committee, which conduct
hearing and scrutinize their respective
programs and projects. It then crafts the
General Appropriation Bill (GAB). In plenary
session, the GAB is sponsored, presented and
defended by the Appropriations Committee and
Sub-Committee Chairmen.
Normally, after receiving the GAB from the
House of Representatives, the Senate conducts
its own committee hearings and plenary
deliberations on the GAB. Once both Houses of
Congress have finished their deliberations, they
will each constitute a panel to the Bicameral
Conference Committee. This committee will
then discuss and harmonize the conflicting
provisions of the House and Senate Versions of
the GAB.

The Harmonized or “Bicam” Version is then

submitted to both Houses, which will then vote
to ratify the final GAB for submission to the
President. Once submitted to the President for
his approval, the GAB is considered enrolled.
The President and DBM then review the GAB
and prepare a Veto Message, where budget

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62

items subjected to direct veto or conditional

implementation are identified, and where
general observations are made. Under the
Constitution, the GAB is the only legislative
measure where the President can impose a line-
veto (in all other cases, a law is either approved
or vetoed in full).

Appropriations are approved by the legislative

body in form of
(1) a General Appropriation Law which
covers most of the expenditures of
government;
(2) Continuing Appropriations for various
public works projects;
(3) Supplemental Appropriations laws
that are passed from time to time, to
augment or correct an already existing
appropriation; and
(4) Certain automatic appropriations
intended for fixed and specific purposes.
3. Budget Execution and Operation
The third phase of the budget process covers
the various operational aspects of budgeting.
This phase of budget cycle begins with DBM’s
issuance of guidelines on the release and
utilization of funds. Agencies are required to
submit their Budget Execution Documents
(BEDs) at the start of budget execution. These
documents outline agency plans and
62
 performance targets. The DBM set a limit for
allotments issued to an agency and on the
aggregate by preparing an Allotment Release
Program (ARP). A Cash Release Program (CRP) is
also formulated alongside to set a guide for
disbursement levels for the year and for every
month and quarter.
In implementing programs, activities and
projects, agencies incur liabilities on behalf of
the government. Obligations are liabilities
legally incurred, which the government will pay
for. To authorize an agency to pay the
obligations it incurs, DBM issues a disbursement
authority. Most of the time, it takes the form of a
Notice of Cash Allocation (NCA); and in special
cases, the Non-Cash Availment Authority (NCAA)
and Cash Disbursement Ceiling (CDC).

4. Budget Accountability
The last phase of budget process consists of the
following: (1) periodic reporting by the
government agencies of performances under
their approved budget; (2) top management
review of government activities and the fiscal
policy implementations thereof; and (3) the
actions of Commission on Audit in assuring the
fidelity of officials and employees by carrying
out the intent of the National Assembly
regarding the handling of receipts and
expenditures.
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64

This phase happens alongside the Budget

Execution phase. Through Budget
Accountability, the DBM monitors the efficiency
of fund utilization, assesses agency
performance and provides a vital basis for
reforms and new policies. Agencies are held
accountable not only for how these use public
funds ethically, but also on how these attain
performance targets and outcomes using
available resources. Submitted by agencies on a
monthly and quarterly basis, 1) Budget
Accountability Reports (BARs) are required
reports that show how agencies used their funds
and identify their corresponding physical
accomplishments. 2) An annual Budget
Performance Assessment Review (BPAR) is
conducted to determine each agency’s
accomplishments and performance by the year-
end. The DBM regularly reports results to the
President.
Auditing is not within the DBM’s jurisdiction, and
is instead lodged under the Commission on
Audit (COA). Nonetheless, auditing is critical in
ensuring agency accountability in the use of
public funds. The DBM uses COA’s audit reports
in confirming agency performance, determining
budgetary levels for agencies and addressing
issues in fund usage.

5. Enumerate and explain the Budgetary accounts.

64
Answer: 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
Department of Budget and Management 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.
6. Explain the Performance-Informed Budgeting.
Answer: Performance-Informed Budgeting is a
budgeting approach that uses performance
information to assist in deciding where the funds will
go. Performance information, both financial and non-
financial information, is presented in the
appropriations document, which provides the context
for the programs, activities and projects pursued by
the different agencies of government. Performance
information typically includes the following :
1. The purpose for the funds required.

65
66

2. The outputs that would be produced or the

services that would be rendered.
3. The outcomes that would be achieved by the
outputs and/or services.
4. The cost of the programs and activities
proposed to achieve the objectives.
Performance-informed budgeting differs from the
traditional line item-based budgeting in a way that
it focuses more on outputs and outcomes and
places less emphasis on the inputs. It links
funding to results, and provides a framework for
more informed resource allocation and
management. This new face of the National
Budget will no longer contain an excessively
detailed line item document, but a budget that
presents performance information aligned to
planned resources that promises to be
understandable and accessible to the people
because of its simplicity.
7. Enumerate and explain the obligational authorities
prescribed by the Government Accounting Manual
(GAM)
Answer: Obligational Authority or Allotment – the
following are the documents which authorize the
entity to incur obligations:
a) General Appropriation Act Release
Document (GAARD)
This serves as the obligational authority for
the comprehensive release of budgetary
66
 items appropriated in the General
Appropriation Act (GAA), categorized as For
Comprehensive Release (FCR). This will
abolish the lengthy process of releasing
allotments to departments and agencies;
thereby, enhancing the operational
efficiency of all agencies across the
bureaucracy, allowing the DBM to speed
up government disbursements and fast-
track the implementation of programs and
projects set for the year.
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 documentats/clearances.
Releases of allotments for Special Purpose
Funds (SPFs) (e.g., Calamity Fund,
Contingent Fund, E-Government Fund,
Feasibility Studies Fund, International
Commitments Fund, Miscelaneous
Personnel Benefits Fund, and Pension and
Gratuity Fund) are also covered by SAROs.
c) 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
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68

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.
8. Enumerate and explain the disbursement
authorities prescribed by GAM.
Answer: Disbursement Authority – the following
documents authorize the entity to pay obligations
and payables:

a. Notice of Cash Allocation (NCA)

This is the authority issued by the DBM to

central, regional, and provincial offices and
operating units to pay operating expenses,
purchases of supplies and materials,
acquisition of PPE, accounts payable, and
other authorized disbursements through
the issue 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

68
 proceeds from loans/grants through
supplier’s credit/constructive cash.
c. 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
pay their operating expenses, purchases of
supplies and materials, acquisition of PPE,
accounts payable, and other authorized
disbursements through the issue of MDS
checks, ADA or other modes of
disbursements.
9. Explain briefly the tax remittance advice (TRA)
Answer: Pursuant to the Tax Remittance Advice (TRA)
System, as provided for in Joint Circular No. 1-2000
dated January 3, 2000, as amended by JC No. 1-
2MOA dated July 31, 2001 of the Department of
Finance, the Department of Budget and
Management and the Commission on Audit, the
Notice of Cash Allocation (NCA) released to the
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70

government agency is reduced by the amount of

the estimated taxes expected to be remitted by
the agency through the Tax Remittance Advice.
Estimated taxes are computed based on the
following percentages: Personnel Services – 8%;
Maintenance and Other Operating Expenses – 5%;
and Capital Outlay – 5%. The Notice of Cash
Allocation received by the government agency
from the Department of Budget and Management
is net of the applicable percentage of Tax
Remittance Advice based on the Notice of Cash
Allocations received.
10.What are the documents/reports, which are
required by the DBM to be submitted on a regular
basis? Explain briefly.
Answer: National Budget Circular No. 507 provides
that the Department of Budget and Management
required agencies to submit, on a regular basis, a)
Budget Execution Documents (BEDs) and b)
Budget Accountability Reports (BARs). Budget
Execution Documents are annual documents
required on the onset of the budget execution
phase that contain the agencies’ targets and plans
for the current year; while Budget Accountability
Reports are reports which contain information on
the agencies’ actual
accomplishments/performance for a given period.
Answers to Multiple Choice (Chapter 4)
1. B
70
 This is the definition of budgetary accounting.
2. D
The national budgetary system consists of
methods and practices of the government for
planning, programming and budgeting. Its primary
concern is the availability and use of money to
provide the necessary services expected of the
government.
3. C
The national government budget is a statement of
estimated receipts based on existing and proposed
revenue measures, and of estimated expenses,
which serves as the basis for a general
appropriation bill.
4. A
Pursuant to Sec. 22, Article VII of the Philippine
Constitution, the President of the Philippines shall
submit to Congress within 30 days from the
opening of every regular session, as the basis of
the general appropriation bill, a budget of
expenditures and sources of financing, including
receipts from existing and proposed revenue
measure.
5. B
This phase of budget process/cycle involves the
review and approval of the budget by the
legislative and the formulation of an appropriation
bill.

71
72

6. C
This phase of budget process/cycle involves the
implementation of the budget by different
government agencies.
7. B
This phase of budget process/cycle involves the
comparison of performance with predetermined
plans. The expenditures and performance are
evaluated.
8. D
This is pursuant to Sec. 29(1), Article VI of the
1987 Constitution.
9. A
Pursuant to Sec. 2(1), Bk VI, 1987 Adm. Code,
appropriations refers to an authorization made by
law or other legislative enactment, directing the
payment of goods and services out of government
funds under specified conditions or for special
purposes.
10. C
This is the definition of allotment.
11. A
This is the definition of obligation.
12. A
This is the definition of program.
13. A

72
 Under the new accounting system, government
agencies/units shall now journalize the receipt of
Notice of Cash Allocation using this journal entry.
Likewise, the accountant of government agency
shall credit “Cash – National Treasury, MDS” each
time payment is made charged against the Notice
of Cash Allocation.
14. C
In government accounting, 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
Department of Budget and Management 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.
15. A
The Allotment Release Order is a formal document
issued by the Department of Budget and
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74

Management to the head of the agency containing

the authorization, conditions and amount of an
agency allocation. The document may be the 2014
General Appropriations Act (GAA), a budget
release document that replaced the Agency
Budget Matrix (ABM), or the Special Allotment
Release Order (SARO).

16. D
The accounts personnel services include basic pay,
all authorized allowances, bonus, cash gifts,
incentives and other personnel benefits of official
and employees of the government.
Telephone charge, Rent, and Meal allowance for
overtime work are incorrect because these are
maintenance and other operating expenses.

