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REVISED CHART OF ACCOUNTS UNDER THE NGAS

Chart of Accounts – is a list of account titles and codes that guides the bookkeeper in the recording of

government transactions. It provides the framework within which the accounting

records are constructed.

Standard Government Chart of Accounts (SGCA) – is a list of general ledger accounts prepared for

the use of National, Local and Government Owned or Controlled Corp design to achieve

the objectives of uniformity in accounting and reporting, facilitate in consolidating

financial reports and adaptability in computerization.

Coding – the systematic assignment of number, letters or other symbols to distinguish items within a

given classification from each other.

Purposes: 1. To save time and clerical work in recording names of accounts, funds,

projects, allotments and expenditures.

2. To facilitate location of accounts in the general and subsidiary ledger.3. To facilitate systematic arrangement and classifying of accounts; and

4. To comply with the requirements of mechanized accounting.

COA Circular No. 2013-002 dated January 30, 3013“Adoption of the Revised Chart of Accounts for

National Government Agencies”. The effectivity is January 1, 2014.

Objectives:

1. To provide new accounts for the adoption of the Philippine Public Sector Accounting

Standards (harmonized with IPSAS)

2. To provide uniform accounts for national government accounting and budget systems to

facilitate the preparation of harmonized financial and budgetary accountability reports3. To expand the account code from three (3) digits in the NGAS Chart of Accounts to eight

(8)

digits, to allow expansion or creation of new accounts as may be necessary to implement new

standards or policies and provide up to four levels of consolidation depending on the users’

information needs.

Major Changes:

A. Coverage is limited only to all national government agencies and GOCCs receiving funds

constituted as Special Accounts in the General Fund (SAGF) from the National Government

B. Expanded account code structure - from three (3) digits to eight (8) digitsCOA Revised Chart of Accounts ACCOUNT CODE STRUCTURE

0 00 00 00 0 Account Group --------------------------------

Major Account Group ------------------------------

Sub-Major Account Group -------------------------------

General Ledger Accounts --------------------------------------

General Ledger Contra-Accounts ------------------------------------

ACCOUNT GROUPS

Codes are assigned to account groups to facilitate location of accounts in the general andSubsidiary ledgers, to provide systematic arrangement and classification of accounts and

facilitate preparation of the consolidated financial reports as follows:

Code Account Groups1 Assets

2 Liabilities

3 Equity

4 Income

5 Expenses

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C.. New accounts were provided for the implementation of the PPSAS.

D. Some accounts were deleted since these accounts are for use by local government units or

government-owned and/or controlled corporations, while other accounts are no longer

applicable to national government agencies.

E. Some accounts were either expanded or compressed. For instance, expense accounts for

Repairs and maintenance and depreciation of property, plant and equipment which were

Previously presented per asset account were compressed based on the major account

classification

COA Circular No. 2014-003 dated April 15, 2014“Conversion from the Philippine Government Chartof Accounts under the New Government Accounting System per COA Circular No. 2004

-008 dated September 20, 2004 as amended, to the Revised Chart of Accounts for National

Government Agencies under COA Circular No. 2013-002 dated January 30, 2013,

additional accounts/revised description/title of accounts and relevant Accounting Policies

and Guidelines in the Implementation thereof”

COA Circular No. 2014- 003 dated April 15, 2014 Re: “Conversion from the PGCA to RCA”

PURPOSE:

1. Provide guidelines and procedures on the conversion of the PGCA to the RCA 2. Provide accounting policies and guidelines on the implementation of the RCA for NGAs

3. Provide additional and revised description title of accounts for proper implementation of the

new and revised accounting policies

Coverage:• Shall be adopted for all funds of NGAs and for Special Accounts in the General Fund

(SAGF) maintained by GOCCs

• For agencies implementing the eNGAS , procedures on the Conversion of the eNGAS

databases to the RCA for NGAs shall be covered by separate guidelines

• The Chart of Accounts for GOCCs and LGUs and its conversion shall be covered by

separate guidelines

Basis for Conversion Balance Sheet as of December 31, 2013

General Guidelines and Procedures

• All NGAs and GOCCs with SAGF shall effect the conversion based on the Balance Sheet

as of December 31, 2013

• The Chief Accountants/Heads of Accounting units shall be guided by the Matrix on the

Conversion of Accounts

• The Chief Accountants/Heads of Accounting units shall carefully analyze the GL and SL

accounts before conversion

• Any clarification or request for assistance shall be directed to the Government

Accountancy Sector (GAS), COA

Specific Guidelines/Procedures1. Analyze balances as of December 31, 2013

2. Prepare JEVs to close the accounts and transfer to the appropriate account

3. Furnish COA Auditor and GAS copies of the JEVs

Specific Accounting Policies and Guidelines

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1. Maintenance of NG books shall be discontinued. . A separate set of books shall be

maintained by fund. . All balances as of December 31, 2013 shall be transferred to the

appropriate new books.

a. Bases shall be the law creating the fund

b. Copies of the JEV shall be furnished the COA Auditor and the COA- GAS

separately2. Appropriate SLs shall be maintained for real accounts and for some income and expense

accounts

3. Public Infrastructures and Reforestation projects shall be recorded in the appropriate fund

using PPE account

a. Based on acquisition cost showing the computed depreciation or appraised value

whichever is determinable4. Revenue/Income shall be recognized by the revenue generating agency using the

appropriate revenue/income accounts whether authorized to use or not

5. For Revolving Funds, income and expenses shall be recognized, the net surplus of which

shall form part of the equity of said fund

Specific Guidelines/Procedures

ITEMS IN TRANSIT (284)

If the balance pertains to delivered items but not recorded, determine the reason for not recording the

ransaction and work for the gathering of the supporting documents to warrant the recording in the books of accounts.

If the balance pertains to fixed assets that were converted to 284 upon implementation of the NGAS

and which remain undelivered as of December 31, 2013, close the said account to Government

Equity.

In conformity with PPSAS 1, the title of the following accounts shall be revised:

•Account “Government Equity” (30101010) shall be changed to “ Accumulated Surplus/Deficit”

(30101010).

•Account “Income and Expense Summary” (30301010) shall be changed to “Revenue and Expense

Summary ”(30101010).

Transitory Provisions

A. New account titles should be used in the implementation of the PPSAS

B. Accounts that have not been converted due to issues not settled as of the conversion date shall be

converted to the most appropriate account in the RCA until further defined

Responsibility

The Chief Accountants/Heads of Accounting units and Budget Officers/Heads of Budget Office/

units shall be responsible for the conversion of these accounts.

COA Resolution No. 2014-003 dated January 24, 2014 “Adoption of the Philippine Public Sector

Accounting Standards (PPSAS)”

The Philippine Public Sector Accounting Standards (PPSAS) Legal Basis – Art. IX-D 1987 Philippine Constitution

“To promulgate auditing and accounting rules and regulations so as to facilitate the keeping, and

enhance the information value of the accounts of the government”.

COA Resolution No. 2014-003 dated January 24, 2014 – “Adoption of the Philippine Public

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Sector Standards (PPSAS).

Functions of the Public Sector Accounting Standards Board(PSAcSB)

1. Assist the COA Commission Proper in formulating and implementing accounting standards for

the public sector.

2. Establish and maintain linkages with the international bodies, governing organizations andacademe on accounting related fields on financial management.

Basis of PPSAS:

• Pronouncements issued by IPSASB, IASB< PICPA, International Organization of Supreme

Audit Institutions and others

• Relevant factors, including best accounting practices, and

• Capacity of agencies to comply with PPSAS.

Objectives

To set out the recognition, measurement, presentation and disclosure requirements for

financial reporting the Philippine government .

Scope:

1. PPSASs set out requirements dealing with transactions and other events in general

purpose

financial reports.

