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kimmy o

on 24 February 2014

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Transcript of NATURE AND SCOPE:



1. To produce information concerning past operations and present conditions;
2. To provide a basis for guidance for future operations;
3.To provide for control of the acts of public bodies and offices in the receipt, disposition and utilization of funds and property;
4. To report on the financial position and the results of operations of gov't agencies for the information and guidance of all persons concerned.

1. Produce a system in conformity with IAS
2. Pursuit of computerization
- including responsibility accounting, thereby ensuring the generation of various reports that are useful to management, lawmakers and the general public;
3. Generation of relevant and periodic financial statements;
4. Effective tool for managers and executives in effective and efficient monitoring of Agency performance.

Government Accounting -
encompasses the process of analyzing, recording, classifying, summarizing, and communicating all transactions involving the receipt and disposition of government fund and property, and interpreting the results thereof.

-Introduced basic policies, the new encoding system, the accounting systems, books, registries, records, forms, reports and financial statements to be adopted by ALL NATIONAL GOVERNEMENT AGENCIES in January 1, 2005.

*OLD GAS: uses manual system
Commission on Audit (COA)

-keeps general accounts of the government
-promulgates rules and regulations
-submits to president and congress an annual report of the gov’t, subdivisions, agencies and instrumentalities, & GOCC’s. (not later than the last day of September)
- define scope
- establish techniques
- promulgates rules and regulations
- NO longer journalizes appropriation & allotment by DBM
Department of Budget and Management (DBM)
-responsible for formulation & implementation of Nat’l Budget w/ goal of attaining our national socio-economic plans and objectives
-responsible for efficient & sound utilization of funds & revenues.
-Registry of Appropriations (RAPAL)
-Registry of Special Purpose Fund Appropriations and Allotments (RESPFA)
-Registry of Allotments and Notice of Cash Allocagtion (RANCA)
-Control and monitoring of Notice of Cash Allocation releases
Bureau of Treasury (BOT)
* Authority:
-receive and keep national funds, manage and control the disbursements thereof
-maintain accounts of financial transactions of all national government offices, agencies and instrumentalities.
-maintain Registry of NCA and Replenishments (RENREP)
-monitoring bank transfers it makes in replenishing MDS accounts
Gov’t Agencies:
-Accounting personnel are under Head of Agency
- Accounting personnel responsibilities:
Maintain and keep accounts of agency
Provide advice on condition and status of appropriations and allotments
Develop and conduct procedures designed to meet needs

Journalize Notice of Cash allocation (NCA)
No longer journalize share in income of national gov’t
Maintain registries for allotments:
-Registry of allotments & obligations – personal services (RAOPS)
-RAO – Maintenance & Operating Expenses (RAOMO)
-RAO- Capital Outlay (RAOCO)
-RAO- Financial Expenses (RAOFE)
Gov’t Agencies:
Government Accounting vs Private Accounting
Private Sector
- does not record stocks, debtors in the balance sheet (Statement of Assets and liabilities)
-focuses on the provision of adequate welfare to the people with probity, accountability, legal and wise spending in mind.
-displays those items, and others such as “sales”, “cost of goods sold” and “carriage outward expenses‟‟ (in the trading and profit and loss accounts).
-peculiar to commercial undertakings which maximization of profit is the main objective.

Private Sector
-adopts “modified cash and accrual basis” of accounting
-operates predominantly “fund accounting” method in collating its data and information.

-adopts “cash/ accrual basis”
-uses the proprietary (or ownership) style which discloses the nature and sources of the enterprise's finance or capital structure - ordinary share capital/ capital structure, such as “ordinary share capital” and “preference share capital.”
a. Accrual Accounting
1. Accrual Method - used by national government agencies when income is realized (earned) during the accounting period regardless of cash receipt. Accounts receivable is set up and the general or specific income accounts according to nature and classification are credited.
2. Modified Accrual – Under the modified accrual basis, income of an agency is recorded as “Deferred Credits to Income” and the appropriate receivable account is debited. The income account is recognized upon receipt of collection and the “Deferred Credits to Income” account is adjusted accordingly.

