ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 1

INSTRUCTIONAL MATERIAL FOR

ACCO 30033

ACCOUNTING FOR GOVERNMENT AND

NOT-FOR-PROFIT ORGANIZATIONS

Compiled by:

JOHN CARLO ABILLONAR

RUTH CARLOS
MA. DELIA LIZ
GRACE MANALO
ANDREA ROSE RIMORIN
ELSA RUADO

2020
2 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

Module 2

ACCOUNTING FOR NATIONAL GOVERNMENT AGENCIES (NGAs)

Overview
Since the implementation of the Government Accounting Manual (GAM) for National
Government Agencies, the New Government Accounting System (NGAS) Manual had been
revised as prompted by the implementation of the Philippine Public Financial Management
Reform Roadmap, which includes the development of the Philippine Public Sector Accounting
Standards (PPSAS) that are harmonized with the International Public Sector Accounting
Standards (IPSAS). It also introduces the Revised Chart of Accounts (RCA) and adoption of the
Unified Account Code Structure (UACS) that will enable the national government agencies to
properly recognize financial transactions and prepare basic financial statements.

Module Objectives

After successful Completion of this module, you should be able to:

• Understand the budgetary procedure for NGAs;
• Describe the Chart of Accounts used by NGAs;
• Prepare journal entries for basic government transactions and
• Prepare basic financial statements of NGAs.

Revenue and Other Receipts

Unless otherwise specifically provided by law, all revenue (income) accruing to the departments,
offices and agencies by virtue of the provisions of existing laws, orders and regulations shall be
deposited in the NT or in the duly authorized depository of the Government and shall accrue to
the General Fund of the Government: Provided, that amounts received in trust and from
business-type activities of government may be separately recorded and disbursed in accordance
with such rules and regulations as may be determined by the Permanent Committee

Revenues received by NGAs may arise from exchange and non-exchange transactions. In a
transaction where the entity may provide some consideration directly in return for the resources
received, but that consideration does not approximate the fair value of the resources received,
the entity determines whether there is a combination of exchange and non-exchange
transactions. Each component of which is recognized separately. (Par. 10, PPSAS 23)

There are transactions where it is not immediately clear whether they are an exchange or a non-
exchange transaction. In these cases, an examination of the substance of the transaction will
determine if they are on exchange or non-exchange transactions. For example, the sale of goods
is normally classified as an exchange transaction. If, however, the transaction is conducted at a
subsidized price, that is, a price that is not approximately equal to the fair value of the goods
sold, that transaction falls within the definition of a non-exchange transaction.
Agencies may receive trade discounts, quantity discounts, or other reductions in the quoted price
of assets for a variety of reasons. These reductions in price do not necessarily mean that the
transaction is a non-exchange transaction.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 3

Revenues received by the NGAs from exchange transactions are derived from the following:
a. Sale of goods or provisions of services to third parties or to other NGAs
b. Use by other entity of assets yielding interest, royalties and dividends or similar
distributions.

Revenue from exchange transaction shall be measured at fair value of the consideration received
or receivable. When goods or services are exchanged or swapped for goods or services which
are of a similar nature and value, the exchange is not regarded as a transaction which generates
revenue. However, when goods are sold or services are rendered in exchange for dissimilar
goods or services, the exchange is regarded as a transaction which generates revenue. The
revenue is measured at the fair value of the goods or services received, adjusted by the amount
of any cash or cash equivalents transferred. When the fair value of the goods or services received
cannot be measured reliably, the revenue is measured at the fair value of the goods given up,
adjusted by the amount of any cash or cash equivalents transferred.

Other receipts of NGAs shall be composed of, but not limited to, the following:

a. Notice of Cash Allocation. The NCA shall be the authority of an agency to pay operating
expenses, purchases of supplies and materials, acquisition of PPE, accounts payable,
and other authorized disbursements through the issue of MDS checks, ADA or other
modes of disbursements.

• No MDS check/ADA shall be issued without the covering NCA. Hence, the total
MDS checks/ADA issued shall not exceed the total NCA received. To maximize
the available NCAs of the agency, the Common Fund System policy shall be
adopted whereby cash allocation balances of agencies under the Regular MDS
Account may be used to cover payment of current year’s accounts payable i.e.,
goods and services which have been delivered and accepted during the year
charged against appropriations of prior year/s, after satisfying their regular
operating requirements as reflected in their Monthly Cash Program.
• NCA issued and credited to the Special MDS Accounts of agencies for payment
of retirement gratuity/terminal leave benefits as well as prior years’ accounts
payable shall be valid within the period prescribed under existing rules and
regulations. The NCA shall be monitored through the maintenance of the Registry
of Allotments and Notice of Cash Allocation (RANCA) (Appendix 30) by the
Accounting Division/Unit.
• NCA issued and credited to the Special MDS Accounts for Trust to cover
payments of authorized claims shall be valid within the period prescribed under
existing regulations.
• For NCA issued for foreign assisted projects such as grants from foreign country
with a separate MDS account maintained by the spending agency with
Government Servicing Banks (GSBs), MDS check/ADA shall be issued only for
specific purpose until full implementation of the project, subject to pertinent DBM
issuances prescribing the validity of the NCA.
4 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

The Collecting Officer shall not issue an OR for the receipt of NCA. The accounting
entries to recognize receipt of NCA are as follows:

Account Title Account Code Debit Credit

Regular
Cash-Modified Disbursement System (MDS), Regular 10104040 P100,000
Subsidy from National Government 40301010 P100,000
To recognize receipt of NCA for Regular Agency Fund

Special Account
Cash-Modified Disbursement System (MDS), Special Account 10104050 P100,000
Cash-Treasury/Agency Deposit, Special Account 10104020 P100,000
To recognize receipt of NCA for Special Account in the General Fund

Cash-Modified Disbursement System (MDS), Trust 10104060 P100,000

Cash-Treasury/Agency Deposit, Trust 10104030 P100,000
To recognize the receipt of NCA for Trust Receipts Fund

b. Non-Cash Availment Authority. The accounting entry to recognize the receipt of NCAA
is as follows:

Account Title Account Code Debit Credit

Accounts Payable 20101010 P950,000
Subsidy from National Government 40301010 P950,000
To recognize the receipt of NCAA

c. Cash Disbursement Ceiling. The accounting entries for the collection of revenue of,
and the constructive receipt of disbursement authority to, Foreign Service Posts (FSPs)
of DFA and DOLE are as follows:

1. DFA and DOLE’s Books

Account Title Account Code Debit Credit

Cash-Collecting Officers 10101010 P100,000
Passport and Visa Fees 40201120 P100,000
To recognize collection of revenue of FSPs

