Government Accounting System of the Philippines

Government Accounting Defined

Under Section 109, of the Presidential Decree (PD) no. 1445, defines Government Accounting as
one that encompasses the process of analyzing, classifying, summarizing and communicating all
transactions that are involved in the receipt and disbursement of all government funds and
properties, and interpreting the results thereof. In pursuant to this definition, objectives were set
to cover several areas in government operations.
Objectives of Government Accounting
Government Accounting has the following objectives:

To produce relevant financial information about past and present transactions of

government.

To serve as a basis for decision making for future operations

To serve as the control mechanism for the receipt, disposition and utilization of
government funds and properties

To come up with financial reports pertaining to the results of operations of various

government agencies that are for dissemination to the public.

Agencies of the Philippines tasked with Accounting Responsibility

This fiscal responsibility emanates from the Constitution and its governing laws, rules and
promulgations. The mandate as prescribed under the said Constitution of the Philippines calls for
the keeping of the general accounts, as well as the promulgation and submission of financial
reports that would cover the operations of government.
The government officers that are mandated to discharge the above-stated Accounting
responsibilities are the Commission on Audit (COA), the Department of Budget and Management
(DBM) and the Bureau of Treasury (BTr) - to discharge the functions of government in
consonance with its commitment to all Filipinos.

Commission on Audit (COA) - as mandated by the 1987 Constitution, the COA shall have
the exclusive authority to do audit and examination, establish audit techniques, implement

accounting rules and regulations, that includes disallowances on the use of government
funds and properties.

Department of Budget and Management (DBM) is the department responsible for the
planning and implementation of the National Budget for the sound utilization of government
funds in achieving the national governments agenda on reform and growth. The DBM is
tasked to monitor all government allotments and appropriations through maintenance of
registries for better control and monitoring.

Bureau of Treasury (BTs) - the department is the keeper of national funds and
disbursements. It is the lead agency in monitoring transactions affecting the national
government, agencies, and other instrumentalities. It maintains the registry on the releases
by the DBM, as well as the bank transfers between agencies.

Government Agencies would include government instrumentalities like bureaus,

Congress, Judiciary, constitutional bodies and self contained institutions, among others,
which are required to have an accounting division, which are of equal level with that of
other agencies that are tasked to do maintenance of accounts and submit financial statements
on a regular basis.

Accounting Method
The modified accrual basis of accounting shall be used where expenses are recognized when
incurred and income recognizes on an accrual basis unless law requires other methods. The old
government system uses both cash and accrual basis.
The New Government Accounting System (NGAS)
The New Government Accounting System (NGAS) has been prescribed according to the
Commission on Audit (COA) Circular No. 2001-004 entitled Adoption of the Revised Chart of
Accounts for National Government Agencies, which was dated October 30, 2001 for all national
government agencies effective January 1, 2002. The presented manual by the NGAs is prescribed
to ensure the proper accounting of all financial institutions of the National Government. All
manuals can be seen in the website of the Commission on Audit and these manuals are
subdivided into two types of government agency:

National Government Agencies (NGA)

Local Government Units (LGU)

NGAS for National Government Agencies

Under COA Circular No. 2002-002, the NGAS for National Government Agencies has three
volumes, namely:

Volume I: The Accounting Policies

Volume II: The Accounting Books, Records, Forms and Reports

Volume III: The Chart of Accounts

The Accounting Policies

The first volume of the manual is an eighty-nine paged manual that discusses the accounting
policies with the following objectives:
a.

Uniform guidelines and procedures in accounting for government funds

and property;

b.

New coding structure and chart of accounts;

c.

Accounting books, registries, records, forms, reports and financial

statements; and

d.

Accounting entries.

It also states the basic features and policies for the National Government Agencies as stated in
Sec. 4.

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

One Fund Concept: The NGA system adopts the one fund concept. Separate fund
accounting shall be done only when specifically required by law or by a donor agency or
when otherwise necessitated by circumstances subject to prior approval of the
Commission. One Fund Concept is defined by the Ombudsman of the Philippines as:
The "one-fund" concept is the policy enunciated through PD No. 1177 which requires
that all income and revenues of the government must accrue to the General Fund and
thus can be freely allocated to fund programs and projects of government as prioritized.

