ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 43  May 2022 CPA Licensure Examination  Week 17

ADVANCED FINANCIAL ACCOUNTING & REPORTING A. DAYAG  C. CAIGA  M. NGINA

AFAR 21: GOVERNMENT ACCOUNTING

Government Accounting Manual-PD 1445
PPSAS - Philippine Public Sector Accounting Standards
Definition (Section 109 of PD 1445)
Government Accounting encompasses the processes of analyzing, recording, classifying , summarizing and
communicating all transactions involving the receipt, disposition and utilization of government funds and property and
interpreting the results thereof.
As a process, it puts together all activities pertaining to the gathering of data which are to be used as the bases for
management decisions. It includes:
1. bookkeeping referred to as analysis, recording and journalizing.
2. posting or grouping or classifying of similar items
3. preparation of periodic financial reports
4. analysis of reports to determine their accuracy and adequacy as well as the efficiency and effectiveness of
agency operations.
Like commercial accounting, government accounting is an art and are based on fundamental concepts regarding
accounting functions and the rules governing accounting practices. These rules which are derived from experience
and reason are flexible and in a constant process of evolution.

Primary Purpose of Government Business

To render service to the public as distinguished from the usual profit motive of the private business.

Basic Objectives of Government Accounting

The basic objectives of government accounting are:
1. The provide information concerning past operations and present conditions.
2. To provide as a basis for guidance for future operations.
3. To provide for control the acts of public bodies and offices regarding the receipt, disposition, and utilization of
government funds and property.
4. To report on the financial condition and the results of operations of government agencies for the information of
all persons concerned.

Subjects of Government Accounting

The subjects of government accounting include:
1. National Government - consisting of departments, bureaus, commissions, boards, state colleges and universities.
2. Local Government – provinces, chartered cities, municipalities, and barangays.
3. Government-owned or government controlled corporations – which were created by law to manage specific
type of business.
Government Accounting Manual (GAM) shall be used by all National Government Agencies (NGAs) in the:
1. preparation of the general purpose financial statements in accordance with the PPSAS and other financial
reports as may be required by laws, rules and regulations; and
2. reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.

Objective of the Government Manual. The Manual aims to update the following:
1. standards, policies, guidelines and procedures in accounting for government funds and property;
2. coding structure and accounts; and
3. accounting books, registries, records, forms, reports and financial statements.

Definition of Terms. For the purpose of this Manual, the terms used shall be construed to mean as follows:
1. Accrual basis – means a basis of accounting under which transactions and other events are recognized when
they occur (and not only when cash or its equivalent is received or paid).
Therefore, the transactions and 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, net assets/equity, revenue, and expenses.
2. 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.
3. Contributions from owners – means future economic benefits or service potential that have been contributed
to the entity by parties external to the entity, other than those that result in liabilities of the entity, that establish
a financial interest in the net assets/equity of the entity, which:
a. conveys entitlement both to (i) distributions of future economic benefits or service potential by the
entity 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 wound
up; and/or
b. can be sold, exchanged, transferred, or redeemed.
4. Distributions to owners – means future economic benefits or service potential distributed by the entity to all or
some of its owners, either as a return on investment or as a return of investment.
5. Entity – refers to a government agency, department or operating/field unit. It may be referred to in this GAM
as an agency
6. Expenses – are decreases in economic benefits or service potential during the reporting period in the form of

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outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity, other
than those relating to distributions to owners.
7. 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.
8. Liabilities – are firm obligations of the entity arising from past events, the settlement of which is expected to
result in an outflow from the entity of resources embodying economic benefits or service potential.
9. Net assets/equity – is the residual interest in the assets of the entity after deducting all its liabilities.
10. Revenue – is the gross inflow of economic benefits or service potential during the reporting period when those
inflows result in an increase in net assets/equity, other than increases relating to contributions from owners.
11. 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)

Basic Government Accounting and Budget Reporting Principles. Each entity shall recognize and present its financial
transactions and operations conformably to the following:
generally accepted government accounting principles in accordance with the PPSAS and pertinent laws, rules and
regulations;
1. accrual basis of accounting in accordance with the PPSAS;
2. budget basis for presentation of budget information in the financial statements (FSs) in accordance with
PPSAS 24;
3. RCA Revised Chart of Accounts prescribed by COA;
4. double entry bookkeeping;
5. financial statements based on accounting and budgetary records; and
6. fund cluster accounting.
Keeping of the General Accounts. The COA shall keep the general accounts of the Government and, for such period
as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto, pursuant to
Section 2, par. (1), Article IX-D of the 1987 Philippine Constitution.
Financial Reporting System for the National Government. The financial reporting system of the Philippine government
consists of accounting system on accrual basis and budget reporting system on budget basis under the statutory
responsibility of the NGAs, Bureau of the Treasury (BTr), Department of Budget and Management (DBM), and the
COA, as follows:
1. Each entity of the National Government (NG) maintains complete set of accounting books by fund cluster
which is reconciled with the records of cash transactions maintained by the BTr.
2. The BTr accounts for the cash, public debt and related transactions of the NG.
3. Each entity maintains budget registries which are reconciled with the budget records maintained by the DBM
and the Government Accountancy Sector (GAS), COA.
4. The COA, through the GAS:
a. maintains budget records showing the overall approved budget of the NG and its
execution/implementation;
b. consolidates the FSs and budget accountability reports of all NGAs and the BTr with COA’s records to
come up with an Annual Financial Report (AFR) for the NG as required in Section 4, Article IX-D of the 1987
Philippine Constitution; and
c. prepares other financial reports required by law for submission to oversight agencies.

Objectives of General Purpose Financial Statements. The objectives of general purpose financial statements (GPFSs)
are to provide information about the financial position, financial performance, and cash flows of an entity that is
useful to a wide range of users in making and evaluating decisions about the allocation of resources. Specifically, the
objectives of general purpose financial reporting in the public sector are to provide information useful for decision-
making, and to demonstrate the accountability of the entity for the resources entrusted to it.

Responsibility for Financial Statements. The responsibility for the preparation of the FSs rests with the following:
a. for individual entity/department FSs – the head of the entity/department central office (COf) or regional office
(RO) or operating unit (OU) or his/her authorized representative jointly with the head of the
finance/accounting division/unit; and
b. for department/entity FSs as a single entity – the head of the entity/department COf jointly with the head of
the finance unit.
Components of General-Purpose Financial Statements. The complete set of GPFSs consists of:
1. Statement of Financial Position
2. Statement of Financial Performance
3. Statement of Changes in Net Assets/Equity
4. Statement of Cash Flows
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements, comprising a summary of significant accounting policies and other
explanatory notes.