3. Cash Basis - Cash basis of accounting shall be used for all other taxes, fees, charges and other revenues where accrual method is impractical. The income account is credited upon collection of the cash or its equivalent.
b. One Fund Concept
-done only when specifically required by law or by a donor agency or when otherwise necessitated by circumstances
General fund.
-available for all functions of government.

Special Purpose Fund

1. Miscellaneous Personal Fund
-used to cover personnel benefits which are not provided for in the regular budget of the agency.
2. Calamity Fund
-used to cover relief, rehabilitation, reconstruction and other services in connection with calamities that may occur during the budget year.
3. Organizational Adjustment Fund
- used to cover budgetary requirements of a newly created organization, program/project/activity w/i an agency.
c. Chart of Accounts and Account Codes
Accounts Account Codes
Assets 100-299
Asset Contra Accounts 300-399
Liabilities 400-499
Equity 500-599
Revenue/Income 600-799
General Income Accounts 600-699
Specific Income Accounts 700-799
Expenses 800-960
Personal Services 801-830
Maintenance and Other 831-950
Operating Expenses
Financial Expenses 951-960

-consists of three-digit codes grouped as follows
Current Assets
For the rest of the Chart of Accounts, Refer to Section 9.

101 Cash in Treasury
102 Cash – National Treasury, Modified Disbursement System (MDS)
103 Cash – Bangko Sentral ng Pilipinas
105 Petty Cash Fund
106 Cash – Collecting Officers
107 Cash – Disbursing Officers
110 Cash in Bank – Local Currency, Current Account
111 Cash in Bank – Local Currency, Savings Account
112 Cash in Bank – Local Currency, Time Deposits
113 Cash in Bank – Foreign Currency, Current Account
114 Cash in Bank – Foreign Currency, Savings Account
115 Cash in Bank – Foreign Currency, Time Deposits

d. Books of Accounts
Concepts of Responsibility Accounting:
A system that relates the financial results to a responsibility center, which provides access to cost and revenue information under the supervision of a manager having direct responsibility for its performance.

-a part, segment, unit or function of a government agency, headed by a manager, who is accountable for a specified test of activities.

1. Responsibility accounting involves accumulating and reporting data on revenues and costs o the basis of the manager’s action.
2. Evaluation of manager’s performance.
3. Responsibility accounting can be used at every level of management in which conditions exist.
4. The reporting of costs and revenues under responsibility accounting differs from budgeting in 2 aspects:
a. A distinction between controllable and non- controllable.

b. Performance reports either emphasize or include only items controllable by individual manager.
5. A responsibility reporting system involves the preparation of a report for each level of responsibility.

6. Evaluation of a manager’s performance for cost centers.

Responsibility Center Code Structure

Regular Agency (RA) Books:

National Agency (RA) Books:
- record the receipt and utilization of Notice of Cash Allocation (NCA) and other income/receipts which the agencies are authorized to use and to deposit with Authorized Government Depository Bank (AGDB) and the National Treasury

Subsidiary Ledgers (SL)
-Property, Plant and Equipment
-Construction in Progress

-Cash Receipts Journal (CRJ)
-Cash Disbursements Journal (CDJ)
-Check Disbursements Journal (CkDJ)
-General Journal (GJ)

-General Ledger (GL)
-Subsidiary Ledgers (SL)

-used to record income which the agencies are not authorized to use and are required to be remitted to the National Treasury.
-Cash Journal (CJ)
-General Journal (GJ)
-General Ledger (GL)
-Subsidiary Ledger (SL)
*With the implementation of the computerized agency accounting system, only the General Journal shall be used together with the ledgers by both books.
e. Financial Statements
-Balance Sheet
-Statement of Government Equity
-Statement of Income and
-Statement of Cash Flows
*Notes to Financial Statements shall accompany the above statements.
Balance Sheet
Statement of Income and Expenses.
- The Statement of Income and Expenses shows the results of operation/performance of the agency at the end of a particular period. This statement shall be prepared by the Accounting Unit from information taken directly from the Pre-Closing Trial Balance.
Statement of Government Equity
The Statement of Government Equity shows the financial transactions, which resulted to the change in Government Equity account at the end of the year.

