Professional Documents
Culture Documents
The general public can understand and analyze government financial statements published for their scrutiny and better
judgment.
Government Accounting Definition and Environment
Section 109 of PD 1445 defines government accounting as:
Government Accounting encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipts and disposition of government funds and property
and interpreting the results thereof (ARCSCI)
Types of government organizational
1. national government - include all departments, bureaus, offices, boards, commissions, councils, authorities,
administrations, institutions, state colleges and universities and other organizational units under the national
government
2. local government - political subdivisions of the Philippines having substantial control over local affairs,
consisting of provinces, cities, municipalities and barangays
3. government corporations - agencies organized by law or pursuant to law, vested with functions relating to public
needs whether government or proprietary in nature, owned by the government directly or through its
instrumentalities either wholly or, where applicable as in case of stock corporation, to the extent of at least fifty
percent of its capital stock
Government - means the National Government, including the Executive, Legislative, the Judicial Branches and the
Constitutional Commissions. (PD 1177 otherwise known as the Budget Reform Decree of 1077)
Objectives of Government Accounting
Section 10 of PD 1445 sets down the objectives or functions of government accounting
1. To provide information concerning past operations and present conditions - enable the evaluation of the
performance of an agency from one period to the next
2. To provide basis for guidance for future operations - results of the evaluation may guide the manager on what
proper course of action to follow in a future operations
3. To provide for control of the acts of public bodies and offices in the receipt, disposition and utilization of funds
and properties
4. To report on the financial position and the results of operations of government agencies for the information and
guidance of all persons concerned - show the extent of the agencys financial and non-financial resources
Government accounting is a service activity with the main purpose of providing quantitative information, primarily
financial in nature about the government entity that is useful in:
1. assessing the stewardship and the aspects of performance of public officials for which they are accountable
2. planning, program selection and budgeting
3. making decision involving the effective and efficient allocation and control of government resources
PROCESS - consolidates all activities pertaining to the gathering of data, which are to be used as the basis for fiscal
management decisions
1. bookkeeping, referring to as analysis and recording;
2. posting, grouping or classifying of similar items
3. preparation of periodic financial reports
4. analysis of the financial reports - determine their accuracy and adequacy as well as the efficiency and effectiveness
of agency operations
Users of Government Accounting Information (MALe GeStuRe)
PRIMARY OBJECTIVE OR PURPOSE - to provide information concerning government operation
1. The general public or the citizenry the group which has interest on the information about government services
2. The legislative body - uses the financial data to see to it that policies are being implemented and that funds are
being properly handled
3. The managers/administrators - responsible for the implementation of the policies and daily conduct of government
affairs. The data will serve as a guide in the performance of their duties
4. The students of public finance and political and other social scientists who need financial information in the
pursuit of their research/studies; and
5. The resource providers of the government such as:
a. donors and grantors - assess how well the objective of a donation or grant have been accomplished;
b. taxpayers - know how the services provided by the government are likely to affect the amount and fees
they will be required to pay; and
c. lenders, suppliers and employees - know whether the government can pay its obligation to them
Accounting Concepts and Conventions
Concepts - provides the rules of accounting that should be followed of all accounts and financial statements. It provides
the foundation for accounting processes
1. Entity Concept a separate identity apart from its owner
2. Money Measurement Concept all transactions are assumed to be measured and recorded in stable monetary
units. Only those transactions which can be measured in terms of money are recorded.
3. Modified Accrual Concept for each accounting period, expenses are recognized when they are incurred not
necessarily when cash is disbursed and income is recognized when earned not necessarily when cash is received
except for transactions where accrual basis is impractical or when other basis may be required by law.
4. Going-Concern Concept an entity is an on-going concern and will continue in operations for the foreseeable
future.
5. Dual-Aspect Concept every transaction affects two or more accounts
6. Cost Concept the value of an asset is to be determined on the basis of historical cost i.e. acquisition cost.
7. Objectivity Concept recorded in an objective manner, free from the personal bias of either management or the
accountant who prepares the accounts
8. Timeliness Concept this principle states that the information should be provided to the users at the right time
for decision making purposes
Conventions - custom or generally accepted practice which is adopted either by general agreement or common consent
among accountants
1. Full Disclosure information relating to the entitys affairs which are of material interest to the users should be
completely disclosed.
2. Consistency the accounting methods and practices should be applied on a uniform basis from period to period.
3. Conservatism Concept avoidance of overstating estimates. (3) Qualitative characteristics of financial
statements namely: prudence, neutrality and faithful representation of alternative values.
4. Materiality strict adherence to GAAP is not required when the items are not significant enough to affect
evaluation, decision and fairness of the financial statements. According to an American Accounting Association,
an item should be regarded as material if there is reason to believe that knowledge of it could influence decision
of informed parties.
CONTROL MECHANISM
1. Fund Accounting
2. Obligation Accounting
3. Cash Disbursement Ceiling (CDC) Accounting
Fund Accounting
FUND - a sum of money or other resources set aside for the purpose of carrying out specific activities or attaining
certain objectives in accordance with special regulations, restrictions or limitations and constitutes an independent fiscal
and accounting entity.
ENTITY - fund is given a personality of its own, that is, it has its own asset and it can incur obligations or liabilities.
TWO MAJOR CLASSIFICATIONS OF FUND AS TO PURPOSE
1. General Fund generally available for all functions of the government
2. Special Fund segregates specified revenues for limited purposes
Obligation Accounting
OBLIGATION ACCOUNTING - provides the ceiling of the maximum extent by which an agency can incur
obligations or commit the resources of the government in the performance of its functions; refers to the accounting
practice, procedures and techniques for recording obligations in the government
Cash Disbursement Ceiling (CDC)
CDC - limited within the boundaries of the appropriations release to government agencies in the form of allotments,
and any additional amount granted by the DBM to liquidate or pay existing valid obligations
Important Characteristics of Government Accounting
1. emphasis on legalities - adherence to legalities more in case a conflict between the GAAP and government
accounting laws ensues
2. emphasis on budget an item of expenditure may be legal but without budget or funding makes the transaction
impossible
3. multiplicity of responsibility
a. LEGISLATIVE BODY appropriates fund
b. BUREAU OF TREASURY acts as the bank
c. SPECIFIC GOVERNMENT AGENCY spends the money
d. COA keeps the general accounts
Distinction Between Government Entity and a Commercial Enterprise
GOVERNMENT ENTITY
OWNERSHIP
Entire people in a given community
PURPOSE
Render service at the lowest possible
cost to its constituents
OPERATES TO MAKE PROFITS profits realized are retained for public
use and not for use of specific
individuals
ORGANIZATION
CONGRESS - responsibility and
authority of a government entity
OFFICERS
AND
ADMINISTRATORS
OF
GOVERNMENT - governed in
almost every act by specific laws,
rules and regulations
LEGISLATIVE BODIES - place
limitations
on
executives,
administrative
officers
and
department heads, through revenue
and appropriations acts
FINANCING
Involuntary contributions from its
constituents in the form of taxes
INCOME
Organized primarily to render service,
cannot make profits on the services it
renders
COMMERCIAL ENTERPRISE
Stockholders, partners, owners
Profits
Succession
of
authority
and
responsibility
Stockholders BOD staff or
officers
COMMERCIAL ACCOUNTING
Geared towards income measurement
aside
GOVERNMENT ACCOUNTING
Control government funds
Provide data for management
BASIS OF ACCOUNTING
PREPARATION OF PERIODIC
REPORTS
Balance Sheet
Income Statement
Statement of Cash Flows
CONTROL MECHANISMS
BOOKS OF ACCOUNTS
ACCOUNTS AND
TRANSACTIONS
SOURCE OF ACCOUNTING
PRACTICE AND PROCEDURES
decision
Modified accrual basis - expenses
shall be recognized when incurred;
Income shall be on accrual basis
except for transactions where accrual
basis is impractical or when other
methods are required by law
Balance Sheet
Statement of Income and Expenses
Statement of Government Equity
Statement of Cash Flows
Fund Accounting
Obligation Accounting
CDC Accounting
iii. provide for a wider range of analytical information designed for use in management audit or
legislative review
iv. furnish information regarding the production of income and the investment in capital items which
is of value in fiscal and economic planning
v. enable tighter accounting control to be exercised over agencies financial relationship with the
Treasury
vi. permit a more simplified preparation of trial balance and a simple and more orderly process of
national consolidation
vii. facilitate the application of mechanical accounting procedures for more effective protection
against error and irregularity and yielding economics in operation (Sec. 113 of PD 1445)
e. permit effective budgetary control and to establish uniformity of accounts and shall be classified in
balanced fund groups; The group of each fund shall include all accounts necessary to set forth its
operations and conditions; All financial statements shall follow this classification (Sec. 116 of PD 1445)
f. a common terminology and classification shall be used consistently throughout the budget, the accounts
and the financial reports (Sec. 115 of PD 1445)
g. estimated revenues, remain unrealized at the fiscal year, shall not be booked or credited to the appropriate
surplus or any other accounts (Sec. 118 of PD 1445)
h. all lawful expenditures and obligations incurred during the year shall be taken up in the accounts of
that year (Sec. 119 of PD 1445)
THE NEW GOVERNMENT ACCOUNTING SYSTEM (NGAS)
ACCOUNTING POLICIES
OBJECTIVES OF THE MANUAL. The New Government Accounting System (NGAS) Manual presents the basic
policies and procedures; the new coding system; the accounting systems, books, registries, records, forms, reports, and
financial statements; and illustrative accounting entries to be adopted by all national government agencies effective
January 1, 2002.