Books of Accounts and Registries. The books of accounts and registries of the NG entities consist of:
a. Journals

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1. General Journal
2. Cash Receipts Journal
3. Cash Disbursements Journal
4. Check Disbursements Journal
b. Ledgers
1. General Ledgers
2. Subsidiary Ledgers
c. Registries
1. Registries of Revenue and Other Receipts
2. Registry of Appropriations and Allotments
3. Registries of Allotments, Obligations and Disbursements
4. Registries of Budget, Utilization and Disbursements
Fund Accounting. The books of accounts shall be maintained by fund cluster as follows:
Code Description
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/Domestic Grants Fund
04 Special Account-Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts

Components of Budget and Financial Accountability Reports. The budget reports consist of the following Budget and
Financial Accountability Reports (COA-DBM-DOF Joint Circular No. 2013-1, as amended by COA and DBM Joint
Circular No. 2014-1 dated July 2, 2014):
a. Quarterly Physical Report of Operation (QPRO)
b. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances (SAAODB)
c. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of
Expenditures (SAAODBOE) A
d. List of Allotments and Sub-Allotments (LASA)
e. Statement of Approved Budget, Utilizations, Disbursements and Balances (SABUDB) – for
Off-Budget Fund)
f. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of Expenditures
(SABUDBOE) (for Off-Budget Fund)
g. Aging of Due and Demandable Obligations (ADDO)
h. Monthly Report of Disbursements (MRD)
i. Quarterly Report of Revenue and Other Receipts (QRROR)
Fair Presentation. The FSs shall present fairly the financial position, financial performance and cash flows of an entity.
Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in
accordance with the definition and recognition criteria for assets, liabilities, revenue, and expenses set out in PPSAS.
The application of PPSAS, with appropriate disclosures, if necessary, would result in fair presentation of the FS.
Compliance with PPSASs. An entity whose financial statements comply with PPSASs shall make an explicit and
unreserved statement of such compliance in the notes. Financial statements shall not be described as complying
with PPSASs unless they comply with all the requirements of PPSASs. Inappropriate accounting policies that do not
comply with PPSAS are not rectified either by disclosure of the accounting policies used, or by notes or explanatory
material.
Departure from PPSAS. In the event that Management strongly believes that compliance with the requirement of
PPSAS would result in misleading presentation that it would contradict the objective of the FSs set forth in PPSAS, the
entity may depart from that requirement if the relevant regulatory framework allows, or otherwise does not prohibit,
such a departure.
Going Concern. The FSs shall be prepared on a going concern basis unless there is an intention to discontinue the
entity operation, or if there is no realistic alternative but to do so.
Consistency of Presentation. The presentation and classification of items in the FSs shall be retained from one period
to the next unless laws, rules and regulations, and PPSAS require a change in presentation.
Materiality and Aggregation. Each material class of similar items shall be presented separately in the financial
statements. Items of a dissimilar nature or function shall be presented separately unless they are immaterial. If a line
item is not material, it is aggregated with other items either on the face of FSs or in the Notes to the FSs. A specific
disclosure requirement in a PPSAS need not be satisfied if the information is not material.
Offsetting. Assets and liabilities, and revenue and expenses shall not be allowed to offset unless required or permitted
by a PPSAS except when offsetting reflects the substance of the transaction or other event.
Comparative Information. Comparative information shall be disclosed with respect to the previous period for all
amounts reported in the FSs. Comparative information shall be included for narrative and descriptive information
when it is relevant to an understanding of the current period’s FSs.
Structure and Content. The FSs and each component shall be identified clearly and distinguished from other
information in the same published document.

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Statement of Financial Position. An entity shall present current and non- current assets, as well as current and non-
current liabilities, as separate classifications on the face of the Statement of Financial Position (SFP).
Statement of Financial Performance. The Statement of Financial Performance (SFPer) shall include line items that
present the revenue, expenses and net surplus or deficit for the period.

Statement of Changes in Net Assets/Equity. An entity shall present in the Statement of Changes in Net Assets/Equity
(SCNA/E) the following:
a. Net Income or Deficit for the period;
b. Each item of revenue and expenses for the period that, as required by Standards, is recognized directly in
net assets/equity, and the total of these items;
c. Total revenue and expenses for the period; and
d. For each component of net assets/equity separately disclosed, the effects of changes in accounting policies
and corrections of errors recognized in accordance with PPSAS 3-Accounting Policies, Changes in
Accounting Estimates and Errors.
Statement of Cash Flows. The Statement of Cash Flows (SCF) provides information to users of FSs a basis to assess the
ability of the entity to generate cash and cash equivalents and to determine the entity’s utilization of funds. This also
provides information on how the entity generates income authorized to be used in their operation and its utilization.
Statement of Comparison of Budget and Actual Amounts. A comparison of budget and actual amounts will enhance
the transparency of financial reporting in government. This shall be presented by government agencies as a separate
additional financial statement referred in this Manual as the Statement of Comparison of Budget and Actual Amounts
(SCBAA).
Notes to Financial Statements. The Notes to FSs contain information in addition to that presented in the SFP, SFPer,
SCNA/E, SCF and SCBAA. Notes provide narrative descriptions or disaggregation of items disclosed in those FSs and
information about items that do not qualify for recognition in those statements.
Qualitative Characteristics of Financial Reporting. An entity shall present information including accounting policies in
a manner that meets a number of qualitative characteristics such as understandability, relevance, materiality,
reliability and comparability. These qualitative characteristics are the attributes that make the information provided
in the FSs useful to users.
Key Features of Assets. The key features of an asset are:
a. the benefits must be controlled by the entity;
b. the benefits must have arisen from a past event; and
c. future economic benefits or service potential must be expected to flow to the entity.
The following are indicators of control of the benefits by the entity:
a. the ability of an entity to benefit from the asset and to deny or regulate the access of others to that benefit.
b. an entity can, depending on the nature of the asset, exchange it, use it to provide goods or services, exact
a price for others’ use of it, use it to settle liabilities, hold it, or perhaps even distribute it to owners.
c. possession or ownership of an object or right would normally be synonymous with control over the future
economic benefits embodied in the right or object.
However, there are instances when an entity may possess an object or right but not expect to enjoy the benefits
embodied in it, e.g. under a finance lease agreement, control over the leased property owned by the lessor is
transferred to the lessee.
The following are indicators of past event:
a. the specification of a past event differentiates assets from intentions to acquire assets, which are
not to be recognized.
b. a transaction or event giving rise to control of the future economic benefits must have occurred.
The following are indicators of future economic benefits:
a. distinguishable from the source of the benefit i.e. the particular physical resource or legal right;
b. does not imply that assets necessarily generate cash flows, the benefits can also be in the form of
‘service potential’;
c. in determining whether a resource or right needs to be accounted for as an asset, the potential to
contribute to the objectives of the entity should be the prime consideration;
d. capacity to contribute to activities/objectives/programs; and
e. the fact that an asset cannot be sold does not preclude it from providing future economic
benefits.
Recognition of an Asset. An asset shall be recognized in the financial position when and only when (a) it is probable
that the future economic benefits will flow to the entity; and (b) the asset has a cost or value that can be measured
reliably.
The following are indicators of probable inflow of future economic benefits:
a. the chance of benefits arising is more likely rather than less likely (e.g. greater than 50%).
b. benefits can be expected on the basis of available evidence or logic.
The following are indicators of reliable measurement:
a. valuation method is free from material error or bias.
b. faithful representation of the asset’s benefits.
c. reliable information will, without bias or undue error, faithfully represent those transactions and events.