The one-fund concept allows fiscal authorities to properly allocate scarce resources in
accordance with national development priorities. It likewise provides a mechanism to
control drawdowns on pooled resources. The level of funds disbursed is regularly
monitored against the level of revenues generated. This way, the government is able to
stick to the targeted level of disbursements for a given period and avoids incurring a
deficit. It also alerts the authorities about possible revenue shortfalls.
Book of Accounts and Financial Statements
Under Volume I, Section 4 of the NGAs Manual, all national agencies shall maintain two sets of
books, namely:

Regular Agency (RA) Books

These shall be used to record the receipt and utilization of Notice of Cash Allocation
(NCA) and other income/receipts which the agencies are authorized to use and to deposit
with Authorized Government Depository Bank (AGDB) and the National Treasury. These
shall consist of journals and ledgers, as follows:
Journals

Cash Receipts Journal (CRJ)

Cash Disbursements Journal (CDJ)

Check Disbursements Journal (CkDJ)

General Journal (GJ)

Ledgers

General Ledger (GL)

Subsidiary Ledgers (SL) for:

o

Cash

Receivables

Inventories

Investments

Property, Plant and Equipment

Construction in Progress

Liabilities

Income

Expenses

National Government (NG) Books

These shall be used to record income which the agencies are not authorized to use and are
required to be remitted to the National Treasury. These shall consist of:

Cash Journal (CJ)

General Journal (GJ)

General Ledger (GL)

Subsidiary Ledger (SL)

With the implementation of the computerized agency accounting system, only the General
Journal shall be used together with the ledgers by both books.
Under Volume I, Section 5, the following financial statements shall be prepared:

Balance Sheet

Statement of Government Equity

Statement of Income and Expenses

Statement of Cash Flows

The General Accounting Plan

Volume I, Chapter 3 of the NGAS manual discusses the general accounting plan that will be used
by the national government units. The one-fund concept allows fiscal authorities to properly
allocate scarce resources in accordance with national development priorities. It likewise provides
a mechanism to control drawdowns on pooled resources. The level of funds disbursed is regularly
monitored against the level of revenues generated. This way, the government is able to stick to the
targeted level of disbursements for a given period and avoids incurring a deficit. It also alerts the
authorities about possible revenue shortfalls.
Sec. 1.

The following accounting systems are the following:

Budgetary Accounts System

Sec. 2.

Budgetary accounts consist of the appropriations, allotments and obligations.

Appropriations refer to authorizations made by law or other legislative enactment for

payments to be made with funds of the government under specified conditions and/or for
specified purposes. Appropriations shall be monitored and controlled through registries
and control worksheets by the DBM and COA, respectively.

Receipts/Income and Deposit System

Sec. 3.

The Receipts/Income Collections and Deposits 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.
Sec. 4.

The income of the National Government are classified into general income

accounts and specific income accounts. The following comprise the general income
accounts, among others:
1.

Subsidy Income from National Government

2.

Subsidy from Central Office

3.

Subsidy from Regional Office/Staff Bureaus

4.

Income from Government Services

5.

Income from Government Business Operations

6.

Sales Revenue

7.

Rent Income

8.

Insurance Income

9.

Dividend Income

10.

Interest Income

11.

Sale of Confiscated Goods and Properties

12.

Foreign Exchange (FOREX) Gains

13.

Miscellaneous Operating and Service Income

14.

Fines and Penalties-Government Services and Business Operations

15.

Income from Grants and Donations

The specific income accounts of national government agencies are classified as follows:

1.

Income Taxes

2.

Property Taxes

3.

Taxes on Goods and Services

4.

Taxes on International Trade and Transactions

5.

Other Taxes

6.

Fines and Penalties-Tax Revenue

7.

Other Specific Income

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.
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.

PROPERTY, PLANT AND EQUIPMENT, AND INVENTORY ACCOUNTS

Sec. 5.

Property, plant and equipment acquired through purchase shall include all costs

incurred to bring them to the location necessary for their intended use, like transportation
costs, freight charges, installation costs, etc. These are recorded in the books of accounts as
Assets after inspection and acceptance of delivery.
During construction period, property, plant and equipment shall be classified and recorded as
Construction in Progress with the appropriate asset classification. As soon as these are
completed, the "Construction in Progress" account shall be transferred to the appropriate asset
accounts.
Accounts Public Infrastructures and Reforestation Projects are closed to Government
Equity account and the asset is recorded in the Registry of Public Infrastructures/Reforestation
Projects at the end of the year.

Sec. 6.

Miscellaneous Transactions

Sec. 7.

