Accounting System 2

Accounting System
Government
Accounting for
Budgetary
Accounts
Section 29 Article VI of the 1987
Constitution
• “No money shall be paid out of the
treasury except in pursuance of an
appropriation by Law”
Accordingly, it may be said that accounting
for budgetary accounts formally commences
upon enactment of the General Appropriations
Act (GAA), which is the legal authorization to use
public money for various programs.
Department of Budget and Management-
Issues allotments or authority of
government agencies to incur obligations or
enter into commitments to spend government
Performance Informed Budgeting
It is an approach in deciding where the funds

will go.
Deciding factors include:
1.Purpose of funds
2.Outputs to produce
3.Outcomes to be achieved by the outputs
4.Cost of Programs
Kinds of Budget
1. As to Nature
a) Annual- Covers a period of one year
b) Supplemental- Adjusts a previous Budget which is
deemed inadequate
c) Special- Amounts not included in the
Appropriation Act
2. As to Basis
a) Performance Budget- Budget emphasizing the
program or services conducted
ex. Nature and services served
b) Line- Item Budget- Based on objects of
expenditures
ex. Wages, traveling expenses etc.
3. As to Approach and Technique
a) Zero based- It requires a systematic consideration
Four Phases of Budgeting
1. Budget Preparation
Covers estimation of government
revenues. It begins with “ Budget Call”
by the DBM issued every December
and submission to the President is a
day after SONA.
Government agencies DBM
President
• 2. Budget Legislation
It begins with the receipt of the
President’s budget by the House
speaker and ends with the enactment of
the General Appropriations Act.
Once the General Appropriations
bill os submitted to the president for
his approval it is considered enrolled.
3. Budget Execution and Operation
Serves as a medium through which
plans for operations can be implemented
using available resources and funds.
It includes authorizations of an
agency to enter into an obligations. As
Provided by the General Accounting
Manual the new obligational authority
includes the release of the following
documents:
A.General Appropriation Act Release
Document (GAARD)
B.Special Allotment Release Order
4. Budget Accountability
This phase includes monitoring the
efficiency of fund utilization, assessing
agency performance and providing a
vital basis for reforms.
Each agency prepares Budget
Execution Documents (BED) and Budget
and financial accountability reports
(BFAR) to be submitted to DBM.
An annual Budget performance
Assessment review (BPAR) is conducted
every year end to be presented to the
Accounting for
Disbursements
Recording of Receipt and
Utilization of NCAs/NTAs
Receives copy of the

GAARD, SARO, and
Accounting
GARO, and posts the
Division/Unit allotment in the
Designated
Staff ‘Allotment Received’
column of the
RANCA/RANTA.
Receives copy of
NCA/NTA from
DBM/Agency’s Central
Receiving/
Office and records in
Releasing the logbook. Forwards
Staff
NCA/NTA to the
Designated Staff for
recording in the
RANCA/RANTA
Records the receipt of

NCA/NTA in the
RANCA/ RANTA.
Designate
d
Records the amount
Personnel disbursed/utilized in the
RANCA/ RANTA based
on processed
DVs/Payroll.
Indicates the balance

of the Unutilized
Designate
d NCA/NTA and
Personnel Unfunded Allotment.
Accounting for disbursements
Payments and Obligations incurred by
the agency
1.Personal Services
2.Maintenance and other operating
expenses
3.Financial Expenses
4.Purchase and/or construction of fixed
assets
5.Miscellaneous transactions
Personal Services
Disbursing Officer
ATM
Individual Checks
ILLUSTRATION:
Salaries and wages ₱360
Additional compensation 100
Personnel Economic Relief Allowance 60
Gross 250
Less: Withholding tax ₱20
GSIS contribution 30
PAG-IBIG contribution 30
PHILHEALTH contribution 20 (100)
Net Payroll ₱420
Cash-disbursing Officers 420
Cash-National Treasury-MDS 420
To record the advances to the disbursing officer
Salaries and wages – Regular pay 360
Additional Compensation 100
PERA 60
Due to BIR 20
Due to GSIS 30
Due to PAG-IBIG 30
Due to PHILHEALTH 30
Cash-Disbursing Officers 420
To record the payment of salaries and wages
Life and retirement Insurance Contributions 30
PAG-IBIG Contributions 30
PHILHEALTH contributions 20
Due to GSIS 30
Due to PAG-IBIG 30
To record government share for employees LRIC,
PHILHEALTH, PAG-IBIG
Due to GSIS 60
Due to PAG-IBIG 60
To record the remittance of salary deductions and
government shares.
Maintenance and other Operating
Expenses
Asset Method
Perpetual Inventory Method
ILLUSTRATION
The government signed a contract for the rental of
office space with 3 months advance payment of ₱90
starting November.
Prepaid Rent ₱90