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Accounting Standards for Revenue. The following accounting standards shall apply for revenue and receipts of
government entities:
a. Revenue includes only the gross inflows of economic benefits or service potential received and receivable
by the entity in its own account. (PPSAS 9)
b. Receipts/Collections shall refer to all cash actually received from all sources during a given accounting
period.
c. Fines shall include economic benefits or service potential received or receivable by a public sector agency,
as determined by a court or other law enforcement body, as a consequence of the breach of laws or
regulations. Fines and penalties, either on tax revenue or other specific income account, shall be recognized
as income of the year these were collected.
d. Gifts and donations shall consist of voluntary transfers of assets including cash or other monetary assets, goods
in-kind and services in-kind that one agency makes to another, normally free from stipulations. (PPSAS 23)
e. Goods in-kind are tangible assets transferred to an agency in a non-exchange transaction, without charge,
but may be subject to stipulations. External assistance provided by multilateral or bilateral development
organizations often includes a component of goods in-kind. (PPSAS 23)
f. Taxes are economic benefits or service potentials compulsory paid or payable to public sector agencies, in
accordance with laws and or regulations, established to provide revenue to the government. Taxes do not
include fines or other penalties imposed for breaches of the law. (PPSAS 23)
g. Transfers are inflows of future economic benefits or service potential from non- exchange transactions, other
than taxes. (PPSAS 23)
Use of Appropriated Funds. All moneys appropriated for functions, activities, projects and programs shall be available
solely for the specific purposes for which these are appropriated.
Appropriation for Loan Proceeds. Expenditures funded by foreign and domestic borrowings shall be included within
the expenditure program of the entity concerned. Loan proceeds, whether in cash or in kind, shall not be used without
the corresponding release of funds through a Special Budget.
The Budget Process (Budgetary Procedures)
One of the distinguishing characteristics of government accounting is the requirement of a budget which shall be the
basis for all expenditures. Budgeting is performed on a basis consistent with the revenue and appropriation systems.
The appropriation system provides for the control and ultimate disbursement of funds. The budgetary procedures are
as follows:
1. Budget Preparation and Presentation. It covers estimation of government revenues, the determination of
budgetary priorities and activities within the constraints imposed by available revenues and borrowing limits,
and the translation of approved priorities and activities into expenditure levels for a budget year.
The budget preparation begins with the issuance of a budget call issued by the DBM in December. This
document outlines the specific guidelines on the preparation of the agency budget estimates to be submitted
to the DBM. The DBM, then consolidates all budgets to form a government-wide budget to be submitted to
the President for final approval before it will be forwarded to the Congress.
2. Budget Legislation and Authorization. This procedure is a prerogative of the Congress, which refers to the
enactment of the General Appropriations Bill based on the budget of “receipts and expenditures” into
Appropriations Act. Series of budget hearings/debate is conducted whereby the various heads of agencies
would explain to Congress the details of their respective budgets. Appropriations are approved by the
legislative body in the form of General Appropriations Act which covers most of the expenditures of the
government. This Act will be forwarded to the President to sign it into law.
3. Budget Execution or Operation. This covers the various operational aspects of budgeting, thus making
budgeting to serve as one of the principal tools of management control to insure that public funds are spent
only for the specific purpose for which they are appropriated. This aspect involves also the regulation of funds
release, the scheduling of preferred activities, etc. The responsibility for monitoring the budget execution rests
primarily with the DBM
4. Budget Accountability. This aspect focuses on tracking, monitoring, and evaluation of expenditures and
performance. This is simply achieved by comparing performance with predetermined plans.
Basic Concepts
What is an appropriation?
It refers to an authorization made by law or other legislative enactment, directing the payment of goods and
services out of government funds under specified conditions or for special purposes.

What is an Allotment?
Allotment, on the other hand, is the authorization issued by the DBM to the Agency, which allows it to incur
obligations, for specified amounts, within the legislative appropriation.

In order that the appropriation may be released, the Agency, in consultation with the DBM, is required to prepare and
to submit the Agency Budget Matrix (ABM), the official document used as the basis in the release of the obligational
authority. The ABM is prepared by appropriation source and major programs and the amounts are classified into
“Needing Clearance” and “Not Needing Clearance”. For automatic appropriations, a separate ABM is prepared and
submitted.

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An Annual Cash Program, which shall provide cash to finance the programs reflected in the ABM and the prior years’
accounts payable, is also submitted with the ABM. Upon approval of the total comprehensive release, the DBM
machine validates the last page of the ABM and releases it to Agency.
For requests “Not Needing Clearance”, the Notice of Cash Allocation (NCA) is issued as requested. For items “Needing
Clearance”, the DBM issues the Special Allotment Release Order (SARO), while the NCA will be released upon request.
Control and Recording of Appropriations, Allotments, Obligations and NCA
Under the new system, the COA does not journalize the appropriations. The control of the release of allotments and
the NCA shall be made by the DBM and the BTr (Bureau of Treasury), thru the registries that they shall maintain. The
Agency shall also monitor the allotments and the obligations it incurs in the registry that it shall also maintain
The National Budget
The national budget is the government estimate of its income and expenditure. It is what the government plans to
spend for its programs and projects , and where the money will come from. It is based on what the government thinks
it will spend during the year and the sources of what it hopes to have as funds, either from revenues or from borrowing,
with which to finance such expenditure.
The national budget is allocated for the implementation of various programs and projects, the operation of
government offices, payment of salaries of government employees, payment of public debts.

Budget Execution, Monitoring and Reporting

Definition of Terms. For the purpose of this Manual, the terms stated below shall be construed to mean as follows:
1. Allotment – is an authorization issued by the DBM to NGAs to incur obligations for specified amounts
contained in a legislative appropriation in the form of budget release documents. It is also referred to as
Obligational Authority.
2. Appropriation – is the authorization made by a legislative body to allocate funds for purposes specified by
the legislative or similar authority.
3. Approved Budget – is the expenditure authority derived from appropriation laws, government ordinances,
and other decisions related to the anticipated revenue or receipts for the budgetary period. The approved
budget consists of the following:
UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08
4. Automatic Appropriations – are the authorizations programmed annually or for some other period prescribed
by law, by virtue of outstanding legislation which does not require periodic action by Congress.
5. Budget Information – the budgetary information consists of, among others, data on appropriations or the
approved budget, allotments, obligations, revenues and other receipts, and disbursements.
6. Continuing Appropriations – are the authorizations to support obligations for a specific purpose or project,
such as multi-year construction projects which require the incurrence of obligations even beyond the budget
year.
7. Disbursements – are the actual amounts spent or paid out of the budgeted amounts.
8. Final Budget – is the original budget adjusted for all reserves, carry-over amounts, transfers, allocations and
other authorized legislative or similar authority changes applicable to the budget period.
9. New General Appropriations – are annual authorizations for incurring obligations during a specified budget
year, as listed in the GAA.
10. Obligation – is an act of a duly authorized official which binds the government to the immediate or eventual
payment of a sum of money. Obligation maybe referred to as a commitment that encompasses possible
future liabilities based on current contractual agreement.
11. Original Budget – is the initial approved budget for the budget period usually the General Appropriations Act
(GAA). The original budget may include residual appropriated amounts automatically carried over from prior
years by law such as prior year commitments or possible future liabilities based on a current contractual
agreement.
12. Revenues – are increases in economic benefits or service potential during the accounting period in the form
of inflows or increases of assets or decreases of liabilities that result in increases in net assets/equity, other than
those relating to contributions from owners.
13. Supplemental Appropriations – are additional appropriations authorized by law to augment the original
appropriations which proved to be insufficient for their intended purpose due to economic, political or social
conditions supported by a Certification of Availability of Funds (CAF) from the BTr.
Fund Release D o c u m e n t s . With the adoption of the UACS and the Performance-Informed Budgeting
(PIB), the following are the fund release documents:
Obligational Authority or Allotment – the following are the documents which authorize the entity to incur
obligations:
1. General Appropriations Act Release Document (GAARD) – serves as the obligational authority for the

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comprehensive release of budgetary items appropriated in the GAA, categorized as For Comprehensive
Release (FCR).