2. PPSASs are designed to apply to the general purpose financial reports of all public sector

entities other than Government Business Enterprises (GBEs)

3. Applies to all NGAs, LGUs and GOCCs not classified as GBEs

PPSAS consists of :

1. International Public Sector Accounting Standards (IPSASs) (Accrual Based IPSASs per 2012

Handbook) developed by IPSASB and published by the International Federation of Accountants

(IFAC), and

2. Philippine Application Guidance (PAG)Philippine Application Guidance (PAG)

3. Provide supplementary guidance of IPSASs to suit the Philippine public sector situation.

4. States the reason for not adopting some paragraphs of the IPSASs.

PPSAS 1- Presentation of FS

Complete set of Financial Statements:

1. Statement of financial position

2. Statement of financial performance

3. Statement of changes in net assets/ equity

4. Cash Flow Statement

5. Notes, comprising a summary of significant accounting policies and other explanatory notes

6. Separate additional statements for comparison of budget and actual amounts shall be

prepared and submitted

PPSAS 2- Cash Flow Statement

Objective:

1. To set overall considerations for the:

2. Provisions of information about changes in cash and cash equivalents by means of a cash

flow statement.

3. Classifies cash flows during the period from operating, investing and financing activities

Salient Features

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1. Cash flows for operating activities are reported using the direct method.

2. Cash flows exclude movements between items that constitute cash or cash equivalents.

3. Investing and financing transactions that do not require the use of cash shall be excluded from

the cash flow statement, but they shall be separately disclosed

PPSAS 3 - Accounting Policies, Changes in Accounting Estimates and ErrorsSalient Features

1. Changes in Accounting Estimates

a. Follow transition requirements

b. If the change is voluntary, apply the new accounting policy retrospectively by

restating prior periods.

2. Effect of a change in estimate is accounted for by including it in net income or

comprehensive income as appropriate in:

a. The period of change if the change affects that period only.

b. The period of change and future periods if the change affects both

PPSAS 4 –The Effects of Changes in Foreign Exchange Rates

Salient Features

1. Covers Foreign currency transactions and Foreign operations.

2. Translation should be done for foreign currency items into functional currency.3. Initial recognition and measurement record the spot exchange rate

PSAS 5 –Borrowing Costs

Salient Features

1. Borrowing costs shall be charged to expenses in the period when they are incurred.

(Benchmark treatment)

2. Borrowing costs directly attributable to the acquisition, construction, or production of a

qualifying asset shall be capitalized as part of the cost of that asset. (Allowed Alternative

Treatment)

3. For borrowing costs pertaining to loans borrowed by the National Government (NG)

which are recorded by the Bureau of the Treasury, the benchmark treatment shall be

used. However for loans borrowed directly by the NGAs and LGUs, the allowed

alternative treatment shall be used

PPSAS 6 – Consolidated and Separate Financial Statement

Salient Features

• Prescribes requirements for preparing and presenting consolidated FS for an economic entity

under the accrual basis of accounting.

• A controlled entity is an entity controlled by another entity, known as the controlling entity.

• Balances, transactions, revenue and expenses between entities within the economic entity

are eliminated in full

PPSAS 8 – Interests in Joint Ventures

Salient Features

1. The key characteristic of a joint venture is a binding arrangement whereby two or more

parties are committed to undertake an activity that is subject to joint control.

2. Joint ventures may be classified as jointly controlled operations, jointly controlled assets

and jointly controlled entities. Different accounting treatments apply for each type of

joint venture

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PPSAS 9 - Revenue from Exchange Transactions

Salient Features

1. Applies to revenue arising from the following exchange transactions and events:

2. The rendering of services.

3. The sale of goods, and4. The use of others of entity assets yielding interest, royalties and dividends.

5. Revenue shall be measured at the fair value of the consideration received or receivable

PPSAS 12 – Inventories

Salient Features

1. Inventories are measured at the lower of cost and net realizable value.

2. If acquired through a non exchange transaction, their cost shall be measured as their fair

value as at the date of acquisition.

3. Cost is determined on weighted average basis

4. Write-downs to net realizable value are recognized as an expense. Reversals arising froman increase in net realizable value are recognized as reduction of the inventory expense in the

period in which they occur

PPSAS 13 – Leases

Salient Features

1. Lease is classified as a Finance lease if:

(a) The lease transfers ownership of the asset to the lessee by the end of the lease term.

(b) The lessee has the option to purchase the asset at a price that is expected to be

sufficiently lower than the fair value.

(c) The lease term is for the major part of the economic life of the asset.

2. Operating lease does not transfer substantially all the risks and rewards incidental to

ownership of the asset.

PPSAS 14 – Events After the Reporting Date

Definitions

1. Adjusting events after the reporting date- events that provide evidence of conditions

that existed at the reporting date.

2. Non-Adjusting events after the reporting date - those that are indicative of conditions

that arose after the reporting date.

An entity shall disclose:

1. The date its financial statements were authorized for issue, and

2. Who gave that authorization

PPSAS 16–Investment Property

Salient Feature

1. Investment property- is property (land or a building or part of a building, or both) held

to earn rentals for capital appreciation, or both, rather than for:

a) Use in the production or supply of goods or services, or for administrative purposes; or

b) Sale in the ordinary course of operations.

2. Investment Property- Shall be measured initially at cost. If acquired through non-exchange

transaction- Fair value as at date of acquisition

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PPSAS 17 – Property, Plant and Equipment

Salient Features

1. Initial recognition is at cost, its cost is its fair value as at the date of acquisition.

2. Infrastructure assets are accounted as PPE

3. The carrying amount of an item of property, plant and equipment shall be derecognized: a) On disposal; or

b) When no future economic benefits or service potential is expected from its use or disposal

PPSAS 19 – Provisions, Contingent Liabilities and Contingent Assets

Salient Features:

Recognize a provision only when:

1. A past event has created a present legal or constructive obligation.

2. An outflow of resources to settle the obligation is probable, and

3. There is a reliable estimate of the obligation


Salient Features

Contingent Liability arises when there is:

1. Possible obligation to be confirmed by a future event that is outside the control of the

entity; or

– A present obligation may, but probably will not require an outflow of resources,

or

– A reliable estimate cannot be made.

Contingent liabilities require disclosure only (no recognition). If the possibility of outflow is

remote, then no disclosure.


Salient Features

1. Contingent asset arises when the inflow of economic benefits or service potential is probable,

but not virtually certain, and occurrence depends on an event outside the control of the

entity.

2. Contingent assets require disclosure only (no recognition). If the realization of revenue is

virtually certain, the related asset is not a contingent asset and recognition of the asset and

related revenue is appropriate

PPSAS 20- Related Party Disclosures

Salient Features

1. Related Parties are parties that control or have significant influence over the reporting

entity and parties that are controlled or significantly influenced by the reporting entity.

2. Requires disclosure of:

3. Relationship involving control, even when there have been no transactions in between;

– Related party transactions; and

4. Management compensation

PPSAS 21– Impairment of Non-Cash-Generating Assets

Definition

Cash - generating assets - are assets held with the primary objective of generating a

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commercial return.

Non-cash - generating assets- are assets other than cash-generating assets.

Impairment - a loss in the future economic benefits or service potential of an asset, over and

above the systematic recognition of the loss of the asset’s future economic benefits orservice potential through depreciation

Salient Features

1. A non-cash-generating asset is impaired when the carrying amount of the asset exceeds its

recoverable service amount.

2. An impairment loss shall be recognized immediately in surplus or deficit.

3. After the recognition of an impairment loss, the depreciation charge for the asset shall be

adjusted in future periods.

PPSAS 23 –Revenue from Non-ExchangeTransactions (Taxes and Transfers)

Non-Exchange transactions

Examples:

(a) Taxes; and

(b) Transfers (whether cash or non-cash)

1. An asset acquired through a non exchange transaction shall initially be measured as its fair

value as at the date of acquisition.

2..An entity shall recognize an asset in respect of taxes when the taxable event occurs and

the asset recognition criteria are met

PPSAS 24 – Presentation of Budget Information in Financial Statements

Salient Features

1. Presentation of budget information in the financial statements when the reporting entity is

publicly accountable for its budget.

2. Disclosure of an explanation of the reasons for material differences between the budget and

actual amounts.

To ensure that the public sector entities discharge their accountability obligations and enhance the

transparency of their financial statements.

PPSAS 26 – Impairment of Cash Generating Assets

Definition

Cash-Generating Assets (CGA) - Assets held with the primary objective of generating a

Commercial return.