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.
2. COVERAGE. All national government agencies.
3. LEGAL BASIS. Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which
provides that:
"The Commission on Audit shall have exclusive authority, subject to the limitations in this Article, to define the
scope of its audit and examination, establish the techniques and methods required therefore, and promulgate
accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and
properties".
*To simplify the government accounting system in order to facilitate the process of recording transactions and the
preparation of financial reports, and ultimately expand the numbers/range of users who can see and understand the
accounting system and the output it produces.
The NGAS is a simplified set of accounting concepts, guidelines and procedures designed to ensure correctness,
completeness and timeliness in the recording of government financial transactions and production of financial reports.
The rationale behind the major changes in government accounting system was brought about by the following needs:
b. 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.
c. CHART OF ACCOUNTS AND ACCOUNT CODES. 8-digit coding system
d. BOOKS OF ACCOUNTS. 2 books of accounts
1. REGULAR AGENCY (RA) BOOKS record the receipt and utilization of Notice of Cash Allocation
(NCA) and other income/receipts which the agencies are authorized to use and to deport with Authorized
Government Depository Bank (AGDB) and the National Treasury
Journals: Cash Receipt Journal (CRJ)
Cash Disbursement Journal (CDJ)
Check Disbursement Journal (CkDJ)
General Journal (GJ)
Ledgers: General Ledgers (GL)
Subsidiary Ledgers (SL) for Cash, Receivables, Inventories, Investments, Property, Plant and
Equipment, Construction-in-Progress, Liabilities, Income and Expenses.
2. NATIONAL GOVERNMENT (NG) BOOKS used to record income which the agencies are not
authorized to use and are required to be remitted to the National Treasury
Journal: Cash Journal (CJ)
General Journal (GJ)
Ledgers: 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.
e. FINANCIAL STATEMENTS.
1. Balance Sheet
2. Statement of Government Equity
3. Statement of Income and Expenses
4. Statement of Cash Flows
5. Notes to Financial Statements
f. TWO-MONEY COLUMN TRIAL BALANCE
g. ALLOTMENT AND OBLIGATION. Separate registries shall be maintained to control the allotments and
obligations for each of the four classes of allotment class, namely:
1.
2.
3.
4.
h. NOTICE OF CASH ALLOCATION (NCA). The receipt of NCA by the agency shall be recorded debit CashNational Treasury, Modified Disbursement System (MDS) and credit Subsidy Income from National Government
i. FINANCIAL EXPENSES. Separately classified from Maintenance and Other Operating Expenses (MOOE).
j. PERPETUAL INVENTORY OF SUPPLIES AND MATERIAL. Purchased out of Petty Cash fund charged
directly to the appropriate expense account
k. VALUATION OF INVENTORY. moving average method
l. MAINTENANCE OF SUPPLIES AND PROPERTY, PLANT AND EQUIPMENT LEDGER CARDS. by
category
m. CONSTRUCTION OF ASSETS. Construction Period Theory. Liquidated damages charged and paid for by
the contractor shall be deducted from the total cost of the project. Any related expenses incurred during the
construction of the project capitalized, and those incurred after the construction form part of operating cost.
n. REGISTRY OF PUBLIC INFRASTRUCTURE/REGISTRY OF REFORESTRATION PROJECTS.
1.
2.
3.
4.
o.
p.
RECLASSIFICATION OF ASSETS. Assets no longer being used reclassified to Other Assets; not be subject
to depreciation.
q. ALLOWANCE FOR DOUBTFUL ACCOUNTS.
r.
ELIMINATION OF CONTINGENT ACCOUNTS. Cash shortages and disallowed payments, final and
executory, recorded under the Receivables-Disallowances/Charges
s.
RECOGNITION OF LIABILITY. Recognized goods and services are accepted or rendered and
supplier/creditor bills are received.
t. INTEREST ACCRUAL. Interest income and/or expense shall be accrued as deemed appropriate.
u. ACCOUNTING FOR BORROWINGS AND LOANS. All borrowings and loans incurred shall be recorded to
the appropriate liability accounts.
v. ELIMINATION OF COROLLARY AND NEGATIVE JOURNAL ENTRIES. Acquisition/disposition of
assets debited/credited to the appropriate asset accounts. Error is committed correcting entry to adjust the
original entry shall be prepared.
w. PETTY CASH FUND. Imprest system. Replenishments charged to the expense account. Equal to the total cash
on hand and the unreplenished expenses. Not be used to purchase regular inventory/items for stock.
x. FOREIGN CURRENCY ADJUSTMENT. Cash deposits in foreign currency and outstanding foreign loans
computed at the exchange rate prescribed by the Bangko Sentral ng Pilipinas at balance sheet date. Any gain or
loss on foreign exchange shall be recognized. Subsidiary ledger for foreign currency obligations reflect the
appropriate foreign currency in which the loan is payable. Liability expressed both in the foreign and local
currency.
ACCOUNTING SYSTEM
GENERAL ACCOUNTING PLAN (GAP) - shows the overall accounting system of a government agency/unit.
Includes the source documents, the flow of transactions and its accumulation in the books of accounts and finally their
conversion into financial information/data presented in the financial reports.
1.
2.
3.
4.
BUDGETARY ACCOUNTS SYSTEM encompasses the processes of preparing the Agency Budget Matrix (ABM),
monitoring and recording of allotments received by the agency from DBM, releasing of Sub-Allotment Release Order
(Sub-SARO) to Regional Office (RO) by Central Office (CO), issuance of Sub-SARO to operating units (OUs) by the RO
and recording and monitoring obligations.
BUDGETARY ACCOUNTS
1. APPROPRIATIONS - authorizations made by law or other legislative enactment for payments to be made with
funds of the government. Shall be monitored and controlled through registries and control worksheets by the
DBM and COA, respectively.
2. ALLOTMENTS
3. OBLIGATIONS
AGENCY BUDGET MATRIX (ABM) a document showing the desegregation of agency expenditures into
components
GOVERNMENT PLANNING
PLANNING - involves selecting missions and objectives and the actions to achieve them; requires decision making that
is, choosing from among alternative future courses of action.
FUNCTIONS OF PLANNING
1. Defines and directs the efforts or the agencies.
2. Organizes people; describes productive relationships between and among them; coordinates all decisions and
actions necessary to service delivery outcomes; determine what kind of organization structure to have and what
kind of people needed to do corresponding tasks toward the attainment of organizational goals.
3. Identifies and estimates the resources
4. Establish effective communication
5. A basis for useful supervision, monitoring and evaluation (control)
6. A basis for further capability of agencies
PROGRAM a major purpose for which a government entity is established and includes all functions and activities
devoted to the accomplishment of this purpose
Project a subdivision of a program covering a homogenous group of activities and describes the work to be done
Activity a definable segment of a project
PUBLIC EXPENDITURE MANAGEMENT (PEM) - an approach that ensures resource allocation is results-based, and
that government is accountable for its performance
OBJECTIVES:
1. Aggregate Fiscal Discipline spend within its means
2. Allocative Efficiency Spend On The Right Priorities
3. Operational Efficiency ensure the best value for the peoples money.
THREE PILLARS
1. Medium-Term Expenditure Framework (MTEF) Link policy, planning and budgeting over the mediumterm. Employs a three-year rolling budget approach
2. Organizational Performance Indicator Framework (OPIF) - Links government expenditure priorities with
desired outcomes and agency performance.
3. Zero-Based Budgeting Approach (ZBB) close review and evaluation of major ongoing programs and projects
Budgeting enables the government to manage its scarce resources to support priority programs and projects for promoting
economic growth and providing public services
BUDGETING - a part of the process of assigning financial resources to organizational units so that they can carry their
plans and of scheduling the use of these resources and the results to be achieved outlined in the plan; planning and
controlling
PURPOSES OF BUDGETING
1. Tool of Accountability government agencies are responsible for the management of programs for which the
funds are appropriated.
2. Tool of Management it specifies either directly or indirectly, the cost, time and nature of expected results.
3. Instruments of economic policy
a.
b.
c.
d.
e.
Indicates the direction of the economy since it expresses intentions regarding the utilization of resource;
Leads to the determination of national growth and investment goals;
Promotes macroeconomic balance in the economy;
Reduces inequalities;
Permits quick and meaningful measurement of its impact on the national economy as a whole.
ADVANTAGES OF BUDGETING
1.
2.
3.
4.
5.
6.
7.
8.
9.
NATIONAL BUDGET - governments estimated income and planned expenditures in a given year.
GOVERNMENTS INCOME - taxes (income tax, value-added tax, etc) and non-tax revenues (fees and charges,
privatization proceeds, etc)
EXPENDITURES - programs, activities, projects, purchase of goods and services, among others, that the government
will spend on to achieve its socio-economic development objectives.