Cash in Bank-Foreign Currency, Current Account 10103020 P100,000

Cash-Collecting Officers 10101010 P100,000
To recognize deposit of collections to authorized servicing bank of the FSPs

Cash-Constructive Income Remittance 10104080 P80,000

Subsidy from National Government 40301010 P80,000
To recognize receipt of CDC from DBM

Quarters Allowance-Civilian 50102070 P50,000

Rents-Buildings and Structures 50299050 30,000
Cash in Bank-Foreign Currency, Current Account 10103020 P80,000
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 5

To recognize payment of expenses charged to CDC

2. BTr Books
Account Title Account Code Debit Credit
Subsidy to NGAs 50214010 P80,000
Cash-Constructive Income Remittance 10104080 P80,000
To recognize constructive receipt of remitted collections by FSPs and disbursements
charged to the issued CDCs to FSPs

d. Tax Remittance Advice. This shall be used to recognize: (1) in the books of national
government agencies, the constructive remittance to BIR and BOC of taxes and customs’
duties withheld, and the constructive receipt of NCA for those taxes and customs duties;
(2) in the books of the BIR and BOC, the constructive receipt of tax revenue and customs
duties; and (3) in the books of the BTr, the constructive receipt of the taxes and customs
duties remitted.

1. Tax Withheld by NGAs

Account Title Account Code Debit Credit

NGAs’ (withholding agency) Books

Cash-Tax Remittance Advice 10104070 P100,000
Subsidy from National Government 40301010 P100,000
To recognize constructive receipt of NCA for TRA

Due to BIR 20201010 P100,000

Cash-Tax Remittance Advice 10104070 P100,000
To recognize constructive remittance to BIR of taxes withheld through TRA

BIR Books
Cash-Tax Remittance Advice 10104070 P100,000
Income Tax 40101010 P100,000
To recognize constructive receipt of taxes remitted by NGAs through TRA

BTr Books
Subsidy to NGAs 50214010 P100,000
Cash-Tax Remittance Advice 10104070 P100,000
To recognize constructive receipt of remittance of taxes by NGAs through TRA

Reporting of Collections and Deposits

Receipts and deposits shall be reported as follows:
a. At the close of the business day, the Collecting Officers shall prepare the Report of
Collections and Deposits (RCD) for submission to Accounting Office/Unit. The report lists
all the ORs issued in numerical sequence including cancelled ones.
b. The RCD shall be supported by documentary evidence such as duplicate copies of ORs
and validated deposit slips.
c. The Collecting government entity issuing electronic Official Receipt (eOR) should
generate and submit daily to the Auditor a copy of the RCD. In case the collection system
is not integrated with the accounting system, the Accounting Division/Unit shall recognize
the collections and deposits based on the generated reports duly certified by the
Collecting Officer/Cashier/Head of Cash/Treasury Unit.
6 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

d. Field Offices (FOs)/Operating Units (OUs) without complete set of books shall record
their collections of income chronologically in the Cash Receipts Register (CRReg). The
certified copy of the CRReg together with the required supporting documents, duplicate
copies of ORs and Deposit Slip (DSs) shall be submitted within five (5) days after the end
of each month to the concerned mother unit (central/regional/division office) by the FOs
(a unit under the central/regional/ division office) for review and recording of the
transactions in the CRJ by the Chief Accountant.

Basic Requirements for Disbursements and the Required Certifications

Disbursements of government funds shall comply with the following basic requirements and
certifications:
a. Availability of allotment/budget for obligation/utilization certified by the Budget
Officer/Head of Budget Unit;
b. Obligations/Utilizations properly charged against available allotment/budget by the Chief
Accountant/Head of Accounting Unit;
c. Availability of funds certified by the Chief Accountant. The Head of the Accounting Unit
shall certify the availability of funds before an Agency Head or his duly authorized
representative enter into any contract that involves the expenditure of public funds based
on the copy of budget release documents;
d. Availability of cash certified by the Chief Accountant. The Head of the Accounting Unit
shall certify the availability of cash and completeness of the supporting documents in the
disbursement voucher and payroll based on the Registry of Allotments and Notice of
Cash Allocation/Registry of Allotment and Notice of Transfer of Allocation;
e. Legality of the transactions and conformity with existing rules and regulations. The
requesting and approving officials shall ensure that the disbursements of government
funds are legal and in conformity with applicable rules and regulations;
f. Submission of proper evidence to establish validity of the claim. The Head of the
Requesting Unit shall certify on the necessity and legality of charges to allotments under
his/her supervision as well as the validity, propriety and legality of supporting documents.
All payments of government obligations and payables shall be covered by Disbursement
Vouchers (DV)/Payrolls together with the original copy of the supporting documents
which will serve as basis in the evaluation of authenticity and authority of the claim. It
should be cleared, however, that the submission of the supporting documents does not
preclude reasonable questions on the funding, legality, regularity, necessity and/or
economy of the expenditures or transactions; and
g. Approval of the disbursement by the Head of Agency or by his duly authorized
representative. Disbursement or disposition of government funds or property shall
invariably bear the approval of the proper officials. The DVs/Payrolls shall be signed and
approved by the head of the agencies or his duly authorized representatives.

Modes of Disbursements
The different modes of disbursements are as follows: (a) checks (MDS or commercial checks),
(b) cash (out of cash advance granted to authorized Disbursing Officer), (c) advice to debit the
account, (d) tax remittance advice, (e) working Fund/CDC, and (f) direct payment method.

Disbursements by Check
Checks shall be drawn only on duly approved Disbursement Voucher (DV) or Payroll). These
shall be used for payment of regular expenses which cannot be conveniently nor practically paid
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 7

using the ADA or not authorized to be paid using the Petty Cash Fund or advances for operating
expenses. Checks issued shall be reported and recorded in the books of accounts whether
released or unreleased to the respective payees. There are two types of checks being issued by
government agencies as follows:
a. Modified Disbursement System Checks – are checks issued by government agencies
chargeable against the account of the Treasurer of the Philippines, which are maintained
with different MDS-GSBs.
b. Commercial Checks – are checks issued by NGAs chargeable against the Agency
Checking Account with GSBs. These shall be covered by income/receipts authorized to
be deposited with AGDBs.

The documentary requirements for common government transactions depending on the nature
of expenses to be paid by checks shall be complied with as prescribed in COA Circular No. 2012-
001 dated June 14, 2012, amended by COA Circular No. 2013-001 dated January 10, 2013.