17. C
Purchase and/or construction of fixed assets such
as building and structures, land, land
improvements, equipment, etc. are charged
against the capital outlay.
Salaries and wages account is incorrect because
this is Personnel service. Repairs and maintenance
is incorrect because this is maintenance and other
operating expense. Merchandise inventory is
incorrect because this is current asset.
18. C

74
 Budget Execution Documents is the annual
documents required by the DBM at the onset of
the budget execution phase, which contain the
following: 1.) Physical and Financial Plan, 2.)
Monthly Disbursements Program, 3.) Estimate of
Monthly Income, and 4.) List of Not Yet Due and
Demandable Obligations.
19. A
Physical and Financial Plan is a budget execution
document that serves as overall plan of the
government agencies encompassing the physical
and financial aspects, consistent with their
approved budget level for the year, broken down
by quarter.
20. D
Statement of Allotment, Obligations and Balances
is a budget accountability report which serve as
the agencies’ summary report of allotments
received and corresponding obligations incurred
during the month from all sources by object of
expenditure, and shall be reported on monthly
basis. Monthly Disbursements Program, list not yet
due and demandable obligations, and estimate of
monthly income are budget execution documents.
21. B
Notice of Cash Allocation (NCA) is a disbursement
authority use for payment of personnel services,
maintenance and other operating expenses,
capital outlay, financial expenses, foreign assisted
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76

projects, and prior years/current years’ accounts

payable.
22. C
NBC No. 550 set the deadline for agency
submission of the BEDs to DBM on November 30.
This deadline was reiterated in NBC No. 551 dated
January 2, 2014.
23. C
Balanced budget is a budget where the proposed
expenditures are equal to or less than the
estimated revenues. Currently, the government is
operating with a budget deficiency. As such, it is
serving government priorities to achieve a
balanced budget by increasing revenues and
cutting on expenditures.
24. A
Performance-Informed Budgeting is a budgeting
approach that uses performance information to
assist in deciding where the funds will go.
Performance information, both financial and non-
financial information, is presented in the
appropriations document, which provides the
context for the programs, activities and projects
pursued by the different agencies of government.
25. B
It is the second phase of the budget process
relative to the enactment of the General
Appropriation Bill based on the budget of receipts
and expenditures, generally, submitted by the
76
 President of the Philippines within 30 days from
the opening of its regular session, as the basis of
the general appropriation bill. However, in
contrast, the submission of the President’s budget
under the Aquino Administration is a day after the
State of the Nation Address. This is to ensure that
the National Budget is enacted on time. This
phase starts upon the receipt of the President’s
Budget by the House Speaker and ends with the
President’s enactment of the General
Appropriation Act.
26. C
Line item budget is a budget the basis of which is
the object of expenditures such as: salaries and
wages, travelling expenses, freight, supplies and
materials, equipment, etc.
27. B
Special budget is a budget of special nature and
generally submitted in special forms on account
that itemization are not adequately provided in the
Appropriation Act or that the amounts are not at
all included in the Appropriation Act.
28. C
The budget preparation begins with the issuance
of a “Budget Call” by the DBM. This document
outlines the priority areas of government activity
applicable to the budget year, which begins a year
and one month hence.
29. B
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78

Janitorial services account is a professional service

under Maintenance and Other Operating
Expenses.
30. A
To facilitate the swift and efficient implementation
of the government administration’s expenditure
program, the Department of Budget and
Management (DBM) phased-out the Agency
Budget Matrix (ABM) from the budget process
starting 2014. The General Appropriations Act
Release Document (GAARD), as a budget release
document, shall serve as obligational authority
and will replace the ABM, in order to eliminate the
need to prepare ABM; thereby, abolishing the
lengthy and elaborate process of releasing
allotments to departments and agencies.

78
 Suggested Answers to Problems: (Chapter 4)
1.
Released Released Unfunded
Allotments NCA Allotments
150,000 120,000 30,000
120,000 90,000 30,000
230,000 200,000 30,000
14,000 12,000 2,000
Special Purpose
Fund
150,000 125,000 25,000

Total 547,000 117,000

664,000
2.
Obligations Unobligated
Released Incurred Allotments
Allotments
150,000 100,000 50,000
120,000 80,000 40,000
230,000 180,000 50,000
14,000 10,000 4,000
Special Purpose
Fund
150,000 120,000 30,000

Total 490,000 174,000

664,000
3.
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80

Cash – MDS, Regular 547,000

Subsidy income from 547,000
national government

80
Chapter 5 – Accounting for Disbursements and
Related Transactions
Questions & Answers
1. Enumerate the fundamental principles for the
disbursement of public funds.
Answer: All financial transactions and operations of
any government entity shall be governed by the
following fundamental principles provided in Section
4 of P.D. No. 1445, the Government Auditing Code of
the Philippines: a) No money shall be paid out of any
public treasury or depository except in pursuance of
an appropriation law or other specific statutory
authority; b) Government funds or property shall be
spent or used solely for public purposes; c) Trust
funds shall be available and may be spent only for
the specific purpose for which the trust was created
or the funds received; d) Fiscal responsibility shall, to
the greatest extent, be shared by all those exercising
authority over the financial affairs, transactions, and
operations of the government agency; e)
Disbursement or disposition of government funds or
property shall invariably bear the approval of the
proper officials; f) Claims against government funds
shall be supported with complete documentation; g)
All laws and regulations applicable to financial
transactions shall be faithfully adhered to; and h)
Generally accepted principles and practices of
accounting as well as of sound management and

81
82

fiscal administration shall be observed, provided that

they do not contravene existing laws and regulations.
2. Identify the basic requirements and certifications
for disbursement of public funds.
Answer: The following are the basic requirements
and certifications for disbursements of government:
a) Availability of allotment/budget for
obligation/utilization certified by the Budget
Officer/Head of Budget Unit; b)
Obligations/Utilizations properly charged against
available allotment/budget by the Chief
Accountant/Head of Accounting Unit; c) Availability of
funds certified by the Chief Accountant; d)
Availability of cash certified by the Chief Accountant;
e) Legality of the transactions and conformity with
existing rules and regulations; f) Submission of
proper evidence to establish validity of the claim;
and g) Approval of the disbursement by the Head of
Agency or by his duly authorized representative.
3. Explain the use of Notice of Cash Allocation.
Answer: The NCA shall be the authority of an agency
to pay operating expenses, purchases of supplies
and materials, acquisition of PPE, accounts payable,
and other authorized disbursements through the
issue of a MDS checks, b) ADA (AUTHORITY TO DEBIT
ACCOUNT) or c) 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.
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4. Explain the use of Notice of Transfer of Allocation.
Answer: The NTA shall be the authority of the
regional and operating units to pay their operating
expenses, purchases of supplies and materials,
acquisition of PPE, accounts payable, and other
authorized disbursements through the issue of a)
MDS checks, b) ADA or c) other modes of
disbursements.

5. Enumerate and discuss the two types of checks

being issued by government agencies.
Answer: 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; and 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.
6. List down the COA rules and regulations (and other
issuances) governing the grant and liquidation of
cash advances.
Answer: The COA rules and regulations (and other
issuances) governing the grant and liquidation of
cash advances are as follows: a)No cash advance
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84

shall be given unless for a legally authorized specific

purpose; b) A cash advance shall be reported on and
liquidated as soon as the purpose for which it was
given has been served; c) No additional cash
advance shall be allowed to any official or employee
unless the previous cash advance given to him/her is
first settled/liquidated or a proper accounting thereof
is made; d) Except for cash advance for official
travel, no officer or employee shall be granted cash
advance unless he/she is properly bonded in
accordance with existing laws or regulations. The
amount of cash advance which may be granted shall
not exceed the maximum cash accountability
covered by his/her bond; e) Only permanently
appointed officials shall be designated as disbursing
officers; f) Only duly appointed or designated
disbursing officer may perform disbursing functions.
Officers and employees who are given cash advances
for official travel need not be designated as
Disbursing Officers; g) Transfer of cash advance from
one accountable officer to another shall not be
allowed; and h) The cash advance shall be used
solely for specific legal purpose for which it was
granted. Under no circumstance shall it be used for
encashment of checks or for liquidation of a previous
cash advance.
7. Discuss what a Tax Remittance Advice is.
Answer: 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
84
withheld taxes on funds coming from DBM. With the
inclusion of all NGAs among the taxpayers who are
mandated to use 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 (eTRA). The eTRA 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. The eTRA shall be supported
with the Summary of Taxes Withheld (STW) certified
by the Chief Accountant. The STW is the document
which summarizes the type and amount of taxes
withheld. The Accounting Division/Unit shall
maintain SL to monitor remittances of taxes withheld
from individual employees, suppliers and contractors.
8. Define and discuss what a Cash Disbursement
Ceiling is.
Answer: CDC is an authorization issued by the DBM
to DFA and other agencies with foreign posts to
utilize their collections retained by their Foreign
Service Posts to cover operating requirements, but
not to exceed the released allotment to the said post.
The following are the accounting policies regarding
disbursements by Foreign-based Government
85
86

Agencies: a) Based on the proposed budget of

FSP/Foreign Attaché, a Working Fund shall be
established to cover payment of PS and MOOE. The
Finance Officer shall be required to maintain CBReg
and CDReg to monitor and control the Working Fund;
and b) All disbursements from the Working Fund shall
be covered by duly approved DV/Payroll with the
required SDs. At the end of the month, the Finance
Officer of FSPs/Foreign Attachés shall prepare and
submit RCDisb together with the SDs to the Central

86
 Office concerned for preparation of JEV to record
the liquidation made by the accountable officer.
The JEV shall be recorded in the CkDJ and CDJ
based on the CBReg and CDReg, respectively.
Answer to Multiple Choices (Chapter 5)
1. B
2. B
3. B
4. D
5. C
6. A
7. B
8. B
9. B
10. A
11. C
12. A
13. C
14. C
15. D
16. B
17. A
18. C
19. A
20. B
Answers to Problems (Chapter 5)
1-A
Cost per unit P4,950,000/6 units P825,000

87
 If the promotional item received is the same as
the PPE purchased, the total purchase price shall
be allocated to the total quantity purchased plus
the promotional item.
B-
(Constructive receipt of NCA for withholding tax.)
1010 297,0
Cash - TRA
4070 00
Subsidy from National 4030
297,000
Government 1010
(Payment of accounts payable.)
2010 4,950
Accounts payable
1010 ,000
1010
Cash – MDS, Regular 4,653,000
4040
2020
Due to BIR 297,000
1010
(Remittance of withholding tax through TRA.)
2020
Due to BIR 297,000
1010
1010
Cash - TRA 297,000
4070
2-A
Cost per unit 12,000 – 1,200)/6 units P1,800
If the promotional item received is different from
the PPE purchased, the fair value of the
promotional item shall be the cost of the
promotional item and deducted from the total
88
 price paid. The balance shall be allocated to the
total quantity purchased.
B-
(Purchase of furniture and fixtures.)
1060
Furniture and fixtures 10,800
7010
2010
Accounts payable 10,800
1010
(Receipt of promotional item.)
1060
Office equipment 1,200
5020
2010
Accounts payable 1,200
1010
(Payment of accounts payable.)
2010
Accounts payable 12,000
1010
1010
Cash – MDS, Regular 11,280
4040
2020
Due to BIR 720
1010
Note: Tax rates: VAT is 5% and EWT for goods is
1%.
(Remittance of withholding tax to BIR.)
2020
Due to BIR 720
1010
Subsidy from national 4030
720
government 1010

89
Based on requirement “b”, the NCA received is
net of TRA. In other words, the subsidy from
national government recorded by the agency
upon receipt of NCA does not include the portion
for TRA; thus, the above journal entry.

