The

New Government
Accounting System
(NGAS)

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 “The Commission on Audit shall have exclusive
authority, subject to limitations, to define the scope of
its audit examination, establish the techniques and
methods required therefore and promulgate
accounting and auditing rules and regulations,
including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government
funds and properties.”
(Article IX-D, Section 2 Par. (2) of the 1987 Constitution of the Republic of
the Philippines)
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 Government Accounting
Defined
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.
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(Section 109, PD 1445) JLRecto
 WHAT IS THE NGAS?

NGAS is a simplified set of

accounting concepts, guidelines and
procedures designed to ensure
correctness, completeness, and
timeliness in the recording of
government financial transactions, and
production of financial reports.
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 Date of Effectivity of NGAS
January 1, 2002 – National
Government Agencies and Local
Government Units
January 1, 2005 – Government
Owned and/or Controlled
Corporations
January 1, 2007 - Barangays

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 Why change the existing system and
adopt the NGAS?
The old system was about half a century old
and designed for manual operation.

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  It is no longer responsive to the current
demands of government financial
managers.

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  It is a complex system that cannot be
readily understood by non-accountants
and other users.

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  The NGAS is more in conformity with
International Accounting Standards.

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  It helps government executives in
monitoring the performance of their
agency more effectively.

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  It enables agencies to generate relevant
and periodic financial statements and
other operation reports needed by
government planners and other users.
Revenues
Expenditures
Gross
Borrowings

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  It leads to eventual computerization.

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 1. Simplify government accounting;
2. Conform with applicable laws, COA
accounting policies, rules and
regulations and International
Accounting Standards; and
3. Generate periodic and relevant
financial reports for better
monitoring of performance.
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 Accounting Method
a. Modified Accrual Method
• Income
Non-tax revenues shall be under
accrual method of accounting.
Income shall be recorded when
realized/earned regardless of
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collection/cash receipt. 14
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 b. Cash Basis of accounting shall be used for
all other taxes, fees, charges and other
revenues where accrual method is
impractical.

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 Accrual Accounting System
• Expense

Expenses shall be recognized

when incurred and reported in
the financial statements in the
period to which they relate.

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 One-Fund Concept
 Only one fund shall be maintained by all
government agencies.

 Separate Fund Accounting shall be done

only when specifically required
 by law
 by a donor agency, or
 when otherwise necessitated
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 Asset Method of Accounting
• Recording disbursements as
assets when expenditures apply
to more than one accounting
period

• Recording expenses upon

utilization/ consumption
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 New Chart of Accounts

Three-digit account numbering

system
(COA Circular No. 2004-002 dated
April 29, 2004)

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 Basic Features of the New System
 New Account Codes
Assets 100-299
Asset Contra Accounts 300-399
Liabilities 400-499
Equity 500-549
Income 550-679
Tax Revenue
National Taxes 550-579
Local Taxes 580-599
General Income
Permits and Licenses 600-609
Service Income 610-629
Business Income 630-649
Subsidy Income 650-659
Other Income 660-679
Basic Features of the New System (cont.)
 New Account Codes

New Coding Structure

Account
Accounts Code

Gain or Loss Accounts 680-699

Expenses 700-999
Personal Services 700-749
Maintenance and Other
Operating Expenses 750-969
Financial Expenses 970-999
 Financial Statements and
Reports
• Trial Balance
• Balance Sheet
• Statement of Changes in Equity
• Statement of Income and Expenses
• Cash Flow Statement (Direct Method)
• Notes to the Financial Statements
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 Trial Balance

 Use of two-money
column Trial
Balance
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Basic Features of the New System (cont.)
 Use of two-column Trial Balance
Department of ABC
Trial Balance (RA Books) (Unadjusted)
As of December 31, 2012
Acct.
Account Title Code Debit Credit

Cash-NT, MDS 102 11,600

Due from Officers & Empl 128 500
Other Receivables 139 1,000
Office Supplies Inventory 149 800
Prepaid Rent 161 1,200
Prepaid Insurance 162 600
Prepaid Interest 164 2,400
Office Equipment 204 10,000
Accounts Payable 401 10,000
GSIS Payable 411 700
Government Equity 501 1,000
Subsidy Income from NG 601 40,000
Electricity 835 3,600
Salaries & Wages -Reg.Pay 801 20,000
51,700 51,700
Certified Correct:
Chief Accountant
 Financial Expenses
 Separately classified
from MOOE

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 Perpetual Inventory
System
 Purchases of supplies and
materials for stock are
recorded as inventory.

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 Valuation of Inventory
 Cost of ending and issued
items of inventory of supplies
and materials shall be
computed using the Moving
Average Method.
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 Semi-expendable Supplies
 Small items of supplies with
serviceable life of more than
one year shall be recorded as
inventory upon purchase and
as expense upon issuance.
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 Construction of Assets

 Liability shall be recognized upon

receipt of bills and acceptance by
Management of percentage of
completion.