FISCAL DEFICIT - income is insufficient to finance expenditures
COVERAGE
NATIONAL BUDGET - covers the totality of the budgets of national government agencies not only those of the
Executive branch, but also of Congress, the Judiciary and other Constitutional bodies.; covers the budgetary support given
by the national government to local government units (LGUs), in particular, the Internal Revenue Allotment (IRA); as
well as to government-owned ot controlled corporations (GOCCs) and government financial institutions (GFIs).
COMPONENTS
The National Budget for a given year is composed of the following:
o
NEW GENERAL APPROPRIATIONS legislated by Congress and enacted by the President every
fiscal year as the General Appropriations Act (GAA). The GAA enacts both programmed and
unprogrammed general appropriations.
1. programmed appropriations supported by corresponding resources
2. unprogrammed appropriations can only be executed when the government attains a revenue
windfall (i.e. above target)
AUTOMATIC APPROPRIATIONS under specific laws, certain types of expenditures (e.g. debt
interest payments, LGUs IRA) are automatically set or appropriated.
Section 4 of the Revised Budget Act provides that the budget shall consist of two parts:
1. Current Operating Expenditures; and
2. Capital Outlay.
Fundamental Principles of Fiscal Operations
1
2
3
4
5
6
7
8
No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or
other specific statutory authority;
Government funds or property shall be spent or used solely for public purposes;
Trust funds shall be available and may be spent only for the specific purpose of which the trust was created;
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;
Disbursements or disposition of government funds and property shall invariably bear the approval of the proper
officials;
Claims against government funds shall be supported with complete documentation;
All laws and regulations applicable to financial transactions shall be faithfully adhered to; and
Generally accepted principles and practices of accounting as well as of sound management and fiscal
administration shall be observed, provided they do not contravene existing laws and regulations.
AS TO NATURE
a Annual Budget a budget which covers a period of one year
b Supplemental budget a budget which purports to supplement or adjust a previous budget which is deemed
inadequate for the purpose for which it is intended
c Special budget a budget of special nature and generally submitted in special forms
AS TO BASIS
a Performance Budget a budget emphasizing the programs or services conducted and based on functions,
activities and projects which focus attention upon the general character and nature of the work to be done, or upon
the services to be rendered, rather than the things to be acquired
b
Line-Item Budget a budget the basis of which are the objects of expenditures such as salaries and wages,
travelling expenses, freight, etc.
Agency baseline the cost of performing regular agency functions, excludes the costs of non-recurring programs
Government-wide baseline the budget impact of decisions or policies enunciated by the government that require priority
funding
Examples are:
a Proposed salary adjustment
b Miscellaneous personnel benefits, including retirement benefits
c Mandatory allocations to local governments
d Projected level of support to GOCCs
e Estimated provisions for contingencies due to calamity, foreign exchange fluctuations and other adjustments
FAPs baseline the budgetary requirements, of ongoing programs/projects with foreign financial assistance.
Priority Program/Project Fund - the remaining balance after deducting the baseline budget requirements of the national
government.
4.
a
b
c
NATIONAL BUDGET SYSTEM - consists of the methods and practices of the government for planning, programming
and budgeting; include the adoption of sound economic and fiscal policies and the execution of the programs and projects
geared towards the accomplishment of political, economic and social objectives; primary concern is the availability and
use of money to provide the services required or expected from the government .
The two principal objectives of the current budget system are:
Legal Basis of the Budget System - Budget Reform Decree or PD No. 1177
The Budget Reform Decree requires the following:
1. The formulation of the budget that supports the national development plan and reflects the objectives and strategies of
the plan;
2. The preparation of the budget within the context of the total resources of government
3. The preparation of the annual budget as an integral part of a long-term plan and long-term budget program;
4. The specification of multi-year requirements in each state of the budget process;
5. The preparation of the budget at the regional level, consolidation and review at the department and central levels
6. The implementation and timing of major development projects and the determination of expenditure levels
7. Analysis of budget estimates on a zero-base approach
8. Limiting the time allotted for debate on the budget by the legislative body, thereby ensuring that the budget is approved
before the start of the fiscal year; and
9. Adoption of a management information system for effective performance monitoring and financial evaluation and the
development of standard costs for units of work measurement, in order to effectively evaluate agency programs.
What is a national budget?
NATIONAL BUDGET - the governments estimate of its income and expenditures; the financial translation of the
program and projects that best promote the development of the country; what the government plans 1) to spend for its
programs and projects and 2) where the money will come from
On what is our national budget spent?
Expenditures by expense class show how much is provided for:
1
2
3
4
Current operating expenditures appropriations for the purchase of goods and services for the conduct of normal
government operations within a budget year
Capital outlays appropriations for the purchase of goods and services the benefits of which extent beyond the
budget year and which add to the assets of government
Net Lending net advances by the national government for the servicing of government guaranteed corporate debt
and loans outlays by the national government to government corporations; and
Debt amortization contribution to the sinking fund which is utilized for principal repayment of our loans
Excise tax
License and business tax
Income tax
Import duties
Why does the government borrow from foreign sources? Why cant it make do with what is collected locally.
Relying only on domestic or local resources to finance such projects will limit our governments capacity to provide this
needed support. If the government takes too large a share of domestic resources, local private demand will have less for
their own projects and activities. As a result, credit will be tight, interest charges will be high and prices of goods and
services will go up.
The absence of a long-term domestic capital market and the limited savings in the country, moreover, render the
domestic resources insufficient to finance the enormous requirements of development. By borrowing from foreign
sources, the government takes advantage of long-term loans which are readily available abroad with lower interest rates
in international capital markets.
It should be emphasized that our national government uses borrowing proceeds solely to finance carefully selected capital
projects supportive of the countrys development goals
ANNUAL PREPARATION, THREE-YEAR PERSPECTIVE
The Philippine Constitution requires the President to submit to Congress, within 30 days from the opening of every
regular session as the general appropriations bill, a budget of expenditures and sources of financing, including receipts
from existing and proposed revenue measures.
The annual preparation of the National Budget also ensures that all government spending is reviewed and justified
anew each year. Even so, the government also adopts a three-year perspective (see succeeding section on Medium-Term
Expenditure Framework). This ensures that the National Government remains strategic in managing its resources.
PHASES OF BUDGETING
The regional offices submit their RDC-approved budget to their respective head offices in Manila which in turn,
collate all the regional budget proposals submitted by their different regional offices all over the Philippines and
consolidate these into a single agency budget proposal of the department.
Early Preparation
Budget Call - issued in December (versus against April in the past)
Submission of the Presidents budget a day after the State of the Nation Address (in contrast to the earlier
practice of submitting it late in the 30-day window that the Constitution prescribes).
2. Stakeholder Engagement seeks to increase citizen participation in the budget process
Bottom-Up Budgeting
3. Technical Budget Hearings conducted after departments and agencies submit their Agency Budget Proposals to the
DBM; agencies defend their proposed budgets before a technical panel of DBM, based on performance indicators on
output targets and absorptive capacity. The DBM bureaus then review the agency proposals and prepare
recommendations.
4. Executive Review The recommendations are presented before an Executive Review Board which is composed of
the DBM Secretary and senior officials. Deliberations here entail a careful prioritization of programs and
corresponding support. Implementation issues are also discussed and resolved.
5. Consolidation, Validation and Confirmation DBM then consolidates the recommended agency budgets and
recommendations into a National Expenditure Program (NEP) and a Budget of Expenditures and Sources of
Financing (BESF). As part of the consolidating process, the deliberations by the DBCC will determine the agency
and sectoral allocation of the approved total expenditure ceiling, in line with the macroeconomic and fiscal program.
Heads of major departments are invited to this meeting.
6. Presentation to President and Cabinet - The proposed budget is presented by DBM together with the DBCC, to the
President and Cabinet for further refinements or reprioritization. After the President and Cabinet approve the
proposed National Expenditure Program, the DBM prepares and finalizes the budget documents to be submitted to
Congress.
7. The Presidents Budget ends with the submission of the proposed national budget the Presidents Budget to
Congress. The Presidents Budget consists of the following documents:
Presidents Budget Message the President explains the policy framework and priorities in the budget.
Budget of Expenditures and Sources of Financing (BESF) contains the macroeconomic assumptions,
public sector context (including overviews of LGU and GOCC financial positions), breakdown of the
expenditures and funding sources for the fiscal year and the two previous years.
National Expenditure Program contains the details of spending for each department and agency by
program, activity or project, and is submitted in the form of a proposed General Appropriations Act.
Details of Selected Programs and Projects contains a more detailed disaggregation of key programs,
projects and activities in the NEP
Staffing Summary contains a summary of the staffing complement of each department and agency
BUDGET LEGISLATION / BUDGET AUTHORIZATION
1. House Deliberations
The House of Representatives, in plenary, assigns the Presidents Budget to the House Appropriations Committee. The
Committee and its Sub-Committees then schedule and conduct hearings on the budgets of the departments and agencies
and scrutinize their respective programs and projects. It then crafts the General Appropriations Bill (GAB).
In plenary session, the GAB is sponsored, presented and defended by the Appropriations Committee and Sub-Committee
Chairmen. As in all other laws, the GAB is approved on Second and Third Reading before transmission to the Senate.
