Overview of Government Accounting

CHAPTER 1
GOVERNMENT ACCOUNTING Section 104. Records and reports required by primarily
responsible officers.
 encompasses the process of analyzing, recording,
classifying, summarizing, and communicating all 1) The head of any agency or instrumentality of the national
transactions involving the receipt and disposition of government or any government-owned or controlled
government funds and property, and interpreting the corporation and any other self-governing board or
results thereof. commission of the government shall exercise the
diligence of a good father of a family in supervising
OBJECTIVES GOVERNMENT ACCOUNTING: accountable officers under his control to prevent the
incurrence of loss of government funds or property,
1. To produce information concerning past operations and otherwise he shall be jointly and solidarity liable with the
present conditions; person primarily accountable therefor. The treasurer of
2. To provide a basis for guidance for future operations; the local government unit shall likewise exercise the same
3. To provide for control of the acts of public bodies and degree of supervision over accountable officers under his
officers in the receipt, disposition and utilization of funds supervision, otherwise he shall be jointly and solidarily
and property; liable with them for the loss of government funds or
4. To report on the financial position and the results of property under their control.
operations of government agencies for the information of
all persons concerned. Section 105. Measure of liability of accountable officers.

GOVERNMENT ACCOUNTING EMPHASIZES 1) Every officer accountable for government property shall
THE: be liable for its money value in case of improper or
unauthorized use or misapplication thereof, by himself or
1. Sources and utilization of government funds; any person for whose acts he may be responsible. We
2. Responsibility, accountability, and liability of shall likewise be liable for all losses, damages, or
entities entrusted with government funds and properties. deterioration occasioned by negligence in the keeping or
use of the property, whether or not it be at the time in his
SOURCES OF FUND actual custody.
2) Every officer accountable for government funds shall be
a. Taxes and other fees liable for all losses resulting from the unlawful deposit,
b. Borrowings use, or application thereof and for all losses attributable to
c. Grants from governments and international bodies. negligence in the keeping of the funds.
UTILIZATION OF FUNDS Section 106. Liability for acts done by direction of superior
officer.
Expenditures on:
1) No accountable officer shall be relieved from liability by
a. Programs reason of his having acted under the direction of a
b. Projects superior officer in paying out, applying, or disposing of
c. unanticipated losses from calamities the funds or property with which he is chargeable, unless
prior to that act, he notified the superior officer in writing
PD NO. 1445 (CHAPTER 5)
of the illegality of the payment, application, or
Responsibility, Accountability, and Liability over disposition. The officer directing any illegal payment or
Government Funds and Property disposition of the funds or property shall be primarily
liable for the loss, while the accountable officer who fails
Section 101. Accountable officers; bond requirements. to serve the required notice shall be secondarily liable.
1) Every officer of any government agency whose duties Section 107. Time and mode of rendering account.
permit or require the possession or custody of government
funds or property shall be accountable therefor and for the 1) In the absence of specific provision of law, all
safekeeping thereof in conformity with law. accountable officers shall render their accounts, submit
2) Every accountable officer shall be properly bonded in their vouchers, and make deposits of money collected or
accordance with law. held by them at such times and in such manner as shall be
prescribed in the regulations of the Commission.
Section 102. Primary and secondary responsibility.
Section 108. Prohibition against pecuniary interest.
1) The head of any agency of the government is immediately
and primarily responsible for all government funds and 1) No accountable or responsible officer shall be pecuniary
property pertaining to his agency. interested, directly or indirectly, in any contract or
2) Persons entrusted with the possession or custody of the transaction of the agency in which he is such an officer.
funds or property under the agency head shall be
immediately responsible to him without prejudice to the GOVERNMENT ACCOUNTING
liability of either party to the government. RESPONSIBILITY:

