Government Accounting

Nature and Scope of the New Government Accounting System

Accounting

Effective Financial Management Tool

Helps in
evaluating
past
performance
vis--vis
financial
budgets/
targets

Enables
managers or
unit heads in
making
appropriate
and strategic
decisions

Aids in making
financial plans
for the future

Thus the need for accounting system

Flexible
Responsive to the
needs of users

End
product-

Comprehensive

Financial
statements

Simple
(understandable)

Considering accounting role in any entity, the

COA in exercise of its authority granted under
Sec 2 (2), Art IX-D of the 1987 Constitution,
prescribed the new government accounting
system (NGAS)
(Circular number 2001-004)
Effective January 1, 2002

NGAS
INTRODUCED

1.Basic

policies and procedures

2.New coding and system
3. Accounting System
4. Books
5. Registries
6. Records
7. Forms
8. Reports
9. Financial Statements

Old Government
AccountingVS
System

NGAS

Entries manually done

Simplified

Numerous special
journals are maintained

Updated accounting
system

Manual accounting
system is tedious
Generated financial
reports are often
inefficientual for those
w/o government
accounting background
background

Generates/ produces
functional user-friendly
financial reports

NGAS OBJECTIVES
(TO RESPOND TO THE NEED OF THE FOLLOWING)

Adoption of an accounting system that conforms

with international accounting standards
management
Pursuant of eventual computerizations that will
generate reports useful to:

Generation of relevant and periodic financial

statements

To have an effective tool for

monitoring/evaluating agency performance

Law makers
General
public

Government Accounting by PD 1445, Sec

109 is defined as
One which encompasses the process of
analysis,
recording,
classifying,
summarizing and communicating all
transactions involving the receipt and
disposition of government fund and
property and interpreting the results
thereof.

PD 1445, SEC 110

OBJECTIVES OF GOVERNMENT ACCOUNTING

To produce information concerning past

operations and present conditions
To provide a basis for guidance for future
operations
To provide a basis for control of the acts of public
bodies and offices in the receipts, disposition and
utilization of funds and properties; and
To report on the financial position and results of
operation of government agencies for the
information of guidance of all persons concerned

ACCOUNTING RESPONSIBILITY
Emanates from
Constitution

Laws
Policies
Rules and regulation

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY
COA
Keeps the
governments
general accounts
Promulgates
accounting rules
and regulations for
the prevention and
disallowance of
irregular,
unnecessary,
excessive,
extravagant, or
questionable
expenditure or
uses of
government funds
and properties.

DBM

BTr

Other Government
Agencies

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY

COA

Submits to the
President and
congress within
the time fixed by
law (not later
than Sept. 30
each year)
annual
government
report

DBM

BTr

Other Government
Agencies

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY
COA
Keeps the
governments
general accounts
Promulgates
accounting rules
and regulations
(accounting
audit)
Submits to the
President and
congress within
the time fixed by
law (not later
than Sept. 30
each year)
annual
government
report

DBM

Its subdivision
Agencies and
instrumentalities
Government
owned and
controlled
corporations

BTr

Other Government
Agencies

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY
COA

DBM
(Pursuant to Sec
2, Chap 1 Title
VII, Book IV of
the
Administrative
Code of the
Philippines,
(Executive Order
292)
Formulates and
implements the
national budgets
Responsible for
the efficient and
sound utilization
of government
funds and
revenues

BTr

Other Government
Agencies

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY

COA

DBM

BTr

Registry and
Appropriations and
Allotments (RAPAL)

Controls and
monitors
appropriations
and allotments
Registry of Special
thru the
Purpose Fund
registries it
Appropriation (RESPFA)
maintains:

Registry of Allotments
and notice of Cash
Allotments (RANGA)

Other Government
Agencies

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY

COA

DBM

BTr

Other Government
Agencies

Received and keep

national funds

Play a pivotal
role in the cash
operations of the Maintains the Registry
national
of NCA and
government
replenishment
As one of the
(RENREP)
operating
bureaus of the
Maintain accounts of
Dept of Finance. financial transaction of
It is authorized
all national government
to:

offices, agencies and

instrumentalities

Manage and control the

disbursement of the
national fund

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY
COA

DBM

BTr

Other Government
Agencies
These includes the
department,
bureaus, offices
and other
instrumentalities
of the national
government,
including the
Congress, the
Judiciary, the
Constitutional
bodies, State
Colleges and
Universities and
other selfcontained
institutions and
hospitals

GOVERNMENT OFFICES CHARGED WITH

ACCOUNTING RESPONSIBILITY
COA

DBM

BTr

Other Government Agencies

Are required by law to
have accounting
units/divisions/department
under the direct
supervision of the Head of
agency
Each agency shall
journalize the Notice of
Cash Allocation (NCA) it
receives
Each shall maintain the
following 4 registries for
the allotments it receives
and for the obligation it
incurs
1. Registry of Allotments
and Obligations Personal
Services (RAOPS)
2. Registry of Allotments
and Obligationmaintenance and other
operating expenses
(RAOMO)
3. Registry of Allotments
and Obligation-Capital
Outlay (RAOCO)
4. Registry of AllotmentsFinancial Expenses
(RAOFE)