Impairment - a loss in the future economic benefits or service potential of an asset.

An impairment loss of a cash- generating asset - is the amount by which the carrying amount of an

asset exceeds its recoverable amount.

PPSAS 27 – Agriculture

Salient Features

Prescribes the accounting treatment and disclosures related to agricultural activity.

Agricultural activity - management by an entity of the biological assets for sale, or for distribution

at no charge or for a nominal charge or for conversion into agricultural produce

or into additional biological assets.

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PPSAS 28 – Financial Instruments Presentation

Prescribes principles for classifying and presenting financial instruments as liabilities or net

assets/equity, and for offsetting financial assets and liabilities

IPSAS 29– Financial Instruments: Recognition and Measurement

Established principles for recognizing, derecognizing and measuring financial assetsand financial liabilities.

IPSAS 30 – Financial Instruments: Disclosure

Prescribe disclosures that enable financial statement users to evaluate the significance of

financial instruments to an entity, the nature and extent of their risks, and how the entity

manages those risks.

PPSAS 31 – Intangible Assets

Salient Features

1. Intangible Asset is an identifiable non-monetary asset without physical substance. 2. An intangible asset, whether purchased or self-created, is recognized if:

- It is probable that the future economic benefits or service potential that are attributable

to the asset will flow to the entity and

3. The cost or fair value of the asset can be measured reliably.

4. All research costs are charged to expense when incurred

PPSAS 32 – Service Concession Arrangements: Grantor

Grantor- public sector entity grants service concession arrangements.

Operator - private sector which manages the service concession asset

Service concession arrangement- sets performance standards, mechanism for adjusting prices ,and arrangements for arbitrating disputes.

Service concession assets - turned over to the grantor

PPSAS 32 – Service Concession Arrangements: Grantor

1. Recognize liability when the grantor recognizes a service concession asset

2. Initial measurement - same amount as the asset adjusted by any consideration given by the

grantor or the operator or from the operator to the grantor.

3..The operator is compensated for its service over the period of the service concession arrangement

When the people become involved in their government, government becomes more

accountable,

and our society is stronger, more compassionate, and better prepared for the challenges of the

future.

ARNOLD SCHWARZENEGGER

INTRODUCTION

Recent developments brought about by the Philippine Public Financial Management Reforms

and significant changes in the field of accounting prompted the harmonization of the existing accounting

standards with the international accounting standards. This Commission revised the New Government

Accounting System (NGAS) Manual prescribed under Commission on Audit (COA) Circular No.

2002-002 dated June 18, 2002 to make it responsive to dynamic changes and modern technology.

Legal Basis. The Government Accounting Manual (GAM) is prescribed by COA pursuant to Article IX-D,Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which provides that:

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“The Commission on Audit shall have exclusive authority, subject t o the limitations in this Article, todefine the scope of its audit and examination, establish the techniques and methods required therefore

, and promulgate accounting and auditing rules and regulations, including those for the prevention anddisallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or usesof government funds and properties". (Underscoring supplied)”

Coverage. This Manual presents the basic accounting policies and principles in accordance with the

Philippine Public Sector Accounting Standards (PPSAS) adopted thru COA Resolution No. 2014-

003 dated January 24, 2014 and other pertinent laws, rules and regulations. 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; and illustrative accounting entries. It shall be used by all National Government

Agencies (NGAs) in the:

(a). preparation of the general purpose financial statements in accordance with the PPSAS and

other financial reports as may be required laws, rules and regulations; and

(b) reporting of budget, revenue and expenditure in accordance with laws, rules and

Definition of Terms. For the purpose of this Manual, the terms used as stated below shall be construed to

mean as follows:

a. Accrual basis – means a basis of accounting under which transactions and other events are recognizedwhen they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactionsand 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, netassets/equity, revenue, and expenses.

b. Assets – are resources controlled by an entity as a result of past events, and from which future economic

benefits or service potential are expected to flow to the entity.

c. Contributions from owners – means future economic benefits or service potential that have beencontributed to the entity by parties external to the entity, other than those that result in liabilities of theentity, that establish a financial interest in the net assets/equity of the entity, which:1. conveys entitlement both to (i) distributions of future economic benefits or service potential by

theentity during its life, such distributions being at the discretion of the owners or their representatives;and to (ii) distributions of any excess of assets over liabilities in the event of the entity being woundup; and/or

2. can be sold, exchanged, transferred, or redeemed.

d..Entity – refers to a government agency, department or operating/field unit. It may be referred to in this

GAM as an agency.

e…Expenses – are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets or

equity, other than those relating to distributions to owners. f. 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. (Sec. 109, Presidential Decree (P.D.) No. 1445)

h. Government Budget – is the financial plan of a government for a given period, usually for a fiscal year,which shows what its resources are, and how they will be generated and used over the fiscal period. The budget is the government's key instrument for promoting its socio-economic objectives. The government budget also refers to the income, expenditures and sources of borrowings of the National Government(NG) that are used to achieve national objectives, strategies and programs.

i. Liabilities – are firm obligations of the entity arising from past events, the settlement of which is expectedto result in an outflow from the entity of resources embodying economic benefits or service potential.

j. Net assets/equity – is the residual interest in the assets of the entity after deducting all its liabilities.

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k. Revenue – is the gross inflow of economic benefits or service potential during the reporting period whenthose inflows result in an increase in net assets/equity, other than increases relating to contributionsfrom owners.

l. Revenue funds – comprise all funds derived from the income of any agency of the government and

available for appropriation or expenditure in accordance with law. (Section 3, P.D. No. 1445)

Responsibility, Accountability and Liability over Government Funds and Property A. Responsibility over Government Funds and Property 1. It is the declared policy of the State that all resources of the government shall be managed, expended

or utilized in accordance with laws and regulations, and safeguarded against loss or wastage throughillegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in theoperations of government. The responsibility to take care that such policy is faithfully adhered to restsdirectly with the chief or head of the government agency concerned. (Sec. 2, P.D. No. 1445)

2..Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over thefinancial affairs, transactions, and operations of the government agency. (Sec. 4(4), P.D. No. 1445)

3.The head of any agency of the government is immediately and primarily responsible for all governmentfunds and property pertaining to his agency. Persons entrusted with the possession or custody of thefunds or property under the agency head shall be immediately responsible to him, without prejudice tothe liability of either party to the government. (Sec. 102, P.D. No. 1445)

B. Accountability over Government Funds and Property 1. Every officer of any government agency whose duties permit or require the possession or custody of

government funds or property shall be accountable therefore and for the safekeeping thereof inconformity with law. Every AO shall be properly bonded in accordance with law. (Sec. 101, P.D. No.1445; Section 50, Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)

2.Transfer of government funds from one officer to another shall, except as allowed by law or regulation,

be made only upon prior direction or authorization of the Commission or its representative. (Sec. 75, P.D. No. 1445)

3.When government funds or property are transferred from one AO to another, or from an outgoing officerto his successor, it shall be done upon properly itemized invoice and receipt which shall invariablysupport the clearance to be issued to the relieved or outgoing officer, subject to regulations of theCommission. (Sec. 77, P.D. No. 1445)

C. Liability over Government Funds and Property 1. Expenditures of government funds or uses of government property in violation of law or regulations

shall be a personal liability of the official or employee found to be directly responsible therefore.(Sec. 103, P.D. No. 1445)

2. Every officer accountable for government funds shall be liable for all losses resulting from theunlawful deposit, use, or application thereof and for all losses attributable to negligence in the keepingof the funds. (Sec. 105(2), P.D. No. 1445)

3. No AO shall be relieved from liability by reason of his having acted under the direction of asuperiorofficer in paying out, applying, or disposing of the funds or property with which he is chargeable,

unless prior to that act, he notified the superior officer in writing of the illegality of the payment,application, or disposition. The officer directing any illegal payment or disposition of the funds

or property shall be primarily liable for the loss, while the AO who fails to serve the required noticeshall be secondarily liable. (Sec. 106, P.D. No. 1445)

4. When a loss of government funds or property occurs while they are in transit or the loss is caused byfire, theft, or other casualty or force majeure, the officer accountable therefore or having custodythereof shall immediately notify the Commission or the auditor concerned and, within 30 days or suchlonger period as the Commission or auditor may in the particular case allow, shall present his

application for relief, with the available supporting evidence. Whenever warranted by the evidence,credit for the loss shall be allowed. An officer who fails to comply with this requirement shall not berelieved of liability or allowed credit for any loss in the settlement of his accounts.(Sec. 73, PD.1445).