2. Special Allotment Release Order (SARO) – covers budgetary items under For Later Release (FLR)
(negative list) in the entity submitted Budget Execution Documents (BEDs), subject to compliance of
required documents/clearances. Releases of allotments for Special Purpose Funds (SPFs) (e.g., Calamity
Fund, Contingent Fund, E-Government Fund, Feasibility Studies Fund, International Commitments Fund,
Miscellaneous Personnel Benefits Fund and Pension and Gratuity Fund) are also covered by SAROs.

3. General Allotment Release Order (GARO) – is a comprehensive authority issued to all national
government agencies, in general, to incur obligations not exceeding an authorized amount during a
specified period for the purpose indicated therein. It covers automatically appropriated expenditures
common to most, if not all, agencies without need of special clearance or approval from competent
authority, i.e. Retirement and Life Insurance Premium.

4. Disbursement Authority – the following documents authorize the entity to pay obligations and payables:
a. 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
b. 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;
c. 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 income
collected/retained by their Foreign Service Posts (FSPs) to cover their operating requirements,
but not to exceed the released allotment to the said post; and
d. Notice of Transfer of Allocation – authority issued by the Central Office to its regional and
operating units to cover the latter’s cash requirements.

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);
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.

Monitoring of t h e Budget. The budget shall be monitored by the Budget Division/Units of NGAs through the
maintenance of registries for that purpose.
Responsibility Center Code Structure. Each NGA shall be assigned a responsibility center code defined as organization
code in the UACS Manual. For monitoring revenue and expenses, additional three digit codes for the agency’s major
offices/departments shall be appended to the organization code.
The organization code and the agency’s major offices/departments’ code shall consist of 15 digits as follows:
00 000 0000000 000

Organization
Department

Agency

Lower Level Operating Unit

Additional code for major office/department

Major Office/
Department

Example: National Government of the Commission on Audit

31 000 0100000 000

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Commission on Audit Agency

Agency (none)

Central Office

Additional code for major office/department

National Government Sector

Revenue and Other Receipts

Definition of Terms. For the purpose of this Manual, the following terms shall be construed to mean as follows:
a. Bequest – is a transfer made according to the provisions of a deceased person’s will. The past event
giving rise to the control of resources embodying future economic benefits or service potential for a
bequest occurs when the entity has an enforceable claim, for example on the death of the testator, or
the granting of probate, depending on the laws of the jurisdiction. (Par. 90, PPSAS 23)
b. Concessionary loans – are loans received by an entity at below market terms.
c. Exchange transactions – are transactions in which one entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services,
or use of assets) to another entity in exchange. (Par. 11, PPSAS 9)
d. Fair value – is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction
e. Fines – are economic benefits or service potential received or receivable by NGAs, from an individual or
other entity, as determined by a court or other law enforcement body, as a consequence of the
individual or other entity breaching the requirements of laws or regulations. (Par. 88, PPSAS 23)
f. Gifts, Donations and Goods In-kind – are voluntary transfers of assets, including cash or other monetary
assets, goods in-kind and services in-kind that one entity makes to another, normally free from stipulations.
The transferor may be an entity or an individual. For gifts and donations of cash or other monetary assets
and goods in-kind, the past event giving rise to the control of resources embodying future economic
benefits or service potential is normally the receipt of the gift or donation. (Par. 93, PPSAS 23)
g. Non-exchange transactions – are transactions in which an entity either receives value from another entity
without directly giving approximately equal value in exchange, or gives value to another entity without
directly receiving approximately equal value in exchange. (Par. 11, PPSAS 9)
h. Pledges – are unenforceable undertakings to transfer assets to the recipient entity
i. Revenue – is the gross inflow of economic benefits or service potential during the reporting period when
those inflows result in an increase in net assets/equity, other than increases relating to contributions from
owners.
j. Services in-kind – are services provided by individuals to public sector agencies in a non-exchange
transaction.
Sources of Revenue and Other Receipts. Revenues received by NGAs may arise from exchange and non-exchange
transactions.
In a transaction where the entity may provide some consideration directly in return for the resources received, but
that consideration does not approximate the fair value of the resources received, the entity determines whether there
is a combination of exchange and non-exchange transactions. Each component of which is recognized separately.
(Par. 10, PPSAS 23)
There are transactions where it is not immediately clear whether they are an exchange or a non-exchange
transaction. In these cases, an examination of the substance of the transaction will determine if they are on exchange
or non-exchange transactions. For example, the sale of goods is normally classified as an exchange transaction. If,
however, the transaction is conducted at a subsidized price, that is, a price that is not approximately equal to the fair
value of the goods sold, that transaction falls within the definition of a non-exchange transaction.
Agencies may receive trade discounts, quantity discounts, or other reductions in the quoted price of assets for a
variety of reasons. These reductions in price do not necessarily mean that the transaction is a non-exchange
transaction. (Par. 11, PPSAS 23)
Revenue from Exchange Transactions. Revenues received by the NGAs from exchange transactions are derived from
the following:
a. Sale of goods or provisions of services to third parties or to other NGAs. Examples are:
1. Service Income – Permit Fees, Registration Fees, Registration Plates, Tags and Stickers Fee, Clearance and
Certification Fees, Franchising Fees, Licensing Fees, Supervision and Regulation Enforcement Fees,
Spectrum Usage Fees, Legal Fees, Inspection Fees, Verification and Authentication Fees, Passport and
Visa Fees, Processing Fees and Other Service Income; and
2. Business Income – School Fees, Affiliation Fees, Examination Fees, Seminar/Training Fees, Rent/Lease
Income, Communication Network Fees, Transportation System Fees, Road Network Fees, Waterworks
System Fees, Power Supply System Fees, Seaport System Fees, Landing and Parking Fees, Income from