Statement of Cash Flows
-The Statement of Cash Flows is a statement summarizing all the cash activities of an agency. This includes the operating, investing and financing activities of the entity and provides information on the cash receipts and cash payments during the period. The primary purpose of the Statement of Cash Flows is to give relevant information on the agency’s overall cash position, liquidity and solvency. Using the Statement of Cash Flows, managers, investors and creditors could easily assess if the agency could meet its obligations in operating, investing and financing activities

Notes to Financial Statements
-is a formal statement which shows the financial condition of the agency as of a certain date. It includes information on the three elements of financial position - assets, liabilities and government equity
- To be supported with the following schedules/statements:
-Schedules of Accounts Receivables (SAR)
-Schedules of Accounts Payables (SAP)
-Schedules of Public Infrastructures (SPI)
-Other schedules as may be required
1) Operating Activities
-involves the principal resources producing activities of the enterprise and other activities that are not investing or financing (SFAS 22). Generally, these include the cash effect on transactions that enter in the Income and Expense Summary account.
2) Investing Activities
-involves the acquisition and disposal of long-term assets and other investments not included in cash equivalent (SFAS 22). These activities include cash transactions covering non-operating assets, such as the purchase of property, equipment, short and long-term investments and other non-current assets.

*Non-cash investing activities are not included in the statement of cash flows.

3) Financing Activities
-are derived from the equity capital and borrowings of the agency (SFAS 22). These include cash transactions involving the government equity and non-operational liabilities.

Non-cash financing activities are not included in the statement of cash flows.

Cash flows from operating activities

Cash Inflows:
 Receipt of Notice of Cash allocation (NCA) from the DBM
 Receipt of Notice of Transfer of Allocation to Agency RO/OU from CO
 Cash receipts from all sources of revenues
 Receipt of Inter – agency cash transfers (Due to)
 Cash receipts from the sale of goods or rendition of services
 Cash receipt of interest income, rental income, dividend income, etc.
 Receipt of payment for liquidated damages
 Receipt of refund of deposits
 Receipt of refunds of cash advance or excess payments
 Collection of receivables
 Cash receipt of grants and donations
 Receipt of cash dividends from enterprises (e.g. PLDT)

Cash Outflows:
 Payments of accounts payable
 Cash purchase of merchandise for sale
 Cash advances granted for travel
 Inter-agency transfers (Due from)
 Notice of Transfer of Allocation to Agency RO/OU issued by the NGA Main Office to RO/OU and/or attached agencies through Government Servicing Banks
 Return of unused NCA
 Cash payment for operating expenses
 Remittance of taxes withheld not covered by TRA and other deductions (if any)
 Cash purchase of supplies and equipment
 Cash payment of retirement benefits
 Cash payment of claims for damages
 Cash payment for liabilities incurred in operations
 Cash payments for interest
Cash flows from investing activities:

Cash Inflows:
 Proceeds from sale of marketable stocks and bonds
Cash proceeds from the sale/disposal of equipment and other property, plant and equipment
 Redemption of long-term investments or repayment by GOCC/GFI of long-term loans

Cash Outflows:
 Purchase of property, plant and equipment
 Purchase of land
 Investment in stocks/bonds
 Investment in GOCC/GFI
 Exposure as other long-term investments

Cash flows from financing activities:

Cash Inflows:
 Cash received from domestic and foreign loans
 Issuance of treasury bills

Cash Outflows:
 Payment of domestic and foreign loans
 Redemption of treasury bills outstanding
 Payment of cash dividend

*The net increase in cash provided by operating activities, investing activities and financial activities for the year, and the cash balance at the start of the year, shall equal the cash balance at the end of the year. Such amount shall tally with the total cash account shown in the balance sheet.