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Fundamental Principles for Disbursement of Public Funds. Section 4 of P.D. No. 1445, the

Government Auditing Code of the Philippines, provides that all financial transactions and operations ofany government entity shall be governed by the following fundamental principles:

a.. No money shall be paid out of any public treasury or depository except in pursuance of an appropriationlaw or other specific statutory authority.

b. Government funds or property shall be spent or used solely for public purposes. c. Trust funds shall be available and may be spent only for the specific purpose for which the trust was

created or the funds received.d. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the

financial affairs, transactions, and operations of the government agency.e. Disbursement or disposition of government funds or property shall invariably bear the approval of the

proper officials. f. Claims against government funds shall be supported with complete documentation. g. All laws and regulations applicable to financial transactions shall be faithfully adhered to. h. Generally accepted principles and practices of accounting as well as of sound management and fiscal

administration shall be observed, provided that they do not contravene existing laws and regulations.

Basic Government Accounting and Budget Reporting Principles. Each entity shall recognize and

present its financial transactions and operations conformably to the following:

a. generally accepted government accounting principles in accordance with the PPSAS and pertinent laws,rules and regulations;

b. accrual basis of accounting in accordance with the PPSAS; c. budget basis for presentation of budget information in the financial statements (FSs) in accordance with

PPSAS 24; d. RCA prescribed by COA; e. double entry bookkeeping; f. financial statements based on accounting and budgetary records; and g. fund cluster accounting

ACCOUNTING FOR DISBURSEMENTS AND RELATED TRANSACTIONS

Disbursements covers the rules and regulations to be followed in the disbursement of public funds,

the monitoring of receipt and utilization of NCA/NTA, preparation and processing of DV/Payroll;

preparation and issue of checks; payment by cash; granting, utilization and liquidation/replenishment of

cash advances; payment through ADA; remittance of taxes withheld through TRA; availment of

foreign loans through suppliers credit/constructive cash; and payment of operating requirements on

FSPs through CDC.

Most of the transactions in the government involve the receipt and disbursement of cash. Thecash transactions affect every classification within the financial statements – assets, liabilities, equity,

income and expenses .by check. Thus it is essential that cash transactions are recorded correctly for

reliability in the financial statements. .

.

How to Distinguish Disbursement from Expenditures?

Expenditures are the obligations incurred by the Agency. It includes both the amount actually

paid and those incurred and recorded as liabilities to be paid in the future. While Disbursements are

payments made for such government obligations by cash or check.

Typical transactions for disbursements include the following major classes of payments:

A. Current Operating Expenses

1. Personal Services

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- Salaries and wages

- Other Compensation

- Personnel benefits

- Other personnel benefits

2. Maintenance and Other Operating Expenses- travelling expenses

- training and scholarship program

- supplies and material expenses

- repairs, etc….

3. Financial Expenses

- bank charges

- commitment fees

- documentary stamps

- interest and other financial charges-

B..Capital Expenditures – these expenditures need allotment for CO. As opposed to the current

operating expenses, this involves investments and procurement of assets that is expected

to be used for a longer period of time.

C..Inter-agency fund transfers - this covers the transfer of funds to other agencies for the

implementation of specific projects. This is taken up in the books under “Due to –“ by

the receiving agency and “Due from – “ by the releasing agency.

Basic Requirements for Disbursements and the Required Certifications. Disbursements of government funds shall comply with the following basic requirements and

certifications:

1…Availability of allotment/budget for obligation/utilization certified by the Budget

Officer/Head of Budget Unit;

2..Obligations/Utilizations properly charged against available allotment/budget by the Chief

Accountant/Head of accounting Unit;

3..Availability of funds certified by the Chief Accountant. The Head of the Accounting Unit

shall certify the availability of funds before an Agency Head or his duly authorized

representative enter into any contract that involves the expenditure of public funds based

on the copy of budget release documents;

4..Availability of cash certified by the Chief Accountant. The Head of the Accounting Unit shall

certify the availability of cash and completeness of the supporting documents in the

disbursement voucher and payroll based on the Registry of Allotments and Notice of Cash

Allocation/Registry of Allotment and Notice of Transfer of Allocation;

5..Legality of the transactions and conformity with existing rules and regulations. The requesting

and approving officials shall ensure that the disbursements of government funds are legal and

in conformity with applicable rules and regulations;

6..Submission of proper evidence to establish validity of the claim. The Head of the Requesting

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Unit shall certify on the necessity and legality of charges to allotments under his/her

supervision as well as the validity, propriety and legality of supporting documents. All

payments of government obligations and payables shall be covered by Disbursement Vouchers

(DV)/Payrolls together with the original copy of the supporting documents which will serve as

basis in the evaluation of authenticity and authority of the claim. It should be cleared, however,

that the submission of the supporting documents does not preclude reasonable questions on thefunding, legality, regularity, necessity and/or economy of the expenditures or transactions; and

7.. Approval of the disbursement by the Head of Agency or by his duly authorized representative.

Disbursement or disposition of government funds or property shall invariably bear the approval

of the proper officials. The DVs/Payrolls shall be signed and approved by the head of the

agencies or his duly authorized representatives.

The agency received Notice of Cash Allocation for payment of its obligations. It maybe either for

payment of prior year’s or current year, the same is recorded as:

Cash – MDS, Regular 10104040 XXXX

Subsidy from NG 40301010 XXXX

Certification of Availability of Funds.

No funds shall be disbursed, and no expenditures or obligations chargeable against any

authorized allotment shall be incurred or authorized in any department, office or agency without first

securing the certification of its Chief Accountant or head of accounting unit as to the availability of

funds and the allotment to which the expenditure or obligation may be properly charged.

No obligation shall be certified to accounts payable unless the obligation is founded on a valid

claim that is properly supported by sufficient evidence and unless there is proper authority for its

incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be

considered void. The certifying official shall be dismissed from the service, without prejudice to

criminal prosecution under the provisions of the Revised Penal Code.

Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the governmentfor the full amount so paid or received. ( Book VI, Section 41 of EO No. 292)

Prohibition against the Incurrence of Overdraft.

Heads of departments, bureaus, offices and agencies shall not incur nor authorize the incurrence

of expenditures or obligations in excess of allotments released by the DBM Secretary for their respective

departments, offices and agencies. Parties responsible for the incurrence of overdrafts shall be held

personally liable therefore. ( Book VI, Chapter 5, Section 41 of EO No. 292)

Classification of Expenditures.

Expenditures of NGAs shall be classified into categories as may be determined by the DBM

including, but not limited to the following:

a. Entity incurring the obligation;

b. Program, Activity and Project (PAP);

c. Object of expenditures, including personnel services (PS), maintenance and other operating

expenditures (MOOE), financial expenses (FE), and capital outlays (CO);

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d. Region or locality of use;

e. Economic or functional classification of the expenditures;

f. Obligational authority and cash transactions arising from fund releases; and

g. Such other classifications as may be necessary for the budget process.

Disbursement Authority –

the following documents authorize the entity to pay obligations and payables:

1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central, regional and

provincial offices and operating units to cover the cash requirements of the agencies;

2. Non-Cash Availment Authority (NCAA) – authority issued by the DBM to agencies to cover the

liquidation of their actual obligations incurred against available allotments for availment of

proceeds from loans/grants through supplier’s credit/constructive cash;

3. Cash Disbursement Ceiling (CDC) – authority issued by DBM to the Department of Foreign

Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their incomecollected/retained by their Foreign Service Posts (FSPs) to cover their operating requirements,

but not to exceed the released allotment to the said post; and

4. Notice of Transfer of Allocation – authority issued by the Central Office to its regional and

operating units to cover the latter’s cash requirements.

Obligation Request and Status.