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Hostels/Dormitories and Other Like Facilities, Slaughterhouse Operation, Income from Printing and
Publication, Sales Revenue, Hospital Fees, Share in the Profit of Joint Venture and Other Business Income.
b. Use by other entity of assets yielding interest, royalties and dividends or similar distributions. Examples are:
1. Interest income – charges for the use of cash or cash equivalents, or amounts due to the entity;
2. Royalties – fees paid for the use of entity’s assets such as trademarks, patents, software, and copyrights;
and
3. Dividends – share of the National Government from the earnings of its capital/equity investments in
Government-Owned or Controlled Corporations (GOCCs) and other entities.
Revenue from Non-Exchange Transactions. Revenue of the NGAs from non- exchange transactions are derived
mostly from taxes, gifts and donations, goods in kind and fines and penalties. Most NGAs derive revenues from
transactions where they receive resources and provide no or nominal consideration directly in return. These are as
follows:
a. Tax Revenue
1. Tax Revenue-Individual and Corporation
2. Tax Revenue-Property
3. Tax Revenue-Goods and Services
4. Tax Revenue-Others
b. Fines and Penalties
1. Tax Revenue
2. Service Income
3. Business Income
c. Shares, Grants and Donations
1. Share from National Wealth
2. Share from Philippine Amusement and Gaming Corporation (PAGCOR)/ Philippine Charity
Sweepstakes Office (PCSO)
3. Share from Earnings of GOCCs
4. Income from Grants and Donations in Cash
5. Income from Grants and Donations in Kind
d. Revenue from non-exchange transactions may also arise when, in respect of an inflow of resources from
a non-exchange transaction, the entity satisfies a present obligation recognized as a liability which may
be as follows:
1. Trust Liabilities – Customers’ Deposits Payable and Guaranty/Security Deposits Payable
2. Deferred Credits – Deferred Finance Lease Revenue and Other Deferred Credit
3. Unearned Revenue – Investment Property and Other Unearned Revenue

Transfer of Internal Revenue Allotment. Where an NG imposes a tax, the entire proceeds of which is collected by
NGAs and transferred to LGUs through an appropriation, the NGAs recognize assets and revenue for the tax, and a
decrease in assets and an expense for the transfer to LGUs. The LGUs will recognize the assets and revenue for the
transfer. The following is the accounting entry at the books of accounts of the DBM:
Account Title Debit Credit
Financial Assistance to LGUs P10,000
Cash-Modified Disbursement
System (MDS), Regular P10,000
To recognize transfer of IRA to LGUs
Grant with Condition. If conditions are attached to a grant, a liability is recognized, which is reduced and revenue
recognized as the conditions are satisfied. If the government is required to recognize a liability in respect of any
conditions relating to assets recognized as a consequence of specific purposes, it does not recognize revenue until
the condition is satisfied and the liability is reduced. As an entity satisfies a present obligation recognized as a liability
in respect of an inflow of resources from a non-exchange transaction recognized as an asset, it shall reduce the
carrying amount of the liability recognized and recognize an amount of revenue equal to that reduction.

Example: The NG received a foreign grant amounting to P10 million for the construction of a railroad system. Under
the terms of the grant, the construction project shall be completed within a period of two years from the receipt of
the grant, otherwise, the money shall be returned to the grantor. The money can only be used as stipulated and the
NG is required to include a note in the financial statement detailing how the money was spent. The Department of
Public Works and Highways (DPWH) will be the implementing entity. The transactions shall be recognized as follows:
a. Receipt of the Grant
Account Title Debit Credit
Books of the NG – BTr
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas P10,000,000
Other Deferred Credits P10,000,000
To recognize receipt of grant directly credited to the account of the NG maintained by
the BSP
Books of the Implementing NGA – DPWH
Cash-Modified Disbursement
System (MDS), Special Account P10,000,000
Subsidy from National
Government P10,000,000

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To recognize receipt of the NCA for the construction of a railroad system

b. Purchase of construction materials and payment for labor for the construction of a railroad system
amounting to P10,000,000.
Account Title Debit Credit
Books of the Implementing NGA-DPWH
Construction in Progress-
Infrastructure Assets P10,000,000
Cash-Modified Disbursement
System (MDS), Special
Account P10,000,000
To recognize payment for the materials and labor for the construction of a railroad system

Books of the NG-BTr*

Subsidy from National Government P10,000,000
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas P10,000,000
To recognize replenishment of MDS checks issued for payment of the materials
and labor for the construction of a railroad system

*Books of Treasury and COA are not included in the CPA Licensure Examination
c. Receipt of the report from DPWH for the completion of the construction of a railroad system amounting to
P10,000,000.
Account Title Debit Credit
Books of the NG – BTr*
Other Deferred Credits P10,000,000
Income from Grants and P10,000,000
Donations in Cash
To recognize the income from grants and donations representing payment for
expenses in connection with the grant agreement.
d. Turnover and Acceptance of Completed Infrastructure Asset
Account Title Account Debit Credit
Books of the Implementing NGA – DPWH Code
Railway Systems 10603100 P10,000,000
Construction in Progress-
Infrastructure Assets 10699020 P10,000,000
To recognize the turnover and acceptance of completed railway system
Illustrative Accounting Entries for the Granting and Liquidation of Advances to Officers and Employees covering
Official Travel
Account Title Account Debit Credit
Advances to Officers and Employees Code P2,000
Cash-Modified Disbursement System
(MDS), Regular 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
raveling Expenses-Local P 2,000
Advances to Officers and Employees P 2,000
To recognize liquidation of cash advance for local travel upon receipt of LR and
supporting documents
Account Title Debit Credit
Advances to Officers and Employees P 200,000
Training Expenses 80,000
Cash-Modified Disbursement System
(MDS), Regular P 280,000
To recognize granting of cash advance for training abroad
Account Title Debit Credit
Advances to Officers and Employees P 200,000
Training Expenses 80,000
Cash-Modified Disbursement System
(MDS), Regular P 280,000
To recognize granting of cash advance for training abroad
Traveling Expenses-Foreign P 200,000
Advances to Officers and Employees P 200,000
To recognize liquidation of cash advance for training abroad upon receipt of LR
and supporting documents.

llustrative Accounting Entries for Disbursements Out of Petty Cash

Account Title Account Debit Credit
Code

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Assumptions:
Estimated Expenses:
Traveling Expenses Office P10,000
Supplies Expenses 8,000
Postage and Courier Expenses 5,000
Fuel, Oil and Lubricants Expenses 2,000
Other MOOE
5,000
Total
P 30,000
Petty Cash P 30,000
Cash-Modified Disbursement
System (MDS), Regular P 30,000
To record the establishment of PCF
Traveling Expense-Local P 10,000
Office Supplies Expenses 8,000
Fuel, Oil and Lubricants 2,000
Postage and Courier Expenses 5,000
Other Maintenance and
Operating Expenses 4,800
Cash-Modified Disbursement
System (MDS), Regular P 29,800
To record the replenishment of Petty Cash based on the DV, RPPCVs and SDs
Cash-Collecting Officer P 200
Petty Cash P 200
To record return of unused PCF upon retirement, resignation, separation and
termination of the Petty Cash Custodian based on the OR
Account Title Account Debit Credit
Code
Assume the following are the unreplenished
PCVs as at December 31:
Office Supplies P 300
Traveling Expenses-Local 400
P 700
Traveling Expenses-Local P 300
Office Supplies Expenses 400
Petty Cash P 700
To record the unreplenished petty cash at the end of the year
Self-constructed Property. If an IP is self-constructed, whether by contract or by administration, all costs related to
the construction shall be recognized as “Construction in Progress” while it is not completed. Upon completion,
these costs shall be transferred to an “Investment Property” account when the criteria for recognition of such are
met.