All checks drawn during the day, whether released or unreleased including cancelled checks
shall be recorded chronologically in the Checks and ADA Disbursements Record (CkADADRec)
maintained by the Cash/Treasury Unit. The dates the checks were actually released shall be
indicated in the appropriate column provided for in the CkADADRec. All checks/ADA drawn
whether released or unreleased shall be included in the Report of Checks Issued (RCI) or Report
of ADA Issued (RADAI), which shall be prepared daily by the Cashier. The RCI/RADAI together
with the original copies of the supporting documents (SDs) shall be submitted to the Accounting
Division/Unit for the preparation of JEV. At the end of the year, a Schedule of Unreleased
Commercial Checks shall be prepared by the Cashier for submission to the Accounting
Division/Unit.

• Illustrative Accounting Entries for Disbursements By Check

Account Title Account Code Debit Credit

1. Payment of the following utility bills:

Meralco Bill P 1,200
PLDT Bill 500
Maynilad Bill 200
Total P1,900

Water Expenses 50204010 P 200

Electricity Expenses 50204020 1,200
Telephone Expenses 50205020 500
Cash-Modified Disbursement System (MDS), Regular 10104040 P 1,900
To recognize payment of bills from utility companies based on individual checks
issued

2. Grant of cash advance for travel

Advances to Officers and Employees 19901040 P 1,000
Cash-Modified Disbursement System (MDS), Regular 10104040 P 1,000
To recognize granting of travel allowance to employees

3. Advance payment to Procurement Service

Due from NGAs 10303010 P 2,500
Cash-Modified Disbursement System (MDS), Regular 10104040 P 2,500
8 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

To recognize advance payment to Procurement Service for the purchase of

Office Equipment
4. Establishment of Petty Cash Fund (PCF) – P 20,000
Petty Cash Fund 10101020 P 20,000
Cash-Modified Disbursement System (MDS), Regular 10104040 P 20,000
To recognize establishment of PCF to cover petty expenses

Disbursements by Cash
Cash disbursements constitute payments out of cash advances granted to the regular and
special disbursing officers for personal services, petty expenses and MOOE for field operating
requirements. All cash payments shall be covered by duly approved DVs/payrolls/petty cash
vouchers (PCVs). The cash advances may be granted to the cashiers/disbursing officers/officials
and employees to cover the following: salaries and wages, travels, special time-bound
undertakings and petty operating expenses. The granting and liquidation of cash advances shall
be governed by the following existing COA rules and regulations and other pertinent issuances:
a. No cash advance shall be given unless for a legally authorized specific purpose;
b. A cash advance shall be reported on and liquidated as soon as the purpose for which it
was given has been served;
c. No additional cash advance shall be allowed to any official or employee unless the
previous cash advance given to him/her is first settled/liquidated or a proper accounting
thereof is made;
d. Except for cash advance for official travel, no officer or employee shall be granted cash
advance unless he/she is properly bonded in accordance with existing laws or
regulations. The amount of cash advance which may be granted shall not exceed the
maximum cash accountability covered by his/her bond;
e. Only permanently appointed officials shall be designated as disbursing officers;
f. Only duly appointed or designated disbursing officer may perform disbursing functions.
Officers and employees who are given cash advances for official travel need not be
designated as Disbursing Officers;
g. Transfer of cash advance from one accountable officer to another shall not be allowed;
and
h. The cash advance shall be used solely for specific legal purpose for which it was granted.
Under no circumstance shall it be used for encashment of checks or for liquidation of a
previous cash advance.

The specific rules and regulations on the granting, utilization and liquidation of cash advances
are provided for under COA Circular No. 97-002 dated February 10, 1997, as amended by COA
Circular No. 2006-005 dated July 13, 2006.

Disbursements through List of Due and Demandable Accounts Payable-Advice to Debit

Account (LDDAP-ADA)
The use of LDDAP-ADA as a mode of settlement of accounts payable due the creditors/payees
of all NGAs and their OUs was prescribed under DBM Circular Letter No. 2013-16 dated
December 23, 2013 which implemented the ExMDPS, amended by DBM Circular Letter Nos.
2013-16A and 2013-16B dated February 6, 2014 and February 25, 2014, respectively. The
following are excluded from the implementation of ExMDPS:
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 9

a. Payment of Terminal Leave and Retirement Gratuity (TL/RG) benefits which is governed
by Republic Act No. 10154 as implemented by CSC Resolution No.1300237 and Budget
Circular No. 2013-1;
b. Remittance of social insurance premium contributions to government corporations, such
as GSIS, PHILHEALTH, and HDMF;
c. Payment of Accounts Payable to utility companies, such as: supplier of petroleum, oil and
lubricants, water, illumination and power services, telephone, internet and other
communication services; and
d. Other payables which cannot be conveniently nor practicably paid using the ADA.

The Head of the Accounting Division/Unit shall prepare a JEV and credit the “Cash-Modified
Disbursement System (MDS), Regular” account upon receipt from the Cash/Treasury Unit of the
RADAI supported with DV and SDs. The JEV shall be recorded in the ADA Disbursements
Journal (ADADJ).

LLDAP-ADA may be invalidated due to any inconsistency of information (i.e., bank branch,
account name/number) between the bank records and LDDAP-ADA or errors stated in item 8.0
of DBM Circular Letter 2013-16 dated December 23, 2014. An invalidated ADA shall be reported
as follows:
a. New LDDAP-ADA may be issued for the replacement of invalidated LDDAP-ADA, upon
submission of the validated LDDAP-ADA indicating non-payment to creditors/payees due
to any inconsistency of information (i.e., bank branch, account name/number) to the
Accounting Division/Unit by the Cash/Treasury Unit. A certified copy of the previously
paid DVs shall be attached to the request for replacement.
b. A JEV shall be prepared to take up the cancellation of the invalidated LDDAP-ADA. The
replacement LDDAP-ADA shall be reported in the RADAI.

• Illustrative Accounting Entries for Disbursements By ADA

Account Title Account Code Debit Credit

1. Payment for delivery of supplies and materials for consumption

Office Supplies Inventory 10404010 P 2,500
Cash-Modified Disbursement System (MDS), Regular 10104040 P 2,500
To recognize payment for the delivery of supplies and materials based on Delivery
Receipt No. 12451

2. Payment of rent
Prepaid Rent 19902020 P 1,300
Cash-Modified Disbursement System (MDS), Regular 10104040 P 1,300
To recognize payment of one year rent of photocopying machine (July, 2015–
June, 2016)

3. Advances to Contractors
Advances to Contractors 19902010 P 8,000
Cash-Modified Disbursement System (MDS), Regular 10104040 P 8,000
To recognize 15% mobilization fees to contractors to be recouped from progress
billings
10 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

4. Payment of Accounts Payable

Gross P 40,000
Less: Withholding Tax (VAT) 3,600
Net P 36,400

Accounts Payable 20101010 P40,000

Due to BIR 20201010 P 3,600
Cash-Modified Disbursement System (MDS), Regular 10104040 36,400
To recognize payment of payables based on duly approved DV and SDs

Disbursements Through electronic Modified Disbursement System as part of the Modified

Disbursement Scheme
As part of the implementation of the Treasury Single Account (TSA) system for government
disbursement, the electronic Modified Disbursement System (eMDS) has been adopted as one
of the modes of disbursement under Joint Administrative Order (JAO) No. 2015-1 dated March
12, 2015 of the DBM and DOF. This is to facilitate an efficient and prompt reconciliation of
spending agencies’ disbursements vis-à-vis the accounts of the BTr maintained at the LBP as
Authorized Government Servicing Bank (AGSB).