The incurrence of obligations shall be made through the issuance of Obligation Request and

Status (ORS) ( Appendix 11). The ORS shall be prepared by the Requesting/Originating Office supported

by valid claim documents like DVs, payrolls, purchase/job orders, itinerary of travel, etc. The Head ofthe Requesting or Originating Office or his/her authorized representative shall certify in the Section A of

the ORS as to the necessity and legality of charges to the budget under his/her supervision, and validity,

propriety and legality of SDs. The Head of the Budget Division/Unit shall certify to the availability of

allotment and such is duly obligated by signing in Section B of the ORS.

Subsidiary Record for Obligation.

A subsidiary record to monitor a particular obligation shall be maintained by the Budget

Division/Unit in Section C of the ORS. It shall contain the original amount of obligation, payable (goods

delivered and services rendered) and the actual amount paid.

Adjustment of Obligation.

Adjustment of obligation incurred after the processing of the claim by the Accounting Division

or Unit shall be made through the use of Notice of Obligation Request and Status Adjustment (NORSA).

The adjustment shall be effected through a positive entry (if additional obligation is necessary) or a

negative entry (if reduction is necessary) in the ‘Obligation’ column of the ORS and RAOD.

Notice of Obligation Request and Status Adjustment.

The NORSA shall be prepared by the Accounting Division/Unit after the processing of the claim

which shall be used in adjusting the original amount obligated to the actual obligations incurred in the

RAOD. It shall be forwarded by the Accounting Division/Unit to the Budget Division/Unit to take up

the adjustments of obligation in the RAOD. The following transactions shall also need adjustments of

obligations:

Transactions Supporting Documents

a. Refund of cash advance granted during the year Certified copies of official receipts and other SDs

b. Over/Underpayment of expenditures Certified copies of official receipts and bills

during the year and other SDs

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c..Disallowances pertaining to expenses incurred Certified copies of official receipts and bills,

during the validity period notice of the budget that the disallowances became final and executory during the same

period.

Modes of disbursement in the government :

1. by check – thru MDS checks or commercial checks

2. Treasury single account (TSA)

3. by cash – cash advances granted to disbursing officer and petty cash fund.

4. Advices to Debit account (ADA)

5. Non-Cash Availment Authority (NCAA)

Disbursement by Checks – Checks shall be drawn only on duly approved DV or PCV. These shall be reported and recorded in the books of accounts only when actually released to the respective payees.

Two types of checks are being issued by government agencies:

1. Modified Disbursement System (MDS) checks – issued by government agencies chargeable

against the account of the Treasurer of the Phil which are maintained with different MDS

Governemnt Servicing Banks. These are covered by Notice of Cash Allocation, an authorization

issued by the DBM to all government agencies to withdraw cash from the National Treasury

through the issuance of MDS checks or other authorized mode of disbursements.

2. Commercial checks – issued by government agencies chargeable against the agency checking

account with GSBs. These are covered by income/receipts authorized for deposits with AGDBsand funding checks received by RO/OUs from CO/ROs respectively.

Accounting Books, Records, Forms and Reports to be Prepared and Maintained .

All checks drawn during the day, whether released or unreleased including cancelled checks shall

be recorded chronologically in the Checks and ADA Disbursements Record (CkADADRec) maintained

by the Cash/Treasury Unit. The dates the checks were actually released shall be indicated in the

appropriate column provided for in the CkADADRec. All checks/ADA drawn whether released or

unreleased shall be included in the Report of Checks Issued (RCI) or Report of ADA Issued (RADAI),

which shall be prepared daily by the Cashier.

The RCI/RADAI together with the original copies of the supporting documents (SDs) shall be

submitted to the Accounting Division/Unit for the preparation of JEV. At the end of the year, a Schedule

of Unreleased Commercial Checks shall be prepared by the Cashier for submission to the Accounting

Division/Unit for adjustments.

Disbursements by Cash.

Cash disbursements constitute payments out of cash advances granted to the regular and special

disbursing officers for personal services, petty expenses and MOOE for field operating requirements.

All cash payments shall be covered by duly approved DVs/payrolls/petty cash vouchers (PCVs).

The cash advances may be granted to the cashiers/disbursing officers/officials and employees to cover

the following: salaries and wages, travels, special time-bound undertakings and petty operating

expenses. The granting and liquidation of cash advances shall be governed by the following existing

COA rules and regulations and other pertinent issuances:

a. No cash advance shall be given unless for a legally authorized specific purpose;

b. A cash advance shall be reported on and liquidated as soon as the purpose for which it was given

has been served;

c..No additional cash advance shall be allowed to any official or employee unless the previous cash

advance given to him/her is first settled/liquidated or a proper accounting thereof is made;

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d..Except for cash advance for official travel, no officer or employee shall be granted cash advance

unless he/she is properly bonded in accordance with existing laws or regulations. The amount of

cash advance which may be granted shall not exceed the maximum cash accountability covered

by his/her bond;

e..Only permanently appointed officials shall be designated as disbursing officers;

f. Only duly appointed or designated disbursing officer may perform disbursing functions. Officers

and employees who are given cash advances for official travel need not be designated as

Disbursing Officers;

g. Transfer of cash advance from one accountable officer to another shall not be allowed; and

h. The cash advance shall be used solely for specific legal purpose for which it was granted. Under

no circumstance shall it be used for encashment of checks or for liquidation of a previous cashadvance.

The specific rules and regulations on the granting, utilization and liquidation of cash advances are

provided for under COA Circular No. 97-002 dated February 10, 1997, as amended by COA Circular

No. 2006-005 dated July 13, 2006.

Cash Advance for Payroll.

Advances for Payroll shall be granted to Regular Disbursing Officers for payment of salaries,

wages, honoraria, allowances and other personnel benefits of officials and employees. The Advances for

Payroll shall not be used for encashment of checks or for liquidation of previous or other types of cash

advances. It shall be equal to the net amount of the processed payroll corresponding to the pay period.

Liquidation of the advances shall be made within five (5) days after the end of the pay period. Any

unclaimed salaries/allowances shall be refunded and issued official receipt to close the account.

Accounting Books, Records, Forms and Reports to be Prepared and Maintained.

The Disbursing Officer shall maintain the Cash Disbursements Record (CDRec) to monitor the

cash advances/payroll, current operating expenses, and special purpose/time-bound undertakings and

prepare the Report of Cash Disbursements (RCDisb) to report its utilization. Payments shall be based

on duly approved Payroll and shall be posted by the Designated Staff to the IP. The JEV shall be

prepared based on the RD and shall be recorded in the CDJ.

Illustrative Accounting Entries for Granting and Liquidation of Advances for Payroll and the Set-up ofSalary Deductions and Due to Officers and Employees Account Title Account Code Debit Credit1. Set-up of Due to Officers and Employees and Salary Deductions Assumptions: Salaries and Wages P35,000 PERA 15,000 Total 50,000 Less: Salary Deductions Withholding Tax 5,000 Life and Retirement Premiums 3,000

Pag-IBIG premiums 500 PhilHealth premiums 600 GSIS Salary loan 200 Employees' Association 100 9,400 Net Amount P40,600

=======

Salaries and Wages-Regular 50101010 P 35,000 PERA 50102010 15,000 Due to BIR 20201010 P 5,000 Due to GSIS 20201020 3,200 01 Life and Retirement

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Premiums 3,000

02 Salary Loan 200

Due to Pag-IBIG 20201030 500 Due to PhilHealth 20201040 600 Other Payables 29999990 100 Due to Officers and Employees 20101020 40,600 To recognize payable to Officers and employees and to set up salary deductions

2. Granting of Advances for Payroll Advances for Payroll 19901020 P 40,600 Cash-MDS, Regular 10104040 P 40,600 To record grant of advances to cover payment of salaries and wages Of employees

3. Liquidation of Payroll Fund

Due to Officers and Employees 20101020 P 40,600 Advances for Payroll 19901020 P 40,600 To recognize liquidation of Advances for Payroll based on the RCDisb and SDs

Cash Advances for Operating Expenses of Government Units without Complete Set of Books of Accounts.Field/Extension/Satellite Offices are some of the government units under the central/regional/district

offices without complete set of books of accounts. Those offices may be granted cash advances covering twomonths requirements for MOOE/authorized expenses to finance their operations. The cash advance shall begranted to the duly designated or appointed Disbursing Officers.