Funds
Sum of money or other resources
Set aside for specific activities
Fund operations
Controlled by system of budgets
Budgets
A plan of financial operation
Composed of estimates/proposed expenditures
for a given period or purpose

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES

Budget
Preparation and
Presentation
Covers
estimation,
determination
and translation
of government
revenues,
priorities and
activities

Budget
Authorization

Budget Execution
and Operation

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES
Budget
Preparation and
Presentation

Steps
Government
agencies prepare
budgets for the
year
Submit to Dept
of Budget and
Management for
review
DBM
consolidates all
budgets to form
the national
budget
National budget
is submitted to
the President for
final approval

Budget
Authorization

Budget Execution
and Operation

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES

Budget
Preparation and
Presentation

Budget
Authorization
Submission of
the National
Government
Budget to the
Legislative Body

Budget Execution
and Operation

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES

Budget
Preparation and
Presentation

Budget
Authorization
Steps
Reviews,
Deliberates
Formulates and
Appropriation
Bill
Forwards to the
President for
approval and
signature

Budget Execution
and Operation

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES

Budget
Preparation and
Presentation

Budget
Authorization

Budget Execution
and Operation
Covers
implementation
of the various
operational
aspects of the
budget

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES
Budget
Preparation and
Presentation

Budget
Authorization

Budget Execution
and Operation
Steps:
Release of
allotments to
various agencies
Continuing
review of
governmental
fiscal position
Other related
activities

Budget
Accountability

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES

Budget
preparation and
presentation

Budget
authorization

Budget execution
and operation

Budget
accountability

Involves
evaluation of
expenditures
and
performance
against
predetermined
budgets

GOVERNMENT BUDGETARY PROCEDURES

4 MAJOR PHASES
Budget preparation and presentation

Budget authorization

Budget execution and operation

Budget accountability

Steps
Personnel
use of funds
and work
accomplishe
d are
compared
with plans
and goals
as indicated
in their
budgets by
agency
heads
COA
examines
the
operations
og agencies

NGAS BASIC FEATURES AND

POLICIES

Accounting methods
Modified Accrual Basis of Accounting is in
used
All expenses are recognized when incurred
and reported in the financial statements in
the period in which they relate

Income shall be recognized on accrual basis

except fro transactions where accrual basis
is unpractical or when other methods are
required by law

NGAS BASIC FEATURES AND

POLICIES

One fund concept

It adopts the one fund concept or the general
fund, which is generally available for all function
of the government. Separate fund accounting
shall only be done when specifically required by
law or by a donor agency
A Special Purpose fund may only be created for
the following purposes

A SPECIAL PURPOSE FUND

Appropriated for purposes other than regular funds

provided for government agencies

Examples:
1. Miscellaneous Personal Fund- Being used for
Personnel benefits not provided in the regular budget
2. Calamity Fund- used for relief, rehabilitation and
other services with calamities
3. Organizational Adjustment Fund- Being used for
budgetary requirements of newly created
organizations, programs, projects, activities within
an agency

SOURCES OF FUND

General Fund
All financial
resources of the
government except
those restricted

Special Purpose

Proceeds of specific
revenue from taxes

GOVERNMENT CHART OF
ACCOUNTS
List of Ledger Accounts

REAL

NOMINAL

Being used by all sectors of

the national government
Provides framework
within which accounting
records are based
Uses a 3-digit codes

CLASSIFICATION OF ACCOUNTS
Balance Sheet Accounts

Income and Expense

Accounts

Assets:

Current Assets
Investments
Property, Plants and

Equipments

Other Assets

Liabilities:

Current Liabilities
Long-term liabilities
Other Liabilities

Government equity
Intermediate Accounts

Equity:

2 major
income
statements
accounts
classifications

3 major
expense
classifications

General income accounts

Specific accounts
classifications

all types of revenue/income generated by the

government

In the exercise of their administrative and

regulatory functions
Ex: Income from public enterprise, income
from investment and grants and donations

all taxes imported income and

properties and use or sale of
goods/services
Taxes on international trade and
other taxes, including fines and
penalties.

3 MAJOR EXPENSE CLASSIFICATION

Expense classification
Personal Services (PS)
Inclusive of current
operating expenses
1. Pay proper
2. Authorized
allowances
3. Bonus
4. Cash gifts
5. Incentive
6. Benefits
7. Other personal
benefits paid to
government officials
and employees

Maintenance and other

operating expenses
(MOOE)
1. Traveling expenses
2. Training and
seminar expenses
3. Utilities expenses
4. Advertising
5. Rent
6. insurance, etc.