Section 103. General liability for unlawful expenditures. 1. COMMISSION ON AUDIT (COA) – It has the primary
function to examine, audit and settle all accounts and
1) Expenditures of government funds or uses of government expenditures of the funds and properties of the Philippine
property in violation of law or regulations shall be a government.
personal liability of the official or employee found to be 2. DEPT. OF BUDGET AND MANAGEMENT (DBM) –
directly responsible therefor. responsible for the formulation and implementation of the
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 National Budget through the efficient and sound 1. UNDERSTANDABILITY – information is easily
utilization of government funds and resources for the understood.
attainment of the country's development objectives. 2. RELEVANCE – how helpful the information is for
3. BUREAU OF TREASURY (BTr) – acts as principal financial decision-making processes
custodian of the financial assets of the national  Confirmatory value – Provides information about
government. It makes funds available for various past events
government programs and projects.  Predictive value – Provides predictive power
4. GOVERNMENT AGENCIES – responsible for regarding possible future events
oversight or administration of a specific sector, field, or 3. MATERIALITY – an information is material if the
area of study. omission, misstatement and obscuring of the information
could reasonably affect the economic decision of primary
FINANCIAL REPORTING SYSTEM TO
users
NATIONAL GOVERNMENT 4. TIMELINESS – how quickly information is available to
users of accounting information.
5. RELIABILITY – information accurately reflects a
company’s resources, obligatory claims, transactions, etc.
6. FAITHFUL REPRESENTATION – actual effects of the
transactions shall be properly accounted for and reported
in the financial statements
7. SUBSTANCE OVER FORM – transaction and events
are accounted in accordance with their substances and
reality and not merely their legal form
8. NEUTRALITY – without bias in the preparation or
presentation of financial information/free from bias
9. PRUDENCE – dealing with the uncertainties in the
THE GAM FOR NGAS measurement process such that assets or income are not
overstated and liabilities or expenses are not
For National Government Agencies understated
10. COMPLETENESS – requires that relevant information
 VOLUME I – accounting policies, guidelines and should be presented in a way that facilitates
procedures, and illustrative accounting entries understanding and avoids erroneous application.
 VOLUME II – Accounting books, registries, records, 11. COMPARABILITY – accounting standards and policies
forms and reports are consistently applied from one period to another
 VOLUME III – the revised chart of accounts (updated
2015) COMPONENTS OF GENERAL-PURPOSE
FINANCIAL STATEMENTS
1. Statement of Financial Position
2. Statement of Financial Performance
3. Statement of Changes in Net Assets/Equity
BASIC ACCOUNTING AND BUDGET
4. Statement of Cash Flows
REPORTING PRINCIPLES 5. Statement of Comparison of Budget and Actual Amounts
1. Philippine Public Sector Accounting Standards (PPSAS) 6. Notes to Financial Statements
and relevant laws, rules, and regulations
ELEMENTS OF THE FINANCIAL STATEMENTS
2. Accrual basis of accounting
3. Budget basis 1. ASSETS – items of economic benefit that are expected
4. Revised Chart of Accounts to yield benefits in future periods
5. Double entry bookkeeping 2. LIABILITIES – legally binding obligations payable to
6. FS based on accounting and budgetary records another entity or individual
7. Fund cluster accounting 3. EQUITY – the amount invested in a business by its
owners, plus any remaining retained earnings
FUND CLUSTER ACCOUNTING
4. REVENUE – an increase in assets or decrease in
Code Fund Cluster
liabilities caused by the provision of services or products
01 Regularly agency fund to customers. It is a quantification of the gross activity
02 Foreign assisted project fund generated by a business
03 Special account-locally funded/domestic grants 5. EXPENSES – the reduction in value of an asset as it is
fund used to generate revenue
04 Special account-foreign funded/domestic grants
fund
05 Internally generated funds
06 Business related funds
07 Trust receipts

QUALITATIVE CHARACTERISTICS OF
FINANCIAL REPORTING
The qualities or attributes that make financial accounting
information useful to the users.