Example: Entity A constructed a building intended to earn rent income. Contract price is P11,200,000, inclusive of
VAT, payable in two progress billings. Advance payment to contractor is 15% of the contract price while retention
fee is 10% of the progress billing.

The following are the illustrative accounting entries:

Account Title Debit Credit

Advances to Contractors P 1,680,000
Cash-Modified Disbursement
System (MDS), Regular P 1,680,000
To recognize payment of mobilization fee to contractor
Construction in Progress- Buildings
and Other Structures P 5,600,000
Advances to Contractors P 1,680,000
Accounts Payable 3,920,000
To recognize first progress billing – 50% completed
(P11,200,000 x 50% = P5,600,000 – P1,680,000 = P3,920,000)
Accounts Payable P 3,920,000
Guaranty/Security Deposits
Payable P 560,000
Due to BIR 350,000

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Cash-Modified Disbursement
System (MDS), Regular 3,010,000
To recognize payment for first progress billing
Cash-Tax Remittance Advice P 350,000
Subsidy from National
Government P 350,000
To recognize constructive receipt of NCA for TRA
Due to BIR P 350,000
Cash-Tax Remittance Advice P 350,000
To recognize constructive remittance of withholding tax through TRA
Construction in Progress- Buildings
and Other Structures P 5,600,000
Accounts Payable P 5,600,000
To recognize receipt of final progress billing
Accounts Payable P 5,600,000
Guaranty/Security Deposit
Payable P 560,000
Due to BIR 350,000
Cash-Modified Disbursement
System (MDS), Regular 4,690,000
To recognize payment of final progress billing
Cash-Tax Remittance Advice P 350,000
Subsidy from National
Government P 350,000
To recognize constructive receipt of NCA for TRA
Due to BIR P 350,000
Cash-Tax Remittance Advice P 350,000
To recognize constructive remittance of withholding tax through TRA
Investment Property, Buildings P 11,200,000
Construction in Progress-
Buildings and Other
Structures P 11,200,000
To recognize IP based on the certificate of acceptance
Guaranty/Security Deposits
Payable P 1,120,000
Cash-Modified Disbursement
System (MDS), Regular P 1,120,000
To recognize refund of retention fee

Entity A constructed a building by administration with total costs of P1,048,000, consisting of construction materials
(inclusive of VAT), labor costs and various overhead expenses amounting to P448,000, P350,000, and P250,000,
respectively.
The illustrative accounting entries shall be as follows:
Account Title Debit Credit
Construction Materials Inventory P 448,000
Due to BIR P 24,000
Cash-Modified Disbursement
System (MDS), Regular 424,000
To recognize payment of construction materials amounting to P 448,000
Construction in Progress-
P 448,000
Investment Property, Buildings
Construction Materials
Inventory P 448,000
To recognize issue of construction materials amounting to P 448,000
Construction in Progress-
P 350,000
Investment Property, Buildings
Due to BIR P 35,000
Cash-Modified Disbursement
System (MDS), Regular 315,000
To recognize payment of labor costs amounting to P350,000
Construction in Progress-
P 250,000
Investment Property, Buildings
Water Expenses P 10,000
Electricity Expenses 150,000
Salaries and Wages-Regular 90,000

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To recognize payment of overhead expenses amounting to P250,000

Cash-Tax Remittance Advice P 59,000
Subsidy from National
Government P 59,000
To recognize constructive receipt of NCA for TRA
Due to BIR P 59,000
Cash-Tax Remittance Advice P 59,000
To recognize constructive remittance of taxes withheld through TRA
Investment Property, Buildings P 1,048,000
Construction in Progress-
Investment Property,
Buildings P 1,048,000
To recognize investment property upon completion of construction

Purchase of PPE. PPE acquired through purchase are charged against appropriations/allotments or special budget
for capital outlay. PPE can be purchased on cash basis, on account, on installment basis, with promotional items,
and at a lump sum price.
a. On Cash Basis. PPE acquired through cash purchase shall initially be recognized at cost which includes
cash paid plus all costs incurred in bringing the asset to the location necessary for its intended use such as
delivery, installation costs, etc. These are recognized in the books of accounts as PPE after inspection and
acceptance of delivery.
Example: An entity purchased a photocopying machine with the following costs:
Total cost:
Invoice price P45,000
Delivery cost 3,000
Installation cost 1,500
Test run cost 1,000
Total 50,500
Less: Withholding Tax 3,140
Net Amount Paid P37,460
The accounting entries to recognize the photocopying machine shall be as follows:
Account Title Debit Credit
Office Equipment P50,500
Cash-Modified Disbursement
System (MDS), Regular P37,460
Due to BIR 3,140
To recognize cash purchase of office equipment
b. On Account. When an asset is acquired on account subject to a cash discount, the cost of the asset is equal to the
purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
Example: An entity purchased a threshing machine on account at P200,000, with credit terms of 2/10, n/30. The
accounting entries to recognize the machine shall be as follows:
Account Title Debit Credit
Agricultural and Forestry Equipment P196,000
Accounts Payable P196,000
To recognize purchase of machinery on account
Accounts Payable P196,000
Cash-Modified Disbursement
System (MDS), Regular P184,240
Due to BIR 11,760
To recognize payment of machinery within the discount period
Accounts Payable P196,000
Other Losses 4,000
Cash-Modified Disbursement
System (MDS), Regular P188,240
Due to BIR 11,760
To recognize payment of machinery beyond the discount period

Note: The cost of the asset is the invoice price minus the discount regardless of whether the discount is taken or not. Cash
discounts are generally considered as reduction of cost and not as income. If the discount is not taken, it shall be
recognized as Other Losses.
c. On Installment Basis. The cost of an item of PPE is the cash price equivalent or its fair value at the recognition date.
However, if acquired through installment and payment is deferred beyond normal credit terms, the difference between
the cash price equivalent and the total payment is recognized as interest over the period of credit, unless such interest
is capitalized as allowed in PPSAS 5, Borrowing Cost.
Example: An entity purchased a bulldozer at an installment price of P3,000,000. The terms are P500,000 down payment
and the balance is payable in four equal annual installments. The cash price of the heavy equipment is P2,700,000. The
purchase shall be recognized as follows:
Account Title Debit Credit
Construction and Heavy Equipment P2,700,000
Accounts Payable P2,200,000
Cash-Modified Disbursement
System (MDS), Regular 355,359