(Note: In the First Reading, the Presidents Budget is assigned to the Appropriations Committee.)
2. Senate Deliberations
Conducts its own committee hearings and plenary deliberations on the GAB; formally start after the House of
Representatives transmits the GAB. For expediency Senate Finance Committee and Sub-Committees usually start
hearings on the GAB even as House deliberations are ongoing.
The Committee submits its proposed amendments to the GAB to plenary only after it has been formally transmitted by the
House.
3. Bicameral Deliberations
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. A Harmonized Version of the GAB is thus produced.
4. Ratification and Enrollment
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.
5. The Veto Message
The President and DBM then review the GAB and prepare a Veto Message; GAB only legislative measure where the
President can impose a line-veto (in all other cases, a law is either approved or vetoed in full).
6. Enactment
When the GAA is not enacted before the fiscal year starts, the previous years GAA is automatically reenacted.
BUDGET EXECUTION
Spending the Budget; peoples money is actually spent
1. Release Guidelines and Program. The budget execution phase begins with DBMs issuance of guidelines
on the release and utilization of funds
2. Budget Execution Documents (BEDs) - outline agency plans and performance targets; include the physical and
financial plan, monthly cash program, estimate of monthly income, and list of obligations that are not yet due and
demandable; submitted at the start of the budget execution
3. Allotment and Cash Release Programming
DBM prepares an Allotment Release Program (ARP) to set a limit for allotments issued to an agency and on the
aggregate; corresponds to the total amount of the agency-specific budget under the GAA, as well as Automatic
Appropriations
Cash Release Program (CRP) - formulated alongside to set a guide for disbursement levels for the year and for
every month and quarter.
4. Allotment Release
Allotments - authorize an agency to enter into an obligation, are either released by DBM to all agencies
comprehensively through the Agency Budget Matrix (ABM) and individually via Special Allotment Release
Orders (SAROs).
ABM - disaggregates all programmed appropriations for each agency into two main expenditure categories:
not needing clearance and needing clearance. The ABM is the comprehensive allotment release document
for appropriations which do not need clearance, or those which have already been itemized and fleshed out in the
GAA.
SARO - identified as needing clearance are those which require the approval of the DBM or the President; an
agency needs to submit a Special Budget Request to the DBM with supporting documents. Once approved, a
SARO is issued
5. Incurring Obligations
Obligations - liabilities legally incurred, which the government will pay for
The GAA as Allotment Release
The Aquino Administration plans to design the annual General Appropriations Act as the comprehensive allotment
release document itself. This is being pursued in order to significantly speed-up the process of releasing the Budget
and implementing the programs and projects that it funds. This entails the disaggregation of all budget items into full
detail, as well as the elimination of all lump-sum funds, save for a few exceptions such as the Calamity Fund. In other
words, this reform significantly reduces the need for SAROs.
6. Cash Allocation
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).
NCA - a cash authority issued periodically by the DBM to the operating units of agencies to cover their cash
requirements; specifies the maximum amount of cash that can be withdrawn from a government servicing bank
for the period indicated; based on an agencys submission of its Monthly Cash Program and other required
documents.
Others Disbursement Authorities. NCAAs - issued to authorize non-cash disbursements. CDCs - issued to
departments with overseas operations, allowing them to use income collected by their foreign posts for their
operating requirements.
7. Disbursement the actual spending
Modified Disbursement Scheme - where disbursements of national government agencies chargeable against the
Treasury are made through government servicing banks
BUDGET ACCOUNTABILITY - happens alongside the Budget Execution phase; DBM - monitors the efficiency of
fund utilization, assesses agency performance and provides a vital basis for reforms and new policies.
1. Performance and Target Outcomes
These performance measures are set alongside the preparation of the National Budget; and these are indicated in the
OPIF Book of Outputs
2. Budget Accountability Reports (BARs) - submitted by agencies on a monthly and quarterly basis; shows how agencies
used their funds and identify their corresponding physical accomplishments; include quarterly physical and financial
reports of operations; quarterly income reports, a monthly statement of allotments, obligations and balances; and monthly
report of disbursements.
When the agencies issue their financial reports and statements they are asserting the following:
Existence or Occurrence - assets or liabilities of the audited agency actually exist at a given date, and whether
recorded transactions have occurred during the given period.
Completeness all transactions and accounts that should be presented in the financial statements are included.
Rights and Obligations - assets are actually owned by the agency and liabilities are the obligation of the agency at
a given date.
Valuation or Allocation - the asset, liability, revenue and expenses components have been included in the financial
statements at appropriate amounts.
Presentation and Disclosure particular components of the financial statements are properly classified, described
and disclosed.
Assertions on Achievement of Goals and Objectives (Performance or Value for Money Accountability)
When the agencies prepare and submit to proper authorities their reports on the performance of an activity or a
project, the agency is asserting that they used and managed the resources for that activity or project in an economical,
efficient and effective manner.
Performance of government entities is measured from the point of view of economy, efficiency and effectiveness.
Economy refers to the reasonableness of cost incurred. Measuring economy will determine whether the agency has been
performing at the least possible cost or under the terms most advantageous to the government.
Efficiency refers to the relationship between goods or services produced and resources used to produce them. The
measurement of efficiency involves the determination of whether an agency is managing or utilizing its resources in an
efficient manner
Effectiveness is concerned with the relationship between the outputs and the goals of the agency. Measuring effectiveness
will determine whether the desired results are achieved
Accounting for Budgetary Accounts
Budgetary accounts consist of the appropriations, allotments and obligations. Appropriations refer 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. Allotment is the authorization issued by the DBM to the agency, which
allows it to incur obligations for specified amounts, within the legislative appropriation.
In order that the appropriation may be released, the agency, in consultation with the DBM, is required to prepare and to
submit the Agency Budget Matrix (ABM), the official document used as the basis in the release of the obligational
authority. This is prepared by appropriation/financing sources to support expenditures to be made during the year broken
down by allotment class/expenses. The ABM shall contain, among others, the following information:
a. The amount to be released categorized under Not Needing Clearance column, (ABM)
b.
The amount that will be released through the issuance of Special Allotment Release Order ( SARO)
categorized under Needing Clearance column including continuing appropriations based on the Statement
of Allotments, Obligations and Balances (SAOB).
Annual Cash Program - provide cash to finance the programs reflected in the ABM and the prior years accounts
payable; with approved total comprehensive release by DBM to be released to the agency
For request Non-Needing Clearance, the Notice of Cash Allocation (NCA) is issued as requested. Pursuant to the Tax
Remittance Advice (TRA) - the NCA released to the agency is reduced by the amount of the taxes withheld to be
remitted by the DBM for the Agency thru the TRA based on the request of the agency duly supported by the Summary of
Taxes Withheld (STW).
Control and Recording of Appropriations, Allotments. Obligations and the NCA
The COA does not journalize the appropriations. The control of the release of allotments and the NCA shall be made by
the DBM and the BTr, thru the registries that they shall maintain. The Agency shall also monitor the allotments and the
obligations it incurs in the registry that it shall also maintain.
The agency shall journalize the NCA it receives as debit to Cash-National Treasury-MDS and credit to Subsidy Income
from the National Government.
Records of the DBM
Approval and issuance of the ABM and the SARO
1. Registry of Appropriations and Allotments (RAPAL) - enter the pertinent data on releases for each
government agency
2. Registry of Allotments and NCA (RANCA) allotments and NCA issued; the control and monitoring
record of the DBM and shall furnish the BTr a copy of the NCA.
Records of the BTr
Receipt of the NCA from DBM - enter it in the Registry of NCA and Replenishment (RENREP). It shall also enter the
transfer of cash from its bank account(s) to the appropriate MDS account.
Records of the Agency
Receipt of the approved ABM and ARO - the Budget Officer shall record the allotment to the respective registries
through the Allotment and Obligation Slips (ALOBS).
Maintain four registries for the obligations it incur:
-
Accounting of Obligations:
Obligation refers to a commitment by a government agency arising from an act of a duly authorized official which binds
the government to the immediate or eventual payment of a sum of money.
Head of the Requesting Unit - prepare the Obligation Request (ObR) or Budget Utilization Request (BUR) and
Disbursement Voucher. He shall certify on the necessity and legality of charges to appropriations/allotment under his
direct supervision as well as the validity, propriety and legality of supporting documents.
Head of the Budget Unit - certify the availability of allotment and obligations incurred in the ObR or budget and
utilization in the BUR. Obligations shall be taken up in the registries maintained by the Budget Unit through the ALOBS
prepared/processed by the office; verifies the completeness of the documents. If complete, then prepares the ALOBS.
Verifies the availability of the allotment based on the RAOs. If no allotment is available, returns the documents to the
office concerned, if there is an available balance of allotment to cover the obligations, prepares the ALOBS and record
in the appropriate RAOs.
The obligation is recognized and will be entered in the appropriate RAO when the obligation is incurred as evidenced by
the approved ALOBS. Obligations shall be posted in the Obligation Incurred column of the RAOs to arrive at the
balance of allotment still available at a given period.
Adjustment in the RAOs shall be effected thru a positive entry (if additional obligation is necessary) or a negative
entry (if reduction) in the Obligation Incurred column.