Financial expenses
Inclusive of:
1. Bank charges
2. Interest expense
3. Commitment fees
4. Other financial
charges
5. Forex losses

ACCOUNTING REPORTS

Trial balance-2 money column

Monthly

Quarterly

Pre-closing

Post-closing

Balance Sheet

Statement of Income and Expenses

Cash Flow Statement

CODING SYSTEM

Coding is the systematic assignment of numbers

to distinguish items within a given classification
from each other.
The new chart of Accounts consists of three-digit
codes as follows:

Accounts
Account Code
Assets
100-299
Contra assets account
300-399
Liabilities
400-499
Equity
500-599
Revenue/Income
Tax Revenue:
National Taxes
550-579
Local Taxes
580-599
General Income:
Permits and Licenses 600-609
Service Income
610-629

Accounts

Account Code

Business Income
630-649
Subsidy Income 650-659
Other Income 660-679
Gain or Loss Account
680-699
Expenses 700-999
Personal Services 700-749
Maintenance and Other
Operating Expenses 750-969
Financial expenses 970-999

BASIC OBJECTIVES, FEATURES AND POLICIES

OF NEW GOVERNMENT ACCOUNTING SYSTEM
Commission on
Audit (COA)
issued
New Government Accounting System
adopts
Commercial accounting
Double-entry
bookkeeping
Responsibility
accounting

Basic Objective
1. Simplify Government Accounting
2. Conform to international accounting standard
3. Generate periodic and relevant financial reports for
better monitoring of performance.
Basic Features and Policies
a. Accrual Accounting- under this method, all
expenses shall be recognized when incurred and
income shall be on accrual basis except for transactions
where accrual basis is impractical or when other
methods are required by law.

b. One Fund Concept- one fund shall be maintained.

Provision: Separate Fung accounting
c. Accounting Books:
1. Regular Agency (RA) books- used to record the
receipt of Notice of Cash Allotment (NCA) and other
income/receipts . These consist of journal 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 for:
Cash
Receivables
Inventories
Fixed Assets
Construction in Progress
Liabilities
2. National Government (NG) Books- used to record
income which are required to be remitted to the Bureau
of Treasury and for which the agencies are not
authorized to used.

Consist of:
Cash Journal (CJ)
General Journal (GJ)
General Ledger (GL)
d. Accounting Reports
e. Two-Money Column Trial Balance
f. Allotment and Obligation- is modified to eliminate
the complicated procedures in the occurrences of
obligation and the recording of the budgetary accounts
(appropriation, allotments and obligation incurred and
liquidated)

g. Financial Expenses- shall be separately classified

from Maintenance and Other Operating Expenses
(MOOE)
h. Notice of Cash Allotment (NCA)- the receipt of
NCA by the agency shall be recorded in the books as
debit
to
Cash-National
Treasury-Modified
Disbursement System (MDS) account and credit to
Subsidy Income from National Government (SING)
account.
i. Perpetual Inventory of Supplies and Materialssupplies and materials purchased for inventory
purpose shall be recorded using the perpetual
inventory system.

BASIC FEATURES AND POLICIES

j. Valuation of Inventory- cost of inventory of supplies
and materials shall be computed using the moving
average method.
k. Construction of Assets- for assets under construction,
liability shall be recognized as bills are received, based
on percentage of completion of the project.
l. Depreciation- is recognized for the depreciable assets
of an agency.
m. Allowance for Doubtful Accounts- shall be set up
for estimated uncollectible receivables .
n. Elimination of Contingent Asset Accounts- shall no
longer be used and shall be shown only in the notes to
financial statements.

o. Recognition of Liability- shall be recognized at the

time goods and services are accepted or rendered and
supplier/creditor bills are received.
p. Accrued Interest- whenever applicable and
appropriate, interest income and/or expenses shall be
accrued and recognized in the books of accounts.
q. Borrowings and Loans- all borrowings and loans
incurred shall be recorded direct to the appropriate
liabilities account

BASIC FEATURES AND POLICIES

r.

Registry of Public Infrastructure/Investment- for

agencies that construct public infrastructure, a Registry of
Public Infrastructure/Investment (RPH) shall be maintained
for each category infrastructure/investment.
Ex.
a. Registry of Public Infrastructure/InvestmentBridges
(RPHB)
b. Registry of Public Infrastructure/Investment- Road (RPHR)
c. Registry of Public Infrastructure/Investment- Parks (RPHP)
d. Registry of Public Infrastructure/Investment- Reforestation
(RPHR)

s. Elimination of corollary and negative entriesshall no longer be used in the new accounting system.
Acquisition of inventory and other assets shall be
recognized as capital expenditures in the regular books
of accounts, negating the need for corollary entry.

ACCOUNTING PROCEDURES FOR

APPROPRIATION, ALLOTMENTS AND
NOTICE OF CASH ALLOCATION
An appropriation is a formal authorization under
legislative act for an agency to incur expenditures up to
a stated sum for specified purposes usually within a
given period of time subject to certain conditions
Allotment, on the other hand is the authorization issued
by the DBM to the agency, which allows it to incur
obligations, for specified amounts, within the
legislative appropriations.