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 The Budget Process
CHAPTER 2
THE NATIONAL BUDGET  The budget preparation in the Philippines uses a “bottom-
up” approach.
 Government accounting is primarily budgetary  “BOTTOM-UP” BUDGETING – several parties
accounting. participate in the budget preparation, starting from the
 Government accounting does not only aim to provide lowest to the highest levels of the government.
information on past events and transactions but also  “TOP DOWN” BUDGETING – wherein the budget
budget information in accordance with PPSAS 24. preparation starts from the agency heads.
 NATIONAL BUDGET – is the government estimate of
the sources and uses of government funds within fiscal The current year’s budget is formulated
year. INCREMENTA based on the previous year’s budget,
L BUDGETING which is just adjusted for any various
BUDGET CYCLE experiences in the past.
ZERO BASED The current year’s budget is formulated
 Budget Preparation BUDGETING without regard to the
 Budget Legislation previous year’s budget. Government
 Budget Execution agencies are required to justify their
 Budget Accountability current year’s proposed programs and
expenditures, irrespective of whether
I. BUDGET PREPARATION these are new or carried over from the
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 previous year.  After deliberations in both houses are finished, a
committee called the Bicameral Conference Committee is
1. BUDGET CALL formed to harmonize any conflicts between the
Representatives and Senate version of the GAB.
The budget preparation starts when the Department of Budget
and Management (DBM) issues a Budget Call to all 7. PRESIDENT’S ENACTMENT
government agencies.
The President enacts the budget, which is now known as the
RELEVANT TERMS: General Appropriations Act (GAA).

a. BALANCED BUDGET – Prepared in such a way that THE APPROVED BUDGET

estimated revenues exceed estimated expenditures.
b. ANNUAL BUDGET – covers a period of one year and APPROVED BUDGET – is the expenditure authority derived
forms the basis for the annual appropriation. from the appropriation laws, government ordinances, and other
c. SPECIAL BUDGET – provides for items not adequately decisions related to the anticipated revenue or receipts for the
covered or not included in the general appropriation act. budgeting period.
d. LINE-ITEM BUDGET – focuses on specific
APPROPRIATION
expenditures such as salaries and wages, travel expenses,
freight, supplies materials and equipment. Is the authorization made by a legislative body to allocate
e. PERFORMANCE BUDGET – a plan of activities to be funds for purposes specified by the legislative of similar
undertaken including their related costs, with the authority.
emphasis on meeting targets and desired result.
f. OBLIGATIONS BUDGETS – focuses on expenditures a. NEW GENERAL APPROPRIATIONS – are annual
incurred in the current year which are to be paid either in authorizations for incurring obligations during a specified
the same year of in the following year. budget year as listed in the GAA.
b. CONTINUING APPROPRIATIONS – Kare the
2. BUDGET HEARINGS authorizations to support obligations for a specific
purpose or project, such as multi- year construction
 Budget hearings are conducted after the agencies submit projects which require the incurrence obligations even
their budget proposals. beyond the budget year.
c. SUPPLEMENTAL APPROPRIATIONS – are
3. PRESENTATION TO THE OFFICE OF THE
additional appropriations authorized by law to augment
PRESIDENT the original appropriation which proved to be insufficient
 The President and the Cabinet members review the for their intended purpose duty to economic, political or
proposed budget. social conditions supported by Certification of
Availability of Funds from the BTr.
THE PRESIDENT’S BUDGET d. AUTOMATIC APPROPRIATION – are the
authorizations programmed annually or for some other
a. PRESIDENT’S BUDGET MESSAGE – this contains period prescribed by law which do not require periodic
the President’s explanation of the country’s fiscal policy action by Congress
and budget priorities e. UNPROGRAMMED FUNDS – are standby
b. NATIONAL EXPENDITURE PROGRAM (NEP) – appropriations authorized by Congress in the annual GAA
this contains the details of all the government entities which may be availed only when any of the following
proposed expenditures in the coming year. instances occur:
c. BUDGET OF EXPENDITURES AND SOURCES OF  Revenue collections exceed the original revenue
FINANCING (BESF) – this contains the estimated targets in the Budget of Expenditures and Sources
expenditures accompanied by estimates of expected of Financing submitted by the President to the
sources of financing. Congress;
d. OTHER DOCUMENTS – aimed to provide other  New revenues are collected or realized from
explanation of selected items in the NEP. sources not originally considered in the BESF; or
 Newly approved loans for foreign assisted projects
II. BUDGET LEGISLATION are secured or when conditions are triggered for
 Government Funds shall only be spent in pursuance of an other sources of funds such as perfected loan
appropriation made by law. agreements for foreign assisted projects.
 Therefore, due process must be undertaken to legalize the f. RETAINED INCOME/FUNDS – Collections which are
proposed budget. authorized by law to be used directly by agencies
concerned for their operations or specific purposes.
4. HOUSE OF DELIBERATIONS g. REVOLVING FUNDS – receipts derived from business
type activities of departments/agencies which are
 Upon receipts of the President’s Budget, the House of authorized by law to be constituted as such and deposited
representative conducts hearings to scrutinize the various in an authorized government depository bank.
agencies respective proposed programs and expenditures. h. TRUST RECEIPTS – receipts by any government
agency acting as trustee, agent or administrator for the
5. SENATE DELIBERATIONS fulfilment of some obligations or conditions.
 The senate conducts its own deliberation on the GAB. III. BUDGET EXECUTION
 These normally start after the Senate receives the GAB
from the House of Representatives. This is the phase where government funds are spent.

