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12/13/2013 1JLRecto
TheNew GovernmentAccounting System
NGAS)
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The Commission on Audit shall haveexclusive authority, subject to limitations, to define
the scope of its audit examination, establish the
techniques and methods required therefore andpromulgate accounting and auditing rules and
regulations, including those for the prevention anddisallowance 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 AccountingDefined
encompasses the processes ofanalyzing,recording,classifying,summarizing andcommunicating
all transactions involving the receiptand disposition of governmentfunds and property and
interpretingthe results thereof.
(Section 109, PD 1445)JLRecto
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NGAS is a simplified set of accountingconcepts, guidelines and procedures design
to ensure correctness, completeness, andtimeliness in the recording of government
financial transactions, and production of financial reports.
WHAT IS THE NGAS?
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Date of Effectivity of NGAS
January 1, 2002 NationalGovernment Agencies and Local
Government Units
January 1, 2005 GovernmentOwned and/or Controlled
Corporations
January 1, 2007 - Barangays
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Why change the existing system and adop
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 financialmanagers.
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It is a complex system that cannot be
readily understood by non-accountantsand other users.
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The NGAS is more in conformity withInternational Accounting Standards.
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It helps government executives in
monitoring the performance of theiragency more effectively.
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ExpendituresRevenues
GrossBorrowings
It enables agencies to generate relevant
and periodic financial statements andother operation reports needed bygovernment planners and other users.
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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, rulesand regulations and International
Accounting Standards; and
3. Generate periodic and relevantfinancial reports for bettermonitoring of performance.
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Accounting Methoda. Modified Accrual Method
Non-tax revenues shall be under
accrual method of accounting.Income shall be recorded whenrealized/earned regardless ofcollection/cash receipt.
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Income
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b. Cash Basis of accounting shall be used forall other taxes, fees, charges and otherrevenues where accrual method is
impractical.
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Expenses shall be recognizedwhen incurred and reported in
the financial statements in theperiod to which they relate.
Accrual Accounting System
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Expense
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One-Fund ConceptOnly one fund shall be maintained by
all government agencies.Separate Fund Accounting shall be doneonly when specifically required
by lawby a donor agency, orwhen otherwise necessitated
by circumstances. JLRecto
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Asset Method of Accounting Recording disbursements as
assets when expendituresapply to more than oneaccounting period
Recording expenses uponutilization/ consumption
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New Chart of Accounts
Three-digit account numberingsystem
(COA Circular No. 2004-002 dated April 29, 2004)
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Basic Features of the New SystemNew Account Codes
Assets 100-299 Asset Contra Accounts 300-399Liabilities 400-499Equity 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
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Basic Features of the New Systemcont.)New Account Codes
AccountsAccount
Code
Gain or Loss Accounts 680-699Expenses 700-999 Personal Services 700-749 Maintenance and Other Operating Expenses 750-969 Financial Expenses 970-999
New Coding Structure
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Trial Balance Balance Sheet Statement of Changes in Equity
Statement of Income and Expenses Cash Flow Statement (Direct Method) Notes to the Financial Statements
Financial Statements and Reports
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Use of two-moneycolumn TrialBalance
Trial Balance
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Separately classifiedfrom MOOE
Financial Expenses
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Valuation of Inventory
Cost of ending and issueditems of inventory ofsupplies and materials shallbe computed using theMoving Average Method.
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Small items of supplies withserviceable life of more thanone year shall be recordedas inventory upon purchaseand as expense uponissuance.
Semi-expendable Supplies
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Construction of Assets
Liability shall be recognizedupon receipt of bills andacceptance by Management of
percentage of completion.
Construction Period TheoryJLRecto
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Construction Period Theory
Expenses such as licensefees, permit fees, taxes and
other expenses related tothe construction of assetsshall be capitalized.