90
Chapter 6 – Accounting for Income, Collections
and Related Transactions
Questions & Answers
1. Differentiate revenue from revenue funds.

Answer: Revenue pertains to the gross inflow of

economic benefits or service potential during the
reporting period when those inflows result in an
increase in net assets/equity, other than increases
relating to contributions from owners.
Revenue funds on the other hand comprise all
funds derived from the income of any agency of the
government and available for appropriation or
expenditure in accordance with law.
2. Enumerate the fundamental principles governing
revenues accruing to the NGAs.
Answer: Revenues accruing to the NGAs are
governed by the following fundamental principles: a)
Unless otherwise specifically provided by law, all
revenues accruing to an entity by virtue of the
provisions of existing law, orders and regulations
shall be deposited/remitted in the National Treasury
(NT) or in any duly authorized government
depository, and shall accrue to the General Fund (GF)
of the NG; b) Except as may otherwise be specifically
provided by law or competent authority, all moneys
and property officially received by a public officer in
any capacity or upon any occasion must be
91
accounted for as government funds and government
property; c) Amounts received in trust and from
business-type activities of government may be
separately recorded and disbursed in accordance
with such rules and regulations as may be
determined by a Permanent Committee composed of
the Secretary of Finance as Chairman, and the
Secretary of Budget and Management and the
Chairman, COA, as members;
d) Receipts shall be recorded as revenue of Special,
Fiduciary or Trust Funds or Funds other than the GF,
only when authorized by law as implemented by
rules and regulations issued by the Permanent
Committee; e) No payment of any nature shall be
received by a collecting officer without immediately
issuing an official in acknowledgement thereof. The
receipt may be in the form of postage, internal
revenue or documentary stamps and the like,
officially numbered receipts, subject to proper
custody, accountability, and audit; f) Where
mechanical devices (e.g. electronic official receipt)
are used to acknowledge cash receipts, the COA may
approve, upon request, exemption from the use of
accountable forms; g) At no instance shall temporary
receipts be issued to acknowledge the receipt of
public funds; h) Pre-numbered ORs shall be issued in
strict numerical sequence. All copies of each receipt
shall be exact copies or carbon reproduction in all
respects of the original; i) An officer charged with the
collection of revenue or the receiving of moneys

92
payable to the government shall accept payment for
taxes, dues or other indebtedness to the government
in the form of checks issued in payment of
government obligations, upon proper endorsement
and identification of the payee or endorsee. Checks
drawn in favor of the government in payment of any
such indebtedness shall likewise be accepted by the
officer concerned. At no instance should money in
the hands of the CO be utilized for the purpose of
cashing private checks; and j) Under such rules and
regulations as the COA and the Department of
Finance (DOF) may prescribe, the Treasurer of the
Philippines and all AGDB shall acknowledge receipt of
all funds received by them, the acknowledgement
bearing the date of actual remittance or deposit and
indicating from whom and on what account it was
received.
3. Discuss when revenues are accrued to the General
fund or Special, Fiduciary or Trust Funds.
Answer: All revenues (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, unless otherwise
specifically provided by law.
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
93
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.
4. Identify and differentiate the sources of revenue of
NGAs.
Answer: The sources of revenues of NGAs are a)
exchange and b) non-exchange transactions.
Exchange transactions are transactions in which
one entity receives assets or services, or has
liabilities extinguished, and directly gives
approximately equal value (primarily in the form
of cash, goods, services, or use of assets) to
another entity in exchange.

Non-exchange transactions are transactions in

which an entity either receives value from another
entity without directly giving approximately equal
value in exchange, or gives value to another entity
without directly receiving approximately equal value
in exchange.

5. How are exchange and non-exchange transactions

recognized and measured?
Answer: Revenue from exchange transaction shall be
measured at fair value of the consideration received
or receivable and it shall be recognized when it is
probable that future economic benefits or service
94
potential will flow to the entity and these benefits
can be measured reliably.
On the other hand, the cash basis of accounting shall
be applied by all government agencies in the
recognition of revenue from non-exchange
transaction until a reliable model of measurement of
this revenue is developed. Revenue from non-
exchange transactions shall be measured at the
amount of the increase in net assets recognized by
the entity, unless it is also required to recognize a
liability. Where a liability is recognized and
subsequently reduced, because the taxable event
occurs, or a condition is satisfied, the amount of the
reduction in the liability will be recognized as
revenue.

6. Identify the sources of revenue of NGAs under

exchange and non-exchange transactions.
Answer: Revenues received by the NGAs from
exchange transactions are derived from the a)
sale of goods or provisions of services to third
parties or to other NGAs and b) use by other
entity of assets yielding interest, royalties and
dividends or similar distributions while revenue
of the NGAs from non-exchange transactions are
derived mostly from taxes, gifts and donations,
goods in kind and fines and penalties.
7. Discuss what a Dishonored Check is.

95
Answer: A check is dishonored either by non-
payment or non-acceptance.
Dishonor by non-payment occurs when (a) the
check is duly presented for payment and payment
is refused or cannot be obtained; or (b)
presentment is excused and the check is overdue
and unpaid.
Dishonor by non-acceptance happens when (a) the
check is duly presented for acceptance, and such
an acceptance as is prescribed by law is refused or
cannot be obtained; or (b) presentment for
acceptance is excused and the check is not
accepted.
A dishonored check may also be defined as a
check paid to the agency that was dishonored by
the AGDB due to “Drawn Against Insufficient Fund
(DAIF)” or “Drawn Against Uncleared Deposits
(DAUD).”
8. How is Cash Shortage/Overage of Disbursing
Officer accounted for by NGAs?
Answer: 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

96
despite demand in writing by the Auditor shall be
taken up as receivable from the Disbursing Officer.
9. Define and provide the accounting treatment for
Cancelled Checks.

Answer: Checks may be cancelled when they become

a) stale, b) voided or c) spoiled. The depository bank
considers a check stale, if it has been outstanding for
over six months from date of issue or as prescribed.
A stale, voided or spoiled check shall be marked
cancelled on its face and reported as follows: a)
Voided, spoiled or unclaimed stale checks with the
Cashier shall be reported as cancelled in the List of
Unreleased Checks that will be attached to the RCI
(report or registry of checks issued) and b) New
checks may be issued for the replacement of
stale/spoiled checks in the hands of the payees or
holders in due course, upon submission of the
stale/spoiled checks to the Accounting Division/Unit.
A certified copy of the previously paid DVs shall be
attached to the request for replacement. A JEV shall
be prepared to take up the cancellation. The
replacement check shall be reported in the RCI.
Answer to Multiple Choices (Chapter 6)
1. C
2. D
3. C
4. A
5. B
6. D
97
7. B
8. D
9. B
10. C
11. C
12. C
13. B
14. C
15. C
16. B
17. A
18. A
19. D
20. B
Chapter 7 – Trial Balance, Financial Reports
and Statements
Questions & Answers
1. Discuss the purpose of Financial Statements.

98
Answer: The purpose of general purpose
Financial statements is 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 a)
to provide information useful for decision
making, and b) to demonstrate the
accountability of the entity for the resources
entrusted to it.
General purpose financial statements can also have
a predictive or prospective role, providing
information useful in predicting the level of resources
required for continued operations, the resources that
may be generated by continued operations, and the
associated risks and uncertainties.

2. Who is/are responsible for the preparation of

Financial Statements?
Answer: The responsibility for the preparation of the
FSs rests with 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 for individual
entity/department FSs; and for department/entity FSs
99
as a single entity, the responsibility for the
preparation of the FSs rests with the head of the
entity/department COf jointly with the head of the
finance unit.
3. Define what a Statement of Management
Responsibility is.
Answer: A The Statement of Management
Responsibility for Financial Statements shall
serve as the covering letter in transmitting the
entity financial statements to the COA, and
other regulatory agencies and other entities.
It shows the entity’s responsibility for the
preparation and presentation of the financial
statements.
4. Enumerate and explain briefly the Components of
General Purpose Financial Statements

Answer: A complete set of financial statements

(condensed and by fund cluster) to be submitted by
an entity shall include the following:

a) Statement of Financial Position - is a

formal statement which shows the financial
condition of the entity as at a certain date. It
includes information on the three elements of
financial position, namely, assets, liabilities
and equity. The Statement of Financial
Position shall be presented in comparative,
detailed and condensed format.
100
b) Statement of Financial Performance -
shows the results of operation/performance
of the entity at the end of a particular period.
All items of revenue and expense recognized
in a period shall be included in surplus or
deficit unless a PPSAS requires otherwise.
c) Statement of Changes in Net
Assets/Equity - The Statement of Changes
in Net Assets/Equity shows the changes in
equity between two accounting periods
reflecting the increase or decrease in the
entity’s net assets during the year.
d) Statement of Cash Flows - summarizes the
cash flows from operating, investing and
financing activities of an entity during a given
period. It identifies the sources of cash
inflows, the items on which cash was
expended during the reporting period, and
the cash balance as at the reporting date.
Cash flow information provides users of
financial statements with a basis to assess (a)
the ability of the entity to generate cash and
cash equivalents, and (b) the needs of the
entity to utilize those cash flows.
e) Statement of Comparison of Budget and
Actual Amounts – A separate additional
financial statement for comparison of budget
and actual amounts shall be prepared since