Notice of Cash Allocation (NCA) is issued by the DBM to

an agency authorizing the latter to disburse by checks
a certain amount within specified period.
ENTRY
Cash- National Treasury- Modified Disbursement System 100
Subsidy Income from National Government

100

To record the receipt of the NCA

Due to BIR

10

Subsidy Income from National Government

10

To record the remittance of the taxes withheld

Due to BIR

10

Cash- National Treasury-MDS

10

To record the remittance of the taxes withheld, if the NCA includes the
taxes to be withheld

ACCOUNTING FOR OBLIGATIONS

These are amounts to be paid by a government agency
arising from an act of a duly authorized administrative
officer binding the government to the immediate or
eventual payment of a sum of money.

ACCOUNTING FOR DISBURSEMENT

These are payments of obligation incurred by the agency.
The NCA is used for the payment of the following types
of transactions :

ACCOUNTING FOR DISBURSEMENT

1. Personal services
2. Maintenance and other operating expense
3. Financial expenses
4. Purchase and/or construction of fixed asset such as building and
structures, land improvements, equipment, etc., charged against
the capital outlay.
5. Miscellaneous transactions, such as cash transfer to another agency
to implement a project of the Agency

PERSONAL SERVICES
Payment for salaries, wages, other remuneration to the
personnel of the Agency may be made through the ff:
1. Payroll Fund in the hands of Disbursing Officer (DO)
2. Payroll Fund deposited in an authorized bank,
withdrawal by the employees is through the
automated teller machine (ATM)
3. Direct payment to employees by individual checks.

Illustration: To illustration the accounting procedures,

assume the following payroll fund is established:
Salaries and wages
P360
Additional compensation
100
Personnel Economic Relief Allowance (PERA) 60
Gross
P520
Less: Withholding tax
P20
GSIS contribution
30
PAG-IBIG contribution
30
PHILHEALTH contribution 20
100
Net Payroll
420

Cash-disbursing Officer
Cash-National Treasury

420

420

To record advanced to a Disbursing Officer

Salaries and wages-Regular pay

360
Additional Compensation (ADCOM)
100
Personnel Economic Relief Allowance (PERA) 60
Due to Bureau of Internal Revenue
Due to GSIS
30
Due to PAG-IBIG
30
Due to PHILHEALTH
20
Cash-Disbursing officers
420

20

To record the payment of Salaries and wages and other allowances

Life and Retirement Insurance Contributions

PAG-IBIG Contributions
30
PHILHEALTH Contribution
20
Due to GSIS
30
Due to PAG-IBIG
30
Due to PHILHEALTH
20

30

To record the obligation of the government representing his share in the

life and retirement insurance, Pag-ibig, and the Philhealth
contributions

Due to GSIS
60
Due to PAG-IBIG
60
Due to PHILHEALTH
40
Cash-National Treasury-MDS

160

To record the remittance of salary deductions and government share

MAINTENANCE AND OTHER OPERATING EXPENSES

Under the new accounting method, the Asset

Method will be used in recording disbursement
when expenditures apply to more than
accounting period.
Examples of Disbursement
1. Rent
2. Supplies and Materials
3. Cash Advances
4. Financial Expenses
5. Purchase/Construction of Fixed Assets

ILLUSTRATION:
Rent: The government signed a contract for the rental of the
office space with 3 months advance payment of P90
starting November.
Prepaid Rent
90
Cash- National Treasury, MDS
To record the obligation in the RAOMO

90

MAINTENANCE AND OTHER OPERATING EXPENSES

Supplies and Materials
Assume the following transactions about office supplies
1. Issued Purchase Order (PO) for office supplies, P60.
2. Paid the (PO) less withholding tax of P5.
3. Withdrawal of office supplies for office use P40
4. Remittance of withholding tax thru Tax Remittance advice
(TRA)
The above transactions are recorded by the agency as follows:
1. The agency enters the obligation for office supplies in the
RAOMO, P60
2. The payment of the PO is recorded by the ff entry.

MAINTENANCE AND OTHER OPERATING

EXPENSES
Office Supplies Inventory 60
Due to BIR 5
Cash-National Treasury, MDS 55
3. The entry to record the withdrawal of the office supplies is:
Office Supplies Expense 40
Office Supplies Inventory 40
4. The agencys entry to record the issuance of TRA is:
Due to BIR 5
Subsidy Income from NG 5

CASH ADVANCES
To illustrate the accounting for cash advances, assume the
following transactions:
1. Set up petty cash funds for miscellaneous expenses, P120.
2. Release of the cash advance to the disbursing officer.
3. Release for replenishment of the petty cash fund for the
following expenses:
Office Supplies P50
Transportation fares
10
Repairs
20
FEDEX air cargo
15
Total P95
4. Replenishment of the petty cash fund.
5. Liquidation at year end for Office Supplies Expense P80 and
Traveling Expense, P20
6. Return of unused petty cash fund (PCF).

The accounting procedures to record transactions

1. The agency enters the obligation for the petty cash fund
(PCF) in the RAOMO, P120.
2. The release of the cash advance is recorded by the agency
is as follows:
Petty Cash Fund 120
Cash-Treasury- MDS 120
3. The request for replenishment of the PCF is recorded in
the RAOMO, P95.