Illustrative Accounting Entries to be recorded in the Central/Regional/Division Office or OU Books forAdvances for MOOE/Authorized Expenses Granted to Government Units without Complete Set of Booksof Account Account Title Account Code Debit CreditCentral/Regional/Division Office or OU Books Assumptions: Estimated Expenses for 2 months requirements: Office Supplies Expenses P 10,000 Traveling Expenses 15,000 Water Expenses 8,000 Telephone Expenses 5,000 Electricity Expenses 12,000 Total P50,000 ======

Advances for Operating Expenses 19901010 P50,000

Cash-MDS, Regular 10104040 P50,000 To recognize granting of cash advance

to field units without books of accounts

Office Supplies Expenses 50203010 P 10,000 Traveling Expenses-Local 50201010 15,000 Water Expenses 50204010 8,000 Electricity Expenses 50204020 5,000 Telephone Expenses 50205020 12,000 Advances for Operating Expenses 19901010 P 50,000 To recognize liquidation of cash advance upon receipt of the certified copies of CDReg

with paid DVs and other supporting documents

from field/extension/ satellite offices/operating units

Cash Advances for Travel.

Section 2 of Executive Order (EO) No. 248 dated May 29, 1995, as amended by EO No. 248A

and EO No. 298 dated August 14, 1995 and March 23, 2004, respectively, provide that travels shall

cover only those that are urgent and extremely necessary, will involve the minimum expenditure and are

beneficial to the agency concerned and/or the country.

a. No government fund shall be utilized to defray foreign travel expenses of any government

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official or employee, except in the case of training, seminar or conference abroad when the

officials or other personnel of the foreign mission cannot effectively represent the country

therein, and travels necessitated by international commitments; provided that no official or

employee, including uniformed personnel of the Department of the Interior and Local

Government (DILG) and Department of National Defense (DND) will be sent to foreign training,

conferences or attend international commitments when they are due to retire within one year

after the said foreign travel [Section 16(c) of Fiscal Year (FY) 2012 GAA or pertinent provisions

of the GAA for the Year]. Under Memorandum Circular No. 52 dated October 2, 2003 of the

Office of the President, the grant of clothing allowance in all categories of trips is suspended

indefinitely.

b. Officials and employees authorized to travel shall be granted cash advance to cover travelingexpenses. The amount to be granted shall be accounted as “Advances to Officers and

Employees”. No additional cash advance shall be granted to any official or employee unless the

previous cash advance given to him/her for travel is first liquidated and accounted for in the

books. For local travel, liquidation shall be done within a period of 30 days upon return to the

personnel’s workstation. On the other hand, cash advance for foreign travel shall be liquidated

within 60 days upon return to the Philippines. The Liquidation Report (LR) shall be prepared by

the officers/employees concerned and submitted to the Accounting Division/Unit with

appropriate SDs as basis for JEV preparation. The excess cash advance shall be refunded and an

OR shall be issued to acknowledge receipt thereof. In case the amount of cash advance is less

than the travel expenses incurred, the LR shall be submitted to liquidate the cash advance previously granted and a DV shall be prepared to claim reimbursement of the deficiency in

amount.

Accounting Books, Records, Forms and Reports to be Prepared and Maintained.

The officers/employees who made the travel shall prepare the LR which shall be the basis for the

preparation of the JEV. The Accounting Division/Unit shall record the JEV in the GJ and maintain

SL/IP for officers and employees where the granting and liquidation of travel allowances shall be

posted for monitoring purposes

Illustrative Accounting Entries for the Granting and Liquidation of Advances to Officers and

Employees Covering Official Travel

Account Title Account Code Debit Credit

Advances to Officers and Employees 19901040 P2,000

Cash-M DS, Regular 10104040 P2,000

To recognize granting of cash advance for local travel

to officers and employees based on duly approved

and paid DV, Authority to Travel and IT

Traveling Expenses-Local 50201010 P 2,000

Advances to Officers and Employees 19901040 P 2,000

To recognize liquidation of cash advance for local

travel upon receipt of LR and supporting documents


Training Expenses 50202010 80,000

Cash-MDS, Regular 10104040 P 280,000

To recognize granting of cash advance for training abroad

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Traveling Expenses-Foreign 50201020 P 200,000


To recognize liquidation of cash advance for training

abroad upon receipt of LR and supporting documents.

The Report of Disbursement shall serve as the liquidation report of the cash advance granted tothe Disbursing Officer.

Petty Cash Fund(PCF) -

Another mode of disbursement and the fund shall be sufficient for emergency and petty expensesof the agency. As such, all replenishment shall be directly charged to the appropriate expense

accounts and at all times, the PCF shall be equal to the total cash on hand and the unreplenished

expenses.

The PCF shall not be used to purchase regular inventory items for stock nor for the liquidation of

outstanding cash advances. It shall be used only for disbursements which cannot be conveniently

paid by check.

Disbursement through Petty Cash Fund

Shall be through the PC Voucher which shall be approved by authorized officials and signed bythe payee to acknowledge receipt of the amount from the PCCustodian. A DV shall be prepared to

replenish the fund.

At the end of the year, the PCC shall submit to the Accounting unit all outstanding PCVs. In

case the fund could not be replenished for lack of funds, a JEV shall be prepared to recognize all

unreplenished expenses in the books and the PCF account shall be credited. At the start of the year,

as soon as cash becomes available, the fund shall be replenished by a debit to account “Petty Cash

Fund” and credit to the appropriate “Cash in Bank” account to restore the fund to its original

amount.

In case the PCC resigns or ceases as the custodian of the fund, full accounting/liquidation shall

be made. Any excess cash shall be refunded and all the PCVs together with the original supporting

documents shall be surrendered to the Accounting Unit which shall prepare a JEV to take up the

expenses in the books and credit account “Petty Cash Fund”. In no case shall the remaining cash of

the former custodian be transferred to the incoming PCC.

The Petty Cash Fund record shall be used to record all the PCs received by the PCC as well as

reimbursements received for expenses paid. All PCV shall be supported with valid documents to prove

the propriety of disbursements, such as ORs, invoices, etc.

Illustrative Accounting Entries for Disbursements Out of Petty Cash


Estimated Expenses:

Traveling Expenses P10,000

Office Supplies Expenses 8,000

Postage and Courier Expenses 5,000

Fuel, Oil and Lubricants Expenses 2,000

Other MOOE 5,000

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Total P 30,000

======

Petty Cash 10101020 P 30,000


To record the establishment of PCF.

Traveling Expense-Local 50201010 P 10,000

Office Supplies Expenses 50203010 8,000

Fuel, Oil and Lubricants 50203090 2,000

Postage and Courier Expenses 50205010 5,000

Other Maintenance and Operating Expenses 50299990 4,800


To record the replenishment of Petty Cash

based on the DV, RPPCVs and SDs

Cash-Collecting Officer 10101010 P 200

Petty Cash 10101020 P 200

To record return of unused PCF upon

retirement, resignation, separation and

termination of the Petty Cash Custodian

based on the OR

Assume the following are the unreplenished PCVs as at December 31:

Office Supplies P 300

Traveling Expenses-Local 400

P 700

=====

Traveling Expenses-Local 50201010 P 300

Office Supplies Expenses 50203010 400

Petty Cash 10101020 P 700

To record the unreplenished petty cash

at the end of the year.

Cash Advances for Petty Cash Fund of Government Units without Complete Set of Books of

Accounts.

Government Units without complete set of books of accounts may be granted cash advance

covering two months operating requirements for authorized petty and other miscellaneous expenses to

finance their operations. The cash advance shall be granted to the duly designated or appointed

Disbursing Officer

Accounting for Cash Shortage/Overage of Disbursing Officer.

Cash overage discovered by the Auditor that cannot be satisfactorily explained by the Disbursing

Officer shall be forfeited in favor of the government and an official receipt shall be issued by the

Collecting Officer or Cashier. The cash overage shall be taken up as Miscellaneous Income. Cash

shortage which is not restituted by the Disbursing Officer despite demand in writing by the Auditor shall

be taken up as receivable from the Disbursing Officer.