This JAO shall apply to all spending agencies, offices and instrumentalities under the Executive
Branch, including SUCs, together with other Executive Offices using LBP as GSB. The Judicial
Branch, the Legislative Branch, Constitutional Offices, and all other Agencies, Offices and
Instrumentalities banking with LBP and therefore maintaining MDS sub-accounts with said bank
are likewise covered by the JAO for NG to have a holistic view of the budgetary transactions of
all spending agencies.

The policy guidelines are as follows:

a. Heads of Departments, Bureaus, Offices and other instrumentalities under the Executive
Branch, maintaining MDS sub-accounts with LBP, including SUCs, together with other
Executive Offices, are enjoined to enroll and subscribe to the eMDS to perform selected
MDS transactions online; and to monitor disbursements and generate MDS reports under
the Government’s MDS;
b. Enrolment in the eMDS shall be free of charge; and
c. All other spending agencies, offices, and instrumentalities of government maintaining
MDS sub-accounts with GSBs other than LBP shall continue to observe the current
procedure of the MDS System, unless they voluntarily transfer their accounts with LBP
to avail of the latter’s eMDS facility or until after enrolment and subscription to the eMDS
upon amendment or repeal of Memorandum Order Nos. 276 (s. 1990) and/or (s. 1994).

Disbursements through Tax Remittance Advice

The Tax Remittance Advice (TRA) refers to a serially-numbered document prescribed by the
DBM that should be used by the NGAs in the remittance of withheld taxes on funds coming from
DBM. With the inclusion of all NGAs among the taxpayers who are mandated to use the
Electronic Filing and Payment System (eFPS) under the Bureau of Internal Revenue Regulations
No. 1-2013 dated January 23, 2013, the TRA is accomplished on-line which is called the
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 11

Electronic TRA (eTRA). The eTRA is certified correct by the Chief Accountant/Head of
Accounting Division/Unit and approved by the Head of Agency/Authorized Official, and used to
record the remittance of taxes withheld to the BIR. The same document shall be the basis for the
BIR and the BTr to draw a JEV to record the tax collection and deposit in their respective books
of accounts. The JEV shall be recorded in the GJ.

The eTRA shall be supported with the Summary of Taxes Withheld (STW) certified by the Chief
Accountant. The STW is the document which summarizes the type and amount of taxes withheld.
The Accounting Division/Unit shall maintain SL to monitor remittances of taxes withheld from
individual employees, suppliers and contractors.

• Illustrative Accounting Entries for Remittance of Taxes Withheld through TRA

Account Title Account Code Debit Credit

Agency Books
1. Constructive Receipt of NCA for TRA
Cash-Tax Remittance Advice 10104070 P 5,000
Subsidy from National Government 40301010 P 5,000
To recognize constructive receipt of NCA for TRA

2. Remittance of taxes withheld through TRA

Due to BIR 20201010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
To recognize remittance of taxes withheld through TRA

BIR Books
1. Constructive Receipt of Tax Revenue through TRA from the NGAs
Cash-Tax Remittance Advice 10104070 P 5,000
Income Tax 40101010 P 5,000
To recognize constructive receipt of tax revenue based on the TRA received
from the agency

BTr Books
1. Constructive Utilization of NCA for TRA by the remitting NGAs
Subsidy to NGAs 50214010 P 5,000
Cash-Tax Remittance Advice 10104070 P 5,000
To recognize remittance of taxes withheld by the agency based on the TRA
received

Disbursement for Inter-Agency Transferred Funds (IATF)

The following are the accounting policies for the transfer of funds:
a. A Memorandum of Agreement (MOA) shall be entered into by the SA and the IA for the
undertaking by the latter of the project of the former. The MOA shall provide for the
requirements for project implementation and reporting.
b. The fund to be transferred or sub-allotted to the IA shall be a) in an amount sufficient for
three months operation subject to replenishment upon submission of the reports of
disbursements by the IA, or b) the total project cost, as may be determined by the Heads
of the two agencies in either case.
12 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

c. The check shall be issued in the name of the IA for deposit to its trust account in its
authorized government depository bank. The IA shall issue its official receipt in
acknowledgment.
d. Depending on the MOA, the fund transfers may be treated as a) If the MOA provides a
condition that the fund shall be spent as specified and any excess shall be returned to
the SA, the IA shall recognize the receipt of the fund as asset at its fair value with a
corresponding liability, while the SA shall recognize a receivable corresponding to the
fund transfer; or b) If the MOA provides stipulations or no condition, the IA shall recognize
the receipt of the fund as asset at its fair value with a corresponding revenue, while the
SA shall recognize an expense corresponding to the fund transfer.
e. A separate subsidiary record for each account shall be maintained by the IA whether or
not a separate bank account is opened.
f. Within ten (10) days after the end of each month/end of the agreed period for the Project,
the IA shall submit the RCI and the RCDisb to report the utilization of the funds. Only
actual project expenses shall be reported. The reports shall be approved by the Head of
the IA.
g. The IA shall return to the SA any unused balance upon completion of the project, if
stipulated in the MOA.
h. The SA shall draw a JEV to take up the reports. The amount to take up the liquidation in
the RCI shall be net of the cash advances granted by the IA to its accountable officers.
i. The IA Auditor shall audit the disbursements out of the trust accounts in accordance with
existing COA Regulations
j. The Chief Accountant/Head of the Accounting Division/Unit of the IA shall, on the basis
of the Notice of Finality of Decision (NFD), record in the books of accounts any audit
disallowance as receivable.
k. When the IA is a Bureau/Regional Office of the SA, the procedures for centrally managed
projects shall be followed in accordance with entries herein provided.