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Depreciation
Use of Straight Line Method
Starts on the following monthafter purchase of Equipmentor completion of Constructed
Asset
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TABLE OF ESTIMATED USEFUL LIFE OF PROPERTY PLANT
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TABLE OF ESTIMATED USEFUL LIFE OF PROPERTY, PLANT AND EQUIPMENT
102030
o Woodo Mixedo Concrete
Buildings those that are predominantly
102040
10
o Land Improvementso Runways/taxiwayso Railwayso Electrification, Power and Energy
Structures
Land Improvements
EstimatedUseful Life(in years)
Property, Plant and Equipment
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10101010107
101010101010
o Machinerieso Agricultural, Fishery and Forestryo Airport Equipment
o Communication Equipmento Construction and Heavy Equipmento Firefighting Equipment and Accessorieso Hospital Equipment
o Medical, Dental and Laboratory Equipmento Military and Police Equipmento Sports Equipmento Technical and Scientific Equipment
o Other Machineries and Equipment
Machineries and Equipment
EstimatedUseful Life(in years)
Property, Plant and Equipment
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Depreciation
Residual value equivalent
to ten (10%) percent
Estimated useful life of PPE
prescribed under COACircular No. 2003-007 datedDecember 11, 2003
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Basic Features of the New System
Adoption of Valuation Accounting onProperty, Plant and Equipment
Old system
To recorddepreciation
none
NGAS
Depreciation-Buildings xxx
Accumulated Depreciation- Buildingsxxx
Acquisition Cost Salvage ValueDepreciation =
Estimated Useful Life
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Reclassification of Assets
Serviceable assets which areno longer used shall be
classified to Other Assets .
Not subject to depreciationJLRecto
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Allowance for Doubtful Accounts
Set up for estimateduncollectible trade receivables
For fair valuation
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Basic Features of the New System
implementation of valuation accounting ontrade receivablesThe determination of bad debts expense is derived frompercentage 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%
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Contingent Accounts
No longer used All financial transactions shallbe recorded using appropriateaccounts
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Recognition of Liability
goods are accepted
services are rendered
At the time -
when supplier/creditorbills are received
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Interest Accrual
Interest income and/orexpenses shall be accrued,whenever practicable and
appropriate
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BorrowingsDirectly credited to theappropriate liability accounts
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Corollary and Negative Entries
Not used in NGAS
Use of appropriate accountsfor acquisition/ disposition ofassets
Correcting entry to adjustthe original entry
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Petty Cash Fund
Maintained under theImprest System
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Foreign Currency Adjustments
Revaluation of Foreign Currencydeposits and outstanding foreignloans
At the closing rate prescribed bythe Bangko Sentral ng Pilipinas(BSP) at balance sheet date
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General Ledger
Subsidiary Ledgers (where applicable)
Ledgers
Cash
Receivables
Inventories
Investments
PPE, CIP
Liabilities
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Accountable Officers shall maintain thefollowing:
Required to be maintained byagencies with complete books
Cash Receipts Record
Cash in Bank RecordCash Disbursements Record
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recording of Allotment and Obligation in
the Registries instead of the GeneralJournal and General Ledger
Policies, Rules and Regulations under NGAS
recording of the receipt of Notice of Cash Allocation (NCA) in the books as Cash andIncome
Old system New systemMemo entry in the
Allocation andUtilization Control
Sheet (AUCS)
Dr. Cr.
Cash-National Treasury, MDS xxx
Subsidy Income from NG xxx
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Features NGAS OGAS
Comparison of NGAS and
OGAS1. System
followedCommercial
AccountingObligation Accounting
Double-entrybookkeeping
Double-entrybookkeeping
ResponsibilityAccounting
FundAccounting
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Features NGAS OGAS
Comparison of NGAS and
OGAS2. Basis of
Accountingfor Income
Modified Accrual Cash basis for tax, grantsand borrowings, accrualfor operating income,obligation accounting forexpenses anddisbursements
For Expenses Expenses are recognizedwhen incurred.
Expenses wererecognized uponobligation.
