Chapter I

General Provisions, Basic Standards and Policies

INTRODUCTION
The Government Accounting Manual presents the basic accounting policies and principles in accordance
with Philippine Public Sector Accounting Standards (PPSAS) adopted through COA Resolution No. 2014-
003 dated January 24, 2014 and other pertinent laws, rules and regulations. It is a revision of the New
government Accounting System (NGAS) prescribed under COA Circular No. 2002-002 dated January 18,
2002; and it includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002
dated January 30, 2013, as amended; the accounting procedures, books, registries, records, forms, reports
and financial statements.
It aims to update the following:
1.) standards, policies, guidelines and procedures in accounting for government funds and property;
2.) coding structure and accounts; and,
3.) accounting books, registries, records, forms, reports and financial statements.

It shall be used by all National Government Agencies (NGAs) in the:

l.) preparation of the general-purpose financial statements in accordance with the PPSAS and other financial
reports as may be required by laws, rules and regulations; and,
2.) reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.

Government Accounting
Government accounting is defined, pursuant to Section 109 of PD 1445, as one which "encompasses the
process of analyzing, recording, classifying, summarizing and communicating all transactions involving the
receipt and disposition of government fund and property and interpreting the result thereof"
Section 110, Presidential Decree 1445 sets down the following objectives of government accounting:
1. To produce information concerning past operations and present conditions;
2. To provide a basis for guidance for future operations;
3. To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and
4. To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.

Public Sector Accounting Standards Board

The Public Sector Accounting Standards Board (PSASB) was created in 2008 under COA Resolution No.
2008-12 dated October 10, 2008. In developing standards of the Philippine Public Sector Accounting
Standards (PPSAS), the PSASB considers and make use of, among others, the existing laws, financial
reporting, accounting rules and regulations, and pronouncements issued by the International Public Sector
Accounting Standards Board (IPSASB).

The PSASB shall assist the commission in formulating and implementing Philippine Public Sector
Accounting Standards (PPSAS). The PPSAS shall apply to all National Government Agencies (NGAs),
Local Government Units (LGUs) and Government Owned and/or Controlled Corporations (GOCCs) not
considered as Government Business Enterprises (GBEs), in which case, the Philippine Financial Reporting
Standards (PFRS) and relevant standards issued by the Financial Reporting Standards Council, Board of
Accountancy, and Professional Regulation Commission shall apply. In other words, GBE is covered by the
accounting standards issued by IFRS/PFRS but not IPSAS/PPSAS.

Government Business Enterprise (GBE) is an entity that has all the following characteristics:
GBE hybrid of both public and private entity.
1. An entity with the power to contract in its own name;
2. Has been assigned the financial and operational authority to carry on a business;
 3. Sells goods and services, in the normal course of its business, to other entities at a profit or full cost
recovery;
4. Not reliant on continuing government funding to be a going concern (other than purchase of outputs
at arm's length); and
5. Controlled by a public sector entity.

The following are the processes and other considerations in developing the Philippine Public Sector
Accounting Standards (PPSAS):

1. Applicability of IPSAS.
IPSAS, to be referred to as the Philippine Public Sector Accounting Standards (PPSAS). The
PPSAS, as aligned with the prevailing international standards, provide quality accounting standards
thereby enhancing the quality and uniformity in financial reporting by Philippine Public Sector
entities, and ensuring accountability, transparency and comparability of financial information with
other public sector entities around the world."

2. Exposure draft of PPSAS.

The PSASB issues exposure drafts of all proposed PPSAS for comment by interested parties
including COA officials and auditors, agency finance personnel, oversight agencies, professional
organizations, academe and other stakeholders. The PSASB sets a reasonable time to allow
interested parties to consider and comment on its proposals. The PSASB evaluates all comments
received on exposure drafts and makes such modifications, where appropriate.

3. Fundamental issues.
Where an accounting principle or a significant element of a disclosure requirement contained
in IPSAS is considered to be in conflict with the Philippine laws, rules and regulations, this would be
regarded as a fundamental issue and the accounting principle or disclosure requirement may be
changed.

4. Statutory authority.
Where the international standard deviates from the Philippine regulatory or legislative
environment, Philippine application guidance shall be issued accordingly.