Disbursements by Foreign-based Government Agencies

CDC is an authorization issued by the DBM to DFA and other agencies with foreign posts to
utilize their collections retained by their Foreign Service Posts (FSPs) to cover operating
requirements, but not to exceed the released allotment to the said post. (National Budget Circular
No. 535 dated December 29, 2011). The following are the accounting policies regarding
disbursements by Foreign-based Government Agencies (FBGAs):
a. Based on the proposed budget of FSP/Foreign Attaché, a Working Fund shall be
established to cover payment of PS and MOOE. The Finance Officer shall be required to
maintain CBReg and CDReg to monitor and control the Working Fund.
b. All disbursements from the Working Fund shall be covered by duly approved DV/Payroll
with the required SDs. At the end of the month, the Finance Officer of FSPs/Foreign
Attachés shall prepare and submit RCDisb together with the SDs to the Central Office
concerned for preparation of JEV to record the liquidation made by the accountable
officer. The JEV shall be recorded in the CkDJ and CDJ based on the CBReg and
CDReg, respectively.

Disbursements through Direct Payment Method

This type of disbursement should be covered by an NCAA. This mode of disbursement is made
through the JEV issued by the BTr to the availing/implementing agency to record payment of
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 13

goods and services made directly by the lending institution to the supplier or contractor. The JEV
shall be recorded in the GJ.

Property, Plant and Equipment (PPE)

PPE includes land; land improvements; buildings and other structures; machinery and
equipment; transportation equipment; furniture, fixtures and books; leasehold improvements;
and other PPE including specialist military equipment, infrastructure assets, and heritage assets.

The cost of an item of PPE shall be recognized as assets if, and only if:
a. it is probable that the future economic benefits or service potential associated with the
item will flow to the entity;
b. the cost or fair value of the item can be measured reliably;
c. beneficial ownership and control clearly rest with the government;
d. the asset is used to achieve government objectives; and
e. it meets the capitalization threshold of P15,000.

PPE that qualifies for recognition as an asset shall be measured at cost. However, where the
PPE is acquired through a non-exchange transaction, its cost shall be measured at its fair value
as at the date of acquisition.

For consistency and uniformity, the cost model shall be applied to an entire class of PPE. Cost
model means that PPE are carried at cost, less any accumulated depreciation and any
accumulated impairment losses.

Subsequent costs are costs of the day-to-day servicing of an item of PPE which are recognized
as an expense when incurred. Costs of day-to-day servicing are primarily the costs of labor and
consumables, and may include the cost of small parts. The purpose of these expenditures is
often described as “repairs and maintenance” of an item of PPE.

PPE gradually loses its ability to provide service over the course of time. Because of this, its cost
needs to be distributed on a systematic basis over its useful life. The allocated cost is referred to
as depreciation. The depreciation charge for each period shall be recognized as expense unless
it is included in the carrying amount of another asset. For example, the depreciation of
manufacturing plant and equipment is included in the costs of conversion of inventories.
Similarly, depreciation of PPE used for development activities may be included in the cost of an
intangible asset recognized. The following are policies regarding depreciation of PPE:
a. There are three factors an entity must consider in determining depreciation:
1. Initial cost,
2. Useful life, and
3. Expected residual value at the end of its useful life.
b. Except for land and not recognized heritage assets, all PPE shall be depreciated.
c. Depreciation of an asset begins when it is available for use such as when it is in the
location and condition necessary for it to be capable of operating in the manner intended
by management. For simplicity and to avoid proportionate computation, depreciation shall
be for one month if the PPE is available for use on or before the 15th of the month.
However, if the PPE is available for use after the 15th of the month, depreciation shall be
for the succeeding month.
14 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

d. Depreciation of an asset ceases when the asset is derecognized. Therefore, depreciation

does not cease when the asset becomes idle or is retired from active use and held for
disposal unless the asset is fully depreciated.
e. The straight line method of depreciation shall be adopted unless another method is more
appropriate for entity operation. That method is applied consistently from period to period
unless there is a change in the expected pattern of consumption of those future economic
benefits or service potential.
f. The estimation of the useful life of the asset is a matter of judgment based on the
experience of the entity with similar assets. The agency/entity is in the best position to
estimate the expected useful life of its PPE.
g. Based on the above life spans, the entity shall prepare the specific estimated useful life
for each asset based on its experience on the life of its PPE, copy furnished the Resident
Auditor and the Government Accountancy Sector of COA.
h. The estimated useful life of the undepreciated portion of a PPE shall be reviewed on a
regular basis and revised when the appropriateness of a change can be clearly
demonstrated.
i. A residual value equivalent to at least five percent (5%) of the cost shall be adopted
unless a more appropriate percentage is determined by the entity based on its operation
subject to the approval of COA.
j. The residual value and the useful life of an asset shall be reviewed at least at each annual
reporting date and, if expectations differ from previous estimates, the change(s) shall be
accounted for as a change in an accounting estimate.
k. The computation of monthly depreciation expense shall be as follows:
Depreciation Expense = Cost – Residual Value
Estimated Useful Life (in months)
l. Depreciation shall be recognized as a debit to the “Depreciation Expense” account and
a credit to the “Accumulated Depreciation” account. Accumulated Depreciation is a
contra-asset account presented in the FS as deduction from the related asset account.
m. Each part of an item of PPE with a cost that is significant in relation to the total cost of
the item shall be recorded and depreciated separately.

Basic Government Accounting and Budget Reporting Principles

Each NGA shall recognize and present its financial transactions and operations conformably to
the following:

a. generally accepted government accounting principles in accordance with the PPSAS and
pertinent laws, rules and regulations;
b. accrual basis of accounting in accordance with the PPSAS;
c. budget basis for presentation of budget information in the financial statements (FSs) in
accordance with PPSAS 24;
d. RCA prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records; and
g. fund cluster accounting.

The COA shall keep the general accounts of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers pertaining thereto,
pursuant to Section 2, par. (1), Article IX-D of the 1987 Philippine Constitution.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 15

Financial Reporting System for the National Government

The financial reporting system of the Philippine government consists of accounting system on
accrual basis and budget reporting system on budget basis under the statutory responsibility of
the NGAs, Bureau of the Treasury (BTr), Department of Budget and Management (DBM), and
the COA, as follows:

a. Each entity of the National Government (NG) maintains complete set of accounting books
by fund cluster which is reconciled with the records of cash transactions maintained by
the BTr.
b. The BTr accounts for the cash, public debt and related transactions of the NG.
c. Each entity maintains budget registries which are reconciled with the budget records
maintained by the DBM and the Government Accountancy Sector (GAS), COA.
d. The COA, through the GAS:
1. maintains budget records showing the overall approved budget of the NG and its
execution/implementation;
2. consolidates the FSs and budget accountability reports of all NGAs and the BTr
with COA’s records to come up with an Annual Financial Report (AFR) for the NG
as required in Section 4, Article IX-D of the 1987 Philippine Constitution; and
3. prepares other financial reports required by law for submission to oversight
agencies.