6. BICAMERAL DELIBERATIONS 8. RELEASE GUIDELINES AND BEDS

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The DBM issues guidelines on the release and utilization of 3) NON-CASH AVAILMENT AUTHORITY – authority
funds while the various agencies submit their Budget issued by the DBM to agencies to cover the liquidation of
Execution Documents (BEDs). their actual obligations incurred against available
allotments for availment of proceeds from loans/grants
BEDs through supplier's credit/constructive cash.
4) CASH DISBURSEMENT CEILING – authority issued
It summarizes an agency's fiscal year plans and performance by the DBM to agencies with foreign operations.
targets.
IV. BUDGET ACCOUNTABILITY
It includes the following:
 This phase occurs concurrently with the Budget
 Physical and Financial Plan
Execution phase.
 Monthly cash program
 As the budget is being executed, it is regularly monitored
 Estimate of Monthly income to determine the conformance of actual results with
 List of obligations that are not yet due and demandable. planned targets
THE MAJOR RECIPIENTS OF THE BUDGET 12. BUDGET ACCOUNTABILITY REPORTS
1) NATIONAL GOVERNMENT AGENCIES (NGAS) – Government agencies are required to submit the following
simplify the recording of government transactions and accountability reports:
generate financial statements that are reflective of the
government's true state of affairs. a. Monthly Report of Disbursements
2) LOCAL GOVERNMENT UNITS (LGUS) – designated b. Quarterly Physical Report of Operation
as units of local government by law, which exercise c. Statement of Appropriations, Allotments, Obligations,
limited governmental powers or powers in respect to Disbursements and Balances
limited governmental subjects d. Summary of Appropriations, Allotments, Obligations,
3) GOVERNMENT OWNED AND CONTROLLED Disbursements and Balances by Object of Expenditure
CORPORATIONS (GOCCS) – a state-owned e. List of Allotments and Sub-Allotments
enterprise that conducts both commercial and non- f. Statement of Approved Budget, Utilizations,
commercial activity. Disbursements and Balances
g. Summary of Approved Budget, Utilizations,
9. ALLOTMENT Disbursements and Balances by Object of Expenditure
h. Quarterly report of Revenue and Other Receipts
 Allotment is an authorization issued by the DBM to i. Aging of Due and Demandable Obligations
government agencies to incur obligations for specified
amounts contained in a legislative appropriation in the 13. PERFORMANCE REVIEWS
form of budget release documents
 It is also referred to as Obligational Authority.  The DBM and COA perform periodic reviews of the
agencies' performance and budget accountability and
OBLIGATION report to the President.

 It is an act of a duly authorized official which binds the 14. AUDIT

government to the immediate or eventually payment of a
sum of money.  The COA audits the agencies.