5. Disclosure requirements.
Disclosure requirements may be amended when the amendments are regarded as being
significant for improving fair presentation of the matter.

6. PPSAS numbering.
The PPSAS is assigned the same number as the IPSAS to maintain the link. Where a PPSAS
is developed and there is no IPSAS equivalent, the standard will be assigned a number in a series of
PPSAS starting with 101. When IPSASB subsequently issues the equivalent standard as an IPSAS,
the 100 series PPSAS will be withdrawn and reissued as a PPSAS with the IPSAS number.
Standards of PPSAS have equal authority regardless of the numbering used.

7. Financial reporting issues not dealt with by IPSAS.

Where issues related to financial reporting emerged, researches were done and a discussion
document prepared based on other relevant accounting standards not in conflict with Philippine laws.

8. Submission of draft to PSASB for consideration of the COA.

Where there are significant changes or unresolved issues associated with an exposure draft,
the PSASB may decide to re-expose a proposed PPSAS.

9. If considered appropriate, focus group discussions will be held to obtain further opinions on issues
identified by the exposure process.
Accounting Responsibility
Accounting responsibility emanates from the Constitution, laws, policies, rules and regulations. The
Constitution of the Philippines, the fundamental law of the land, mandates the keeping of the general
accounts of the government, promulgation of accounting rules, and the submission of reports covering the
financial condition and operation of the government.
The offices charged with the accounting responsibility are the Commission on Audit (COA), the
Department of Budget and Management (DBM), the Bureau of Treasury (BTr), and the government
Agencies discharging the functions of government to enable it to attain its commitments to the Filipino
people.

Commission on Audit
The Commission on Audit (COA) keeps the general accounts of the government, promulgates accounting
rules and regulations, and submits to the President and Congress, within the time fixed by law (not later than
the last day of September each year — Section 41, PD 1445), an annual report of the government, its
subdivisions, agencies and instrumentalities, including government-owned or controlled corporations.

In the performance of its functions, as mandated by Article IX-D, Section 2 par. (2)of the 1987 Constitution
of the Philippines, to wit: "The Commission on Audit shall have exclusive authority, subject to the limitation
in this Article, to define the scope of its audit and examination, establish the techniques and methods
required therefor, and promulgate accounting and auditing rules and regulations, including those for the
prevention and ance of irregular, unnecessary, excessive, extravagant, or unconscionable or uses of
government funds and properties," the Commission on Audit revised the previous government accounting
system.

Pursuant to the COA, DBM and DOF Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts
Code Structures (UACS), the consistency of account classification and coding structures with the Revised
Chart of Accounts shall be the responsibility of the COA. (UACS and the Revised Chart of Accounts will be
discussed in detail in the later chapter of this book.)

As mentioned in the preceding section, the Commission on Audit, pursuant to the 1987 Philippine
Constitution, Sec. 2(2), Art. IX-D, which vests the exclusive authority to promulgate accounting rules and
regulations, created the Public Sector Accounting Standards Board (PSASB) under COA Resolution 2008-
12 dated October 10, 2008.

Department of Budget and Management

Pursuant to Section 2, Chapter l, Title XVII, Book IV of the Administrative Code of the Philippines (EO
292), "The Department of Budget and Management shall be responsible for the formulation and
implementation of the National Budget with the goal of attaining our national socio-economic plans and
objectives. The Department shall be responsible for the efficient and sound utilization of government funds
and revenues to effectively achieve the country's development objectives."

Furthermore, as provided by the Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts Code
Structures (UACS), the validation and assignment of new codes for funding source organization, sub-object
codes for expenditure items shall be the responsibility of the DBM. In addition, the validation and
assignment of new program, activity, project codes shall be decided jointly by the proponent agency and
DBM.

Bureau of Treasury

The Bureau of Treasury (BTr) plays a pivotal role in the cash operations of the national government.
Accounting rules and regulations pertaining to cash operations, collections, remittances and disbursements,
including public borrowings, are issued by the Commission on Audit, jointly or with the concurrence of the
Department of Finance and the Department of Budget and Management.
Under the Revised Administrative Code, the Bureau of Treasury, as one of the operating bureaus of the
Department of Finance is authorized to:

l. Receive and keep national funds, manage and control the disbursements thereof; and
2. Maintain accounts of financial transactions of all national government offices, agencies and
instrumentalities.