101
 the financial statements and budget of NGAs
are not on the same accounting basis.

f) Notes to the Financial Statements -

comprising a summary of significant
accounting policies and other explanatory
notes. Notes to financial statements are
integral parts of the financial statements.
Notes provide additional information and help
clarify the items presented in the financial
statements. It provides narrative description
or disaggregation of items in the financial
statements and information about them that
do not qualify for recognition.
5. Identify and discuss briefly the qualitative
characteristics of Financial Statements.
Answer: An entity shall present information including
accounting policies in a manner that meets the
following qualitative characteristics enumerated in
PPSAS 1:

a. Understandability – information is
understandable when users might reasonably
be expected to comprehend its meaning. For
this purpose, users are assumed to have a
reasonable knowledge of the entity’s activities
and the environment in which it operates, and
to be willing to study the information.
Information about complex matters should not
be excluded from the financial statements
102
 merely on the grounds that it may be too
difficult for certain users to understand.
b. Relevance – information is relevant to
users if it can be used to assist in evaluating
past, present or future events or in confirming,
or correcting, past evaluations. In order to be
relevant, information must also be timely.
c. Materiality – the relevance of
information is affected by its nature and
materiality. Information is material if its
omission or misstatement could influence the
decisions of users or assessments made on the
basis of the financial statements. Materiality
depends on the nature or size of the item or
error, judged in the particular circumstances of
its omission or misstatement.

d. Timeliness – the usefulness of

financial statements is impaired if they are not
made available to users within a reasonable
period after the reporting date. Ongoing factors
such as the complexity of an entity’s operations
are not sufficient reason for failing to report on
a timely basis. More specific deadlines are dealt
with by legislation and regulations in many
jurisdictions.

If there is an undue delay in the reporting of

information, it may lose its relevance. To
provide information on a timely basis, it may
103
 often be necessary to report before all aspects
of a transaction are known, thus impairing
reliability. Conversely, if reporting is delayed
until all aspects are known, the information
may be highly reliable but of little use to users
who have had to make decisions in the interim.
In achieving a balance between relevance and
reliability, the overriding consideration is how
best to satisfy the decision-making needs of
users. (PPSAS 1)

e. Reliability – reliable information is free

from material error and bias, and can be
depended on by users to represent faithfully
that which it purports to represent or could
reasonably be expected to represent.
f. Faithful representation – information
to represent faithfully transactions and other
events, it should be presented in accordance
with the substance of the transactions and other
events, and not merely their legal form.
g. Substance over form – if information is
to represent faithfully the transactions and
other events that it purports to represent, it is
necessary that they be accounted for and
presented in accordance with their substance
and economic reality, and not merely their legal
form. The substance of transactions or other
events is not always consistent with their legal
form.
104
h. Neutrality – information is neutral if it
is free from bias. Financial statements are not
neutral if the information they contain has been
selected or presented in a manner designed to
influence the making of a decision or judgment
in order to achieve a predetermined result or
outcome.
i. Prudence – is the inclusion of a degree
of caution in the exercise of the judgments
needed in making the estimates required under
conditions of uncertainty, such that assets or
revenue are not overstated and liabilities or
expenses are not understated. However, the
exercise of prudence does not allow, for
example, the creation of hidden reserves or
excessive provisions, the deliberate
understatement of assets or revenue, or the
deliberate overstatement of liabilities or
expenses, because the financial statements
would not be neutral and, therefore, not have
the quality of reliability.
j. Completeness – the information in
financial statements should be complete within
the bounds of materiality and cost.
k. Comparability – information in
financial statements is comparable when users
are able to identify similarities and differences
between that information and information in
other reports. Comparability applies to the
105
 comparison of financial statements of different
entities and comparison of the financial
statements of the same entity over periods of
time. An important implication of the
characteristic of comparability is that users
need to be informed of the policies employed in
the preparation of financial statements,
changes to those policies, and the effects of
those changes. Because users wish to compare
the performance of an entity over time, it is
important that financial statements show
corresponding information for preceding
periods.
6. What are information that needs to be disclosed in
the Notes to Financial Statements?
Answer: The Notes to Financial Statements should
contain the following:
a. a statement of compliance with
PPSASs;

b. summary of significant accounting

policies adopted and followed by the reporting
entity shall include:
i. the measurement basis (or
bases) used in preparing the financial
statements;

106
 ii. the extent to which the entity has
applied any transitional provisions in any
PPSAS; and
iii. the other accounting policies
used that are relevant to an understanding of
the financial statements;
c. supporting information for items
presented on the face of the Statement of
Financial Position, Statement of Financial
Performance, Statement of Changes in Net
Assets/Equity or Statement of Cash Flows, in the
order in which each statement and each line
item is presented; and
d. additional information required by
PPSAS that is not shown on the face of the
financial statements but is relevant to an
understanding of any of them which includes
the following:

i. disclosure that the budgeted amounts have

not been exceeded. If any budgeted amounts
or appropriations have been exceeded or
expenses incurred without
appropriation/allotment, then details shall be
disclosed; (Par. 24 (b) PPSAS 1)
ii. nature and extent of prior period errors;
(PPSAS 3)

107
 iii. events after the reporting date that have a
material effect on the financial statements;
(PPSAS 14)
iv. contingent liabilities (PPSAS 19), and
unrecognized contractual commitments;
v. related party disclosure (PPSAS 20); and
vi. non-financial disclosures, e.g., the entity’s
financial risk management objectives and
policies. (PPSAS 15)
7. What are the Events After the Reporting Date?
Answer: Events after the reporting date are those
events, both favorable and unfavorable, that occur
between the reporting date and the date when the
financial statements are authorized for issue.
Two types of events can be identified:
a. Adjusting events after the reporting
date – those that provide evidence of conditions
that existed at the reporting date; and
b. Non-adjusting events after the
reporting date – those that are indicative of
conditions that arose after the reporting date.
(Par. 5, PPSAS 14)
The reporting date is set every end of the calendar
year while the date on which the financial
statements are authorized for issue is the date
when the Statement of Management’s
108
 Responsibility is approved by the Chief Executive
or his authorized representative and the Head of
Finance Department.
8. Is change of Accounting Policy allowed for
government agencies?

Answer: Change is not allowed in PPSAS unless the

change is a) required by PPSAS or b) results in the
financial statements that providing reliable and more
relevant information about the effects of
transactions, other events and conditions on the
entity’s financial position, financial performance, or
cash flows.
9. Differentiate current period errors from prior
period errors and provide the accounting
treatment for each item.
Answer: Current period errors – are errors committed
and discovered within the same period. It shall be
corrected by an adjusting entry, within the same year
before the financial statements are authorized for
issue.
Prior period errors – are omissions from, and
misstatements in, the entities’ financial statements
for one or more prior periods arising from failure to
use, or misuse of reliable information that was
available when financial statements for those periods
were authorized for issue and could reasonably be
expected to have been obtained and taken into
account in the preparation and presentation of those
109
financial statements. An entity shall correct material
prior period errors retrospectively in the first set of
financial statements authorized for issue after their
discovery by restating the comparative amounts for
prior period(s) presented in which the error occurred
or if the error occurred before the earliest prior
period presented, restating the opening balances of
assets, liabilities and net assets/equity for the
earliest prior period presented. (Par. 47, PPSAS 3).
The correction of a prior period error is excluded from
the computation of income and expense for the
period in which the error is discovered.
10. What are the limitations for the retrospective
restatement of prior period errors?
Answer: The limitations of retrospective restatement
of prior period errors are as follows:
a. A prior period error shall be corrected by
retrospective restatement, except to the extent
that it is impracticable to determine either the
period specific effects or the cumulative effect
of the error. (Par. 48, PPSAS 3)
b. When it is impracticable to determine the
period-specific effects of an error on
comparative information for one or more prior
periods presented, the entity shall restate the
opening balances of assets, liabilities, and net
assets/equity for the earliest period for which
retrospective restatement is practicable (which
may be the current period). (Par. 49, PPSAS 3)
110
 c. When it is impracticable to determine the
cumulative effect, at the beginning of the
current period, of an error on all prior periods,
the entity shall restate the comparative
information to correct the error prospectively
from the earliest date practicable. (Par. 50,
PPSAS 3)
11. What are Interim Financial Statements?
Answer: Interim Financial Statements are Financial
Statements that are required to be prepared at any
given period or at a financial reporting period without
closing the books of accounts. The interim financial
statements shall be prepared employing the same
accounting principles used for annual reports.
Adjusting and closing journal entries shall be
prepared. However, only the adjusting journal entries
are recognized in the books of accounts. To facilitate
the preparation of the interim financial statements,
the use of the worksheet is recommended.
12. Differentiate Trial Balance from Pre-closing Trial
Balance and Post-closing Trial Balance.
Answer: Trial Balance (TB) is a list of all the GL
accounts and their balances at a given time. The
Pre-Closing Trial Balance shall be prepared after
posting the AJE in the GJ and the same to the GL. It
shows the adjusted balances of all accounts as at a
given period. This is also described/termed as the
Adjusted Trial Balance. The Post-Closing Trial
111
Balance shall be prepared at the end of the year
after preparing and posting the closing journal
entries in the GJ and posting to the GL. Since
revenue and expense accounts have been closed
out, the only accounts with balances are balance
sheet or real accounts.
Answer to Multiple Choices (Chapter 7)
1. C 6. B 11. A 16. D
2. C 7. C 12. C 17. C
3. B 8. B 13. D 18. B
4. C 9. C 14. A 19. A
5. D 10. D 15. D 20. B