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Features NGAS OGAS
Comparison of NGAS and
OGAS3. Chart of Accounts Uses new chart of
accounts with 3digits
Provides for
responsibilityaccounting
Used standardchart of accounts with6 digits
Did not provide for
responsibilityaccounting
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Features NGAS OGAS
Comparison of NGAS and
OGAS
4. Trial Balance Trial balance of balances;Uses 2-money column TB
Trial balance of totals andbalances;Used 4-money column TB
JLR
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Features NGAS OGAS
Comparison of NGAS and
OGAS5. Statement of
Income andExpenses
Purchases of PPE aretreated as real account, notpart of SIE
Purchases of PPE werereported as obligations,thus, part of Statement ofOperations
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Features NGAS OGAS
Comparison of NGAS and
OGAS6c. Depreciation Different method of
depreciationaccounting was used
Depreciation accounting
Uses straight-line method,
Residual value of 10%
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Features NGAS OGAS
Comparison of NGAS and
OGAS6d. Repairs and
MaintenanceRepairs and maintenancecosts are monitored foreach item of PPE
No monitoring ofindividual repairs andmaintenance costs;
Cost of repairs andmaintenance were lumpedin one account
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Features NGAS OGAS
Comparison of NGAS and
OGAS6e. Loss of PPE Dropped from the books
only upon receipt of thedecision on the Requestfor Relief fromAccountability from COA
Dropped from the booksupon receipt of the Noticeof Loss
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Features NGAS OGAS
Comparison of NGAS and
OGAS
7. Petty Cash Fund Treated as a regular cashadvance
Maintained under theImprest Fund System
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Features NGAS OGAS
Comparison of NGAS and
OGAS8. Inventory
Method forSupplies &Materials
Perpetual Inventory Method Periodic InventoryMethod
Inventory Costing Moving Average Method First-In, First-Out Method
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Features NGAS OGAS
Comparison of NGAS and
OGASSubsidiary Ledgers Maintenance by the
Accounting Unit for eachitem of inventory
Reorder Point andNo. of Days toConsume
Maintenance ofsubsidiary ledgers notstrictly followed
SLs, if ever maintained, didnot provide for such
information
SLs provide information onthere-order point of inventoryand the number of days toconsume
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Features NGAS OGAS
Comparison of NGAS and
OGAS9. Public
InfrastructuresNot considered as assetsof agency
Considered assets of theagency
Recorded in the respectiveRegistries upon completion
No Registries weremaintained for publicinfrastructures
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Features NGAS OGAS
Comparison of NGAS and
OGAS
10. Liabilities Recognized only whengoods are delivered and/orservices rendered or whensuppliers bills are received
Liabilities were recognizedupon obligations
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Features NGAS OGAS
Comparison of NGAS and
OGAS
11. FinancialExpenses
FE were part of theMOOE
FE are separatelyclassified from MOOE
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Features NGAS OGAS
Comparison of NGAS and
OGAS
12. Borrowings All borrowings and loans
are recorded direct to theappropriate liabilityaccounts.
Borrowings were taken
up as receipts andcorollary entries weremade to record theliability.
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Features NGAS OGAS
Comparison of NGAS and
OGAS14. Contingent
AccountCash shortages ordisallowed paymentswere recorded under thecontingent accounts.
Contingent accounts notused
Cash shortages/disallowed payments aredirectly recorded using theappropriate accounts.
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Features NGAS OGAS
Comparison of NGAS and
OGAS15. Corollary
entriesDoes not use corollaryentries
Used corollaryentries
Acquisition/disposition ofPPE is recorded usingappropriate asset accounts
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Features NGAS OGAS
Comparison of NGAS and
OGAS16. Negative Journal
entryTotally stopped Used negative journal
entry to effect currentyear corrections
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Features NGAS OGAS
Comparison of NGAS and
OGAS
17. Adjusting
entries
Deferred and accrued
income and expenses aretaken up at end of period
Deferred and accrued
income and expenseswere not taken up at year-end
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