Head of the Accounting Unit, for contract or purchase order, shall certify the availability of funds based on the ObR or
BUR duly certified by the Budget Officer and certify the availability of cash and completeness of supporting documents
in the DV.
A new ALOBS for the following adjustments of obligations as negative entries in the Obligation Incurred column
shall be made:
1
2
3
To support the negative entries, a certified copies of OR for the overpayment/refunds shall be furnished to the Budget
Unit.
The Accountant shall credit Cash-National Treasury-MDS each time a payment is made charged against the NCA and
debit the specific account being paid for, either asset or expense account.
Illustrative Entry:
a Receipt of Allotment
b Incurrence of obligation
Notice of Cash Allocation (NCA) - specifies the maximum amount of withdrawal that an agency can make from the
National Treasury through the issuance of MDS checks or other authorized mode of disbursement. This is issued by
DBM based on the Annual Cash Program or as requested and prescribed under the Modified Disbursement System
(MDS).
Upon receipt of the NCA, the accountant shall record in the books as:
Cash-National Treasury, MDS
108
Subsidy Income from National Government
651
XX
XX
Taxes
Operating and Service Income
Grants and Donations
4. Borrowings
5. Miscellaneous Receipts
Accrual Method used when income is realized (earned) during the accounting
Period regardless of cash receipt. Account Receivable is set up
and the general or specific income accounts according to nature
and classification are credited.
Cash Basis - shall be used for all other taxes, fees, charges and other revenues
where accrual method is impractical. The income account is
credited upon collection of the cash or its equivalent.
All collecting officers shall deposit intact all their collections with AGDB daily or not later than the next banking day and
shall record all the deposits made in the Cash Receipts Record.
Only National Government Agencies shall maintain two sets of books:
1
Regular Agency books this shall be used to record the regular transactions of the agency like the receipt and
utilization of Notice of Cash Allocation (NCA), and collections of income and other receipts which the agency are
authorize to use. This shall consist of journals and ledgers, as follows:
Journals:
Cash Receipts Journal (CRJ)
Cash Disbursement Journal (CDJ)
Check Disbursement Journal (CkDJ)
General Journal (GJ)
Ledgers:
General Ledger (GL)
Subsidiary Ledgers (SL)
National Government books this shall be used to record collections, which the agency cannot use but are required to
be remitted to the Bureau of the Treasury. These shall consist of the following:
Cash Journal
General Journal
General Ledger
Subsidiary Ledger
The Collecting Officer (CO) receives payment from creditors and issues Official Receipt.
The CO records collections in Cash Receipt Record.
The CO deposits collections.
The CO records deposit in Cash Receipt Record.
The CO prepares the Report of Collections and Deposits and forwards to accounting unit with copies of official
receipts and validated Deposit Slips.
6 The accounting unit prepares Journal Entry Voucher (JEV) and records in the Cash Receipts Journal.
Types of collections as to authority to use:
1
2
3
4
5
6
2.
xxx
xxx
411
102
xxx
xxx
xx
xx
xx
xx
xx
xx
xx
xx
3. Cash from another agency to implement its project (Inter-agency Transferred Funds). Under existing
regulations, the collections made by an Implementing Agency (IA) of cash from a source agency (SA) to
implement the latters project shall be remitted by the recipient agency, the IA, to the BTr. The IA shall request
the necessary NCA from the DBM)
6.a Receipt of the check from the SA.
Cash collecting officers
Due to Other NGAs( SA)
6.b Remittance of cash to the BTr
102
416
xx
131
102
xx
106
131
xx
xx
xx
xx
416
xx
xx
xx
226
xx
416
108
xx
xx
102
622
xx
xx
111
102
xx
xx
xx
622
111
xx
xx
xx
xx
411
xx
102
xx
P500,000
250,000
300,000
The proceeds from sale were accordingly remitted to the National Treasury through the bank. The agency
received Special Allotment Release Order (SARO) in the amount of P500,000 for the purchase of a new car with Notice
of Cash Allocation (NCA) in the amount of P450,000, net of withholding tax of P50,000. After approval of the purchase
order issued, the motor vehicle was delivered and accordingly, paid in full, net of withholding tax. The said tax was
afterwards remitted to the Bureau of Internal Revenue through a Tax Remittance Advice (TRA).
To record sale of motor vehicle.
Cash collecting officer
Accumulated DepreciationLand Transport Equipt
Land Transport Equipment
Gain on Sale of Asset
102
300,000
314
214
623
250,000
500,000
50,000
107
631
450,000
450,000
214500,000
500,000
401500,000
412
107
50,000
450,000
412 50,000
631
50,000
Chart of Accounts is a list of account titles and codes that guides the bookkeeper in recording government transactions.
It provides the framework within which the accounting records are constructed.
Standard Chart of Accounts (SGCA) is a list of general ledger accounts prepared for the use of National, Local and
Government Owned or Controlled Corporations design to achieve the objectives of uniformity in
accounting and reporting, facility in consolidating financial reports and adaptability in
computerization.
- It consists of Balance sheet accounts and Budget/Operation accounts.
Coding the systematic assignment of number, letters or other symbols to distinguish items within a given classification
from each other.
Purposes:
1. To save time and clerical work in recording items of accounts, funds, projects, allotments and
expenditures;
2. To facilitate location of accounts in the general and subsidiary ledger;
3. To facilitate systematic arrangement and classifying of accounts; and
4. To comply with the requirements of mechanized accounting.
The Chart of Accounts consists of three-digit codes grouped as follows:
Accounts
Account Codes
Assets
100-299
Asset Contra Accounts
300-399
Liabilities
400-499
Equity
500-549
Income
550-699
Tax Revenue
National Taxes
550-579
Local Taxes
580-599
General Income
Permits and Licenses 600-609
Service Income
610-629
Business Income
630-649
Subsidy Income
650-659
Other Income
660-679
Gain or Loss Accounts
680-699
Expenses
700-999
Personal Services
700-749
MOOE
750-969
Financial Expenses
970-999
ACCOUNTING FOR DISBURSEMENTS AND RELATED TRANSACTIONS
The cash transactions affect every classification within the financial statements assets, liabilities, and residual equity,
income and expenses by checks.
Disbursements constitute all cash paid out during a given period either in currency (cash) or by check; the settlement of
government payables/obligation by cash or by check; covered by Disbursement Voucher (DV), Petty Cash Voucher, or
Payroll.
How to Distinguish Disbursement from Expenditures?
EXPENDITURES - the obligations incurred by the Agency; includes both the amount actually paid and those incurred
and recorded as liabilities to be paid in the future
DISBURSEMENTS - payments made for such government obligations by cash or check.
Typical transactions for disbursements include the following major classes of payments:
A Current Operating Expenses
1 Personal Services
- Salaries and wages
- Other Compensation
- Personnel benefits
- Other personnel benefits
2
Financial Expenses
- bank charges
- commitment fees
- documentary stamps
- interest and other financial charges
Capital Expenditures these expenditures need allotment for CO; involves investments and procurement of
assets that is expected to be used for a longer period of time.
Inter-agency fund transfers - covers the transfer of funds to other agencies for the implementation of specific
projects; taken up in the books under Due to by the receiving agency and Due from by the releasing
agency.
Commercial checks issued by government agencies chargeable against the agency checking account with
GSBs; covered by income/receipts authorized for deposits with AGDBs and funding checks received by RO/OUs
from CO/ROs respectively.
All checks issued including cancelled checks shall be recorded chronologically in the Check Disbursement Record
(CKDR) and indicate the date checks were actually released.
All checks actually released to the claimants including the cancelled ones included in the Report of Checks
Issued the Cashier. All unreleased and cancelled enumerated in the List of Unreleased Checks to be
attached to the RCI.
Receipt of NCA this entry will that the NCA received is the share of the agency in the income of the National
Government; proof that there was an allocation of cash for the Agency by the National Treasury; may be net of the amount
of the taxes to be withheld by the agency
Cash National Treasury, MDS
XXXX
Subsidy Income from NG
XXXX
Disbursement by Cash - shall be made from cash advance drawn and maintained in accordance with COA rules and
regulations; based on duly approved payrolls/disbursement vouchers. May either for:
1 personal services or salaries and wages equal to the net amount due the officials and employees; fully
liquidated within 5 days after the pay period; UNCLAIMED WAGES remitted and receipted to close the
cash advance account
2 travels accounted for as Due from officers and Employees; subject to liquidation upon completion
a LIQUIDATION OF TRAVEL WHERE THE AMOUNT OF CASH ADVANCE =/> THE TRAVEL
EXPENSES INCURRED LIQUIDATION REPORT FORM shall be prepared by the employee
concerned and submitted to the accounting unit as a basis for JEV preparation ; close the receivable
account
b EXCESS CASH ADVANCE refunded and an Or shall be issued to acknowledge receipt; noted in
the LIQUIDATION REPORT
c CASH ADVANCE < TRAVEL EXPENSES INCURRED LIQUIDATION REPORT shall be
submitted to liquidate cash advance previously granted; DV prepared to claim reimbursement of the
deficiency in amount
3 miscellaneous expenses - recorded in separate cashbooks
REPORT OF DISBURSEMENT - serve as the liquidation report of the cash advance granted to the Disbursing Officer.