4. The entry to record the replenishment of the PCF is

Office Supplies Expense 50
Traveling Expense-Local 10
Office Equipment Maintenance
Office Expenses 15
Cash-National Treasury-MDS

20
95

5. A year-end the agency record the liquidation of expense as

follows:
Office Supplies Expenses 80
Traveling Expenses-Local 20
Petty Cash Fund 100

6. The RAOMO is adjusted for the unused PCF of P20. The

agency record the return of the unused PCF by the ff
entry:
Cash-Collection Officer
Petty Cash Fund

20

20

PURCHASE/CONSTRUCTION OF FIXED
ASSETS
Fixed Asset account are recognized upon purchase. All
incidental expenses are to be capitalized. Depreciation is
taken up starting on the month succeeding the month of
purchase or completion of construction.
CASE 1: Purchase of Office Equipment
1. Issued PO for the office equipment, P150.
2. Received the office equipment with the charge invoice.
3. Paid the office equipment less withholding tax of P10.
The above transaction are recorded as follows:
1. Either the obligation of P150 in the RAOCO, P150.
2. Office Equipment
150
Accounts Payable
150

PURCHASE/CONSTRUCTION OF FIXED ASSETS

3. Accounts Payable
150
Due to BIR
10
Cash-National Treasury, MDS
140
CASE 2: Construction of Building by Contract
1. Signed the construction contract for the construction of
the building, P200.
2. Paid 30% of the contract price, P60.
3. Received the first billing, 50% of the contract price, P100.
4. Paid the first billing less withholding tax of P8.
5. Received the second billing for the balance of the current
price, P100% completed.
6. Paid the second billing less withholding tax of P20.

PURCHASE/CONSTRUCTION OF FIXED
ASSETS
7. To recognize the Building account and to close the Construction
in Progress account.
8. To close Withholding Tax Payable account to Subsidy Income
from the NG.
The above transaction are recorded as follows:
1. The obligation for the contract price is entered in the RAOCO, 200
2. Advances to Contractor 60
Cash- National Treasury- MDS 60
3. Construction in progress- Agency Assets
100
Advances to Contractor 60
Accounts Payable 40
4. Accounts payable 40
Due to BIR
8
cash- National Treasury-MDS 80
5. Construction in progress- Agency Assets 100
Accounts Payable
100

PURCHASE/CONSTRUCTION OF FIXED ASSETS

6. Accounts Payable
100
Due to BIR 20
Cash- National Treasury-MDS 80

7. Buildings
200
Construction in progress- Agency Assets

200

8. Due to BIR
28
Subsidy Income from National Government 28

CASE3: GENERAL REPAIR/CONSTRUCTION OF

BUILDING BY ADMINISTRATION

For repair or construction of building and other structures

undertaken by the administration, the materials
purchased shall be recorded to the Construction Materials
Inventory account. This account is credited for all
materials issued and labor paid for construction or repairs
with a corresponding debit to Construction in Progress
Agency account. Upon completion of the project, the
appropriate fixed asset account is recognized and the
Construction in Progress Agency Assets account is
closed.

CASE 4: PURCHASED OF LAND AND BUILDING

When land and building are purchased together, the cost of
each asset is segregated to establish separate accounts so that
appropriate depreciation on the building can be recorded.
To illustrate transactions are recorded as follows:
1. The obligation to pay P300 for the land and building is
entered in the ROACO.
2. Land 180
Building 120
Accounts Payable 300
3. Accounts Payable 300
Due to BIR
30
Cash-National Treasury-MDS 270

CASE 4: PURCHASED OF LAND AND

BUILDING
4. Due to BIR

30

Cash- National Treasury-MDS

30

Miscellaneous Transactions
Interagency transfer of funds to implement an Agency Project.
The agency making the transfer is the Source Agency (SA) and
the receiving agency is the Implementing Agency (IA).
Illustration: Assume the following transactions
1. Agency ABC is to transfer cash of P400 to Agency XYZ for a land
beautification project.
2. Cash is transferred to Agency XYZ.
3. Received report from Agency XYZ.

CASE 4: PURCHASED OF LAND AND

BUILDING
The foregoing transactions are recorded by Agency ABC
the Source Agency as follows:
1. Enters the obligations in RAOCO, P400.
2. Due from NGA Agency XYZ
400
Cash National Treasury - MDS
3. Land Development

Due from NGA Agency XYZ

400

400

400

ACCOUNTING FOR THE INCOME, COLLECTION AND

RELATED TRANSACTIONS

The sources of income and collections made by the

Agency are:
1.
2.
3.
4.
5.

Taxes
Operating and Service Income
Grants and Donations
Borrowings
Miscellaneous Receipts and Collections

The accounting procedures to record the collections will

depend on the Agencys authority to use the income
collected.

WITHOUT AUTHORITY TO USE

All revenues collected by the agency, regardless of the
amount and frequency of collections are to be remitted to
the National Treasury. Such income shall be recorded by
the collecting agency in a separate book of accounts it
shall maintain, the National Government Books.
The collection shall be credited to the income account of
the collecting agency, and which shall be debited upon
remittance to the National Treasury.