Thus, the Bureau of Treasury shall control and monitor the Notice of Cash Allocation (NCA) released by the
Department of Budget and Management; as well as the bank transfers it makes in replenishing its Modified
Disbursement System (MDS) accounts.

According to the Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts Code Structures
(UACS), the consistency of accounts classification and coding standards with the Government Finance
Statistics (GFS) shall be the responsibility of Department of Finance - BTr. However, it should be noted that
GFS coding will generally not be shown to be part of the UACS; instead, GFS data will be obtained from
reference table inside the system that will map GFS function coding from MFO/PAP codes, as well as GFS
economic classification coding from object codes for non-financial assets, financial assets, liabilities,
revenues and expenses. (For more detail see Chapter 3 of this book.)

National Government Agencies

Departments, bureaus, offices and other instrumentalities of the National Government, including the
Congress, the Judiciary, the Constitutional bodies, state colleges and universities, and other self-contained
institutions and hospitals are required by law to have accounting units/divisions/departments, which are to
be of the same level with other Head units/divisions/departments of the Agency. Accounting in the agency
personnel and shall under (1) the direct supervision of the maintain and keep the current accounts of the
agency, (2.) provide advice on the financial condition and status of the appropriations and allotments of the
agency as its Head may require, and (3.) to develop and conduct procedures designed to meet the needs of
management. They shall perform the aforesaid duties in accordance with existing laws, rules, regulations,
procedures and comply with the reporting requirements of the Commission on Audit, the Department of
Finance and the Department of Budget and Management. Failure to comply with these requirements is
sufficient ground for dismissal from the government service.

Under the new accounting system, the government agencies shall maintain the following registries:

1. Registry of Revenue and Other Receipts — Summary (RRORS)

The RROR shall be maintained by the Budget Division/Unit of NGA to monitor the revenue and
other receipts estimated/budgeted, collected and remitted/deposited.
This summary shall be kept by the Budget Division/Unit for each fund cluster maintained by the entity.
(See Appendix IA)

2. Registry of Revenue and Other Receipts — Regular Agency and Foreign Assisted Projects Fund
(RROR-RA&FAP)
This registry shall be maintained by the Budget Division/Unit of the entity for the following fund
clusters: l.) Regular Agency Fund; and, 2.) Foreign Assisted Project fund. (See Appendix 1B)

3. Registry of Revenue and Other Receipts — Special Account Locally Funded/Domestic Grants Fund
and Special Account Foreign Assisted/Foreign Grants Fund (RROR-SADFGF).
This registry shall be maintained by the Budget Division/Unit of the entity for the following fund
clusters: l.) Special Account Funded/Domestic Grants Fund; and, 2.) Special Account Assisted/Foreign
Grants Fund. (See Appendix IC)

4. Registry of Revenue and Other Receipts — Internally Generated Funds (Off Budgetary Funds —
Retained Income Funds)/Business Related Funds (RROR-IGF/BRF)
 This registry shall be maintained by the Budget Division/Unit of the entity for the following fund
clusters: 1.) Internally Generated Funds (Off Budgetary Retained Income Funds); and, 2.) Business
Related Funds. (See Appendix ID)

5. Registry of Revenue and Other Receipts — Trust Receipts/lnter-agency Transferred Funds (RROR-
TR/IATF).
This registry shall be maintained by the Budget Division/Unit of the entity for the Trust Receipts
(lnter-agency Transferred Funds. (See Appendix IE)

6. Registry of Appropriation and Allotments (RAPAL)

The RAPAL shall be maintained to monitor appropriations and allotments charged thereto. It shall
show the original, supplemental and final budget for the year and all allotments received charged against
the corresponding appropriation.
This registry shall be maintained by fund cluster by the Budget Division/Unit of each entity to ensure
that allotment releases are within the authorized appropriation. Separate registry shall be maintained for
prior year's appropriations. (See Appendix 2).