Petty Cash Fund (PCF) - fund shall be sufficient for emergency and petty expenses of the agency; replenishment
directly charged to the appropriate expense accounts; equal to the total cash on hand and the unreplenished expenses; not
be used to purchase regular inventory items for stock nor for the liquidation of outstanding cash advances; used only for
disbursements which cannot be conveniently paid by check.
Disbursement through Petty Cash Fund - shall be through the PC Voucher which shall be approved by authorized
officials and signed by the payee to acknowledge receipt of the amount from the PC Custodian ; DV prepared to
replenish the fund.
At the end of the year, the PCC shall submit to the Accounting unit all outstanding PCVs. In case the fund could not be
replenished for lack of funds, a JEV shall be prepared to recognize all unreplenished expenses in the books and the PCF
account shall be credited.
At the start of the year, as soon as cash becomes available, the fund shall be replenished by a debit to account Petty
Cash Fund and credit to the appropriate Cash in Bank account to restore the fund to its original amount.
PCC resigns or ceases - full accounting/liquidation shall be made.
1 EXCESS CASH - refunded and all the PCVs together with the original supporting documents shall be
surrendered to the Accounting Unit which shall prepare a JEV to take up the expenses in the books and
credit account Petty Cash Fund. In no case shall the remaining cash of the former custodian be
transferred to the incoming PCC.
Petty Cash Fund record - used to record all the PCs received by the PCC as well as reimbursements received for
expenses paid; PCV supported with valid documents to prove the propriety of disbursements, such as ORs, invoices,
etc.
Advice to Debit Account (ADA) a system by which no check is issued to the payee in payment of government
obligations, but instead, the current account number of the payee in the bank where the government maintains a deposit,
shall be obtained by the accounting unit. Payment is to be made the ADA shall be issued by the Accounting Unit of
the agency to the bank where it maintains an account. All payments made to the credit of the payees account and a
debit to the account maintained by the government agency in the same bank. A JEV prepared to record the transaction
in the GJ.
Recording the different types of Disbursements:
a. Personal Services
Made through the following:
1. Payroll Fund in the hands of a Disbursing Officer (DO) as cash advance. Payments are made by the DO in cash
to the employees.
2. Payroll Fund deposited in an authorized depository bank, withdrawal by the employees is through the
automated teller machine (ATM).
3. Direct payment to employees by individual check.
Example, Assume the following payroll fund is established:
Salaries and wages
P 36,000
Additional Compensation
10,000
Personnel Economic Relief Allowance (PERA)
6,000
Gross
P 52,000
Less: Withholding tax
P 2,000
GSIS contribution
3,000
PAG-IBIG contribution
3,000
PHILHEALTH contribution
2,000
10,000
Net Payroll
P 42,000
=======
a Enters the obligation RAOPS
b Cash Advance to be granted to the DO
c Recognize the expenses and liabilities
d Obligation and recording of the government share of the mandatory contributions
e Remittance of the deductions to the respective offices.
b Maintenance and Other Operating Expenses
Asset Method - used in recording disbursements when expenditures apply to more than the accounting period.
Example, Assume the following types of expenditures:
Rent: The government signed a contract for the rental of office space with 3 months advance payment of P1,200 starting
November.
The Agency enters the obligation of P1,200 in the RAOMO, and records the payment as:
Prepaid Rent
P1,200
Cash National Treasury, MDS
P1,200
Supplies and Materials: Assume the following transactions about office supplies:
1 Issued Purchase Order (PO) for office supplies, P60,000.
a Obligation
b Payment (thru Procurement Service). Compare with purchases made to outside supplier.
c Record the asset received/delivered
d Record the used supplies.
e Remittance of withholding tax thru TRA
The expense shall be taken up upon utilization/consumption.
Cash Advances: Petty Cash Fund, Travelling Expenses
a Obligation
b Record the granting of cash advances
c Record liquidations. Determine if there are refunds, reimbursements or additional claims.
d. remittance of refunds to the Bureau of Treasury and adjust obligations.
Property and Inventory accounting System - consists of the system of monitoring, controlling and recording of
acquisition and disposal of property and inventory.
The system starts with the receipt of the purchases inventory items and equipment. The requesting office need of the
inventory items and equipment after determining that the items are not available in stock shall prepare and cause the
approval of the Purchase Request (PR). Based on the approved PR and after accomplishing all the required
procedures adopting a particular mode of procurement, the agency shall issue a duly approved Purchase Order. The subsystem are as follows:
1 Receipt, Inspection, Acceptance and Recording Deliveries of Inventory Items and Equipment,
2 Requisition and Issuance of Inventory Items
3 Requisition and Issuance of Equipment
PERPETUAL INVENTORY METHOD purchase of supplies and materials for stock recorded as Inventory
account; an inventory control account is maintained in the General Ledger on a current basis.
Regular purchases - recorded under the Inventory account; issuance - recorded based on the Report of Supplies and
Materials Issued. Purchases out of Petty Cash Fund - charged immediately to the appropriate expense accounts.
Perpetual inventory records Supplies Ledger Cards for each inventory stock; Property, Plant and Equipment
Ledger Cards for each category of plant, property and equipment including work and other animals, livestock, etc.
Subsidiary ledger cards contain the details of the General Ledger accounts.
Property and Supply Officer/Unit - maintain Property Cards (PC) for property, plant and equipment, and Stock Cards
(SC) for inventories. The balance in quantity per PC and SC - reconcile with the ledger cards of the Accounting Unit.
Moving Average Method - used for costing inventories. Accounting Unit - responsible in computing the cost of
inventory on a regular basis.
Financial Expenses - expenses not used in the actual operation of the agency such as interest expenses, bank charges, etc.
Purchase and/or Construction of Fixed Assets
PROPERTY, PLANT AND EQUIPMENT AND INVENTORY ACCOUNTS acquired through purchase - include
all costs incurred to bring them to the location necessary for their intended use ; recorded as Asset after inspection and
acceptance of delivery.
CONSTRUCTION PERIOD THEORY used in recording fixed assets
Depreciation - taken up starting on the month succeeding the month of purchase or completion of construction; Straightline method; rate of depreciation - depend on the nature of the assets, guidelines for this shall be issued by the COA.
Recording of fixed assets - the Construction Period Theory shall be followed. All expenses during the construction
period shall be capitalized.
During the 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.
Public Infrastructures and Reforestation Projects accounts closed to Government Equity account; asset recorded in the Registry of Public Infrastructures/Reforestation Projects at the end of the year.
Purchase/Construction of Fixed Assets
Example: Purchase of office equipment either thru the Procurement Service / outside suppliers.
1. Issue PO for the office equipment
2. Record the obligation, RAOCO
3. Record payment (Procurement Service/outside supplier) or recognize the liability and taxes withheld
4. Record the asset received/delivered
5. Remit taxes withheld upon receipt of TRA
Construction of Building by Contract
1 Signed the construction contract. Record the obligation RAOCO
2 Record performance bond posted by the contract(cash-5%, bank guarantee-10%,
And surety bond-30% of the contract cost)
3 Grant 15% advances to the contractor if requested
4 Payment based on the percentage of completion billed
5 Imposed retention fees and observed if needed up to the last claims
6 Required withholding taxes to be deducted for every billing
7 Record completion and turn-over
8 Return the performance bond, retention fees and remittance of withholding taxes
Miscellaneous Transactions
Accounting for loss of cash and property - may be due to malversation, theft, robbery, fortuitous event or other causes;
CASH SHORTAGE reported through the Report of Cash Examination. The Auditor issues an audit report in case of
shortage in property accountability. As soon as a shortage is definitely established, the auditor shall issue a
memorandum pertaining thereto and the accountant shall draw a JEV to record the shortage as a receivable from the
accountable officer concerned.
In case of loss of property due to other causes like theft, force majeure , etc., a report thereon shall be prepared by the
accountable Officer concerned for purposes of requesting relief from accountability. No accounting entry shall be made
but the loss shall be disclosed in the notes to financial statements pending result or request for relief from accountability.
Grant of Relief from Accountability Grant of relief from accountability due to shortage or loss of fund a copy of
the decision shall be forwarded to the Chief Accountant who shall draw a JEV to record the transaction; debited to the
Loss of Assets account and credited to the appropriate receivable account; Request for relief is denied immediate
payment of the shortage shall be demanded from the AO. Restitution - acknowledged by the issuance of an official
receipt.
Request for relief from accountability for loss of property caused by fire, theft, etc, is granted - a copy of the
decision shall be forwarded to the Chief Accountant for the preparation of the JEV; same journal entry; Request for
relief is denied - taken as receivable from the accountable officer and shall be credited to the appropriate asset account.
Accounting for Cash Overage - the amount shall be forfeited in favor of the government and an official receipt shall be
issued by the cashier; taken up as Miscellaneous Income.
Accounting for stale checks - outstanding for over six months from date of issue or as prescribed.
A stale check shall be marked cancelled on its face and reported as follows:
1. Unclaimed stale checks still with Cashier - cancelled and reported in the List of Unreleased Checks as cancelled, which
is attached to the RCI.
2. In the hands of the payees or holders in due course and requested for replacements - new checks maybe issued upon
submission of stale checks to the accounting 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.