Financial statements shall present fairly the financial position, financial performance and cash
flows of an entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, revenue, and expenses set out in PPSASs. The application of
PPSASs, with additional disclosures when necessary, is presumed to result in financial
statements that achieve a fair presentation.

Objectives of General Purpose Financial Statements

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

Responsibility for Financial Statements.

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

Components of General Purpose Financial Statements

The complete set of GPFSs consists of:
16 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

a. Statement of Financial Position (SFP) - An entity shall present current and non-current
assets, as well as current and non-current liabilities, as separate classifications on the
face of SFP
b. Statement of Financial Performance (SFPer) - The SFPer shall include line items that
present the revenue, expenses and net surplus or deficit for the period.
c. Statement of Changes in Net Assets/Equity - (SCNA/E). An entity shall present in the
SCNA/E the following:
1. Net Income or Deficit for the period;
2. Each item of revenue and expenses for the period that, as required by Standards,
is recognized directly in net assets/equity, and the total of these items;
3. Total revenue and expenses for the period; and
4. For each component of net assets/equity separately disclosed, the effects of
changes in accounting policies and corrections of errors recognized in
accordance with PPSAS on Accounting Policies, Changes in Accounting
Estimates and Errors.
d. Statement of Cash Flows - Cash flow information provides users of financial statements
with a basis to assess the ability of the entity to generate cash and cash equivalents for
remittance to the NG and to determine the entity’s utilization of funds provided by the NG.
This also provides information on how the entity generates income authorized to be used
in their operation and its utilization.
e. Statement of Comparison of Budget and Actual Amounts - A comparison of budget and
actual expenditures will enhance the transparency of financial reporting in government.
This shall be presented by government agencies as a separate additional financial
statement referred in this Manual as the Statement of Comparison of Budget and Actual
Amounts (SCBAA).
f. Notes to the Financial Statements, comprising a summary of significant accounting
policies and other explanatory notes - Contain information in addition to that presented
in the SPF, SFPer, SCNA/E and SCF. Notes provide narrative descriptions or
disaggregation of items disclosed in those statements and information about items that
do not qualify for recognition in those statements.

Books of Accounts and Registries. The books of accounts and registries of the NG entities
consist of:
a. Journals
1. General Journal
2. Cash Receipts Journal
3. Cash Disbursements Journal
4. Check Disbursements Journal

b. Ledgers
1. General Ledgers
2. Subsidiary Ledgers

c. Registries
1. Registries of Revenue and Other Receipts
2. Registry of Appropriations and Allotments
3. Registries of Allotments, Obligations and Disbursements
4. Registries of Budget, Utilization and Disbursements

Preparation and Submission of Other Reports

 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 17

In addition to the set of financial statements enumerated in Section 5 of this Chapter, the
following reports/ schedules/statements shall be submitted to GAS, COA:
a. Pre-Closing Trial Balances
b. Post-Closing
c. Other schedules
1. Regional Breakdown of Income
2. Regional Breakdown of Expenses

Trial Balance
Trial Balance (TB) is a list of all the GL accounts and their balances at a given time. The accounts
are listed in the order in which they appear in the RCA, with the debit balances in the left column
and the credit balances in the right column.
a. The TB shows the equality of debit and credit balances of all GL accounts as at 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.
b. The TB is prepared to:
1. Prove the mathematical equality of the debits and credits after posting;
2. Check the accuracy of the postings;
3. Uncover errors in journalizing and posting; and
4. Serve as basis for the preparation of the financial statements.

Pre-Closing Trial Balance

The Pre-Closing Trial Balance shall be prepared after posting the AJE in the GJ and the same
to the GL. It shows the adjusted balances of all accounts as at a given period. This is also
described/termed as the Adjusted Trial Balance. The TB shall be supported with the schedule of
SL balances of the controlling accounts.

Adjusting Journal Entries

Adjusting journal entries are made at the end of an accounting period to allocate revenue and
expenses to the period in which they actually occurred. AJEs are required every time a financial
statement is prepared to make the statement truly reflective of the financial condition of the entity
at a given period. Adjustments are of two main types:
a. Accrued items - adjusting entry for an economic activity already undertaken but not yet
recognized into asset and revenue accounts or liability and expense accounts. It requires
asset/revenue adjustments and liability/expense adjustments.
1. Asset/Revenue Adjustment. It involves earned revenues not yet recognized 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 at the year-end.
2. Liability/Expense Adjustment. It involves expenses, which have already been
incurred but remained unpaid at the end of the accounting period. Examples are
salaries and wages, water, electricity and other expenses which are already
incurred but not yet paid.
b. Deferred items - adjusting entries transferring data previously recognized in an asset
account to an expense account, or data previously recognized in a liability account to a
revenue account.
1. Asset/Expense Adjustments. These pertain to assets, portion of which are
consumed/used/incurred at the end of the accounting period. Examples of these
18 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

adjustments are prepayments. Prepayments are expenses paid before they are
incurred. At the end of the accounting period, the expired portion shall be
determined and an adjusting journal entry shall be prepared to recognize the
expense applicable to the period being reported.
2. Liability/Revenue Adjustments. For accounting purposes, the cash received does
not represent revenue until it has been earned. Thus, the recognition of revenue
must be deferred until it is earned. Advance income collections are recognized by
debiting Cash and by crediting a liability account for unearned revenue. As
unearned revenue is earned, an adjusting journal entry is made at the end of each
period to transfer the appropriate amount from the liability account to revenue
account. This adjustment reflects the fact that all or part of the entity's obligation
to its customers has been fulfilled and that revenue has been realized.