7. Registry of Allotments, Obligations and Disbursements Personnel Services (RAOD-PS)

The RAOD shall be maintained to record allotments, obligations and disbursements. It shall show
the allotment received for the year, obligations incurred, and the actual disbursements made. The
incurrence of obligations shall be made through the issuance of Obligations Request and Status
(ORS). Every time an entry is made, the balance is determined to prevent incurrence of obligations in
excess of allotment and overdraft in disbursements against obligations incurred.
This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster
by Major Final Output (MFO) or Program/Activity/Project (PAP) for personnel services. (See
Appendix 3A)

8. Registry of Allotments, Obligations and Disbursements — Maintenance and Other Operating

Expenses (RAOD-MOOE)
This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program/Activity/Project (PAP) for maintenance and other operating
expenses. (See Appendix 3B)

9. Registry of Allotrnents, Obligations and Disbursements --- Financial Expenses (RAOD-FE)

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program Activity/Project (PAP) for financial expenses. (See Appendix
3C)

10. Registry of Allotments, Obligations and Disbursements Capital Outlays (RAOD-CO)

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program/Activity/Project (PAP) for capital outlays. (See Appendix 3D)

11. Registry of Budget, Utilization and Disbursements — Personnel Services (RBUD-PS)

The RBUD shall be used to record the approved special budget and the corresponding utilizations
and disbursements charged to retained income authorized under RA 8292 for State Universities and
Colleges (SUCs) and other retained income collections of a NGA with similar authority.
This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output
(MFO) or Program Activity/Project (PAP) for personnel services. (See Appendix 4A)

12. Registry of Budget, Utilization and Disbursements — Maintenance and Other Operating Expenses
(RBUD-MOOE) This registry shall be maintained by the Budget Division/Unit by fund cluster, by
Major Final Output (MFO) or Program Activity/Project (PAP) for maintenance and other operating
expenses. (See Appendix 4B)
 13. Registry of Budget, Utilization and Disbursements — Financial Expenses (RBUD-FE)
This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output
(MFO) or Program Activity/Project (PAP) for financial expenses. (See Appendix 4C)

14. Registry of Budget, Utilization and Disbursements -- Capital Outlays (RBUD-CO)

This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output
(MFO) or Program Activity/Project (PAP) for capital outlays. (See Appendix 4D)

15. Registry of Allotments and Notice of Cash Allocation (RANCA)

This registry shall be maintained by the Accounting Division/Unit to determine the amount of
allotments not covered by NCA and to monitor available NCA. (See Appendix 5)

16. Registry of Allotments and Notice of Transfer of Allocation (RANTA)

This registry shall be maintained by the Accounting Division/Unit to determine the amount of
allotments not covered by NTA and to monitor available NTA. (See Appendix 6)

BASIC ACCOUNTING AND BUDGET REPORTING PRINCIPLES

The Government Accounting Manual provides general provisions from existing laws, rules and
regulations; and basic standards/fundamental accounting principles for financial reporting by national
government agencies. It requires each government entity to recognize and present its financial transactions
and operations in conformity with the following:

l. Generally accepted government accounting principles in accordance with the PPSAS and pertinent laws.
rules and regulations.
COA Resolution No. 2014-003 dated January 24, 2014 prescribed the adoption of twenty five (25)
Philippine Public Sector Accounting Standards (PPSASs) effective January l, 2014. These PPSASs were
based on International Public Sector Accounting Standards (IPSASs) which were published in the 2012
Handbook of International Public Sector Accounting Pronouncements of the IPSASB.
In adopting International Public Sector Accounting Standards (IPSAS), PSASB attempts, wherever
possible, to maintain the accounting treatment and original contents of the IPSASs and its approved
amendments, unless there is a significant accounting issues that warrants a departure. In so doing, the
PPSAS is assigned the same number as the IPSAS to maintain the link.
In cases where a specific accounting issue is either not comprehensively dealt with in an existing
IPSAS or an IPSAS has not been developed by the IPSASB, a new standard of PPSAS shall be developed.
Accordingly, researches shall be conducted and a discussion document shall be prepared based on other
relevant accounting standards not in conflict with Philippine laws. As discussed in the preceding section,
where a new PPSAS is developed and there is no equivalent IPSAS, the standard will be assigned a number
in a series of PPSAS starting with 101. When IPSASB subsequently issues the equivalent standard as an
IPSAS, the 100 series PPSAS will be withdrawn and reissued as a PPSAS with the IPSAS number.