Cash-National Treasury-MDS ₱90
ILLUSTRATION
Disbursements for Office Supplies
1. Issued Purchase order for office supplies ₱60
The agency enters the obligation for in the RAOMO ₱60
2. Paid the PO less withholding tax of ₱5
Office supplies Inventory 60

Due to BIR 5
3. Withdrawal of office supplies for office use ₱40
Office supplies Expense 40

Office Supplies-Inventory 40
4. Remittance of withholding tax thru Tax Remittance

Advice
Due to BIR 5
Subsidy Income from National Government 5
ILLUSTRATION:
Petty cash
1. Set-up petty cash fund for miscellaneous expenses,
₱120
The agency enters the obligation for the petty cash fund in
the RAOMO, ₱120
2. Release of the cash advance to the disbursing officer.

Petty Cash Fund 120
Cash-National Treasury – MDS 120
3. Request for replenishment of the petty cash fund for the

following expenses.
Office Supplies ₱40
Transportation Fees 10
Repairs 20
FEDEX air cargo 15
TOTAL ₱95
4. Replenishment of the PCF

Office Supplies Expense 50
Traveling Expense 10
Office Equipment Maintenance 20
Other Expenses 15
5. At year-end the Agency record the liquidation of

expenses.
Office Supplies Expenses 80
Traveling Expense – local 20
Petty Cash Fund 100
6. The RAOMO is adjusted for the unused PCF.
Cash-Collecting Officer 20
Petty Cash Fund 20
Financial Expenses
Interest Expense
Bank Charges
ILLUSTRATION
Bank charges per bank statement, ₱5
Accounting Procedure:
1. The agency enters the obligation for bank charges in
RAOFE.
2. Record in the regular books as:
Bank Charges 5
Cash in Bank- Local Currency-Current Account 5
ILLUSTRATION
Interest expense upon receipt of the bill, ₱8
1. The receipt of the bill for interest is entered in the RAOFE.
2. Record in the regular books as:
Interest Expenses 8
Accounts Payable 8
3. Payment of interest expense

Accounts Payable 8
Purchase/Construction of Fixed Assets
Fixed asset accounts
Straight line method
Historical cost
Public Infrastructure
Construction in Progress
ILLUSTRATION
Case 1: Purchase of Office Equipment
1. Issued Purchase Order for the Office Equipment, ₱150
Enter the obligation of ₱150 in the RAOCO
2. Received the office equipment with the charge invoice.

Office Equipment 150
Accounts Payable 150
3. Paid the office equipment less withholding tax of ₱10.

Due to BIR 10
Case 2: Construction of Building by Contract

1. Signed the construction contract for the construction of
the building, ₱200
The obligation for the contract price is entered in the
RAOCO, ₱200
2. Paid 30% of the contract price, ₱60

Advances to Contractor 60
3. Received the first billing, 50% of the contract price, ₱100
Construction in progress – Agency Assets 100

Advances to Contractor 60
Accounts Payable 40
4. Paid the first billing less withholding tax of ₱8
Accounts Payable 40
Due to BIR 8
5. Received the second billing for the balance of the

contract price, 100% completed.
Construction in Progress – Agency Asset 100

6. Paid the second billing less withholding tax of ₱20

Due to BIR 20
7. To recognize the Building account and to close the

Construction in Progress account.
Buildings 200
Construction in Progress 200
8. To close Withholding Tax Payable account to Subsidy

Income from the NG.
Due to BIR 28
Subsidy Income from National Government 28
Case 3: Purchase of Land and Equipment
1. Signed contract to purchase land and building, ₱300
The obligation to pay ₱300 for the land and building is

entered in the RAOCO.
2. Assessed value of the land, ₱180
Land 180
Building 120
3. Paid the land and building less 10% withholding tax.