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Due to BIR 144,641

Accounts Payable P550,000
Interest Expenses 75,000
Cash-Modified Disbursement
System (MDS), Regular P 625,000
To recognize the first installment payment and corresponding interest
APPROPRIATIONS, ALLOTMENTS AND OBLIGATIONS
Memorandum Entry /Posting to
(1) Receipt of Gen Appropriations Act the appropriate RAPAL
PS (Personal Services) 650,000 (Registry of Appropriations
MOOE (Maint. & Oth Oper Exp) 750,000 and Allotments)
CO (Capital Outay) 1,000,000
Total 2,400,000
Memorandum Entry / Posting to the
(2) Receipt of allotment from the DBM appropriate RAPAL and RAOD
PS 640,000 (Registry of Appropriations and
MOOE 725,000 Obligations for Disbursements)
CO 950,000
Total 2,315,000
Memorandum Entry /Posting of ORS
(Obligation of Request and Status) to the
(3) Incurrence of obligation appropriate RAOD
PS 600,000
MOOE 69,000
Capital Outlays 940,000
1,609,000
(4) Receipt of Notice of Cash of Allocation Cash-Modified Disbursement System
from DBM (net of tax) (MDS), Regular 1,200,000
Subsidy from National
a) for current year's 1,200,00 Government 1,200,000
appropriation 0
b) for prior year's accounts payable and Cash-Modified Disbursement System
not yet due and demandable obligations (MDS), Regular 26,618
Subsidy from Nat’l. Govt. 26,618
26,618

REVENUE
(5) Billing of revenue/income
Rent/Lease Income 30,000 Accounts Receivable 300,000
Waterworks System Fees 50,000 Rent/Lease Income 30,000
Power Supply System Fees 100,000 Waterworks System Fees 50,000
Seaport System Fees 45,000 Power Supply System Fees 100,000
Landing and Parking Fees 75,000 Seaport System Fees 45,000
Total 300,000 Landing and Parking Fees 75,000
6) Collections and Remittances
a. Prior year's Billed Revenue
Income
a.1 collection
Permit Fees 10,000 Cash-Collecting Officers 10,000
Accounts Receivable 10,000
Cash-Treasury/Agency Deposit, 10,000
a.2 remittance to BTr Regular
Cash-Collecting Officers 10,000
b. CY Billed Revenue/Income
b.1 collection Cash-Collecting Officers 200,000
Rent/Lease Income 25,000 Accounts Receivable 200,000
Waterworks System Fees 50,000
Power Supply System Fees 75,000
Seaport System Fees 40,000
Landing and Parking Fees 10,000
Total 200,000
162,000
Cash-Treasury/Agency Deposit,
b.2 remittance to BTr Regular
Cash-Collecting Officers 162,000
c. Unbilled Tax Revenue
c.1 collection thru Agency Collecting Officer Cash-Collecting Officers 270,000
Travel Tax 20,000 Travel Tax 20,000
Immigration Tax 250,000 Immigration Tax 250,000

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total 270,000
Cash-Treasury/Agency Deposit, 270,000
c.2 remittance to BTr Regular
Cash-Collecting Officers 270,000
c.3 direct deposit thru Authorized Agent Cash-Treasury/Agency Deposit, 275,000
Banks Regular
Travel Tax 75,000 Travel Tax 75,000
Immigration Tax 200,000 Immigration Tax 200,000
275,000
d. Unbilled Service Income
d.1 collection Cash-Collecting Officers 750,000
Permit Fees 200,000 Permit Fees 200,000
Registration Fees 75,000 Registration Fees 75,000
Registration Plates, Tags and Registration Plates, Tags and Sticker
Sticker Fees 125,000 Fees 125,000
Clearance & Certification 30,000 Clearance and Certification Fees 30,000
Franchising Fees 100,000 Franchising Fees 100,000
Licensing Fees 50,000 Licensing Fees 50,000
Supervision and Regulation
Enforcement Fees 60,000 Supervision and Regulation
Spectrum Usage Fees 20,000 Enforcement Fees 60,000
Legal Fees 25,000 Spectrum Usage Fees 20,000
Inspection Fees 5,000 Legal Fees 25,000
Verification and 5,000
Authentication Fees 20,000 Inspection Fees
Passport and Visa Fees 10,000 Verification and Authentication Fees 20,000
Processing Fees 25,000 Passport and Visa Fees 10,000
Fines and Penalties Service 25,000
Income 3,000 Processing Fees
Other Service Income 2,000 Fines and Penalties Service Income 3,000
750,000 Other Service Income 2,000
Cash-Treasury/Agency Deposit, 750,000
d.2 remittance Regular
Cash-Collecting Officers 750,000

e. Unbilled Business Income without authority to use

e.1 collection Cash-Collecting Officers 3,000
Affiliation Fees 400 Affiliation Fees 400
Examination Fees 500 Examination Fees 500
Seminar/Training Fees 1,000 Seminar/Training Fees 1,000
Guarantee Income 400 Guarantee Income 400
Fines and Penalties- Business
Income 200 Fines and Penalties- Business Income 200
Other Business Income 500 Other Business Income 500
total 3,000
Cash-Treasury/Agency Deposit,
e.2 remittance Regular 3,000
Cash-Collecting Officers 3,000

(7) Delivery of Office Equipment and Office Supplies for agency use
Assumption: Beginning of the year
a. Prior Year's obligation
receipt of delivery Office Supplies Inventory 200
Office Supplies Inventory 200 Accounts Payable 200
b. Current year's purchases and delivery
receipt of delivery Office Equipment 658,000
Office Equipment 658,000 Office Supplies Inventory 13,800
Office Supplies Inventory 13,800 Accounts Payable 671,800
671,800

(8) Payment of Personnel Benefits

a. Set up of payable to Officers and Employees 510,000
Salaries and Wages Regular
upon approval of payroll
510,000 Personnel Economic Relief 55,000
Salaries and Wages
Allowance (PERA)
PERA 55,000 Due to BIR 51,000
Gross Compensation 565,000 Due to GSIS 15,300

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Withholding Tax 51,000 Due to PagIBIG 10,200

GSIS 15,300 Due to PhilHealth 510
PAG-IBIG 10,200 Due to Officers & Employees 487,990
PhilHealth 510

Total Deductions 77,010

Net 487,990
b. Grant of Cash Advance for 487,990
487,990 Advances for Payroll
payroll
Cash-Modified Disbursement
System (MDS), Regular 487,990
To recognize grant of cash
advance for payroll
(9) Liquidation of Payroll Fund 487,990 Due to Officers and Employees 487,990
Advances for Payroll 487,990
(10) Payments of MOOE and Traveling Expenses -Local 4,416
accounts payable Training Expenses 11,040
a. payment of expenses Water Expenses 1,656
Traveling-Local (reimbursement) 4,416 Electricity Expenses 8,280
Training 11,040 Telephone Expenses 1,656
Water 1,656 Janitorial Services 1,104
Electricity 8,280 Security Services 2,760
Telephone 1,656 Rent/Lease Expenses 22,080
Janitorial 1,104 Due to BIR 2,158
2,760 Cash-Modified Disbursement
Security System MDS, Regular 50,834
Rent 22,080
52,992
Less: Withholding taxes* 2,158
Net 50,834
* Withholding taxes:
Training 283
10% withholding tax (income) 110
1% withholding tax on income 99
5% withholding of final tax (VAT) 74
Water 33
Electricity 414
Telephone 83
Janitorial 69
2% withholding tax on income 20
5% withholding of final tax (VAT) 49
Security 173
2% withholding tax on income 49
5% withholding of final tax (VAT) 123
Rent 1,104
Total Withholding taxes 2,158
b. payment of accounts payable
b.1 current year's acts payable Accounts Payable 537,440
Purchase of : Due to BIR 28,791
Office Equipment 526,400 Cash-Modified Disbursement
System (MDS), Regular 508,649
Office Supplies Inventory 11,040
Total 537,440
Less: 1% tax on income 4,799
5% final tax (VAT) 23,993
Withholding tax 28,791
Net 508,649
Breakdown of Wtax
Office Equipment 28,200
Office Supplies Inventory 591
28,791

b.2 prior year's accts payable Accounts Payable 20,000

MOOE Due to BIR 1,250
20,000 Cash-Modified Disbursement
Total System (MDS), Regular 18,750
Less: Withholding tax 1,250
2% Wtax on income 357
5% With. final tax (VAT) 893