 Construction Period Theory

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 Construction Period Theory

 Expenses such as license fees,

permit fees, taxes and other
expenses related to the
construction of assets shall be
capitalized.
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 Construction Period Theory

 Those incurred after the

construction shall form part
of operating cost.

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 Maintenance of Registry of Public
Infrastructures (RPI)

 Transfer to RPI of completed

public infrastructures like parks,
plazas and monuments at year
end

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  Appropriate Public Infrastructures
account shall be closed to
Government Equity at year end.

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 Depreciation
 Use of Straight Line Method
 Starts on the following month
after purchase of Equipment or
completion of Constructed Asset

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TABLE OF ESTIMATED USEFUL LIFE OF PROPERTY, PLANT
AND EQUIPMENT
Estimated
Property, Plant and Equipment Useful Life
(in years)
Land Improvements
o Land Improvements 10
o Runways/taxiways 20
o Railways 40
o Electrification, Power and Energy
Structures 10

Buildings – those that are predominantly

o Wood 10
o Mixed 20
o Concrete 30
 Estimated
Property, Plant and Equipment Useful Life
(in years)

Leasehold Improvements (Note 1)

o Land 10
o Building
o Wood 10
20
o Mixed
30
o Concrete

Office Equipment, Furniture and Fixtures

o Office Equipment 5
o Furniture and Fixtures 10
o IT Equipment 5
o Library Books 5
 Estimated
Property, Plant and Equipment Useful Life
Machineries and Equipment
(in years)

o Machineries 10
o Agricultural, Fishery and Forestry 10
o Airport Equipment 10
o Communication Equipment 10
o Construction and Heavy Equipment 10
o Firefighting Equipment and Accessories 7
o Hospital Equipment 10
o Medical, Dental and Laboratory Equipment 10
o Military and Police Equipment 10
o Sports Equipment 10
o Technical and Scientific Equipment 10
o Other Machineries and Equipment 10
 Estimated
Property, Plant and Equipment Useful Life
(in years)
Transportation Equipment
o Motor Vehicles 7
o Trains 10
o Aircraft and Aircraft Ground
Equipment 10
o Watercrafts 10
o Other Transportation Equipment 10
Other Property, Plant and Equipment 5

Note 1 – The estimated useful life shall depend on the

length of the lease. It shall be the period of the lease
or the estimated useful life of the assets, as given,
whichever is shorter.
 Depreciation
 Residual value equivalent to
ten (10%) percent
 Estimated useful life of PPE
prescribed under COA Circular
No. 2003-007 dated December
11, 2003
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 Basic Features of the New System
 Adoption of Valuation Accounting on
Property, Plant and Equipment

Old system NGAS

To record none Depreciation-Buildings xxx
depreciation
Accumulated Depreciation- Buildings
xxx

Acquisition Cost - Salvage Value

Depreciation =
Estimated Useful Life
 Reclassification of Assets

 Serviceable assets which are no

longer used shall be classified to
“Other Assets”.

 Not subject to depreciation

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 Allowance for Doubtful Accounts

 Set up for estimated uncollectible

trade receivables
 For fair valuation

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 Basic Features of the New System
 implementation of valuation accounting on
trade receivables
The determination of bad debts expense is derived from
percentage and aging of accounts receivable as follows:

Age of Accounts Percentage

1 – 60 days 1%
61 - 180 days 2%
181 days – 1 year 3%
More than 1 year 5%
 Contingent Accounts
 No longer used
 All financial transactions shall be
recorded using appropriate
accounts

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 Recognition of Liability
 At the time -
 goods are accepted
 services are rendered
 when supplier/creditor bills
are received
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 Interest Accrual
 Interest income and/or
expenses shall be accrued,
whenever practicable and
appropriate

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 Borrowings
 Directly credited to the
appropriate liability accounts

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 Corollary and Negative Entries
 Not used in NGAS
 Use of appropriate accounts
for acquisition/ disposition of
assets
 Correcting entry to adjust the
original entry
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 Petty Cash Fund

 Maintained under the

Imprest System

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 Foreign Currency Adjustments

 Revaluation of Foreign Currency

deposits and outstanding foreign
loans
 At the closing rate prescribed by
the Bangko Sentral ng Pilipinas
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(BSP) at balance sheet date 50
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  Journals
 Cash Receipts Journal
 Cash Disbursements
Journal
 Check Disbursements Journal
 General Journal (GJ)
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  Ledgers
 General Ledger
 Subsidiary Ledgers (where applicable)
• Cash • Investments
• Receivables
• PPE, CIP
• Inventories
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 Accountable Officers shall maintain the
following:
Required to be maintained by
agencies with complete books