Other Adjustments
The following adjustments shall also be made (if applicable) for fair presentation of the results
of operation of the entity in the financial statements:
a. Unused NCA (National) - For NGAs receiving subsidies from the national government in
the form of NCA, adjusting journal entry shall be made for the reversion of the unused or
unutilized NCA at the end of the accounting period.
b. Petty Cash Fund - At the end of the year, all unreplenished Petty Cash Fund expenses
shall be reported and supporting papers submitted to the Accounting Division/Unit, to
recognize the expenses incurred to the period to which they relate. In case no
replenishment could be made for lack of fund, a JEV shall be prepared to recognize all
the expenses paid under the Petty Cash with a credit to the account “Petty Cash”. If
replenishment is made, the credit shall be the appropriate cash account.
c. Unreleased Commercial Checks - A Schedule of Unreleased Commercial Checks shall
be prepared by the Cashier for submission to the Accounting Division/Unit. All unreleased
checks at the end of the year shall be reverted back to the cash accounts. A JEV shall
be prepared to recognize the restoration of the cash equivalent to the unreleased checks
and the recognition of the appropriate liability/payable account.
d. Allowance for/Accumulated Impairment Losses of asset accounts
e. Write-down of Inventories
f. Correction/Reclassification Entries
g. Adjustment for reversal of Impairment Losses
h. Depreciation Expense
i. Exchange differences on foreign currency
j. Other adjustments

Closing Journal Entries

Closing journal entries are entries which close out the balances of all nominal/temporary and
intermediate accounts at the end of the year. The closure will reduce the balance of those
accounts to zero. The nominal and intermediate accounts that shall be closed at the end of the
year are as follows:
a. Balance of all revenue accounts to the “Revenue and Expense Summary” account;
b. Balance of all expense accounts to the “Revenue and Expense Summary” account;
c. Balance of the “Revenue and Expense Summary” to the “Accumulated Surplus/ (Deficit)”
account;
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 19

d. Balance of all “Cash-Treasury/Agency Deposit, Regular” to the “Accumulated

Surplus/(Deficit)” account; and
e. Other Closing Entries.

For the purpose of preparing the financial statements for the first, second and third quarters, the
closing entries shall be prepared, but shall not be recorded in the books of accounts.

Post-Closing Trial Balance

The Post-Closing Trial Balance shall be prepared at the end of the year after preparing and
posting the closing journal entries in the GJ and posting to the GL. Since revenue and expense
accounts have been closed out, the only accounts with balances are balance sheet or real
accounts.

Components of Budget and Financial Accountability Reports.

The budget reports consist of the following:
a. Financial Accountability Reports (COA-DBM-DOF Joint Circular No. 2013-1, as amended
by COA and DBM Joint Circular No. 2014-1 dated July 2, 2014)
1. Quarterly Physical Report of Operation (QPRO) – Budget Accountability Report
(BAR) No. 1. This report shall reflect the Department’s/Agency’s actual physical
accomplishments as at a given quarter, in terms of the performance measures
indicated in its Physical Plan.
2. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances
(SAAODB) – Financial Accountability Report (FAR) No. 1 (SAAODB). This report
shall reflect the authorized appropriations and adjustments, total allotments received
including transfers, total obligations, total disbursements and the balances of
unreleased appropriations, unobligated allotments, and unpaid obligations of a
department/office/entity by source and by allotment class. It shall be presented by:
i. Fund Authorization;
ii. Major Final Output;
iii. Program/Activity/Project; and
iv. Major Programs/Projects - identified by Key Result area (KRA)
3. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances
by Object of Expenditures (SAAODBOE) – FAR No. 1.A (SAAODBOE). This report
shall be prepared by Funding Source Code (FSC) as clustered and shall reflect the
summary of appropriations, allotments, obligations, disbursements and balances
detailed by object of expenditures consistent with the COA Revised Chart of Accounts
per COA Circular No. 2013-002 dated January 30, 2013 and the Adoption of the
PPSAS per COA Resolution No. 2014-003 dated January 24, 2014.
4. List of Allotments and Sub-Allotments (LASA) – FAR No. 1.B. This report shall reflect
the allotments released by the DBM and the sub-allotments issued by the Entity
Central Office/RO, their corresponding numbers, date of issuance, and amounts by
allotment class and FSC. The total allotments per this report should be equal to the
total allotments appearing in the SAAODB (FAR No. 1).
5. Statement of Approved Budget, Utilizations, Disbursements and Balances
(SABUDB)– FAR No. 2 (for Off-Budget Fund). This report shall reflect the approved
budget, the utilizations, disbursements and balance of the entity’s income authorized
20 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

by law to use, such as OWWA/SUCs, duly approved by their Board of

Trustee/Regents and shall be prepared by FSC as clustered.
6. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object
of Expenditures (SABUDBOE) – FAR No. 2-A (for Off-Budget Fund). This report shall
reflect the details of the approved budget, utilizations, disbursements and balance of
the entity’s income authorized by law to use presented by object of expenditures
consistent with the COA Revised Chart of Accounts and shall be prepared by Funding
Source Code as clustered.
7. Aging of Due and Demandable Obligations (ADDO) – FAR No. 3. This report shall be
prepared by FSC as clustered and shall reflect the balance of unpaid obligations as
indicated in the Obligation Request (ObR) and the ADDOs as at year-end.
8. Monthly Report of Disbursements (MRD) – FAR No. 4. The report shall reflect the
total disbursements made by department, office or entity and operating unit from the
following disbursement authorities:
i. Notice of Cash Allocation;
ii. NCA for Working Fund issued to BTr as an advance funding from loan/grant
proceeds in favor of an entity;
iii. Tax Remittance Advice issued;
iv. CDC issued by departments with foreign-based agencies or units;
v. Non-Cash Availment Authority; and
vi. Others, e.g. Customs, Duties and Taxes (CDT), BTr Documentary Stamps.

The report shall track the actual disbursement of the departments/agencies against
their Disbursement Program. The reasons for over or under spending shall be
indicated.
9. Quarterly Report of Revenue and Other Receipts (QRROR) – FAR No. 5. This report
shall reflect the actual revenue and other receipts/collections from all sources
remitted with the BTr and deposited in other AGDB for the current year presented by
quarter, and by specific sources consistent with the COA Revised Chart of Accounts.

Watch:
• Philippine Budget Process (https://www.youtube.com/watch?v=OUbUC94oa6s)

Readings:
• Government Accounting and Accounting for Non-Profit Organizations by Zeus Vernon B.
Millan
• Government Accounting Manual (Volume 1)
• Government Accounting Manual (Volume 3 Updated 2019)
• Government websites such as www.dbm.gov.ph and www.coa.gov.ph
• https://dbm.gov.ph/images/2020-People's-Enacted-Budget.pdf
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 21

Activities/Assessments:

Exercise 1: A government agency had the following transactions during the month:

1) Established petty cash fund, P100,000.

2) Replenishment of the petty cash fund:
Office Supplies Expense, P40,000
Travelling Expenses-Local, 30,000
Representation Expenses, P10,000
3) Bill received from MERALCO, P112,000.
4) PLDT bill, P44,800.
5) Payment of PLDT bill, net of appropriate government tax.
6) Payment of MERALCO bill, net of appropriate of government tax.
7) Signing of the contract for the rental of office space with 6 months advance payment of
P134,400.
8) Issued special order for the attendance to seminar, fee of P5,000.
9) Payment of the seminar fee.
10) Receipt of liquidation report with Certificate of Attendance for advances to seminar.
11) Approval of itinerary of local travel, P30,000.
12) Payment of per diems and allowances related with the local travel, P30,000.
13) Liquidation of cash advance for travel.
14) Issuance of PO to dealer of office equipment, P35,000
15) Receipt of office equipment with charge invoice.
16) Payment of the delivered equipment, net of appropriate government tax.
17) Obligation for ICT Equipment per Purchase order, P100,000.
18) Payment to Procurement Service for IT equipment.
19) Receipt of IT Equipment based on Invoice/Delivery Receipt.