Accounts payable 300
Due to BIR 30
4. Remitted the withholding tax, which was included in the
NCA for the land and building.
Due to BIR 30
Miscellaneous transactions
Source agency
Implementing Agency
1. Agency ABC is to transfer cash of ₱400 to Agency XYZ

for a land beautification project.
Enters the obligation in RAOCO, ₱400
2. Cash is transferred to Agency XYZ

Due from NGA – Agency XYZ 400
3. Received report from Agency XYZ

Land Development 400
Due from NGA – Agency 400
Accounting for Income,
Collections and
Related Transactions
SOURCES OF INCOME
• Taxes
• Operating and service income
• Grants and donations
• Borrowings
• Miscellaneous receipts and collections
Without authority to use
• All revenues collected by the agency are to
be remitted to the National Treasury.
• National Government Books – book of
accounts
• To record collection of income taxes:
Cash – Collecting Officer xxx
Income taxes – Individuals
xxx
• To record remittance of collections to
Bureau of Treasury:
Income taxes – Individuals xxx
• To record receipt of excise tax payment
to Bureau of Customs:
Excise Tax on Articles xxx
• To record remittance to BTR thru bank:
Excise Tax on Articles xxx
Cash – Collecting Officer
xxx
• To record collection of motor vehicles
registration fees to Land Transportation
Office:
Registration Fees xxx
• To record remittance to BTR:
Registration Fees xxx
Cash – Collecting Officer
xxx
With authority to use
• For agency which are authorized to use
income collected for their operations,
the collection shall be recorded as
income in the Regular Agency (RA)
Books.
With authority to use
• Example: Service Fees
1.) Collection of Inspection fees:
Inspection Fees xxx
2.) Deposit of Collections in the bank:
Cash in Bank – LCCA* xxx
3.) Use of income collected to pay for overtime
services:
Overtime and Night Pay xxx
Cash in Bank – LCCA* xxx
*LCCA - Local Currency, Current Account
Trial Balance,
Financial Reports and
Statements
Trial Balance
• A listing of general ledger accounts with
their corresponding debit and credit
balances.
Purpose of Trial Balance

1. To prove the mathematical equality of
the debits and credits after posting.
2. To check the accuracy of the posting.
3. To uncover errors in journalizing and
posting.
4. To serve as basis for the presentation of
financial statements.
Types of Trial Balance
 Pre-closing Trial Balance

 Post-closing Trial Balance
Adjusting Journal Entries
 Accrued Items
Asset/Revenue Adjustments
Illustration: (Interest Income)
Interest Receivable xxx
Interest Income xxx
Liability/Expense Adjustments
Illustration: (Accrued salaries)
Salaries and Wages -Regular xxx
Due to officers and employees xxx
 Deferred Items
Asset/Expense Adjustments
Illustration: (Prepaid Expenses)
Rent/Lease Expense xxx
Prepaid Rent xxx
Liability/Revenue Adjustments
Illustration: (Unearned Revenue)
Other Deferred Credits xxx
Rent/Lease Income xxx
Other Adjustments
• Unused NCA
• Petty Cash Fund
• Unreleased Commercial Checks
• Allowance for Impairment Losses of
Asset Accounts
• Depreciation Expenses
• Other Adjustments
Reversion of Unused Notice of Cash
Allocation
• The entry for lapsed regular NCA and
those issued for the payment of
accounts payable/retirement
gratuity/terminal leave shall be: xxx
Subsidy from National Government
Cash-Modified Disbursement System (MDS), Regular xxx
• For unused NCA issued for the release
of performance/bidders/bail bonds,
which were deposited with the National
Treasury:
Cash – Treasury/Agency Deposit, Trust XXX
Cash-MDS, Trust XXX
Adjustments for Unreleased