ILLUSTRATION: TO ILLUSTRATE, ASSUME THE

FOLLOWING:

Income Taxes
1. Collection of income taxes from individuals by the
Bureau of Internal Revenue (BIR), 100.
2. Remits the above collections to Bureau of Treasury
(BTR).
The following are the journal entries to record the above
transactions in the books of BTR.
1. Cash Collecting Officer
Income taxes Individuals
2. Income Taxes Individuals
Cash Collecting Officer

100
100
100
100

TAXES ON GOODS AND SERVICES

1. Receipt of excise tax payment to Bureau of Customs
(BOC), P200.
2. Remittance to BTR thru bank.
The journal entries of the BOC to record the above
transactions are:
1. Cash Collecting Officer
Excise Tax on Articles

200
200

2. Excise Tax on Articles

200
Cash - Collecting Officer

200

MOTOR VEHICLES REGISTRATION FEES

1. Land Transportation Office (LTO) collected motor
vehicles registration fees, P300.
2. Remittance to BTR.
LTO records the above transaction by the following entry:
1. Cash Collecting Officer
Registration Fees

300
300

2. Registration Fee.
300
Cash Collecting Officer

300

WITH AUTHORITY TO USE

For agencies which are authorized to use income collected
for their operations, the collections shall be recorded as
income in the Regular Agency (RA) Books.
Illustration:
collected.

Assume

the

following types

of

Rent
1. Issuance of bill for the rent of office space, P20.
2. Collection of the rent.
3. Deposit to the bank.
4. Use of the collection for the repair of the office
space.

income

WITH AUTHORITY TO USE- RENT

In the RA Books the entries are:
1. Accounts Receivable
Rent Income 20

20

2. Cash Collecting Officer 20

Accounts Receivable 20
3. Cash in Bank Local Currency, Current
Account (LCCA) 20
Cash Collection Officer 20
4. Repairs and Maintenance Office Bldg.
Cash in Bank LCCA 20

20

WITH AUTHORITY TO USE SERVICE

FEES
1. Collection of inspection fees, P10.
2. Deposit of Collections in the bank.
3. Use of income collected to pay for overtime
services.
The journal entries to record above transactions in RA Books
are:
1. Cash Collecting Officer
Inspection Fees 10
2. Cash in Bank LCCA 10
Cash Collecting Officer 10
3. Overtime and Night Pay
Cash in Bank LCCA 10

10

10

TRIAL BALANCE
A trial balance is a list of ledger account in their debit
balances. It is usually prepared before the preparation of
the financial statements. In the old government
accounting system, a four column or the trial balance of
totals and balances was required. Under the new system
(NGAS) the two-money column or the trial balance of
balances is required.
The column headings of the trial balance are:
Account Title

Account Code

Debit

Credit

ADJUSTING ENTRIES
Under the NGAS, before the preparation of financial
statements, adjusting entries are to be prepared for
proper matching of revenues and expenses. As in
commercial accounting, there are two principal types of
adjustments: accrued items and deferred items.
Depreciation accounting will be followed in the new
accounting system. Like in commercial accounting
depreciation shall be recorded in the books as expense
and is credited to the accumulated depreciation.
Straight-line method of computing depreciation is to be
used.

CLOSING ENTRIES
Under the NGAS the following shall be closed at the end of
the year:
Unused Notice of Cash Allocation (NCA)
Nominal or temporary accounts.
Unused NCA
At the end of the year unused or unutilized NCA is to be
reverted to the Bureau of Treasury (BTR) because of the
policy of the DBM that the NCA will only be used for the
year it was issued.

Illustration: Assume that the ledger accounts of the

Agency shows the following:
Total NCA received for the year
P100,000
Total MDS checks issued
90,000
Unused NCA
P 10,000
The closing entry would be:
Subsidy, Income from National Government 10,000
Cash, National Treasury MDS
10,000

Nominal and Temporary Accounts

As in commercial accounting, under the NGAS all
income and expense accounts shall be close to the Income
and Expense Summary account.
The following are the procedure of the closing process:
1. Close all income accounts to Income and Expense Summary.
2. Close all expense accounts to Income and Expense Summary.
3. Close all expense of Income and Expense Summary account to
Retained Operating Surplus
4. Close the balance of Prior Years Adjustments to Retained
Operating Surplus account.
5. Close the balance of the Retained Operating Surplus account
to Government Equity account.