Required: Journalize the above transactions.

Exercise 2: A national government agency had the following transactions relating with
inventories and fixed assets:
1) Issued PO for spare parts, P20,000.
2) Receipt of spare parts.
3) Payment of liability for spare parts, net of appropriate government tax.
4) Signed a contract for construction of building, P5,600,000.
5) Payment of 15% mobilization fee to contractor of buildings.
6) Receipt of 1st progress billing-50% completion.
7) Payment of 1st progress billing, net of advances and tax.
8) Receipt of final billing100% completion.
9) Final payment for building, net of tax.
10) Turnover and acceptance of building.
11) Depreciation for the building, 20 years estimated life. (6 months)

Required: Journalize the above transactions.

22 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

Exercise 3: The following are the transactions of a national government agency:

1. Receipt of allotment for:

CO 2,000,000
MOOE 1,400,000
PS 1,400,000
FE 200,000
TOTAL 5,000,000

2. Receipt of Notice of Cash Allocation from DBM- P4,000,000

3. Obligation for PS, P1,000,000.
4. Recording of expenses
Salaries 800,000
PERA 100,000
Representation Allowance 50,000
Transportation Allowance 50,000 1,000,000

Less: Wtax 240,000

Ret. And Life Ins. 90,000
Pag-ibig premiums 12,000
Philhealth premiums 20,000 362,000
Net amount 638,000
5. Grant of cash advance for payroll-P638,000.
6. Liquidation of cash advance.
7. Remittance of salary deductions, excluding withholding tax.
8. Obligation for government share:
Ret. And Life Ins. P120,000
Pag-ibig Contributions 12,000
Philhealth contributions 20,000
9. Remittance of Government share.
10. Payment of one year rent, P134,400, less tax.
11. Payment of Meralco bill, P112,000, less tax.
12. Payment of PLDT bill, P67,200, less tax.
13. Granting of cash advance for travel, P50,000.
14. Liquidation of cash advance for travel, P40,000.
15. Refund of excess cash advance.
16. Deposit of cash collection to BTr.
17. Establishment of Petty cash fund, P60,000.
18. Replenishment of petty cash fund.
Office supplies , P40,000
Postage & courier P16,000
19. Purchase of Office equipment on account, P336,000.
20. Purchase of ICT Equipment P560,000, on account.
21. Payment of all accounts payable, net of tax.
22. Remittance of withholding taxes thru TRA.
23. Advance payment to Procurement Service for office supplies, P50,000.
24. Receipt of office supplies and invoice from procurement service.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 23

25. Received report of supplies issued from the Property/supplies unit,

Office supplies used, P45,000.
26. Depreciation for the following:
Office equipment, (est. life 5 years;, 9 months in use)
ICT Equipment, (est. life 4 years; 6 months in use)
27. Rent expense for the year, 6 months.

Required: Journalize all transactions.

THEORIES
True or False
1. Transfer of government funds from one officer to another shall, except as allowed by law
or regulation, be made only upon prior direction or authorization of the Commission or its
representative.
2. When government funds or property are transferred from one Administrative Officer to
another, or from an outgoing officer to his successor, it shall be done upon properly
itemized invoice and receipt which shall invariably support the clearance to be issued to
the relieved or outgoing officer, subject to regulations of the Commission.
3. Expenditures of government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found to be directly
responsible therefore.
4. Only the head of the agency shall be liable for all losses resulting from the unlawful
deposit, use, or application thereof and for all losses attributable to negligence in the
keeping of the funds.
5. The Government shall keep the general accounts of the Government and, for such period
as may be provided by law, preserve the vouchers and other supporting papers pertaining
thereto
6. The financial reporting system of the Philippine government consists of accounting
system on accrual basis and budget reporting system on budget basis under the statutory
responsibility of the NGAs, Bureau of the Treasury (BTr), Department of Budget and
Management (DBM), and the COA.
7. The COA accounts for the cash, public debt and related transactions of the NG.
8. Each entity of the National Government (NG) maintains complete set of accounting books
by fund cluster which is reconciled with the records of cash transactions maintained by
the BTr.

Multiple Choice
1. The entry to record the payment of P300,000 (inclusive of VAT) accounts payable for the
services rendered in government accounting is:
A. Accounts Payable 300,000
Due to BIR 5,357
Cash-Modified Disbursement System, Regular 294,643
B. Accounts Payable 300,000
Due to BIR 18,750
Cash-Modified Disbursement System, Regular 281,250
C. Obligations Liquidated 300,000
Cash-Modified Disbursement System, Regular 300,000
24 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

D. Accounts Payable 300,000

Cash in Bank-Local Currency, Current Account 300,000

2. A national government agency received the following allotment for the year 2020:

Personal Services (PS) P 50,000,000

Maintenance and Other Operating Expenses (MOOE) 60,000,000
Financial Expenses (FE) 200,000
Capital Outlay (CO) 100,000,000

The proper recording of the allotment for the year is:

A. No entry
B. Cash-Modified Disbursement System, Regular 210,200,000
Subsidy Income from National Government 210,200,000
C. Posting to appropriate RAPAL and RAOD
D. Appropriations Allotted 210,200,000
Obligations Incurred 210,200,000

3. It refers the authorization issued by the DBM to NGAs to incur obligations for specified
amounts contained in a legislative appropriation in the form of budget release documents.
A. Allotment
B. Approved Budget
C. Appropriation
D. Final Budget

4. Which of the following is used as the basis of recording in the journals?

A. Journal Entry Voucher
B. Allotment and Obligation Slip
C. Obligation Request and Status
D. General Journal

5. The entry to record receipt of grants and donation from foreign entities/institution deposited
to the Bureau of the Treasury (BTr)? (BTr Books)
A. Dr Cash-Modified Disbursement System, Regular, Cr Income from Grants and
Donation in Cash
B. Dr Cash-Treasury/Agency Deposit, Regular, Cr Income from Grants and Donation in
Cash
C. Dr Cash-Cash in Bank, Foreign Currency, Savings Account, Cr Income from Grants
and Donation in Cash
D. Dr Cash-Collecting Officer, Cr Income from Grants and Donation in Cash