2. Accrual basis of accounting in accordance with the PPSAS.

Accrual basis means a basis of accounting under which transactions and other events are recognized
when they occur, and not when cash or its equivalent is received or paid. Thus, the transaction and events
are recognized in the accounting records and recognized in the financial statements of the periods to which
they relate. The elements recognized under accrual accounting are assets, liabilities, net assets equity,
revenue, and expenses.

3. Budget basis for presentation of budget information in the financial statements in accordance with PPSAS
24.
IPSAS 24, Presentation of Budget Information in Financial Statements, requires a comparison of
budget amounts and the actual amounts arising from execution of the budget to be included in the financial
statements of entities that are required to, or elect to, make publicly available their approved budget/s, and
for which they are, therefore, held publicly accountable. It also requires disclosure of an explanation of the
reasons for material differences between the budget and actual amounts. Compliance with the requirements
of this standard will ensure that public sector entities discharge their accountability obligations and enhance
the transparency of their financial statements by demonstrating:
a. Compliance with the approved budget/s for which they are held publicly accountable; and,
b. Where the budget/s and the financial statements are prepared on the same basis, their financial
performance in achieving the budgeted results.

4. Revised Chart of Accounts prescribed by Commission on Audit.

The Commission on Audit as member of the International Organization of Supreme Audit
Institutions (INTOSAI) is encouraged to adopt relevant International Accounting Standards. The IPSASB of
the International Federation of Accountants which promulgates the IPSASs, acknowledges the right of
governments and national standards-setters to establish their respective accounting standards and guidelines
for financial reporting in their jurisdictions. And to provide new accounts for the adoption of the PPSAS
which were harmonized with the IPSAS to enhance the accountability and transparency of the financial
reports, and ensure compatibility of financial information, the COA recognizes the need to revise the New
Government Accounting System (NGAS) Chart of Accounts prescribed in COA Cir. No. 2004-008 dated
September 20, 2004. The Commission also recognizes the need for uniform accounts to be used in the
national government accounting and budget systems to facilitate the preparation of harmonized financial and
budget accountability reports.
Accordingly, the COA revokes COA Cir. No. 2004-008 and the COA Circular No. 2013-002 dated
January 30, 2013, Adoption of the Revised Chart of Accounts for National Government Agencies, is
adopted. Along this line, COA Circular No. 2014-003, dated April 15, 2014, Implementing Rules and
Guidelines on the Conversion from the Philippine Government Chart of Accounts under the NGAS to the
Revised Chart of Accounts for National Government Agencies; and COA Circular No 2015 — 007, dated
October 22, 2015, Prescribing the Government Accounting Manual for Use of All National Government
Agencies, were considered.

5.Double entry bookkeeping

Historically, one important breakthrough in the century is the introduction of double-entry
bookkeeping. The Messari (Treasurer's) accounts of Genoa, a city in Italy, is the oldest record of a complete
double-entry system that was discovered in 1340. It contains debits and credits journalized in a bilateral
form; thus, called double-entry system.
It is a system of bookkeeping where every journal entry to account requires a corresponding and
opposite entry to a different account. In the double-entry accounting system, two accounting entries are
required to record each accounting transactions. Recording of a debit amount to one or more accounts and an
equal credit amount to one or more accounts results in total debits being equal to total credits for all
accounts in the general ledger.

6. Financial statements based on accounting and budgetary records.

The objectives of general purpose financial reporting in the public sector should be to provide
information useful for decision making, and to demonstrate the accountability of the entity for the resources
entrusted to it, by:
a. Providing information about the sources, allocation, and uses of financial resources;
b. Providing information about how the entity financed its activities and met its cash requirements;
c. Providing information that is useful in evaluating the entity's ability to finance its activities and to
meet its liabilities and commitments;
d. Providing information about the financial condition of the entity and changes in it;
e. Providing aggregate information useful in evaluating the entity's performance in terms of service
costs, efficiency and accomplishments.