Miscellaneous transactions are transactions types that are unique and not recurring in the

ordinary course of government operations. These seldom take place or should not happen at
all. Some of the miscellaneous transactions are as follows:
1. Loss of Cash and Property
2. Request for Relief from Accountability
3. Cash Overage
4. Stale MDS and Commercial Checks
5. Set-up and Settlement of Disallowances
6. Refund of Overpayments
Responsibility Accounting
The NGAS makes use as well of the responsibility accounting method. It is defined by COA as:
a system that relates the financial results to a responsibility center, which provides access to cost
and revenue information under the supervision of a manager having a direct responsibility for its
performance. It is a system that measures the plans (by budgets) and actions (by actual results) of
each responsibility center.
Responsibility Centers
A responsibility center is defined as a part, segment, unit or function of a government agency,
headed by a manager, who is accountable for a specified set of activities. Except for some, which
derive most of their income from collection of taxes and fees, national government agencies are
basically cost centers whose primary purpose is to render service to the public at the lowest
possible cost. Cost centers are established to provide each government agency accessibility to
cost information and to facilitate cost monitoring at any given period.

While the use of

Subsidiary Ledgers is sufficient to control cost, it requires considerable time to summarize the
cost incurred by agency for its different programs, projects, activities and offices/divisions, hence,
responsibility accounting shall be done only under the computerized accounting system.
Objectives of Responsibility Accounting
COA cites the following objectives of Responsibility Accounting:
a. Ensure that all costs and revenues are properly charged/credited to the correct
responsibility center so that deviations from the budget can be readily attributed to
managers accountable therefore;

b. Provide a basis for making decisions for future operations; and

c. Facilitate review activities, monitoring the performance of each responsibility center and
evaluation of the effectiveness of agencys operations.

Responsibility Code Structure

Each government agency shall be assigned a responsibility center code. The coding structure
shall be as follows:
000-00-000-000-000

Department/Agency/Province/City
Responsibility Area (CO/RO)
Sub-responsibility Area (District/ Division)
Sub-responsibility Area
(Office/Unit/Program/Project)

Account Code

NGAS for Local Government Units

The NGAs for Local Government Units, as compared with the NGAs for National Government
Units, has the same objectives as follows:
a. Uniform guidelines and procedures in accounting for government
funds and property;

b. New coding structure and new chart of accounts; and

c. New accounting books, reports/forms, financial statements and
accounting entries.
Furthermore, NGAS for LGUs follows some basic features and policies as that of the NGAS for
National Government Units such as Accrual Accounting and One Fun Concept topics.

Book of Accounts and Financial Statements

The book of accounts for LGUs is as follows:
Journals

Cash Receipts Journal (CRJ)

Cash Disbursements Journal (CDJ)

Check Disbursements Journal (CKDJ)

General Journal (GJ)

Ledgers

General Ledger (GL)

Subsidiary Ledgers, where applicable for:

Cash

Receivables

Inventories

Investments

Property, Plant and Equipment

Liabilities

Income

Expenses

All the above records shall be maintained by the accounting unit of the LGUs. However,
treasurers and disbursing officers shall also maintain their respective cash records such as:
Cashbook Cash in Treasury
Cashbook Cash in Bank
Cashbook Cash Advances
The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD) daily and
the Report of Accountability for Accountable Forms (RAAF) monthly.
Also, the following statements shall be prepared:

Balance Sheet

Statement of Income and Expenses

Statement of Cash Flows

The General Accounting Plan for LGUs

The General Accounting Plan shows the overall accounting cycle in the Local Government Unit.
Transactions shall emanate from the different offices/departments of the local government units
(LGUs).

These offices/departments will provide/produce the source documents and other

accounting forms leading to the perfection of the transaction, whether it be budgetary, collections
or disbursements. The source documents and accounting forms shall be the basis for the
preparation of reports by the Office of the Treasurer. The Office of the Accountant shall record
the transactions to the registries or to the corresponding books of original entry. Posting to the
books of final entry and preparation of the financial reports shall also be undertaken by the Office
of the Accountant.
The General Accounting Plan is presented as to the following type of transactions:
Appropriations, Allotments and Obligations
Budgetary accounts are composed of appropriations, allotments and obligations.
Appropriation refers to an authorization made by ordinance, directing the payment of goods and
services from local government funds under specified conditions or for specific purposes. The
local sanggunian approves the annual budget thru the issuance of appropriation ordinance. On the
first business day of the fiscal year, the entire annual budget of the local government unit shall be
recorded in the Registry of Appropriations, Allotments and Obligations (RAAO). The
appropriations, in the amounts approved by the legislative body and confirmed by the reviewing
authorities, are recorded in the registries maintained by the accountant where they may be
compared with the actual developments of the period.