Cash Receipts Record

Cash in Bank Record
Cash Disbursements Record
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Policies, Rules and Regulations under
NGAS
 recording of Allotment and Obligation in
the Registries instead of the General
Journal and General Ledger

 recording of the receipt of Notice of Cash

Allocation (NCA) in the books as Cash and
Income
Old system New system
Memo entry in the Dr. Cr.
Allocation and
Utilization Control Cash-National Treasury, MDS xxx
Sheet (AUCS)
Subsidy Income from NG xxx
 Comparison of NGAS and
OGAS
Features NGAS OGAS
1. System Commercial Obligation Accounting
followed Accounting

Double-entry Double-entry
bookkeeping bookkeeping

Responsibility Fund
Accounting Accounting

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
2. Basis of Modified Accrual Cash basis for tax, grants
Accounting and borrowings, accrual
for Income for operating income,
obligation accounting for
expenses and
disbursements

For Expenses Expenses are recognized Expenses were

when incurred. recognized upon
obligation.
 Comparison of NGAS and
OGAS
Features NGAS OGAS
3. Chart of Accounts Uses new chart of Used standard
accounts with 3 chart of accounts with
digits 6 digits

Provides for Did not provide for

responsibility responsibility
accounting accounting

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

4. Trial Balance Trial balance of balances; Trial balance of totals and

Uses 2-money column TB balances;
Used 4-money column TB

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
5. Statement of Purchases of PPE are Purchases of PPE were
Income and treated as real account, not reported as obligations,
Expenses part of SIE thus, part of Statement of
Operations

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6. PPE Asset method is followed; Purchases were taken up
Purchases are directly as expenses; Corollary
recorded as assets; entries were used to
corollary entry not used record the assets

6a. Assets not Obsolete assets/ No depreciation

used in serviceable assets no accounting
operation longer being used are
reclassified to “Other No reclassification made
Assets” account

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6b.Benchmarking Equipment with Benchmark was set
serviceable life of more where purchases of
than 1 year are PPE costing less than
classified under PPE P10,000 were classified
and charged to capital as inventory and
outlay. charged to MOOE.
No benchmark

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6c. Depreciation Depreciation accounting Different method of
depreciation
Uses straight-line method,
accounting was used
Residual value of 10%

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6d. Repairs and Repairs and maintenance No monitoring of
Maintenance costs are monitored for individual repairs and
each item of PPE maintenance costs;

Cost of repairs and

maintenance were lumped
in one account

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6e. Loss of PPE Dropped from the books Dropped from the books
upon receipt of the Notice only upon receipt of the
of Loss decision on the “ Request
for Relief from
Accountability” from COA

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
6f. Valuation of Accountability of Computed at “book
lost accountable officers is value”
property computed at “sound
value”.

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

7. Petty Cash Fund Maintained under the Treated as a regular cash

Imprest Fund System advance

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
8. Inventory Perpetual Inventory Method Periodic Inventory
Method for Method
Supplies &
Materials

Inventory Costing Moving Average Method First-In, First-Out Method

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
Subsidiary Ledgers Maintenance by the Maintenance of
Accounting Unit for each subsidiary ledgers not
item of inventory strictly followed

Reorder Point and SLs provide information on SLs, if ever maintained, did
No. of Days to the not provide for such
Consume re-order point of inventory information
and the number of days to
consume

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
9. Public Not considered as assets Considered assets of the
Infrastructures of agency agency

Recorded in the respective No Registries were

Registries upon completion maintained for public
infrastructures

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

10. Liabilities Recognized only when Liabilities were recognized

goods are delivered and/or upon obligations
services rendered or when
suppliers’ bills are received

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

11. Financial FE are separately FE were part of the

Expenses classified from MOOE MOOE

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

12. Borrowings All borrowings and loans Borrowings were taken

are recorded direct to the up as receipts and
appropriate liability corollary entries were
accounts. made to record the
liability.

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
13. Correcting entries Correcting entries are made Negative journal
thru JEV either by entries were made to
reversing the original correct errors
entries or changing the committed in the same
accounts used, whichever year.
is appropriate.

Does not use negative

entries
 Comparison of NGAS and
OGAS
Features NGAS OGAS
14. Contingent Contingent accounts not Cash shortages or
Account used disallowed payments
were recorded under the
contingent accounts.
Cash shortages/
disallowed payments are
directly recorded using the
appropriate accounts.

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
15. Corollary Does not use corollary Used corollary
entries entries entries

Acquisition/disposition of
PPE is recorded using
appropriate asset accounts

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 Comparison of NGAS and
OGAS
Features NGAS OGAS
16. Negative Journal Totally stopped Used negative journal
entry entry to effect current
year corrections

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 Comparison of NGAS and
OGAS
Features NGAS OGAS

17. Adjusting Deferred and accrued Deferred and accrued

entries income and expenses are income and expenses
taken up at end of period were not taken up at year-
end

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