Accounting for Disallowance - taken up in the books of accounts only when they become final and executory. The
accountant shall prepare the JEV to take up the Receivable-Disallowance/Charges and credit the appropriate expense
account for the current year or Prior Years Adjustment account if pertaining to expenses of previous years.
Cash settlement for disallowances - acknowledged through the issuance of an official receipt and reported by the cashier
in the RCD.
Accounting for overpayments - refunds shall be demanded of the employees concerned.
TRIAL BALANCES, FINANCIAL REPORTS AND STATEMENTS
Financial Reporting System. This financial Reporting System (FRS) 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
2. Preparation and Submission of Financial Statements
The Trial Balance shows the equality of debit and credit balances of all general ledger accounts as of a given period. It is
prepared and submitted monthly, quarterly and annually. At the end of the fiscal year, the pre-closing and the post-closing
trial balances shall be prepared.
Purposes of the Trial Balance. The trial balance is prepared to:
1. prove the mathematical equality of the debits ad credits after posting;
2. uncover errors in journalizing and posting; and
3. serve as basis for the preparation of the financial statements
The Pre-closing trial balance shall be prepared after recording the adjusting journal entries in the General Journal and
posting the same to the General Ledger. It shows the adjusted balances of all accounts as of a given period. This is also
described as the adjusted trial balance.
Adjusting or Correcting Journal Entries. Under the matching principle, adjustments shall be made for economic activities
that have taken place but are not yet recorded at the time when the financial statements are prepared. Such adjusting
journal entries are made to ensure that revenues and expenses are recorded in the period when they are earned or incurred.
Adjustments are two main types: accrued items and deferred items.
Adjustment for Accrued Item. It is an adjusting entry for an economic activity already undertaken but not yet recorded into
an asset and revenue accounts or a liability and expense accounts. It requires asset/revenue adjustments and
liability/expense adjustments.
Asset/Revenue Adjustment. It involves earned revenues not yet recorded as assets and income at the end of the accounting
period. Examples are receivables for revenues already earned but not yet collected nor billed as of the year end.
Account Title
Account Code Debit Credit
-------------------------------Interest Receivables
117
500
Interest Income
612
500
Liability/Expense Adjustment. It involves expenses, which exist already but remain unpaid at the end of the accounting
period. Examples are salaries, wages and other expenses already incurred but not yet paid.
Account Title
Account Code
Debit Credit
---------------------------- -----Salaries and Wages-Regular
701
1,000
Due to Officers and
Employees
423
1,000
Adjustment for Deferred Items. These are adjusting entries transferring data previously recorded in an asset account to an
expense account, or data previously recorded in a liability account to a revenue account. It also requires asset/expense
adjustments and liability/revenue adjustments.
Asset/Expense Adjustments. These pertains to assets, portion of which shall be recorded as expense of the agency at the
end of the accounting period. Examples are prepaid expenses, bad debts and depreciation.
Account Title
Account Code
Debit
Credit
-----------------------Original Entry:
Prepaid Rent
171
Cash-National Treasury,
MDS
107
1,000
Adjusting Entry:
Rent Expenses
Prepaid Rent
900
786
171
-----
------
1,000
900
Bad Debts. Trade receivables shall be valued at their face amounts minus, whenever appropriate, allowance for doubtful
accounts. Bad debts expense and/or any anticipated adjustments, which in the normal course of events will reduce the
amount of receivables from the debtors to estimated realizable values, shall be set up at the end of the accounting period.
The Allowance for Doubtful Accounts shall be provided in an amount based on collectibility of receivables balances and
evaluation of such factors as aging of the accounts, collection experiences of the agency, expected loss experiences and
identified doubtful accounts
The determination of bad debts expense shall be derived from computations based on percentages and aging of accounts
receivables as follows:
Age of Accounts
Percentage
-----------------------1-60 days
1%
61-180 days
2%
181-1 year
3%
More than 1 year
5%
An adjusting journal entry to take up bad debts expense is as follows:
Account
Title
Account Code Debit Credit
------------------------ ---------Bad Debts
901
1,000
Allowance for Doubtful
Accounts
301
1,000
Depreciation for Property, Plant and Equipment. The cost of property, plant and equipment are allocated to the periods
benefited through the provision of accumulated depreciation. Depreciation is the systematic and gradual allocation of the
depreciable amount of assets over its useful life.
Method of Depreciation. Depreciation shall be computed using the Straight Line Method. Depreciation shall start on the
second month from purchase. A residual value equivalent to ten percent of the cost shall be set. Annual depreciation is
computed as follows
Annual Depreciation = Assets Cost less Estimated
Residual/Salvage Value
-------------------------Estimated Useful Life
Asset Cost
- Purchase or Acquired Value of the Asset
Estimated Salvage Value - 10% of the asset cost
Estimated Useful Life - Estimated number of years the asset
shall be used as determined by the Commission on Audit
A sample adjusting journal entry for depreciation expense is as follows:
Account Title
Account Code Debit Credit
---------------------------- -----Depreciation-Office Equipment
907
1,000
Accumulated DepreciationOffice Equipment
307
1,000
Reversion of the unused or utilized Subsidy Income from National Government at the end of the year due to the DBM
policy that NCA will only be valid within the year of issue except NCA for accounts payable, which is valid one month
after its issuance. There is no need to issue an MDS Check when reverting the account.
Account Title
Account Code
Debit Credit
---------------------------- -----Subsidy Income from National
Government
631
100
Cash-National Treasury, MDS 107
100
Closing Journal Entries. Closing journal entries are general entries which close out the balances of all
nominal/temporary and intermediate accounts at the end of the accounting period. The nominal and intermediate
accounts that shall be closed at the end of the accounting period are as follows:
1. Close the balance of the Subsidy Income from National Government account to Income and Expense
Summary account.
Account Title
Account Code
-----------------------Subsidy Income from National
Government
631
Income and Expense Summary
999
Debit
-----
Credit
------
1,000
1,000
2. Close the balance of all income accounts to Income and Expense Summary account.
Account Title
Account Code
-----------------------Other business Income
618
Other Income
659
Income and Expense Summary
999
3.
Credit
-----900
Close the balance of all expense accounts to Income and Expense Summary account.
Debit
----500
400
999
701
800
800
Close the balance of the Income and Expense Summary account to the Retained Operating Surplus account.
999
1,100
1,100
5. Close the balance of the Prior Year's Adjustments accounts to Retained Earnings Surplus account.
Prior Year's Adjustment
Retained Operating Surplus
6.
200
200
Close the balance of the Retained Operating Surplus to Government Equity account.
684
1,300
471
1,300
Close Public Infrastructures or Reforestation Projects accounts to Government Equity account and transfer
the corresponding amount to the respective registries.
Government Equity
Public Infrastructures/
Reforestation Projects
471
251-260
261-262
1,300
1,300
For the purpose of preparing the financial statements for the first, second and third quarters, the closing entries
nos. 1 to 6 shall be prepared using the worksheet.
The Post-Closing Trial Balance. The Post-closing Trial Balance shall be prepared after recording the closing
journal entries in the General Journal and Posting to the General Ledger. It contains a listing of all general ledger
accounts that remain open after the closing process is completed.
GENERATION OF FINANCIAL STATEMENTS
Generation of Financial Statements and Supporting Schedules. Financial statements and their supporting schedules are
the products of the government accounting processes. These are the principal comprehensive means by which the
information accumulated and processed in the state accounting system is periodically communicated to those who use
them. The financial statements generally prepared in the National Government are: the Balance Sheet, Statement of
Income and Expenses, Statement of Government Equity, and Statement of Cash Flows.
Responsibility for Financial Statements. Responsibility for the fair presentation and reliability of financial statements
rests with the management of the reporting agency. This responsibility is discharged by applying generally accepted state
accounting principles that are appropriate to the entity's circumstances, by maintaining effective system of internal control
and by adhering to the chart of accounts prescribed by the Commission on Audit.
To achieve fair presentation and reliable information of the financial statements, the following standards shall be
observed.
a. FAIRNESS OF PRESENTATION. This refers to the overall propriety in disclosing financial information. Full
disclosure in financial aspects requires observance of the following standards of reporting:
All essential facts relating to the scope and purpose of each report and the period involved shall be included
and clearly displayed.
- All financial data presented shall be accurate, reliable, and truthful. The requirement for accuracy does
not rule out the inclusion of reasonable estimates when the making precise measurements is
impracticable, uneconomical, unnecessary, or conducive to delay. All appropriate steps shall be taken
to avoid bias, unclear facts, and presentation of misleading information.
Financial reports shall be based on official records maintained under an adequate accounting system
that produces information objectively and discloses the financial aspects of all events or transactions
taking place. Where financial data or reports based on sources other than the accounting systems are
presented, their basis shall be clearly explained.
The financial data reported shall be derived from accounts that are maintained in all material respects
on a consistent basis from period to period; material changes in accounting policies or methods and
their effect shall be clearly explained.
Consistent and non-technical terminology shall be used in financial reports to promote clarity and
usefulness.
b.
COMPLIANCE. The report shall be in accordance with prescribed government requirements and
international accounting standards of reporting.
c.