DOCUMENTS USED IN RELEASING ALLOTMENTS

TO GOVERNMENT AGENCIES:

1) General Appropriations Act Release Document (GAARD)

2) Special Allotment Release Order (SARO)
3) General Allotment Release Order (GARO)

10. INCURRENCE OF OBLIGATIONS

 Government agencies incur obligations which will be
paid by the government.

11. DISBURSEMENT AUTHORITY

 The DBM issues disbursement authority to the
government agencies

DOCUMENTS USED IN RELEASING DISBURSEMENT

AUTHORITY TO GOVERNMENT AGENCIES:

1) NOTICE OF CASH ALLOCATION (NCA) – authority

issued by the DBM to central, regional and provincial
offices and operating units to cover their cash
requirements.
2) NOTICE OF TRANSFER OF ALLOCATION –
authority issued by an agency's Central Office to its
regional and operating units to cover the latter's cash
requirements
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  A cost is considered controllable at a given level of
managerial responsibility if the manager has the power to
incur it within a given period of time.

NON-CONTROLLABLE COST
 are costs incurred indirectly an allocated to a
responsibility level.

RESPONSIBILITY ACCOUNTING
 To better evaluate the budget accountability of an entity
government accounting adheres to the concept of
responsibility accounting.

RESPONSIBILITY CENTER
 A part, segment, unit, or function of a government agency
 Headed by a manager, who is accountable for a specified
set of activities.

CONTROLLABLE COSTS

The Government Accounting Process

CHAPTER 3
BOOK OF ACCOUNTS AND REGISTRIES
1. JOURNALS (unit of account) – book of original
entries
2. LEDGERS (unit of account) – principal book of
accounts Personal Services (PS) xx
3. REGISTRIES (budget division) – budget records Maintenance & Other OpEx (MOOE) xx
Financial Expenses (FE) xx
Capital Outlays (CO) xx
Total Appropriation for the current year xx

3. REGISTRIES OF ALLOTMENTS, OBLIGATIONS

AND DISBURSEMENTS (RAOD) – maintained by the
Budget Unit of agencies to record allotments, obligations
and disbursements. It shall show the allotments received
for the year, obligations incurred against the
corresponding allotment and the actual disbursements
made

BUDGET REGISTRIES
1. REGISTRIES OF REVENUE AND OTHER
RECEIPTS – monitor the revenue and other receipts
estimated/budgeted, collected and remitted/deposited.

4. REGISTRIES OF BUDGET, UTILIZATION AND

DISBURSEMENTS (RBUD) – used by the Requesting/
Originating Offices in the utilization of their approved
budget allocations for off budgetary and custodial funds
such as SAGF, internally generated funds, Business
related funds and Trust funds.

INCURRENCE OF OBLIGATION
Obligation Request and Status (ORS)
2. REGISTRIES OF APPROPRIATIONS AND
ALLOTMENTS (RAPAL) – to monitor appropriations
and allotments charged thereto.

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 EXAMPLE:

1) APPROPRIATION

Entity A (a government agency) receives its GAA consisting of

the following:
Personal Services (PS) 100,000
Maintenance & Other OpEx (MOOE) 60,000
Financial Expenses (FE) -
Capital Outlays (CO) 200,000
Total Appropriation for the current year 360,000

3) INCURRENCE OF OBLIGATION
2) ALLOTMENT
a. Personnel Services – Employment contracts (Job Order)
Entity A receives its allotment from the DBM consisting of the amounting to P70,000
following: b. Maintenance & Other Operating Services – Purchase
contract for office supplies worth P25,000
Personal Services (PS) 90,000 c. Capital Outlays – Purchase contract for office equipment
Maintenance & Other OpEx 40,000 worth P160,000
Financial Expenses -
Capital Outlays 170,000
Total Allotment 300,000

Only one ORS is presented for the three contracts. Separate

ORSs should be prepared for each of them.

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  Determines the amount of allotments not covered by
NCA
 Monitors the available balance of NCA

REGISTRY OF ALLOTMENT AND NOTICE OF

TRANSFER OF ALLOCATION (RANTA)

 Determines the amount of allotments not covered by the

Notice of Transfer of Allocation (NTA)
 Notices the available balance of NTA

POSTING OF NCA IN THE RANCA

NORSA
 or Notice of Obligation Request and Status Adjustment.
 This is used when the obligations recorded in the RAOD
and ORS needs to be adjusted.