112
 21. Suggested Answers to Problems (Chapter
7)
22.
23. 1.
24. Capital 25. 26. 27. 14,25
outlay 0,000
28. MOOE 29. 30. 31. 11,40
0,000
32. Total 33. 34. 35. 15,65
NCA 0,000
received
36. Less 37. 38. 39.
payments:
40. Left 41. 6,50 42. 43.
wing 0,000
constructio
n
44. Right 45. 2,00 46. 47.
wing 0,000
repainting
48. Total 49. 8,50 50. 51.
0,000
52. Less: 53. 595, 54. 7,90 55.
W/tax (5% 000 5,000
+ 2%)
56.
57. 58. 59.
60. 62. 64. 65.
Purchase 63. 3,00
of furniture 0,000
and
61.
fixtures
 and
equipment
66. 67. 2,50 68. 69.
Purchase 0,000
of office
supplies
70. Total 71. 5,50 72. 73.
0,000
74. Less: 75. 330, 76. 5,17 77. 13,07
W/tax (5% 000 0,000 5,000
+ 1%)
78. Cash 79. 80. 81. 2,575,
balance 000
82.
83. 2.
84. Subsidy from national 85. 86.87. 52
government 0,000
88. Less: Unutilized NCA 89. 10 90. 91.
0,000
92. Refund of excess 93. 5,0 94.95. 10
cash advance 00 5,000
96. Balance 97. 98.99. 41
5,000
100. Less Expenses: 101. 102. 103.
104. Salaries and wages 105. 15 106. 107.
0,000
108. PERA 109. 50, 110. 111.
000
112. Retirement and life 113. 18, 114. 115.
insurance premiums 000
116. Pag-IBIG premiums 117. 2,5 118. 119.
00
 120. Philhealth premiums 121. 4,5 122. 123.
00
124. Travelling expenses - 125. 13, 126. 127.
local 000
128. Electricity expenses 129. 12, 130. 131.
000
132. Telephone expenses 133. 10, 134. 135.
000
136. Rent/lease expenses 137. 25, 138. 139.
000
140. Office supplies 141. 20, 142. 143.
expenses 000
144. Depreciation - 145. 15, 146.
147. 32
Machinery 000 0,000
148. Excess of income over 149. 150.
151. 95,
expenses 000
152.
153. 3.
154. Current assets 155. 500,
000
156. Property, plant and 157. 800,
equipment 000
158. Total assets 159. 1,30
0,000
160. Less: Current liabilities 161. 200,
000
162. Accumulated 163. 1,10
surplus/Deficit 0,000
164.
165. 4.
166. Excess of income over 167. 50
expenses 0,000
168. Depreciation - 169. 5,0
Machinery 00
170. Increase in accounts 171. 30,
payable 000
172. Increase in due to BIR 173. 5,0
00
174. Increase in due from 175. (55
NGA ,000)
176. Increase in office 177. (25
supplies inventory ,000)
178. Cash provided by 179. 46
operating activities 0,000
180. Chapter 8 – Bank Reconciliation
181.
182. Questions & Answers
183.
1. Define bank reconciliation.
184.
185. Bank reconciliation is the settlement of
differences contained in the bank statement and
the cash account in the agency’s/entity’s books. It
compares the bank balance with the entity balance
and explains any differences.