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AFAR-21
Week 17: GOVERNMENT ACCOUNTING

Net 18,750
b.3 prior year's obligation Accounts Payable 200
MOOE Due to BIR 11
Total 200 Cash-Modified Disbursement
Less: Withholding tax System (MDS), Regular 189
1% withholding tax on
income 2
5% withholding of final tax
(VAT) 9
Net 189
c. grant of cash advance for Advances to Officers and 2,000
traveling expenses 2,000 Employees
Cash-Modified Disbursement
System (MDS), Regular 2,000
d. liquidation of cash advance for 1,900 Traveling Expenses-Foreign 1,900
traveling expenses -foreign Advances to Officers and Employees 1,900
e. receipt and deposit of refund 100 Cash-Collecting Officers 100
of excess cash advance for Advances to Officers and Employees 100
Cash-Treasury/Agency Deposit,
traveling expenses Regular 100
Cash-Collecting Officers 100
(11) Remittance of taxes thru TRA
a. Constructive receipt of NCA Cash-Tax Remittance Advice 87,460
Subsidy from National 87,460
for TRA consisting of: Government
PS 55,250
MOOE 4,010
CO 28,200
Total 87,460
Breakdown per type of tax:
Income Tax 60,685
Business Tax 26,775
Total 87,460
b. Remittance of taxes thru TRA Due to BIR 87,460
Cash-Tax Remittance Advice 87,460
Income Tax 60,685
Business Tax 26,775
Total 87,460

(12) Remittance of the following:

GSIS 15,300 Due to GSIS 15,300
PAG-IBIG 10,200 Due to PagIBIG 10,200
PhilHealth 510 Due to PhilHealth 510
26,010 Cash-Modified Disbursement
System (MDS), Regular 26,010

(13) Issuance of supplies and materials Office Supplies Expenses 12,420

to end users Office Supplies Inventory 12,420
Subsidy from National 132,196
(14) Adjustment for unused NCA Government
1,226,618 Cash-Modified Disbursement
NCA Received System (MDS), Regular 132,196
Payments 1,094,422
132,196
Depreciation of Office Equipment (estimated life of 5 Depreciation-Machinery and
15) years) Equipment 140,220
140,220 Accumulated Depreciation-Office
yearly depreciation Equipment 140,220

Depreciation of building with an estimated life of 25 Depreciation-Buildings and

(16) years Other Structures 19,000
yearly depreciation 19,000 Accumulated Depreciation-Buildings 19,000

Allowance for impairment of Impairment Loss - Loans and 120

(17) accounts receivable Receivables
Allowance for Impairment - Accounts 120
Receivable

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AFAR-21
Week 17: GOVERNMENT ACCOUNTING

(18) Closing entries for:

a. Income Accounts Travel Tax 95,000
Immigration Tax 450,000
Permit Fees 200,000
Registration Fees 75,000
Registration Plates, Tags and 125,000
Sticker Fees
Clearance and Certification 30,000
Fees
Franchising Fees 100,000
Licensing Fees 50,000
Supervision and Regulation 60,000
Enforcement Fees
Spectrum Usage Fees 20,000
Legal Fees 25,000
Inspection Fees 5,000
Verification and Authentication 20,000
Fees
Passport and Visa Fees 10,000
Processing Fees 25,000
Fines and Penalties Service 3,000
Income
Other Service Income 2,000
Affiliation Fees 400
Examination Fees 500
Seminar/Training Fees 1,000
Rent/Lease Income 30,000
Waterworks System Fees 50,000
Power Supply System Fees 100,000
Seaport System Fees 45,000
Landing and Parking Fees 75,000
Guarantee Income 400
Fines and Penalties- Business 200
Income
Other Business Income 500
Revenue and Expense
Summary 1,598,000
To recognize closing of income accounts
Revenue and Expense 791,652
b. Expense Accounts Summary
Salaries and Wages Regular 510,000
Personnel Economic Relief 55,000
Allowance (PERA)
Traveling Expenses -Local 4,416
Traveling Expenses -Foreign 1,900
Training Expenses 11,040
Office Supplies Expenses 12,420
Water Expenses 1,656
Electricity Expenses 8,280
Telephone Expenses 1,656
Janitorial Services 1,104
Security Services 2,760
Rent/Lease Expenses 22,080
Depreciation-Buildings and Other 19,000
Structures
Depreciation-Machinery and Equipment 140,220
Impairment Loss - Loans and Receivables 120
To recognize closing of expense
accounts

c. Subsidy from NG and Subsidy from National 1,182,882

Subsidy to NGAs Government
Revenue and Expense
Summary 1,182,882
To recognize closing of subsidy account
Revenue and Expense
d. Revenue and Expense Summary Summary 1,998,230
Accumulated Surplus/(Deficit) 1,998,230
To recognize closing of revenue and
expense summary account

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY AFAR-21
Week 17: GOVERNMENT ACCOUNTING

e. Cash Deposit Account Accumulated Surplus/(Deficit) 1,320,100

Cash-Treasury/Agency
Deposit, Regular 1,320,100
To recognize closing of cash deposit account
POST CLOSING TRIAL BALANCE AGENCY (except BIR and BOC)
Debit Credit
Cash-Collecting Officer 178,000
Accounts Receivable 135,000
Allowance for Impairment -
Accounts Receivable 120
Buildings 500,000
Accumulated Depreciation-Buildings 19,000
Office Equipment 738,000
Accumulated Depreciation-Office 140,220
Equipment
Office Supplies Inventory 1,580
Accounts Payable 134,360
Due to BIR -
Due to GSIS 1,275
Due to Pag-IBIG 850
Due to PhilHealth 43
Accumulated Surplus/(Deficit) 1,256,713
Total 1,552,580 1,552,580

-end-

**Whatever is expressed is impressed. Whatever you say to yourself, with emotion,

generates thoughts, ideas and behaviors consistent with those words**
**Be not afraid of life. Believe that life is worth living and your belief
will help create the fact.**
**Attitude is more important than the past, than education, than money, than
circumstances, than what people do or say. It is more important than appearance,
giftedness, or skill.**
**The only way to find the limits of the possible is by going beyond them to the
impossible.**

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