Commercial Checks
The accounting
Cash entry
in Bank, Local Currency, for the
Current xxx
restoration of the unreleased check xxx
Accounts Payable to
the cash account shall be:
Allowance for Impairment Losses of
Asset Accounts
• Illustration:
Per aging of the accounts, the required
allowance is 20,000; while the beginning
balance for impairment loss is 15,000. No
ther transactions
Impairment transpired.
Loss- Loans & Recble xxx
Allowance for Impairment xxx
Closing Journal Entries
• Balance of all revenue accounts
• Balance of all expense accounts
• Balance of the Revenue and Expense
Summary
• Balance of all Cash-Treasury/Agency
Deposit, Regular
• Other Closing entries
Qualitative Characteristic of
Financial Reporting
a) Understandability
b) Relevance
c) Materiality
d) Timeliness
e) Reliability
f) Faithful Representation
g) Substance over Form
h) Neutrality
i) Prudence
j) Completeness
k) Comparability
Financial Statements
1. Statement of Financial Position
2. Statement of Financial Performance
3. Statement of Changes in Net Assets
Equity
4. Statement of Comparison of Budget
and Actual Amount
5. Statement of Cash Flows
6. Notes to Financial Statements
Statement of Financial Position
a. Condensed Statement of Financial
Position
Presents only the major sub-
classification of Statement of Financial
Position accounts in the Revised Chart
of Accounts
b. Detailed Statement of Financial
Position
Presents all Statement of Financial
Position accounts in the Revised Chart
Statement of Financial Performance
All items of revenue and expense
recognized in a period shall be included in
surplus or deficit unless a PPSAS requires
otherwise
• Items excluded from surplus or deficit for
the current period:
1. The connection of prior period errors
2. The effect of changes in accounting
policies
3. Gains or losses on remeasuring available-
for-sale financial assets
Statement of Changes in Net Assets Equity
a. Surplus or deficit for the period

b. Each item of revenue and expense for the
period that, as required by other
Standards, is recognized directly in net
assets/equity, and the total of these items
c. Total revenue and expenses for the
period
d. The effects of changes in accounting
policies and corrections of errors for each
component of net assets/equity disclosed
e. The balance of accumulated surpluses or
deficits at the beginning of the period
and at the reporting date, and the
Statement of Comparison of
Budget and Actual Amount
Differences
a. Basic Differences
b. Timing Differences
c. Entity Differences
Statement of Cash Flows
1. Cash flow from operating activities
2. Cash flow from investing activities
3. Cash flow from financing activities
4. Effect of foreign exchange rate
diffrences, if any.
5. Net increase (decrease) in cash during
the period
6. Non-cash investing and financing
activities
Notes to Financial Statements
a. A statement of compliance with
PPSASs
b. Summary of significant accounting
policies adopted and followed by the
reporting entity
c. Supporting information for items
presented on the face of financial
statements
d. Additional information required by
PPSAS that is not shown on the face of

Accounting System 2

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Accounting System 2

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Accounting System

It is an approach in deciding where the funds

Receives copy of the

Records the receipt of

Indicates the balance

Prepaid Rent ₱90

2. Paid the PO less withholding tax of ₱5

Office supplies Inventory 60

3. Withdrawal of office supplies for office use ₱40

Office supplies Expense 40

4. Remittance of withholding tax thru Tax Remittance

2. Release of the cash advance to the disbursing officer.

3. Request for replenishment of the petty cash fund for the

4. Replenishment of the PCF

5. At year-end the Agency record the liquidation of

6. The RAOMO is adjusted for the unused PCF.

3. Payment of interest expense

2. Received the office equipment with the charge invoice.

3. Paid the office equipment less withholding tax of ₱10.

Accounts Payable 150

Case 2: Construction of Building by Contract

2. Paid 30% of the contract price, ₱60

3. Received the first billing, 50% of the contract price, ₱100

Construction in progress – Agency Assets 100

4. Paid the first billing less withholding tax of ₱8

5. Received the second billing for the balance of the

Construction in Progress – Agency Asset 100

6. Paid the second billing less withholding tax of ₱20

Accounts Payable 100

7. To recognize the Building account and to close the

8. To close Withholding Tax Payable account to Subsidy

The obligation to pay ₱300 for the land and building is

2. Assessed value of the land, ₱180

3. Paid the land and building less 10% withholding tax.

1. Agency ABC is to transfer cash of ₱400 to Agency XYZ

2. Cash is transferred to Agency XYZ

3. Received report from Agency XYZ

Purpose of Trial Balance

 Pre-closing Trial Balance

Prepaid Rent xxx

Adjustments for Unreleased

a. Surplus or deficit for the period

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