2. According to the GAM, what are the objectives of

the Bank Reconciliation Statement (BRS)?
186.
187. Answer: According to GAM, the Bank
Reconciliation Statement (BRS) shall be prepared
in order to:
a. Check correctness of both the bank’s and
agency’s/entity’s records,
b. Serve as a determent to fraud, and
c. Enable the agency/entity or bank to take
up charges or credits recognized by the
bank or agency/entity but not yet known to
the agency/entity or bank.
188.
3. Explain briefly the importance of using a bank as a
depository and clearing house for checks issued
and received by an entity.
189.
190. Answer: When an agency/entity uses a
bank as a depository and clearing house for checks
issued and checks/cash received, the use of a
 bank, among others, facilitates the control of cash,
because it creates a double record of all bank
transactions – one by the agency/entity and one by
the bank.
191.
4. What are the two accounts in Revised Chart of
Accounts of National Government Agencies
covered by this chapter for purposes of bank
reconciliation? Enumerate the components of each
account.
192.
193. Answer: The bank reconciliation statement is
prepared for a) AGDB accounts and b) Treasury
account for Modified Disbursement System (MDS)
accounts.
194.
195. AGDB accounts comprised of Cash in Bank
– Current Accounts; while the Treasury account for
MDS accounts comprised of: a) Cash – MDS,
Regular; b) Cash – MDS, Special Accounts; and c)
Cash – MDS, Trust.
196.
5. Explain briefly the reconciliation procedure as
provided by the GAM.
197.
198. Answer: The Chief Accountant/Designated Staff
shall reconcile the monthly bank statement
together with the paid checks, debit
memorandum, like bank service charge, and credit
memorandum, like interest earned, from
Government Servicing Banks. In other words, in
reconciling the bank account, it is customary to
reconcile the balance per books and balance per
bank to their adjusted cash balances.
 199.
200. The monthly BRS shall be prepared by the Chief
Accountant/Designated Staff for each of the bank
accounts maintained by the agency/entity using the
Adjusted Balance Method. Under this method, the
book balance and the bank balance are brought to an
adjusted cash balance that must appear in the
Statement of Financial Position.
201.
6. Enumerate the reconciling items for Cash – MDS
accounts.
202. Cash – Modified Disbursement System
Accounts
203.
204. Bank
 Notice of Cash Allocation (NCA) received
by the entity but not yet recognized by
the bank
 Lapsed/unused NCA
 Outstanding checks
 Outstanding Authority to Debit Accounts
(ADA)
 Errors committed by the bank
205.
206. Agency/Entity
 NCA received by the bank but not yet
recognized by the agency/entity
 Cancelled checks
 Lapsed NCAs not yet adjusted by the
agency/entity
 Bank charges
 Errors committed by the agency/entity
207.
7. Enumerate the reconciling items for Authorized
Government Depository Bank accounts.
208.
209. Answer: Authorized Government Depository
Bank Accounts
210.
211. Bank
 Unrecorded deposit/deposit in transit
 Outstanding checks
 Errors committed by the bank
212.
213. Agency/Entity
 Deposit per bank statement but not yet
recorded in the books.
 Cancelled checks
 Returned check deposit
 Bank charges
 Errors committed by the agency/entity
214.
8. Differentiate the credit memorandum from debit
memorandum.
215.
216. Answer: Credit memorandum is a document
issued by the bank informing an increase in the
depositor’s (agency’s/entity’s) account, such as
previous bank debit errors and collections directly
deposited to the agency’s/entity’s bank account.
While, debit memorandum is a document issued
by the bank informing a decrease in the account,
such as previous bank credit errors or service
charges and fees.
217.
218.
 219. Answers to Multiple Choice (Chapter 8)
220.
1. C – Outstanding checks
2. C – Notice of Cash Allocation
3. B – Bank statement
4. B – Cancelled checks
5. D – Credit memorandum
6. A – Debit memorandum
7. D – All of the above
8. E – A, B, and C
9. E – Chief Accountant or Designated Staff
10. B – Chief Accountant
221.
222. Chapter 9 – Accounting for Local
Government Units
223.
224. Questions & Answers
225.
226. 1. Enumerate and explain the three separate
books that shall be maintained by local
government units as required under sections 308
to 310 of the local Government Code.
227.
228. Answer: The three separate books that shall be
maintained by local government units under
Section 308 – 310 of the local government code
are:
a. General Fund
229.
230. This consists of monies and resources
not accruing to any other fund and shall be
available for payment of expenditures,
obligations or purposes not specifically
declared by law as chargeable to or payable
 from, any other fund, though transfers of
monies or resources therefrom to other funds
of local government may be made by proper
appropriation.
231.
b. Special Education Fund
232.
233. This consists of the respective shares
of provinces, cities and municipalities in the
proceeds of the additional one percent (1%)
tax on the assessed value of real property for
education purposes under the Real Property
Tax Code. This amount accruing to special
education fund shall be automatically
released to the local schools.
234.
c. Trust Fund
235.
236. This consists of private and public
monies received, by local government or of a
local government official as trustee, agent or
administrator, as a guaranty for the
fulfillment of some obligations. A trust fund
shall only be used for the specific purpose for
which it was intended.
237.
238. 2. Enumerate the special accounts in the
general fund of local government unit that shall be
supported by subsidiary ledgers.
239.
240. Answer: Special accounts maintained in the
General Fund that shall be supported by subsidiary
ledgers are the following:
241.
 a. Public utilities and other economic
enterprises;
b. Loans, interests, bonds issued, and
other contributions for specific purposes;
c. Development projects funded from the
Share in the Internal Revenue Collections;
and
242. d. Other special accounts, which may be
created by law or ordinance.
243. 3. Identify and discuss the two different kinds
of books of accounts to be used by the local
government unit.
244.
245. Answer: The accounting unit of the Local
Government Units shall maintain the following
books of accounts:
246.
247. Journals
1. Cash Receipt Journal (CRJ)
2. Cash Disbursements Journal (CDJ)
3. Check Disbursements Journal (CkDJ)
4. General Journal (GJ)
248.
249. Ledgers
1. General Ledger (GL)
2. Subsidiary Ledgers:
a. Cash
b. Receivables
c. Inventories
d. Investments
e. Property, Plant and Equipment
f. Liabilities
g. Income
 h. Expenses
250.
251. In addition to the preceding records, the
treasurers and disbursing officers, however, shall
maintain their respective cash records, such as:
252.
1. Cash book – Cash in Treasury
2. Cash book – Cash in Bank
3. Cash book – Cash Advances
253.
254. 4. What are the two parts of the local
government budget?
255.
256. Answer: The local government budget primarily
consists of two parts, namely:
257.
1. The estimates of income certified collectible
by the treasurer; and
258.
2. The total appropriations covering the current
operating expenditures and the capital
outlays.
259.
260. 5. Enumerate the three main sources of
income of local government units.
261.
262. Answer: The main sources of income of local
government units are as follows:
263.
1. Tax revenues, fees and charges.
2. Share from Internal Revenue Collections.
3. Share from National Wealth.
264.
 265. The sources of income are further
classified into general income accounts and
specific income accounts.
266.
267. 6. Enumerate and explain the methods of
accounting for income.
268.
269. Answer: The following accounting methods shall
be adopted in recording income:
270.
1. Accrual Method – Accrual method of
accounting shall be used to record Share
from Internal Revenue Collections in the
books of accounts. Upon receipt of the
Notice of Funding Check Issued from the
Department of Budget and Management,
Share from Internal Revenue Collections shall
be taken up as Due from National
Government Agencies and credited to Share
from Internal Revenue Collections. However,
Cash in Bank account shall be debited upon
receipt of Bank Credit Advice as to receipt of
the Share from Internal Revenue Collections
regardless of whether or not the Notice of
Funding Check Issued has been received
from the Department of Budget and
Management.
271.
2. Modified Accrual Method – Modified accrual
method of accounting shall be used for real
property taxes; that is, Real Property Tax
Receivable and Special Education Tax
Receivable shall be established at the
 beginning of the year. This in view of the
need to record in the books the actual
receivables from said taxes and not mere
income estimates from real property taxes.
272.
3. Cash Basis – Cash basis of accounting shall
be used for all other taxes, fees, charges and
other revenues.
273.
274. 7. Give at least four examples of other
receipts that may be recognized by the local
government units. Explain briefly.
275.
276. Answer: Other receipts of the local government
units shall be comprised of, but not limited to, the
following:
277.
1. Borrowings – Borrowings are proceeds of
repayable obligations, generally with
interest from the bank, national agency,
another local government unit, and private
sector. All borrowings incurred shall be
recorded directly to the appropriate liability
accounts.
278.
2. Sale of Property, Plant and Equipment – Sale
of property, plant and equipment refers to
the proceeds from the sale of fixed assets,
such as: land, buildings, equipment,
furniture and fixtures, etc. Similar to
commercial accounting, the applicable asset
accounts shall be cancelled from the books
upon disposal.
279.
 3. Refund of Cash Advances – Cash advances
for official travel shall be recorded as a
receivable from the concerned official or
employee. Refunds made shall be credited
to the receivable account previously
recorded. Cash advances for salaries and
wages shall be recorded as debits to the
account Cash Disbursing Officers, and any
refund shall be credited to the same
account.
280.
4. Receipt of Performance/Bidders’ Bonds –
Similar to national government accounting,
performance bond posted by contractor or
supplier to guaranty full and faithful
performance of their work may be in form of
cash, certified check or surety. Performance
bond in cash or certified check shall be
acknowledged through the issuance of
official receipt and recorded in the books by
the accountant using a Journal Entry
Voucher. In case of surety bond, this is
recognized by an acknowledgment receipt
to be issued by the authorized official.
281.
282. 8. Enumerate the reasons behind the
adoption of special accounts of local government
units.
283.
284. Answer: Accounting procedures for the
operations of the special accounts are adopted for
the following purposes:
285.
 1. To determine whether the income generated
by the public utilities or economic enterprises
are sufficient to meet their respective
operating costs.
286.
2. To provide adequate information as to the
assets, liabilities and equity of each special
account.
287.
288. 9. What are the sub-codes for the special
accounts?
289.
290. Answer: The following shall be the sub-codes for
the special accounts:
291.
292. SPECIAL ACCOUNTS 293. S
UB-
COD
E
294. General Fund Proper 295. 0
1
296. Market Operation 297. 0
2
298. Slaughterhouse Operation 299. 0
3
300. Waterworks System 301. 0
4
302. Electricity, Light and Power 303. 0
System 5
304. Telephone System 305. 0
6
306. Toll Roads, Bridges and Ferries 307. 0
7
308. Transportation System 309. 0
8
310. Hospital 311. 0
9
312. School 313. 1
0
314. Sport Center 315. 1
1
316. Recreational Center 317. 1
2
318. Housing Projects 319. 1
3
320. Convention/Conference Center 321. 1
4
322. Parking Space 323. 1
5
324. Ice Plant 325. 1
6
326. Cemetery 327. 1
7
328. 20% Development Fund 329. 1
8
330. 80% Share from Energy 331. 1
Sources 9
332. Share from Development of 333. 2
National Wealth 0
334. Loans 335. 2
1
336. Interests 337. 2
2
338. Bond Issues 339. 2
 3
340.
341. 10.Enumerate and explain the classification of
supplies or property.
342.
343. Answer: Supplies or property shall have the
following classification:
344.
a. Expendable Supplies or Property
345.
346. These are articles, which are normally
consumed in use within one year or
converted in the process of manufacture or
construction, or those having a life
expectancy of more than one year but which
shall have decreased substantially in value
after being put to use for only one year.
Examples are stationery, fuel, spare parts,
etc. Expendable supplies are part of the
maintenance and operating expenses of the
Local Government Unit.
347.
348. b. Non-expendable Supplies or Property
349.
350. These are articles, which are not
consumed in use and ordinarily retain their
original identity during the period of use,
whose serviceable life is more than one year
and which add to the assets of the
government. Examples are furniture, fixtures,
transport equipment, etc. Non-expendable
supplies or property are capital outlays of
LGU.
351.
352. c. Non-Personnel Services
353.
354. These articles include, but not limited
to repairing, cleaning, redecorating, and
furnishing of necessary repair parts or other
supplies as part of the services performed.
Examples are contractual services like
trucking, hauling, janitorial, security and
related services. Non-Personnel services are
charged to maintenance and operating
expenses of LGU.
 355. Answers to Multiple Choice
(Chapter 9)
356.
357. 1. D
358. One of the basic features of the Local
Government Unit is the one-fund concept.
However, separate fund accounting shall be done
when specifically required by law or by a donor
agency or when otherwise necessitated by
circumstances subject to prior approval of the
Commission. As required under Section 308, 309
and 310 of the Local Government Code, separate
books shall be maintained for the General Fund,
Special Education Fund and Trust Fund,
respectively.
359.
360. 2. C
361. Journal Entry Voucher (JEV) shall be used
for all the transactions of the government,
whether cash receipts, cash/check disbursements,
or non-cash transactions. It shall be prepared by
the Accounting Unit based on transaction
documents presented and shall be the basis of
recording the transactions in the appropriate
journals.
362.
363. 3. B
364. Cash receipt journal shall be used to record
all collections and deposits reported during the
month for the Regular Agency books. The sources
of entries are the journal entry vouchers, which
shall be prepared based on the Reports of
Collections and Deposits.
365.
366. 4. A
367. The accounting unit of local government
units shall maintain the books of accounts, such
as, journal and ledgers.
368.
369. 5. B
370. The treasurers and disbursing officers shall
maintain their respective cash records, such as,
Cash book – Cash in Treasury, Cash book – Cash in
Bank, and Cash book – Cash Advances.
371.
372. 6. C
373. Check disbursements journal shall be used
to record check payments made by the cashier or
disbursing officers. Recording to this journal shall
be based on the JEVs supported with paid
disbursement vouchers and duplicate copies of
checks listed in the Report of Checks Issued
submitted by the Cashier/Disbursing Officers.
374.
375. 7. A
376. In order to monitor allotments received,
obligations incurred, NCAs received and utilized,
public infrastructures, dormant accounts, accounts
written off, loans and grants, among other,
registries shall be maintained by the concerned
government agencies.
377.
378. 8. A
379. Section 61 of the NGAS manual provides
that liquidation report shall be prepared by the
concerned employees/officers to liquidate cash
advances for travel or for other purposes except
 those cash advances granted to Regular/Special
Disbursing Officers.
380.
381. 9. B
382. Section 53 of the NGAS manual provides
that Requisition and Issue Slip shall be used to
request for supplies and materials that are carried
on stock.
383.
384. 10. C
385. Grants and donations coming from foreign
funding institutions, other levels of government
and private institutions/individuals for specific
projects/purpose shall accrue to the Trust Fund.
The equity of the local government unit on
projects under a trust agreement shall also accrue
to the Trust Fund.
386.
387. 11. A
388. Under the NGAS (2002), Prior Period
Adjustments account is used to record the
adjustment of prior years’ transaction affecting
revenue and expenses and other adjustments
which increase or decrease the Retained Operating
Surplus of the government. The year-end debit or
credit balance of this account is closed to Retained
Operating Surplus account. However, the Revised
Chart of Accounts of COA Circular 2013-002 dated
30 January 2013 no longer recognizes the Prior
Period Adjustment account. Instead, the prior
period adjustment is directly credited to the
Government Equity account.
389.
 390. NOTE: The COA Circular 2013-002 dated
January 30, 2013, Adoption of the Revised Chart of
Accounts for National Government Agencies,
provides the revised chart of accounts for National
Government Agencies only. Likewise, the COA
Circular No. 2014-003 dated April 15, 2014 also
provides that the Chart of Accounts of GOCCs and
Local Government Units (LGUs) and its conversion
to the New Chart of Accounts shall be covered by
separate guidelines; thus, pending the new
circulars for Local Government Units, current
circulars for accounting for LGU shall be used.
391.
392. 12. C
393. Upon receipt of the Notice of Funding
Check Issued from the Department of Budget and
Management, Share from Internal Revenue
Collections shall be taken up as Due from National
Government Agencies and credited to Share from
Internal Revenue Collections. However, Cash in
Bank account shall be debited upon receipt of
Bank Credit Advice as to receipt of the Share from
Internal Revenue Collections regardless of whether
or not the Notice of Funding Check Issued has
been received from the Department of Budget and
Management.
394.
395. 13. D
396. Approval of disbursements by the Local
Chief Executive himself shall be required whenever
local funds are disbursed, except for regularly
recurring administrative expenses such as:
 payrolls for regular or permanent employees,
expenses for light, water, telephone and telegraph
services, remittances to government creditor
agencies and others, where the authority to
approve may be delegated.
397.
14. A
398. The periodic physical count of inventory of
supplies or property every semester shall be
reported in the Report of the Physical Count of
Inventory (RCPI) and shall be submitted to the
auditor not later than July 31 and January 31 of
each year for the first and second semesters,
respectively. While the physical count of property,
plant and equipment by type shall be made
annually and reported on the Report on the
Physical Count of Property, Plant and equipment
(RPCPPE) and shall be submitted to the auditor not
later than January 31 of each year.
399.
400. 15. D
401. The transfer or issuance of the equipment
to the Office of the Municipal Engineer is
recognized only by using the Acknowledgment
Receipt for the equipment.
402.
403. Chapter 10 – The New Barangay
Accounting System
404.
405. Questions & Answers
406.
407. 1. What are the basic features and policies of
the new barangay accounting system?
408.
409. Answer: The basic features and policies of the
new barangay accounting system are:
410.
411. a. Accounting Method
412.
413. The IPSASB’s Conceptual Framework deals
with concepts that apply to general purpose
financial reporting under the accrual basis of
accounting. Under this method, transactions
and other events are recognized in financial
statements when they occur and not only when
cash or its equivalent is received or paid.
Therefore, the transactions and events are
recorded in the accounting records and
recognized in the financial statements of the
periods to which they relate.
414.
415. The IPSASB has also issued a
comprehensive cash basis IPSASs that includes
mandatory and encouraged disclosures
sections. The cash basis IPSASs encourages an
entity to voluntary disclose accrual based
information, although its core financial
statements will nonetheless be prepared under
the cash basis of accounting.
416.
417. b. Recognition of Liability
418.
419. Liabilities shall be taken up only for goods
actually delivered and accepted or services
rendered or upon receipt of bills from
suppliers/creditors. Cash received to guaranty
faithful performance of an activity shall be
 recorded as a liability. Surety bonds shall not be
recorded in the books.
420.
421. c. Purchase of Supplies and Materials
and Small Items
422.
423. Purchase of supplies and materials and
small items with serviceable life of more than
one year, like stapler, puncher, ruler,
mechanical tools, etc., shall be directly charged
to expense account. Cost of transporting
supplies and materials to barangay shall be
charged to “Delivery Expense” account.
424.
425. d. Cash Advances
426.
427. Cash advance for payment of personnel
services shall be accounted for as “Advances for
Payroll”; while cash advance granted for travel
and other special time – bound undertaking
shall be accounted for as “Advances to Officers
and Employees”.
428.
429. e. Audit Disallowances
430.
431. Audit disallowances shall be recorded only
when they become final and executory.
432.
433. f. Barangay Accounts
434. Barangay accounts shall be kept within the
framework of the New Government Accounting
System (NGAS) chart of accounts.
435.
436. g. Processing of Transaction and
Recording in the Books
437.
438. Processing of transactions shall be done at
the barangay level; while recording in the books
through Journal Entry Voucher shall be done by
the City/Municipal accountant.
439.
440. The financial records (General Journal,
General Ledger, Subsidiary Ledger) of the
barangays shall be kept in the office of the
City/Municipal Accountant. Recording in the
barangay books shall be based on the reports
submitted by the Barangay Treasurer/Barangay
Record Keeper
441.
442. Reports and documents supporting entries
in the reports shall remain with the Barangay
Treasurer/Barangay Record Keeper in the
Barangay and shall be made available to the
Commission on Audit anytime for examination.
443.
444. h. Certified Registers
445.
446. In accordance with the New Barangay
Accounting System, the following certified
registers shall be used:
1. Cash Receipt Registers
2. Cash on Hand and in Bank Registers
3. Cash Disbursement Registers
4. Check Disbursement Registers
5. Petty Cash fund Registers
447.
448. i. Status if Appropriations,
Commitments and Balances
449.
 450. The Status of Appropriations,
Commitments and Balances of each barangay
under the city/municipality shall be consolidated
by the city/municipal Budget Officer.
451.
452. j. Trial Balance
453.
454. The two-money column trial balance shall be
used.
455.
456. k. Financial Statements
457. The New Barangay Accounting System
requires the preparation of the following
financial statements:
1. Balance Sheet (Detailed and Condensed)
2. Statement of Income and Expenses
(Detailed and Condensed)
3. Statement of Cash Flows (Direct Method)
4. Statement of Changes in Government
Equity
458.
459. The City/Municipal accountant shall furnish
the Sangguniang Barangay and the
Auditor/Audit Team Leader with financial
statements within thirty (30) days after the
close of each month.
460.
461. L. Schedules Supporting the Financial
Statements
462.
463. The following schedules supporting the
financial statements prepared by Barangays
shall be used
 1. Schedule of Public Infrastructures and
Reforestation Projects
2. Schedule of Accounts Payable
3. Schedule of Accounts Receivables
464.