Financial reporting may also provide users with information:

a) Indicating whether resources were obtained and used in accordance with the legally adopted budget; and
b) Indicating whether resources were obtained and used in accordance with legal and contractual
requirements, including financial limits established by appropriate legislative authorities.
7. Fund cluster accounting.
Fund cluster refers to an accounting entity for recording expenditures and revenues associated with a
specific activity for which accounting records are maintained and periodic financial reports are prepared.
COA Circular No. 2015-002 dated March 9, 2015, Supplementary guidelines on the preparation of
financial statements and other reports, the transitional provisions on the implementation of the PPSAS, and
other coding structures, provides that for the purpose of preparing the Annual Financial Report and the
Annual Audit Reports, all National Government Agencies (NGAs) shall submit to the COA Auditors and the
Government Accountancy Sector (GAS), COA, the detailed financial statements and trial balances
consolidated by the fund cluster as follows:
A. Regular Agency Fund
B. Foreign Assisted Projects Fund
C. Special Accounts Locally Funded/Domestic Grants Fund
D. Special Accounts Foreign Assisted/Foreign Grants Fund
E. Internally Generated Funds
F. Business Related Funds
G. Trust Receipt/lnter-agency Transferred Funds (IATF)

Responsibility Accounting
Responsibility accounting is a system that relates the financial results to a responsibility center,
which provides access to cost and revenue information under the supervision of a manager having direct
responsibility for its performance. It is a system that measures the plans (by budget) and actions (by actual
results) of each responsibility center.
Responsibility center, on the other hand, is a part, segment, unit or function of a government agency,
headed by a manager, who is accountable for a specified set of activities. Except for some, which derive
most of their income from collection of taxes and fees, national government agencies are basically cost
centers, whose primary purpose is to render service to the public at the lowest possible cost. Cost centers are
established to provide each government agency's accessibility to cost information and to facilitate cost
monitoring at any given period. While the use of subsidiary ledgers is sufficient to control cost, it requires
considerable time to summarize the cost incurred by the agency for its different programs, projects, activities
and offices/divisions, hence, responsibility accounting shall be done only under the computerized accounting
system.
Responsibility accounting aims to: (1.) ensure that all costs and revenues are properly
charged/credited to the correct responsibility center so that deviations from the budget can be readily
attributed to managers accountable therefor; (2.) provide a basis for making decisions for future operations;
and (3.) facilitate review activities, monitoring the performance of each responsibility center and evaluation
of the effectiveness of agency's operations.

The following are the concepts of responsibility accounting:

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

6. Evaluation of a manager's performance for cost centers is based on his ability to meet budgeted goals for
controllable costs.
In order to be effective in identifying the performance of a segment or unit of the agency under the
control and responsibility of the segment's manager, the coding structure has been formulated. However, in
order to provide a harmonized budgetary and accounting code classification that will facilitate the efficient
and accurate financial reporting, this coding structure was modified and repealed lately by the Commission
on Audit, Department of Budget and Management, and Department of Finance through Joint Circular No.
2013-1 dated August 6, 2013: Unified Accounts Code Structure (UACS). (This joint circular was later
enhanced amending the Funding Source Code and MFO/PAP Code.) For the organization code that will be
useful for monitoring revenue and expenses, the Government Accounting Manual assigned each National
Government Agencies a responsibility center code defined as organization code in the UACS Manual.
Questions:
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1. Define government accounting.