FINANCIAL STATEMENTS
After the preparation of the trial balance, adjusting and
closing the appropriate accounts, financial statement can
now be prepared. As in commercial accounting worksheet
is prepared to facilitate the preparation of financial
statement. Under the NGAS the following are the types of
financial statements:
1. Statement of Income and Expenses
2. Balance Sheet
3. Cash Flow Statement

FINANCIAL STATEMENTS
The formats of the financial statements are presented in
the Appendix of this chapter.
Worksheet
The following is the suggested format of the worksheet:
Account

Account

Code

Title

Pre

Adjust-

Post

Statement

Closing

ments

Closing

of Income

Trial

Trial

and

Balance

Balance

Expenses

Dr : Cr Dr : Cr Dr : Cr Dr

Balance
Sheet

: Cr

Dr : Cr

STATEMENT OF INCOME AND EXPENSES

This statement explains the changes in the agencys
equity resulting from operations and economic activities
during the period. The format under the NGAS follows
that of the commercial accounting.
Balance Sheet
The balance sheet statement is to provides information on
the agencys resources, its obligations, and the
government equity in the agency. The format under the
NGAS follows that of the commercial accounting.

CASH FLOW STATEMENT

The basic purpose of this statement is to provide relevant
information about the agencys inflows and outflows of
cash during the year. It is designed to show the changes
in cash and cash equivalent for the year.
the following items shall be reported in the Cash Flow
Statement:
1. Cash Flows from operating activities.
2. Cash Flows from investing activities.
3. Cash Flows from financing activities.
4. Effect of foreign exchange rate changes, if any.
5. Net increase (decrease) in cash during the period.
6. Non-cash investing and financing activities.

CASH FLOW FROM OPERATING ACTIVITIES

Usual cash inflows identified are cash received from:
Notice of Cash Allocation (NCA)
Customers
Interests from deposits
Dividends from deposits
Refunds from suppliers, agency officials and
employees and other parties

Inter-agency transfers

CASH FLOW FROM OPERATING

ACTIVITIES
Usual cash outflows identified are cash paid for:

Purchase of supplies and materials (inventories)

Interest expense
Taxes, duties and fines
Salaries and wages
Advances to agency officers and employees
Inter-agency transfers
Return of unused NCA

CASH FLOW STATEMENT

Cash flows used in investing activities. Included under
this category are:
Cash received from:

Disposal/Sale of property, plant and equipment

Disposal/Sale of investment securities

Collection of loan (interest is operating activity)

Cash paid for:
Acquisition/Purchase of property, plant & equipment
Long-term investment in debit & equity securities
Loans to other parties
Acquisitions of other assets such as patents or other
intangible assets

CASH FLOW STATEMENT

Cash flows from financing activities. This includes:
Cash received from:

Equity contribution

Creditors from issuing debts securities

Cash paid for:

Creditors for payment of amounts borrowed.

CASH FLOW STATEMENT

Effects of foreign exchange rate changes
This will apply to agencies that have foreign operations or foreign
currency transactions
Net increase/decrease of cash during the period
The statement shall show the beginning cash balance, the ending
cash balance and the increase (decrease) in cash.
Non-cash investing and financing activities
These are the investing and financing activities, which involve an
exchange of value other than cash

CASH FLOW STATEMENT

Methods of Preparing Cash Flow Statement
The agency shall prepare the CFS using two methods/
approaches. This are:
Balance Sheet Approach
Income Statement Approach

FINANCIAL STATEMENT
Agency
Balance Sheet
As of _______________, 20___

ASSETS
CURRENT ASSETS
Cash
Petty Cash Fund xx
Cash-Collecting Officers xx
Cash-Disbursing Officers xx
Cash in bank-Local Currency, CA xx
Cash in Bank-Local Currency, SA xx
Cash in Bank-Foreign Currency, SA xx
Cash in Bank-Foreign Currency, TD

xx

xx

Receivables
Accounts Receivable
xx
Less: Allowance for Doubtful Accounts xx xx
Interest Receivablexx
Due from Officers & Employees xx
Due from NGAs xx Due from LGUs xx
Due from GOCCs xx
Other Receivables xx xx
Marketable Securities
Stocks xx
Other Marketable Services xx xx
Inventories
Office Supplies Inventory xx
Spare Parts Inventory xx
Gasoline, Oil and Lubricants Inventory xx
Other Inventory Itemsxx xx

Prepaid Expenses
Prepaid Rent xx
Other Prepaid Expenses xx xx
Other Current Assets
xx Total Current Assets
Long-Term Investments
Investments in Stocks
Other Long-Term Investments
Total Long-Term Investments
FIXED ASSETS
Land xx
Land Improvements xx
Buildingsxx
Less: Accumulated Depreciation
IT Equipment & Software xx
Less: Accumulated Depreciation
Office Equipment xx
Less: Accumulated Depreciation

xx

xx

xx

xx

xx

xx

LIABILITIES AND EQUITY

Liabilities
Current Liabilities
Accounts Payable
xx
Interest Payable
xx
Due to Officers & Employees xx
Due from NGAs xx Due from LGUs xx
Due from GOCCs xx
Guaranty Deposit Payable xx
Withholding tax payable xx
GSIS Payable xx
PAG-IBIG Payable xx
PHILHEALTH Payable xx
Performance Bond Payable xx
Other Payables
xx
Total Current Liabilities
xx