Allotment is the authorization issued by the Local Chief Executive (LCE) to a department/office
of the LGU, which allows it to incur obligations, for specified amounts, within the appropriation
ordinance. Allotments are released quarterly based on the Work and Financial Plan and Request
for Release of Allotment. The Accountant, upon receipt of the Advice of Allotment, shall enter
the allotment in the RAAOs.
Obligations refer to the amounts committed to be paid by the LGU for any lawful act made by an
accountable officer for and in behalf of the local government unit concerned.

Collections and Deposits

Local accountants and treasurers shall maintain separate books and depository accounts,
respectively, for each fund in their custody or administration.
Local treasurer shall maintain depository accounts in the name of their respective local
government units with banks, preferably government-owned, located in or nearest to their
respective areas of jurisdiction. Earnings of its depository accounts shall accrue exclusively
thereto.
The main sources of income of LGUs are as follows:
a. Tax revenues, fees and charges
b. Share from Internal Revenue Collections
c. Share from National Wealth
The sources of income are further classified into general income accounts and specific
income accounts.
The following shall comprise the General Income Accounts applicable to LGUs:
a. Subsidy from Other LGUs
b. Subsidy from Other Funds
c. Subsidy from Special Accounts
d. Sales Revenue
e. Dividend Income
f.

Interest Income

g. Gain on Sale of Securities

h. Gain on Sale of Assets
i.

Sale of Confiscated Goods and Properties

j.

Foreign Exchange (FOREX) Gains

k. Miscellaneous Operating and Service Income

l.

Fines and Penalties Government Services and Business Operations

m. Income from Grants and Donations

The following major classification comprise the specific income accounts for LGUs:
1. Property Taxes
2. Taxes on Goods and Services
3. Other Taxes
4. Other Specific Income

Disbursements
Disbursements refer to the settlement of government payables/obligations by cash or by check.
Typical transactions for which disbursements are made are as follows:
1. Personal Services
2. Maintenance and Other Operating Expenses
3. Capital Outlay
4. Financial Expenses
Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and paid either by
check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an integral part of the
DV.
Disbursements from the general fund shall require the following certifications on the DV:
1

Certification and approval of vouchers and payrolls as to validity, propriety and

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

Necessary documents supporting the disbursement vouchers and payrolls as certified

to and reviewed by the Accountant. (Box B of DV)

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

Miscellaneous and Other transactions

Miscellaneous transactions refer to transactions that are unique and not recurring in the ordinary
course of operations of the government. These transaction types seldom take place or ideally
should not happen at all. The following maybe considered miscellaneous transactions:
o

Loss of Cash and Property Accountability

Cash Overage

Dishonored Check

Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check

Settlement of Suspensions/Disallowances/Charges

Refund of Overpayments

References
Castillo, L. (2014). THE REVISED CHART OF ACCOUNTS AND THE PHILIPPINE PUBLIC
SECTOR ACCOUNTING STANDARDS. Retrieved January 30, 2016 at http://pagba.com/wpcontent/uploads/2014/09/Revised-Chart-of-Accounts.pdf
Commission on Audit (2002). National Government Agencies (AGAs) manual. Volumes I to III.
Retrieved

January

30,

2016

at

http://www.coa.gov.ph/index.php/2013-06-19-13-06-

41/manuals/category/164-national-government-agencies-ngas
Commission on Audit (2002). Local Government Units (LGUs) manual. Volumes I to III.
Retrieved

January

30,

2016

at

http://www.coa.gov.ph/index.php/2013-06-19-13-06-

41/manuals/category/163-for-local-government-units
HubPages Philippines (2014). New Government Accounting System in the Philippines (NGAs).
Retrieved January 30, 2016 at http://hubpages.com/business/New-Government-AccountingSystem-in-the-Philippines-NGAa

Ombudsman of the Philippines (2012). Basic Concepts in Budgeting. Retrieved January 30, 2016
at http://www.ombudsman.gov.ph/UNDP4/wp-content/uploads/2012/12/Chap1_FAQ.pdf