Illustrative Accounting Entries for Cash Overage/Shortage of Disbursing Officer

A. Cash Overage

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Cash-Collecting Officers 10101010 xxx

Miscellaneous Income 40609990 xxx

To recognize forfeiture of cash overageof the Disbursing Officer

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx

To recognize the remittance of forfeited

cash overage to the BTr

B.. Cash Shortage

Due from Officers and Employees 10305020 xxx

Advances for Operating Expenses/ 19901010/ Advances for Payroll/ 19901020/

Advances to Special Disbursing Officer 19901030 xxx

To recognize cash shortage of Disbursing Officer

Cash-Collecting Officers 10101010 xxx Due from Officers and Employees 10305020 xxx

To recognize restitution of cash shortage.



To recognize the remittance of restituted

cash shortage to the BTr

Accounting for Cancelled Checks.

Checks may be cancelled when they become stale, voided or spoiled. The depository bank

considers a check stale, if it has been outstanding for over six months from date of issue or as

prescribed.

A stale, voided or spoiled check shall be marked cancelled on its face and reported as follows:

a. Voided, spoiled or unclaimed stale checks with the Cashier shall be reported as cancelled in the

List of Unreleased Checks that will be attached to the RCI.

b. New checks may be issued for the replacement of stale/spoiled checks in the hands of the payees

or holders in due course, upon submission of the stale/spoiled checks to the Accounting

Division/Unit. A certified copy of the previously paid DVs shall be attached to the request for

replacement. A JEV shall be prepared to take up the cancellation. The replacement check shall

be reported in the RCI.

Illustrative Accounting Entries for Cancelled Checks

A. Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in the current year


Cash-MDS, Regular 10104040 xxx

Accounts Payable 20101010 xxx

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To recognize the cancellation of

stale/voided/spoiled MDS checks.



To recognize the replacement ofstale/voided/spoiled MDS checks.

Cash- MDS, Regular 10104040 xxx

Appropriate Account xxxxxxxx xxx


stale/voided/spoiled MDS checks

without Replacement

B. Cancellation and Replacement of Stale/Voided/Spoiled MDS check issued in the prior year

Accumulated Surplus/(Deficit) 30101010 xxx






To recognize the replacement of






without replacement

C..Cancellation and Replacement of Stale/Voided/Spoiled commercial check issued in the current and

prior year

Cash in Bank-LCCA 10102020 xxx



stale/voided/spoiled commercial checks


Cash in Bank-LCCA 10102020 xxx

To recognize the replacement of

stale/voided/spoiled commercial checks




stale/voided/spoiled commercial checks without replacement.

Accounting for Disallowances.

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Disallowances shall be taken up in the books of accounts only when they become final and

executory. The Accountant shall prepare the JEV to take up the Receivable-Disallowances/Charges

and credit the appropriate account for the current year or Accumulated Surplus/(Deficit) account if

pertaining to expenses of previous years.

Cash settlement of disallowances shall be acknowledged through the issue of an official receipt and

reported by the Cashier in the RCD.

Illustrative Accounting Entries for Disallowances

A. Recording of disallowances for current year’s transaction

Assume that the entity incurred overpayment of Office Supplies:

Amount paid P 100,000

Should be 90,000

Difference P 10,000

Receivables-Disallowances/Charges 10305010 P10,000 Office Supplies Expense 50203010 P10,000 To recognize the overpayment of

purchased office supplies directly issued to end-user

Cash-Collecting Officers 10101010 P10,000 Receivables-Disallowances/Charges 10305010 P10,000 To recognize the settlement of disallowance.

Cash-Treasury/Agency Deposit, Regular 10104010 P10,000

Cash-Collecting Officers 10101010 P10,000 To recognize the deposit of collection

B. Recording of disallowance for prior year’s transaction

Receivables-Disallowances/Charges 10305010 P 10,000 Accumulated Surplus/(Deficit) 30101010 P 10,000

To recognize the overpayment ofoffice supplies purchased during the prior year

Cash-Collecting Officers 10101010 P 10,000 Receivables-Disallowances/Charges 10305010 P 10,000 To recognize the settlement of disallowance

Cash-Treasury/Agency Deposit, Regular 10104010 P 10 Cash-Collecting Officers 10101010 P 10

To recognize the deposit of collection

Accounting for Overpayments.

Sometimes overpayments or even double payment of expenditures do happen in agencies. These

could be avoided with the institution of proper controls but some could not be avoided because of built-

in procedures. One example is the payment of payrolls. Payrolls are prepared in advance and some

agencies pay their employees through the banking system. All these are done before reports of

attendance are submitted, making it impossible to know the exact amount to be paid in case there are

absences without pay during the pay periods. In case of overpayments, refunds shall be demanded of the

employees concerned.

Illustrative Accounting Entries for Overpayments

A Overpayment taken up as receivable

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Salaries and Wages-Regular 50101010 xxx

To recognize overpayment of salaries

and wages (When overpayment is ascertained)



To recognize receipt of refund




B. Refund of overpayment not taken up as receivable


Salaries and Wages-Regular 50101010 xxx

To recognize receipt of refund of Salaries

and Wages-Regular during the current year




Cash-Collecting Officers 10101010 xxx Accumulated Surplus/(Deficit) 30101010 xxx

To recognize receipt of refund of

overpayment in the ensuing year




Advice to Debit Account (ADA) – This is a system by which no check is issued to the payee in

payment of government obligations, but instead, the current account number of the payee in the bank

where the government maintains a deposit, shall be obtained by the accounting unit. If payment is to

be made, the ADA shall be issued by the Accounting Unit of the agency to the bank where it

maintains an account. All payments shall be made to the credit of the payee’s account and a debit to

the account maintained by the government agency in the same bank. A JEV shall be prepared to

record the transaction in the GJ.

Property and Inventory accounting System - consists of the system of monitoring, controlling

and recording of acquisition and disposal of property and inventory.

The system starts with the receipt of the purchases inventory items and equipment. The

requesting office need of the inventory items and equipment after determining that the items are not

available in stock shall prepare and cause the approval of the Purchase Request (PR). Based on the

approved PR and after accomplishing all the required procedures adopting a particular mode of

procurement, the agency shall issue a duly approved Purchase Order. Procedures relative to the

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obligation of the purchase order and payment of the deliveries follow the procedures in the

obligation accounting system and disbursement system.

The sub-system are as follows:

1. Receipt, Inspection, Acceptance and Recording Deliveries of Inventory Items and

Equipment,2. Requisition and Issuance of Inventory Items

3. Requisition and Issuance of Equipment

Perpetual Inventory Method – purchase of supplies and materials for stock regardless of

whether or not they are consumed within the accounting period, shall be recorded as Inventory

account. Under the perpetual inventory method, an inventory control account is maintained in the

General Ledger on a current basis.

Regular purchases shall be recorded under the Inventory account and issuance thereof shall be

recorded based on the Report of Supplies and Materials Issued. Purchases out of Petty Cash Fundshall be charged immediately to the appropriate expense accounts.

The accounting Unit shall maintain perpetual inventory records, such as the Supplies Ledger

Cards for each inventory stock, Property, Plant and Equipment Ledger Cards for each category of

plant, property and equipment including work and other animals, livestock, etc. The subsidiary

ledger cards shall contain the details of the General Ledger accounts.

For check and balance, the Property and Supply Officer/Unit shall maintain Property Cards (PC)

for property, plant and equipment, and Stock Cards (SC) and for inventories. The balance in

quantity per PC and SC should always reconcile with the ledger cards of the Accounting Unit.

The Moving Average Method of costing shall be used for costing inventories. This is a method

of calculating cost of inventory on the basis of weighted average on the date of issue. The

Accounting Unit shall be responsible in computing the cost of inventory on a regular basis.

Property, Plant and Equipment and Inventory Accounts acquired through purchase shall

include all costs incurred to bring them to the location necessary for their intended use, like

transportation cost, freight charges, installation costs, etc. These are recorded in the books of

accounts as Asset after inspection and acceptance of delivery.

During the construction period , property, plant and equipment shall be classified and recorded

as “Construction in Progress” with the appropriate asset classification. As soon as these are

completed, the “Construction in Progress” account shall be transferred to the appropriate asset

accounts.

