Overview of government accounting

Accounting is a measure business activity, processes that information into reports and
communicates the result to decision makers. It is the ‘’Language of business’’ as it is like a big
machine that you put raw financial information into. Records of all your business transactions,
taxes, projections, etc. that then spits out an easy to understand story about the financial state
of your business.
Furthermore, accounting is a service activity. Its function is to provide quantitative
information, primarily financial in nature, about economic entities that is intended to be useful
in making economic decision. It is the act of recording, classifying and summarizing in a
significant manner and terms of money, transactions and events which are in part at least of
financial character, and interpreting the results thereof.
Government Accounting
 Encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transaction involving the receipt and disposition of government
funds and property, interpreting the result thereof.’’ State Audit Code of phil. P.D
No. 1445, sec 109).
Section 110, presidential Decree 1445 sets down the following objectives of government
accounting;
1. To produce information concerning past operation and present conditions
2. To provide basis for guidance for future operations:
3. To provide for control of the acts of public bodies and offices in the receipts, disposition
and utilization of funds and property and
4. To report on the financial position and the result of operations of government agencies
for the information and guidance of all persons concerned.
As a process, it consolidates all activities pertaining to the gathering of data which are to be
used as fiscal management decision. It includes:
 Bookkeeping
 Posting, grouping or classifying similar items
 Preparation of periodic financial reports.
 Analysis of financial reports to determine their accuracy as well as efficiency and
effectiveness of agency operations.

Purpose:
 To establish accountability over receipts, property and expenditures and
 To generate information that permits continues review of government and the
efficiency with which they are implemented
Government Accounting Vs Accounting for private Entities
There are three accounting main differences between government accounting and profit-
business Accounting; accounting standards, statements and reporting.
 Standards refer to the guidelines and principles an organization and entity must follow.
 Statement concerns the kinds of financial statements that businesses organization and
government must file.
 Reports refer to the types of annual financial reports governments and businesses must
file.
In the government environment, public sector entities have different goals, as opposed to the
private sector entities one main goal gaining profit. Also in government accounting the entity
has the responsibility of fiscal accountability which demonstration of compliance in the use of
resources in a budgetary context.
Government accounting is maintained by the government offices to grasp the position of public
fund.
Business accounting is maintained by business organizations to grasp the profit or loss and
therefore the monetary position of the business s. Furthermore, government accounting
strictly follows the government budgeting system while profit oriented business entities has its
own way of preparing their budget.
Also, government accounting is strictly maintained by following the monetary rules and
provisions of state. COA circulars are at hand to be followed by government agencies. On the
other hand, commercial accounting is maintained by following the rules and principles of
Generally Accepted Accounting Principles (GAAP)- a series of standard and procedures that
accountants at all companies must adhere to when preparing financial statements.
Compared to the accounting for business entity government accounting places greater
emphasis on the following:
 Sources and utilization of gov. funds and
 Responsibility, accountability and liability of entities entrusted with gov. funds and
properties.
Responsibility, accountability and liability over government funds and property
 Government resources must be utilized efficiently and effectively in accordance with the
law.
 The head of government agency is directly responsible in implementing this policy.
 All other personnel entrusted with the custody of gov. resources are responsible to the
head of the gov. Agency are accountable for the safeguarding thereof and are liable for
any losses.

Accounting Responsibility
The following are charged with government accounting responsibility
1. COA- Commission of Audit
2. DBM-Department of Budget and management
3. BTr- Bureau of treasury
4. Government agencies

COA- Commission of audit

 Keeps the general accounts of the government promulgates accounting rules and
regularities. And submit to the pres. And congress within the time fixed by law(not
later than last day of sep, each year.)
 As to UACS(unified account code structures) consistency accounts classification and
coding structure with the revised chart of accounts.
DBM- Department of Budget and Management
 Responsible for formulation and implementation of the national Budget with the goal
of attaining our national socio-economic plan and objectives.
 As to UACS the validation and assignment of a new program activity project codes.
BTr-Bureau of treasury
 Plays pivotal role In the cash operation of the national gov. under the revised
administrative code being one of the operating of the DOF is authorized to:
a.) Receive and keep national funds manage and control the disbursement and
b.) Maintain financial of all national government.
NGAs- National government agency
 Maintain and keep the current account of the agency
 Provide advice on financial condition and state of the appropriate and allotments of the
agency and heads and may develop and conduct procedure design to meet the needs of
management.
The GAM for NGAs
 The government Accounting manual for national government agencies is promulgated
by the COA under the activity conferred to its by phil. Constitution.

 The GAM for NGAs was promulgated primarily to harmonize the government
accounting standards with the international public sector accounting standard (IPSAS).
The IPSAS are based on the IFRS.
Objectives of the GAM for NGAs
To update the following:
 Standards, policies guidelines and procedure in accounting for government funds and
property.(volume 1 GAM)
 Coding structure and accounts and(volume 3 GAM)
 Accounting books, registries, records, forms, reports and financial statements. (Volume
2)
 Basic government and accounting principle
Each entity shall recognize and present its financial transaction and operation conformably to
the following:
a. Generally accepted government accounting principles in accordance with the PPSAS and
pertinent rules and regulations;
b. Accrual basis of accounting accordance with the PPSAS
c. Budget basis for presentation of budget information in the financial statements (FSs) in
accordance with PPSAS 24;
d. RCA prescribe by COA;
e. Double entry bookkeeping
f. Financial statements based on accounting and budgetary records and
g. Fund cluster accounting
 Fund cluster refers to an accounting entity for recording expenditures and
revenues associated with a specific activity for which accounting records are
maintained and periodic financial reports are prepared.

Code description
01 regular agency fund
02 foreign assisted project funds
03 special accounts locally accounts locally funded/domestic grants fund
04special account foreign assisted/foreign grunts fund
05 internally generated funds
06 business related funds
07 trust receipt

Philippines public sector accounting standards (PPSAS)

It shall apply to all NGAs, LGUs and GOCCs not considered as government business enterprise
(GBE).
Characteristic of GBE;
 Is an entity with the power to contract in its own name
 Has been assigned the financial and operational authority to carry a business.
 Sells goods and services, in the normal courses of its business, to other entities of profit
and full cost recovery.
 Its not relevant in continuing government funding to be going concern (other than
purchase of output art arms length) and
 Its controlled by public sector entity.
GBEs shall also include bank and non bank financial institution under the supervision of the BSP
entities registered with the SEC required adopting PFRS.

Samples of GOCCs classified as GBEs

 Bangko sentral ng pilipinas
 Philippines International Convention Center. INC
 Palacio de governador condominium corporation
 Home guaranty corporation
 Philippine National Construction corporation
 Cebu port Authority
 Zamboanga city special economic zone Authority
 Philippines crop insurance corporation

Samples of GOCCs classified as Non GBEs

 Lung center of the Philippines
 Cultural center of the Philippines
 Center for international trade exposition and mission
 Development academy of the Philippines
 Light rail transit authority
 National power corporation
 Qualitative characteristic
 Understandability
 Relevance
 Materiality
 Timeliness
 Reliability
 Faithful representation
 Substance over form
 Neutrality
 Prudence
 Completeness
 Comparability

Components of general purpose of financial statements

1. Statement of financial position
2. Statement of financial performance
3. Statement of changes in net and equity
4. Statement of cash flows
5. Statement of comparison of budget and actual amounts and
6. Notes to financial statements