As defined by the State Audit Code of the Philippines, Government Accounting encompasses the
processes of analyzing, recording, classifying, summarizing and communicating all transactions
involving the receipt and disposition of government funds and property, and interpreting the results
thereof. Through these processes, same with the accounting for business entities, government accounting
also produces information relevant in making economic decisions. However, this accounting greatly
emphasizes the sources and utilization of funds and responsibility, accountability and liability of entities
entrusted with government funds and properties.
2. Enumerate the objectives of the government accounting according to Section 110, Presidential
Decree 1445.
The objectives of Government Accounting are:
a. To produce information concerning past operations and present conditions;
b. To provide a basis for guidance for future operations;
c. To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and
d. To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.
3. Explain briefly the purposes of creating the Public Sector Accounting Standards Board (PSASB).
The rationale behind the creation of the Public Sector Accounting Standards Board (PSASB) under
COA Resolution No. 2008-12 dated October 10, 2008, stands after its purposes. From the
development of the Philippine Public Sector Accounting Standards (PPSAS), the Board considers
and makes use of, among others, the existing laws, financial reporting, accounting rules and
regulations, and pronouncements issued by the International Public Sector Accounting Standards
Board (IPSASB).
The main purpose of the Board is to assist the Commission on Audit in the formulation and
implementation of the Philippine Public Sector Accounting Standards (PPSAS). These Standards
shall apply to all National Government Agencies (NGAs), Local Government Units (LGUs) and
Government Owned and/or Controlled Corporations (GOCCs) not considered as Government
Business Enterprises (GBEs), in which case, the Philippine Financial Reporting Standards (PFRS)
and relevant standards issued by the Financial Reporting Standards Council, Board of Accountancy,
and Professional Regulation Commission shall apply.

4. Explain the processes of developing the Philippine Public Sector Accounting Standards (PPSAS).
There nine stages of process and considerations in the development of PPSAS are as follows:

a. Applicability of IPSAS. The development of PPSAS is aligned to the prevailing international

standards specifically the IPSAS. Hence it is relevant that the development shall take into account
the applicability of IPSAS to PPSAS.
b. Exposure draft of PPSAS. The issuance of exposure drafts to parties including COA officials
and auditors, agency finance personnel, oversight agencies, professional organizations, academe and
other stakeholders will give opportunity in accumulating comments as an evaluation for modification
if appropriate.
c. Fundamental issues. The conflict between the accounting principle or a significant element of a
disclosure requirement contained in IPSAS and Philippine laws, rules and regulations then the
accounting principle or disclosure requirement may be changed.
d. Statutory authority. When there is deviation between international standards and Philippine
regulatory or legislative environment, Philippine application guidance shall be issued accordingly.
 e. Disclosure requirements. These requirements may be amended if it will be significant in the fair
presentation of the matter.
f. PPSAS numbering. The international and Philippine standard has the same numbering to
maintain the link in between. However, if the Philippine standards have no equivalent IPSAS
number, then it can start from 101. And if the IPSAS subsequently issues one, then PPSAS shall
withdraw and use the one issued by IPSAS.
g. Financial reporting issues not dealt with by IPSAS. If such happen, researches were done and a
discussion document is prepared based on other relevant accounting standards not in conflict with
Philippine laws.
h. Submission of draft to PSASB for consideration of the COA. Where there are significant changes
or unresolved issues associated with an exposure draft, the PSASB may decide to re-expose a
proposed PPSAS.
i. Focus group discussions will be held to obtain further opinions. This is to resolve issues identified
by the exposure process.

5. What are the government offices primarily charged with the accounting responsibility? Explain their
respective responsibility.
The offices charged with the accounting responsibility are COA, DBM, BTr, and the
government Agencies discharging the functions of government to enable it to attain its commitments
to the Filipino people.
Commission on Audit
The Commission on Audit (COA) keeps the general accounts of the government,
promulgates accounting rules and regulations, and submits to the President and Congress, within the
time fixed by law, an annual report of the government, its subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations.
Department of Budget and Management
The Department of Budget and Management shall be responsible for the formulation and
implementation of the National Budget with the goal of attaining our national socio-economic plans
and objectives. The Department shall be responsible for the efficient and sound utilization of
government funds and revenues to effectively achieve the country's development objectives.
Bureau of Treasury
The Bureau of Treasury (BTr) plays a pivotal role in the cash operations of the national
government. They are authorized (1) to receive and keep national funds, manage and control the
disbursements thereof and (2) maintain accounts of financial transactions of all national government
offices, agencies and instrumentalities.

6. Enumerate the registries of the National Government Agencies (NGAs) as provided by the
Government Accounting Manual (GAM).

7. What are the basic accounting and budget reporting principles under the Government Accounting
Manual?

8. How would the general-purpose financial reporting in the public sector provide useful information
for decision making and demonstrate the accountability of the government entity?

9. Enumerate and explain the concept of responsibility accounting.