465. m. E-NGAS
466.
467. Whenever possible, the use of the
Electronic New Government Accounting System
at the City/Municipality level is encourage to
facilitate the recording of barangay transactions
and to hasten the consolidation of all barangay
financial statements and reports.
468.
469. 2. Describe the barangay accounting system
plan.
470.
471. Answer: The Barangay Accounting System Plan
shows the accounting flow of barangay
transactions in the books maintained by the
City/Municipal accountant. It starts with the receipt
of the certified registers/reports from the Barangay
Record Keeper on or before the 5th day of the
following month, the recording of the barangay
financial transactions in the books of the original
and final entry and the ultimate conversion into
financial information as presented in the financial
statements. Presented in the Accounting System
Plan are the following:
1. Receipts and Deposits
2. Disbursements (Cash or Checks)
3. Public Infrastructures and Reforestation
Projects
 4. Registries of Public Infrastructures and
Reforestation Projects
472.
473. 3. What are the major financial transactions
of barangays? Explain briefly.
474.
475. Answer: The new Government Accounting
System for Barangays prescribes the following
major categories of financial transactions:
476.
a) Appropriations and Commitments
477.
478. Appropriations are amounts in the
annual or supplemental budget that are
authorized by the Sanggunian to be obligated
for the undertaking of a particular function,
program, activity or project. The approved
appropriations of barangays are covered by
General Appropriation Ordinance (GAO).
479.
480. Commitments are amounts
earmarked by the barangay arising from an
act of a duly authorized official, which binds
the barangay to the immediate or eventual
payment of money.
481.
b) Receipts and Deposits
482.
483. Receipts represent all collections in
form of cash and checks received by the
Barangay for a given period such as: share in
national taxes and revenues, Barangay taxes,
other revenues and other sources.
484.
 485. Deposits represent money or its
equivalent received by the bank for
safekeeping and for credit to a checking,
savings or time deposit account of an agency.
486.
487. The Barangay Treasurer shall be
responsible in handling collections of income
and other receipts of the Barangay and the
deposit of the same with Authorized
Government Depository Bank (AGDB), such
as: Development Bank of the Philippines,
Land Bank of the Philippines,
488. and Veterans Bank of the Philippines.
However, agencies may seek authority from
Monetary Board of the Banko Sentral ng
Pilipinas to designate other depository banks.
489.
c) Disbursements
490.
491. Disbursements refer to all cash/check
paid out during a given period for settlement
of government expenditures/payables. It also
represents the movement of cash from an
AGDB or from the Barangay
Treasurer/authorized disbursing officer to the
final recipient. Existing rules ands regulations
require that all disbursements of public funds
be supported by documents necessary to
prove their validity, propriety, and legality.
492.
d) Supplies and Materials, Property, plant and
Equi8pment, Public
Infrastructures/Reforestation Project
493.
494. Requisition, procurement, issuance,
physical inventory and loss of supplies and
materials are governed by existing
government rules and regulation. Except in
emergency cases, all procurement shall be
covered by Approved Procurement Program
as required in RA 9184. Procurement of
supplies shall be charged directly to
Maintenance and Other Operating Expenses
and shall be recorded using the appropriate
expense accounts. Supplies, inspected by
Inspection Committee, shall be accepted by
Barangay Treasurer, who will act as the
Property Officer of the barangay. The cost of
supplies and materials acquired through
purchase shall be based on the invoice cost.
495.
496. Similar with supplies and materials,
all procurement of property, plant and
equipment shall be in accordance with the
requirements of RA 9184, and shall be
insured with GSIS. All deliveries shall be
inspected by the Inspection Committee
headed by Barangay Treasurer with
designated kagawad as member, and shall be
accepted by the Barangay Treasurer, who
shall act as the property officer of the
barangay. Procurement of property, plant and
equipment and construction of public
infrastructures shall be charged against
appropriation of capital outlay and shall be
 recorded in Property, Plant and Equipment
Registry for control and monitoring purposes.
The cost of property, plant and equipment
acquired through purchase shall include the
purchase cost and expenses incurred in
bringing the asset to its intended location
and make it operational. The property, plant
and equipment shall be subject to
depreciation using the straight line method. A
residual value of ten percent (10%) of the
cost shall be provided. The estimated useful
life of the PPE as prescribed by COA shall be
used in computing the rate of depreciation.
Recipient of PPE shall be covered by Property
Acknowledgement Receipt. Any
unserviceable PPE shall be returned to the
Barangay Treasurer for the cancellation of the
Property Acknowledgement Receipt and shall
be reported in the Inventory and Inspection
Report of Unserviceable Property.
497.
498. Infrastructures and reforestation
projects which are for public use and not for
the exclusive use of the barangay are
considered public infrastructure/reforestation
projects. The cost of the projects and the
cumulative cost of repairs and maintenance
shall be monitored using the appropriate
registries such as, but not limited to:
1. Registry of Public Infrastructure – Roads,
highways and bridges
2. Registry of Public Infrastructure – Parks,
plazas and monuments
3. Registry of Reforestation Projects
499.
500. 4. What are the five funds to be recorded in
the Registry of Appropriations and Commitments
of barangays?
501.
502. Answer: The five funds to be maintained in the
Registry of Appropriations and Commitments of
barangays are:
503. 1. General Fund
504. 2. 20% Development Fund
505. 3. Calamity Fund
4. Sangguniang Kabataan Fund
5. Gender and Development Fund
506.
507. 5.Explain briefly the appropriations and
commitments transaction of barangays.
508.
509. Answer: Section 29, par 1 of the Constitution
provides that: No money shall be paid out of the
treasury except in pursuance of an appropriation
made by law. Laws, rules and regulations of the
government provide that all disbursements of
public funds, except those received for specific
purposes, shall be covered by an approved
General Appropriation Ordinance (GAO)
authorizing appropriation for the annual budget,
the expenditures items of which shall be in
accordance with the Philippine Government Chart
of Accounts under NGAS. Unless authorized by the
DBM and covered by subsequent Sangguniang
 Barangay Resolution approving the appropriation,
in no case shall commitments exceed the
approved appropriation.
510.
511. Charges (deductions) against the
appropriated funds shall be based on the
commitments made by the Barangay as shown in
the Disbursement Vouchers, Payroll for personnel
services, Contracts or Purchase Orders, and
Purchase Requests. Expenses for personnel
services, maintenance and other operating
expenses, and financial expenses shall be charged
against respective appropriation; while
investments, purchase of property, plant and
equipment, and construction of public
infrastructures and reforestation projects shall be
charged against appropriation for capital outlay.
512.
513. 6.Explain briefly the receipt and deposit
transaction of barangays.
514.
515. Answer:The Barangay Treasurer shall be
responsible in handling collections of income and
other receipts of the Barangay and the deposit of
the same with Authorized Government Depository
Bank (AGDB), such as: Development Bank of the
Philippines, Land Bank of the Philippines, and
Veterans Bank of the Philippines. However,
agencies may seek authority from Monetary Board
of the Banko Sentral ng Pilipinas to designate
other depository banks.
516.
 517. All collections shall be acknowledged by
the issuance of a pre-numbered Official Receipt or
its equivalent like Real Property Tax Receipt and
Community Tax Certificate subject to proper
custody, accountability and audit, which shall be
secured from the City/Municipal Treasurer. All
collections by the Barangay Treasurer for the
Barangay shall be reported in the Summary of
Collections and Deposits, and shall be deposited
with AGDB daily or not later than the following
banking day.
518.
519. 7. Enumerate the basic requirements
applicable to all classes of barangay
disbursement.
520.
521. Answer: Basic requirements applicable to all
classes of barangay disbursements are:
a) Existence of appropriation sufficient to cover
the expenses.
b) Legality of the expenses and in conformity with
rules and regulations.
c) Approval of the expenses by the Punong
Barangay.
d) Submission of documentary evidence to
establish the validity of the expenses.
522.
523. 8. What are the registries that shall be
maintained for barangay disbursements?
524.
525. Answer: The following registries shall be
maintained for barangay disbursements:
1. Check Disbursements Register
 2. Petty Cash Fund Register
3. Cash Disbursements Register
4. Cash on Hand and in Bank Register
526.
527. 9. What are the two modes of disbursement
applicable to barangays? Explain briefly.
528.
529. Answer: Modes of disbursements may be
classified into two, namely:
1.) By check - Commercial checks for
disbursements is covered by deposit with
AGDB. The check shall be signed by the
Barangay Treasurer and countersigned
Punong Barangay.
530.
2.) By cash (through Barangay
Treasurer/Accountable Officer)
531.
532. Cash advance was given to Barangay
Treasurer/Accountable Officer and shall be
used solely for payment of salaries,
honoraria, and other allowance due the
barangay officials and employees.
533.
534. Disbursements made by petty cash
custodian out of his petty cash fund. The
petty cash fund shall be maintained using the
imprest system.
535.
536. 10.Explain briefly the accounting for supplies
and materials.
537.
538. Answer: Requisition, procurement, issuance,
physical inventory and loss of supplies and
 materials are governed by existing government
rules and regulation. Except in emergency cases,
all procurement shall be covered by Approved
Procurement Program as required in RA 9184.
Procurement of supplies shall be charged directly
to Maintenance and Other Operating Expenses
and shall be recorded using the appropriate
expense accounts. Supplies, inspected by
Inspection Committee, shall be accepted by
Barangay Treasurer, who will act as the Property
Officer of the barangay. The cost of supplies and
materials acquired through purchase shall be
based on the invoice cost.
539.
540. Issuance of supplies and materials shall be
covered by an approved Requisition and Issue Slip.
The recipient of small items with more than one
year life shall be responsible for its upkeep during
the estimated life of the item and shall be issued
an Inventory Custodian Slip.
541.
542. 11. Enumerate the reports that shall be
prepared for property, plant and equipment of
barangays.
543.