Office Equipment xx
Less: Accumulated Depreciation
xx
xx
Furniture and Fixtures
xx Less: Accumulated
Depreciation
xx
xx
Books xx
Other Fixed Assets xx
Less: Accumulated Depreciation
xx
xx
Construction in Progress-Agency Assets xx
Fixed Depreciated Assets xx
Fixed Assets in Transit
xx
Total Fixed Assets
xx
Other Assets
Deferred Charges
xx
Total Other Assets
xx
TOTAL ASSETS

xx

Long-Term Liabilities
Retirement Gratuity Payablexx
Other Long-Term Payable
Total Long-Term Liabilities
Other Liabilities
Deferred Credits to Income xx
Other Deferred Credits xx
Total Other Liabilities
xx
Total Liabilities
xx

xx
xx

Equity
Government Equity, beginning balance xx
Retained Operating Surplus (FY 20__) xx
Total Equity
xx
TOTAL LIABILITIES AND EQUITY

xx

Agency
Balance Sheet
As of _______________, 20___

ASSETS

CURRENT ASSETS
Cash xx
Receivables xx
Marketable Securities xx
Inventories xx
Prepaid Expenses xx
Other Current Assets xx
Total Current Assets xx
INVESTMENT AND FIXED ASSETS
Long-Term Investments xx
Fixed Assets xx
Less: Accum. Depreciation xx xx
Total Fixed Assets xx
TOTAL ASSETS xx

LIABILITIES AND EQUITY

LIABILITIES
Current Liabilities
Long-term Liabilities
Other Liabilities
Total Liabilities
EQUITY
Government Equity

XX

XX

XX
XX

XX

TOTAL LIABILITIES AND EQUITY XX

Agency
Statement of Income and Expenses
For the Fiscal Year Ended December _______________, 20___

Income
Subsidy Income from National Government
xx
Less: Reversion of Unused Notice
of Cash Allocation
xx
xx
Income from Government Services
xx
Income from Government Business Operation
Sales Revenue
xx
Rent Income
xx
Interest Income
xx
Gain on Sale of Assets
xx
Total Income
xx

xx

Less Expenses:
Salaries and Wages-Regular Pay
xx
PERA xx
Additional Compensation xx
Representation Allowance
xx
Transportation Allowance
xx
Clothing Allowance
xx
Christmas Bonus xx
Cash Gift
xx
Productivity Incentive Bonus xx
Life & Retirement Insurance Contributions xx
PAG-IBIG Contributions xx
PHILHEALTH Contributions xx
Other Personal Benefits xx
Traveling Expenses-Local
xx
Traveling Expenses-Foreign
xx
Electricity xx
Telephone/Internetxx
Rent Expense
xx
Office Supplies Expense xx

Spare parts Expense xx

Gasoline Oil and Lubricants Expense xx
Building maintenance xx
IT Hardware and Software Maintenance xx
Motor Vehicles Maintenance xx
Furniture & Fixtures Maintenance xx
Other Repair and Maintenance xx
Grants and Donations xx
Bad Debts Expense xx
Depreciation- Building xx
Depreciation- IT Equipment xx
Depreciation- Office Equipment xx
Depreciation- Other Equipment xx
Depreciation- Furniture & Fixtures xx
Depreciation- Other Fixed Assets xx
Bank Charges xx
Interest Expense xx
Other Financial Charges xx
xx
Net Income Over Expenses xx

Agency
Statement of Income and Expenses
For the Fiscal Year Ended December _______________, 20___

Income
xx
Less: Expenses
Net Income Over Expenses

xx

xx

Agency
Statement of Cash Flow
For the Fiscal Year Ended December _______________, 20___

Cash Flow From Operating Activities:

Net Subsidy over Expenses xx
Increase in Due from NGAs
(xx)
Increase in Spare Parts Inventory
(xx)
Increase in Other Receivables
(xx)
Increase in Prepaid Rent
(xx)
Increase in Accumulated Depreciation Bldg xx
Increase in Accumulated Depreciation
Office Equipment xx
Increase in Accounts Payable
(xx)
Increase in Performance Bonds Payable xx
Increase in Other Payables xx
Increase in Government Equity xx
Cash Provided by Operating Activities xx

Cash Flow from Investing Activities

Increase in Building
(xx)
Increase in IT Equipment and Software
Increase in Office Equipment
(xx)
Cash Used in Investing Activities
Increase in Cash
xx
Add: Cash, Balance, December 31, 20__
Cash Balance, December 31, 20__

(xx)
(xx)

xx

xx

Agency
Statement of Cash Flow
For the Fiscal Year Ended December _______________, 20___

Cash Flow From Operating Activities:

Net Subsidy over Expenses
xx
Add/Deduct: Non-cash expenses, revenues,
losses & gain included in the net income xx
Addition:
Depreciation expense xx
Depreciation in prepaid rent xx
Depreciation in spare parts inventory xx
Depreciation in other receivables xx
Depreciation in Prior Years Accounts
Payables xx
Increase in Performance Bonds Payables xx
Increase in Other Payables xx xx

Deduction:
Increase due in NGA
xx
Increase in prepaid rent
xx
Increase in spare parts inventory
xx
Increase in other receivables
xx
Decrease in accounts payable
xx xx
Cash Provided by Operation
xx