ILLUSTRATIVE JOURNAL ENTRIES FROM SAMPLED TRANSACTION

A. NEDA paid the salaries of their employees. The following are the information taken from the

June’15 payroll, salaries and wages and its mandatory deduction.

a) Salaries and wages – regular P 485,000

b) PERA 30,000

c) Withholding taxes 32,000

d) Retirement and Life (GSIS) 40,000

e) Pag-ibig premium 28,700

f) PhilHealth premium 12,000

The agency paid their counterpart of the mandatory deductions. The agency contributed P 1,500

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for ECC. Withholding taxes were remitted to BIR 2 weeks after end of the month.

Journalize the above transaction:

1. Obligate the P515,000 salaries and wages for the month of June, 2015 and posted in the

Registry of Allotment, Obligation and Disbursement in the obligation column of PS.

2. To record the expenses and establish the liabilities

50101010 Salaries and wages – regular 485,000

50102020 PERA 30,000

20201010 Due to BIR 32,000

20201020 Due to GSIS 40,000

20201030 Due to Pag-ibig 28,700

20201040 Due to PhilHealth 12,000

20101020 Due to Officers and Employees 402,300

3. To record check issuance for ATM employee’s accounts.

20101020 Due to Officers and Employees 402,300

10104040 Cash-MDS-Regular 402,300

4. To record remittance of mandatory deductions.

20201010 Due to GSIS 40,000

20201030 Due to Pag-ibig 28,700

20201040 Due to PhilHealth 12,000

10104040 Cash- MDS, Regular 80,700

5. To obligate the government counterpart of the mandatory deductions, P92,200, recording

in the obligation column of the Registry.

6. To record payment and remittance of the corresponding counterpart.

50103040 ECC Insurance Premiums 1,500

50103010 Ret. And Life Insurance Premium 50,000

50103020 Pag-ibig Contributions 28,700

50103030 PhilHealth Contribution 12,000

10104040 Cash – MDS, Regular 92,200

7. To record remittance to the BIR supported with the approved TRA from DBM.

20201010 Due to BIR 32,000

40301010 Subsidy from National Government 32,000

B. The Regional Director of NEDA 7 was directed to attend and Executive Committee Conference

in Manila NEDA Central Office. The travel was for 3 days but it was cut short due to an

emergency meeting at the regional office with the RDC 7. An itinerary of travel was prepared

showing the following information:

Transportation expenses (1st

and last day) and other incidental

Expenses during the duration of the travel period. . . . . . . . . . . . P 1,600

Per diem (1,200 x 3 days) . . . . . . . . . . . . . . . . . . . . . . 3,600

Plane fare . . . . . . . . . . . . . . . . . . . 5,000

An amended itinerary was made and showed a reduction of the

Per diem equivalent to . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 1,500

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Journalize the following travelling expenses transactions:

1. Obligate and post P10,200 to the obligation column of the registry for MOOE.

2. To grant cash advance for the travel. 19901040 Advances to Officers and Employees 10,200

10104040 Cash – MDS , Regular 10,200

3. To recognize the actual travelling expenses and record liquidation of the

Cash advance.

50201010 Travelling expenses – local 8,700

19901040 Advances to Officers and Employees 8,700

4. To record the refunded amount made upon return from travel.

10101010 Cash – collecting officer 1,500

19901040 Advances to Officers and Employees 1,500

5. To remit the refunded amount to the national treasury.

40301010 Cash – treasury/Agency Deposit, Regular 1,500

10101010 Cash – collecting officer 1,500

6. To adjust the obligation by posting a negative entry of P1,500 in the obligation Columnof the Registry. The obligation was 10,200 for travelling expenses but the actual travelling

expenses was only 8,700.

7. For additional claim of travelling expenses maybe due to an extended official stay,

request for an obligation for the equivalent amount of the extended stay and it has to be

processed in the accounting office for payment/reimbursement. It has to be an official

travel duly supported with proper documentation.

If the travel is not fully supported, the auditor will disallow the claim upon post-audit of

said transaction.

C. Petty Cash Fund – P10,000 was maintained by the agency under the imprest system. As of

December 31, 2014, the used petty cash supported with receipts amounting to P8,200 remained

unreplenished. The receipted use of PC consisted of the following expenses:

Office supplies expense 4,000

Repairs and maintenance – OE 3,200

Other General Services 1,000

Record the transaction: 1) Granting of cash advance

2) Replenishment/liquidation of the expenses at the end of the

Accounting period.

3) Journal entry to be prepared at the beginning of the following year

considering the availability of funds, in order to return back

the balance of the PCF.

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1. To obligate the PCF to be established amounting to P10,000 to be posted in the

obligation column of MOOE in the Registry of Allotment, Obligation and Disbursement.

2. Granting of PCF

10101020 Petty Cash 10,000


3. To record the unreplenished expenses and partially closing the equivalent petty cash

account.

50203010 Office supplies expenses 4,000

50213050 Repairs and Maintenance-Office Equipt 3,200

50212990 Other General Services 1,000

10101020 Petty Cash 8,200 ( not obligated because the original PC was already obligated)

4. Obligate the PC of P8,200 the following year to return the original petty cash of P10,00.

10101020 Petty Cash 8,200


E, The agency process their 6 months requisition of office supplies amounting to P500,000. The

purchase was made to the Procurement Service of DBM, hence, no bidding was conducted, while

P150,000 purchase of equipment (2 air-conditioning units) was made to outside supplier or to SM

Appliance Center considering the lowest bid offer and no available stock in the ProcurementService Office.. There is enough allotment balance in obligating the purchase. A week after the

delivery, P220,000 of office supplies were used in operation and recorded by the accountant

supported by MRSMI.

Purchase (Procurement Service)

1. Obligate P500,000 and post under the obligation column in the registry for MOOE.

2. To record advance payment of the purchase to the Procurement Service Office.

10303010 Due from NGAs 500,000

10104040 Cash – MDS, Regular 500,000

3. To record acceptance of the delivery of office supplies.

10404010 Office supplies inventory 500,000

10303010 Due from NGAs 500,000

4. To record issues of office supplies to different requisitioner as per report.

50203010 Office supplies expense 220,000

10404010 Office supplies inventory 220,000

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(Purchase ( Other Supplier)

1. After the conduct of bidding/canvass, the purchase will be awarded to the lowest bidder/

supplier after a demo is being conducted and a Purchase Order is being prepared to be

signed by both the agency and supplier.

2. Upon delivery of the equipment, obligate the amount, P150,000, for the purchase of

equipment to an outside supplier supported by the PO and posted to the registry under the

obligation column for MOOE.

3. To record the delivery and acceptance of the delivered equipment.

10605020 Office Equipment P150,000

20201010 Due to BIR 6,250

20101010 Accounts Payable 143,750

4. To record payment of office equipment


10104040 Cash – MDS, Regular 143,750

5. To record remittance to BIR supported with approved TRA.

20201010 Due to BIR 6,250


( If the purchase was charged to a trust account and not come from an NCA when paid,

No obligation is necessary and payment shall be charged to the cash in bank- lcca account)

F. . The agency received their bills of the following:

PLDT P 12,000

Water 5,000

Electricity 18,000

Rental (1 yr, 6/1/14-5/31/15) 24,000

Payment was made a month after it was processed.

Record the transaction.

1. Obligate the billed accounts and post under the obligation column of MOOE.

2. Record the bills

19902020 Prepaid rent 24,000

50205020 Telephone expenses 12,000

50204010 Water expense 5,000

50204020 Electricity exp 18,000


3. To record the payment of the above bills.


20201010 Due to BIR 3,235

10104040 Cash – MDS, Reg 55,765

4. To record remittance to BIR supported with approved TRA.

20201010 Due to BIR 3,235


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G. The agency wanted to expand its building. The project was included in the approved budget amounting to P7,500,000. It was awarded to a financially capable contractor and made to start

in May 15, 2014 to be finished four months after. However, constant rain caused the delay

in the completion, which made the agency charged a liquidating damages totalling P 55,000.

There were deficiencies noted during the inspe