TIMELINESS. All needed reports shall be produced promptly to be of maximum usefulness.
d.
USEFULNESS. Financial reports shall be carefully designed to present information that is needed and
useful to reports users.
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS.
The Statement of Management Responsibility for Financial Statements shall serve as the covering letter in
transmitting the agencies financial statements to the Commission on Audit, Department of Budget and
Management, other oversight agencies and other parties. It shows the agency's responsibility for the preparation
and presentation of the financial statements. The statement shall be signed by the Director of Finance and
Management Office or Comptrollership Office, or the Chief of Office who has direct supervision and control over
the agency's accounting and financial transactions, and the Head of Agency or his authorized representative.
BALANCE SHEET. The Balance is a formal statement which shows the financial condition of the agency as of a
certain date. It includes information on the three elements of financial position - assets, liabilities, and government
equity. It shall be prepared from information taken directly from the year-end Post-Closing Trial Balance. The
Balance Sheet shall be supported with the following schedules/statements;
- Schedules of Accounts Receivables (SAR)
- Schedules of Accounts Payables (SAP)
- Schedules of Public Infrastructures (SPI)
- Other schedules as may be required.
Although the allotments and obligations of the agency are not recorded in the books of accounts, the Statement of
Allotments, Obligations and Balances (SAOB) shall be submitted to the Commission on Audit by the Budget
Officer/Agency Officer concerned. This statement shall to be included among the aforementioned schedules for
information of government officials and oversight agencies.
STATEMENT OF INCOME AND EXPENSES. The Statement of Income and Expenses shows the results of
operation/performance of the agency at the end of a particular period. This statement shall be prepared by the
Accounting Unit from information taken directly from the Pre-Closing Trial Balance.
STATEMENT OF GOVERNMENT EQUITY. The Statement of Government Equity shows the financial
transactions, which resulted to the change in Government Equity account at the end of the year.
STATEMENT OF CASH FLOWS. The Statement of Cash Flows is a statement summarizing all the cash
activities of an agency. This includes the operating, investing and financing activities of the entity and provides
information on the cash receipts and cash payments during the period. The primary purpose of the Statement of
Cash Flows is to give relevant information on the agency's overall cash position, liquidity and solvency. Using the
Statement of Cash Flows, managers, investors, and creditors could easily assess if the agency could meet its
obligations in operating, investing and financing activities.
PREPARATION OF THE STATEMENT OF CASH FLOWS. To facilitate the preparation of the Statement of
Cash Flows, the use of a Working Paper is encouraged. It shall show the increase or decrease in the cash account
between two periods.
The net increase in cash provided by 1) operating 2) investing and 3) financing activities in addition to the cash
balance at the beginning shall equal to the cash balance at the end of the period.
1)
OPERATING ACTIVITIES. Operating activities involves the principal resources producing activities of
the enterprise and other activities that are not investing or financing (SFAS 22). Generally, these include the
cash effect on transactions that enter in the Income and Expense Summary account.
2)
INVESTING ACTIVITIES. Investing activities involves the acquisition and disposal of long-term assets
and other investments not included in cash equivalent (SFAS 22). These activities include cash transactions
covering non-operating assets, such as the purchase of property, equipment, short and long-term
investments and other non-current assets.
Non-cash investing activities are not included in the statement of cash flows.
3)
FINANCING ACTIVITIES. Financing activities are derived from the equity capital and borrowings of the
agency (SFAS 22). These include cash transactions involving the government equity and non-operational
liabilities.
Non-cash financing activities are not included in the statement of cash flows.
The increase or decrease in the cash accounts are analyzed and the following computations are made:
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Inflows
- Receipt of Notice of Cash Allocation (NCA) from the DBM
- Receipt of Notice of Transfer of Allocation to Agency RO/OU from CO
- Cash receipts from all sources of revenues
- Receipt of Inter-Agency cash transfers (Due to)
- Cash receipts from the sale of goods or rendition of services
- Cash receipts of interest income, rental income, dividend income, etc.
- Receipt of payment for liquidated damages
- Receipt of refund of deposits
- Receipt of refunds of cash advance or excess payments
- Collection of receivables
- Cash receipt of grants and donations
- Receipt of cash dividends from enterprises (e.g. PLDT)
Cash Outflows:
- Payments of accounts payable
- Cash purchase of merchandise for sale
- Cash advances granted for travel
- Inter-agency transfers (Due from)
- Notice of Transfer of Allocation to Agency RO/OU issued by the NGA Main Office to RO/OU and/or
attached agencies through Government Servicing Banks.
- Return of unused NCA
- Cash payment for operating expenses
- Remittance of taxes withheld not covered by TRA and other deductions (if any)
- Cash purchase of supplies and equipment
- Cash payment of retirement benefits
- Cash payment of claims for damages
- Cash payment of liabilities incurred in operations
- Cash payments for interest
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Inflows:
- Proceeds from sale of marketable stocks and bonds
- Cash proceeds from the sale/disposal of equipment and other property, plant and equipment.
- Redemption of long-term investments or repayment by GOCC/GFI of long-term loans
Cash Outflows:
- Purchase of property, plant and equipment
- Purchase of land
- Investment in stocks/bonds
- Investment in GOCC/GFI
- Exposure as other long-term investments
Where Notes to Financial Statements appear on a separate page, indicate the phrase "See accompanying Notes to
Financial Statements" placed at the bottom of said statements.
Material changes in classification of accounts shall be indicated and explained as notes to financial statements.
The four types of disclosure considered necessary are as follows:
a.
CUSTOMARY OR ROUTINE DISCLOSURE. Information about measurement bases of important assets,
restrictions on assets and government equity, important long-term commitments not recognized in the body of the
statements, information on terms of owner's equity and long-term debt, and certain other disclosures required by
pronouncements of the Philippine Institute of Certified Public Accountants, Accounting Standards Council, and
regulatory bodies that have jurisdiction are necessary for full disclosure.
b.
DISCLOSURE OF CHANGES IN ACCOUNTING PRINCIPLES. Changes in accounting principles, practices, or
the methods of applying them, together with the financial effect, and the justification for the change shall be
disclosed in the financial statements or a note thereto.
In particular, it shall include any of the following:
- Selection from existing acceptable alternatives
- Principles and methods peculiar to the agency
- Unusual application of generally accepted accounting principles.
c.
DISCLOSURE OF SUBSEQUENT EVENTS. Disclosure of events that affect the agency directly and that occur
between the date of, or end of the period covered by, the financial statements and the date of completion of the
statements is necessary if knowledge of the events might affect the interpretation of the statements, even though
the events do not affect the propriety of the statements themselves.
d.
DISCLOSURE OF ACCOUNTING POLICIES. Description of the accounting policies adopted by the reporting
entity is required as an integral part of the financial statements. It is usually captioned "Summary of Significant
Accounting Policies", and placed as first item in the Notes. It shall be limited to description of the policies and no
quantitative data shall be included.
Examples of accounting policy disclosures commonly required:
- Consolidation principles
- Accounting for long-term investments
- Adoption of policy on increasing benefit entitlements of the program members.
The effect of the increase shall be disclosed.
- Basis of revenue recognition
In general, disclosures shall include important judgment as to appropriateness of principles relating to recognition
of revenues and allocation of asset costs to current and future periods.
INTERIM REPORTS. Interim reports are the financial statements required to be prepared at any given period or at a
financial reporting period without closing the books of accounts. The following interim financial statements shall be
prepared and submitted quarterly with the Notes to Financial Statements:
a. Statement of Income and Expenses;
b. Balance Sheet; and
c. Statement of Cash Flows.
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 recorded in the
books of accounts. To facilitate the preparation of the interim financial statements, the use of the worksheet is
recommended.
Sec. 82. WORKSHEET. A worksheet is a tool for accumulating and sorting information needed for the preparation of the
financial statements. It is a columnar sheet used to adjust and close account balances for the preparation of the financial
statements. The format of the worksheet shall be as follows:
Agency Name
Worksheet
As of ______________, 20__
Unad
justed
Trial
Bal.
Title
a.
b.
c.
d.
e.
f.
Cod
e
Dr
Cr
Adjustments
Dr
Cr
Adjusted Closing
Or PreEntries
Adjusted
Trial
Bal.
Dr Cr Dr Cr
Statemen Post
t
Closing
Of
Trial
Income
Bal.
& Exp
Dr Cr Dr Cr
Balance
Sheet
Dr
Cr
Account Title and Code columns show the accounts of the General Ledger.
The Unadjusted Trial Balance columns reflect the amount balances of the General Ledger accounts.
Adjustments columns show adjusting journal entries effected for the accounts.
Adjusted/Pre-Closing Trial Balance columns show the balances of all the accounts after adjustments are
added/deducted from the balances of accounts in the unadjusted trial balance.
Closing Entries debit and credit columns show the amounts debited and credited to close the nominal accounts.
Statement of Income and Expenses columns show all the debit and credit amount balances of the nominal accounts
(subsidies, income and expenses) and intermediate accounts.
g.
h.
Post-Closing Trial Balance columns show the debit and credit amount balances of all accounts after posting the
closing entries.
Balance Sheet columns show all the debit and credit amount balances of all real accounts in the post-closing trial
balance (assets, liabilities, and government equity).