JOURNAL ENTRIES SHOULD BE MADE AFTER:

Which applies to the Accrual Basis of Accounting.

a. The employees have rendered services
b. The office supplies are delivered and received
c. The office equipment is delivered and received

DIFFERENT DEFINITION OF OBLIGATION

What’s the difference of the term Obligation in business and DISBURSEMENT
government setting?
Employees have rendered services and are now entitled to
a. BUSINESS ENTITY – Another term for liability compensation.
b. GOVERNMENT ENTITY – Maybe referred to as a
commitment ASSUMING OUR PAYROLL COMPENSATION

DISBURSEMENT AUTHORITY – NOTICE OF

CASH ALLOCATION (NCA)
Entity A receives a Notice of Cash Allocation (NCA) from the
DBM amounting to P200,000, net of tax.

POSTING OF PAYABLE TO THE SECTION C OF ORS

REGISTRIES USED TO MONITOR THE NCA

REGISTRY OF ALLOTMENT AND NOTICE OF CASH
COLLECTION (RANCA)

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 GRANT OF CASH ADVANCE FOR PAYROLL

CASH RECEIPTS JOURNAL

 A special Journal used to record all cash receipts
transactions.

REVERSION OF UNUSED NOTICE OF CASH

POSTING OF DISBURSEMENT TO THE PAYMENT COLUMN
FOR SECTION OF C OF THE ORS AND DISBURSEMENT ALLOCATION (NCA)
COLUMN OF THE RAOD
Government entities are required to revert any unused NCA at
the end of the accounting period.

BASIC RECORDING OF GOVERNMENT

TRANSACTIONS
Recording in:
TRANSACTIO REGISTRIE
JOURNAL &
N S & OTHER
LEDGER
RECORDS
Appropriation RAPAL None
RAPAL and
REMITTANCE OF AMOUNTS WITHHELD appropriate
Allotment None
RAODS ORS
Entity A remits the ₱15,000 withheld to the other government and
agencies. The breakdown is re-provided below: Incurrence of Appropriate
None
Obligations RAODS
Withholding Tax 10,000 Cash-MDS, Regular
GSIS 2,000 NCA RANCA Subsidy from NG
Pag-IBIG 2,000 Updating of Expense/Asset
PhilHealth 1,000 ORS and Payable
Total Deductions 15,000 Disbursements
appropriate Payable
RAODS Cash-MDS, Regular
Tax Remittance Updating of Cash-TRA
Advice (TRA is ORS and Subsidy from NG
used for
appropriate Due to BIR
remittance of taxes
withheld) RAODS Cash-TRA
Accounts receivable
Cash-CO
RROR,
Billings, Cash-CO
RCD/CRReg
REMITTANCE TO GSIS, PAG-IBIG, PHILHEALTH Collections, & A/R
(not
Remittances Cash-Treasury/Agency
illustrated)
Deposit, Regular
Cash-CO
Reversion of Subsidy from NG
RANCA Cash-MDS, Regular
Unused NCA

BILLINGS, COLLECTIONS & REMITTANCES REVISED CHART OF ACCOUNTS

a. Entity A bills revenue of P100,000 for rent income  CHART OF ACCOUNTS – list of all the accounts used
by an entity.
 Government entities shall use the account titles and
account codes in the Revised Chart of Accounts (RCA)
issued by the COA.
b. Entity A collects from the billed revenue and remits the
collection to the BTr

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 GOVERNMENT ACCOUNTING CYCLE

1. APPROPRIATION
Illustration:

 Entity A receives its GAA amounting to ₱1,000,000.

*Recorded in RAPAL

2. ALLOTMENT
Illustration:

 Entity A receives its allotment to ₱960,000 DBM.

* Recorded in RAPAL and RAOD

3. INCURRENCE OF OBLIGATION
Con page 65…

End//

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