544. Answer: The following reports shall be prepared

for Property, Plant and Equipment (PPE) of
barangays:
1. Inventory and Inspection Report of
Unserviceable Property
2. Report on the Physical Count of Property
3. Inspection and Acceptance Report
545.
546.
547. 12. What are the two types of trial balance?
548.
549. Answer: The two types of Trial Balance are:
1. Pre-Closing Trial Balance
550. It is prepared after all the adjusting entries
have been recorded in the General Journal and
the accounts are posted to the General Ledger
and respective Subsidiary Ledger.
551.
2. Post-Closing Trial Balance
552. It is prepared at year-end after all the
closing journal entries have been recorded in
the General Journal and the accounts are posted
to the General Ledger.
553.
554. 13. Enumerate the financial statements and
supporting schedules for barangays.
555.
556. Answer: The financial statements and
supporting schedules for barangays are:
1. Balance sheet
2. Statement of income and expenses
3. Statement of cash flows
4. Statement of net assets/equity
5. Notes to financial statements
6. Schedule of public infrastructures
7. Schedule of reforestation projects
8. Schedule of accounts receivable
9. Schedule of accounts payable
557.
558. 14.Enumerate the duties and responsibilities of
the city/municipal accountant.
559.
560. Answer: The following are the duties and
responsibilities of the city/municipal accountant:
561.
a) Maintain the General Journal, General Ledger,
Subsidiary Ledgers, and Registries of Public
Infrastructures/Reforestation Projects for each of
the barangays under the city/municipality.
562.
b) Prepare Journal Entry Voucher to record the
financial transactions of barangays based on
the certified registers and supporting
documents submitted by the Barangay Record
Keeper.
563.
c) Record the Journal Entry Vouchers in the
General Journal and post journal entries to the
General Ledgers and Subsidiary Ledgers.
564.
d) Prepare the required monthly and year-end Trial
Balances, Financial Statements and
reports/schedules for each of the barangays.
565.
e) Prepare and submit the Bank Reconciliation
Statement to COA auditor/audit team leader
concerned.
566.
f) Consolidate the year-end trial balances and
financial statements and reports/schedules of
the barangays.
567.
g) Submit monthly and year-end barangay
individual financial reports to the Sangguniang
 Barangay, and the printed and digital copies of
the consolidated year-end trial balances,
financial statements and reports/schedules of
the barangaya together with those of the
city/municipality to GAFMIS-COA and to the
auditor/audit team leader concerned.
568.
569.
 570. Answers to Multiple Choice (Chapter 10)
571.
572. 1. A
573. Purchase of supplies and materials and
small items with serviceable life of more than one
year, like stapler, puncher, ruler, mechanical tools,
etc., shall be directly charged to expense account.
Cost of transporting supplies and materials to
barangay shall be charged to “Delivery Expense”
account.
574.
575. 2. B
576. The IPSASB’s Conceptual Framework deals
with concepts that apply to general purpose
financial reporting under the accrual basis of
accounting. Under this method, transactions and
other events are recognized in financial
statements when they occur and not only when
cash or its equivalent is received or paid.
Therefore, the transactions and events are
recorded in the accounting records and
recognized in the financial statements of the
periods to which they relate.
577.
578. The IPSASB has also issued a
comprehensive cash basis IPSASs that includes
mandatory and encouraged disclosures sections.
The cash basis IPSASs encourages an entity to
voluntary disclose accrual based information,
although its core financial statements will
nonetheless be prepared under the cash basis of
accounting.
579.
 580. Therefore Accrual and Cash basis of
accounting.
581.
582. 3. C
583. Cash advance for payment of personnel
services shall be accounted for as “Advances for
Payroll”; while cash advance granted for travel and
other special time – bound undertaking shall be
accounted for as “Advances to Officers and
Employees”.
584.
585. 4. C
586. Processing of transactions shall be done at
the barangay level; while recording in the books
through Journal Entry Voucher shall be done by the
City/Municipal accountant.
587.
588. 5. C
589. Section 29, par 1 of the Constitution
provides that: No money shall be paid out of the
treasury except in pursuance of an appropriation
made by law. Laws, rules and regulations of the
government provide that all disbursements of
public funds, except those received for specific
purposes, shall be covered by an approved
General Appropriation Ordinance (GAO)
authorizing appropriation for the annual budget,
the expenditures items of which shall be in
accordance with the Philippine Government Chart
of Accounts under NGAS.
590.
591. 6. A
592. The General Fund of barangays is
composed of personnel services, maintenance and
other operating expenses, capital outlay, and
financial expenses, which are recorded in the
respective Registry of Appropriations and
Commitments.
593.
594. 7. D
595. Expenses for personnel services,
maintenance and other operating expenses, and
financial expenses shall be charged against
respective appropriation; while investments,
purchase of property, plant and equipment, and
construction of public infrastructures and
reforestation projects shall be charged against
appropriation for capital outlay. The balance of
appropriations for Capital Outlay, 20%
Development Fund, and Sangguniang Kabataan
Fund shall be valid until fully spent or until the
planned activity is completed. Balances at year-
end of other appropriations shall revert to
unappropriated status.
596.
597. 8. A
598. The Barangay Treasurer shall be
responsible in handling collections of income and
other receipts of the Barangay and the deposit of
the same with Authorized Government Depository
Bank (AGDB), such as: Development Bank of the
Philippines, Land Bank of the Philippines, and
Veterans Bank of the Philippines. However,
agencies may seek authority from Monetary Board
 of the Banko Sentral ng Pilipinas to designate
other depository banks.
599.
600. 9. A
601. Credit memo received from the bank for
direct remittance made by Local Government Units
(LGU) or the Department of Budget and
Management for the Barangay share in real
property tax or the internal revenue allotment,
respectively, shall be recorded direct to the Cash
on Hand and in Bank Register and in the Cash
Receipts and Deposits Register. The LGU or the
DBM making the direct remittance shall furnish the
Barangay a copy of he advice for information and
counterchecking with the credit memo received
from the bank.
602.
603. 10. D
604. The petty cash fund shall be maintained
using the imprest system. The amount of the petty
cash fund shall be determined by the Sangguniang
Barangay but not to exceed 20% of the funds
available and to the credit of the Barangay
Treasurer (Sec. 334 (b) RA 7160).
605.
606. 11. C
607. Except in emergency cases, all
procurement shall be covered by Approved
Procurement Program as required in RA 9184.
Procurement of supplies shall be charged directly
to Maintenance and Other Operating Expenses
and shall be recorded using the appropriate
expense accounts. Supplies, inspected by
 Inspection Committee, shall be accepted by
Barangay Treasurer, who will act as the Property
Officer of the barangay.
608.
609. 12. D
610. The budget officer shall consolidate the
Statement of Appropriations, Commitments and
Balances of each barangay for the five funds, such
as: General Fund, 20% Development Fund,
Calamity Fund, Sangguniang Fund, and Gender
and Development Fund. The budget officer,
likewise, submit the Consolidated Statement of
Appropriations, Commitments and Balances of all
barangays under the city/municipality to GAFMIS-
COA through the auditor/audit tea
611.
612.
613.