-Notes to Financial Statements are integral parts of financial statements, which pertain to additional information necessary for fair presentation in conformity with generally accepted accounting principles. These may explain the headings captions or amounts in the statements of present information that cannot be expressed in money terms, and description of accounting policies.
f. Two-Money Column Trial Balance
-balance showing the account balances shall be used.
OLD: four column
NGAS: similar to commercial accounting
g. Allotment and Obligation
Allotment – authorization issued by DBM to an agency to incur obligation up to a specified amount
Obligation – commitment by a gov’t agency which binds gov’t to immediate payments of money.

Classes of allotments
• Registry of Allotments and Obligations - Capital Outlay (RAOCO)
• Registry of Allotments and Obligations - Maintenance and Other Operating Expenses (RAOMO)
• Registry of Allotments and Obligations - Personal Services (RAOPS)
• Registry of Allotments and Obligations- Financial Expenses (RAOFE).

h. Notice of Cash Allocation
-receipt of NCA by the agency shall be recorded in the books as debit to account “Cash-National Treasury, Modified Disbursement System (MDS)” and credit to account “Subsidy Income from National Government”.
Cash-National Treasury, Modified Disbursement System XX
Subsidy Income from National Government XX

i. Financial Expenses
Financial expenses such as bank charges, interest expenses, commitment charges and other related expenses shall be separately classified from Maintenance and Other Operating Expenses (MOOE).

recognized under Maintenance and other operating expenses (MOE)

j. Perpetual Inventory of Supplies and Materials
-Supplies and materials purchased for inventory purpose shall be recorded using the perpetual inventory system.
-Regular purchases shall be coursed thru the inventory account and issuances thereof shall be recorded as they take place except those purchased out of Petty Cash Fund which shall be charged directly to the appropriate expense accounts.

k. Valuation of Inventory
- Cost of ending inventory of supplies and materials shall be computed using the moving average method.

l. Maintenance of Supplies and PPE Ledger Cards
Accounting units of agencies shall maintain:
-Supplies ledger cards/stock cards by stock number
-Property, Plant and Equipment Ledger Cards/Property Cards by category of PPE

m. Construction of Assets
Construction of Theory shall be applied:

n. Registry of Public Infrastructures/Registry of Reforestation Projects
RPI/RRP shall be maintained for each specific infrastructure/reforestation project.

Registry of Public Infrastructure-Bridges (RPIB)
Registry of Public Infrastructure-Roads(RPIR)
Registry of Public Infrastructure-Parks (RPIP)

o. Depreciation
-Straight Line Method
-Starts on the 2nd month after purchase
-10% of purchase cost=residual value

* Public Infrastructure/Reforestation Projects as well as serviceable assets that no longer being used shall not be charged any depreciation.

p. COA Circular No. 2003-007Dec. 11,2003
q. Reclassification of Assets
Other Assets
-Serviceable assets no longer used
-Obsolete assets
-Unserviceable assets

r. Allowance for Doubtful Accounts
Set-up Estimated Uncollectible trade receivables
A/R xx
Est. Uncoll. t/r xx
* Provided only to Trade Receivables

s. Recognition of Liability
Recognized if:
-Goods are accepted
-Services are rendered
-Supplier/Creditor bills are received

t. Interest Accrual
u. Accounting for Borrowings and Loans
v. Elimination of Corollary and Negative Journal Entries
b) Loans Payable – long – term, Foreign
used to record long – term indebtedness (in cash or in kind) from foreign governments or international financial institutions evidenced by a contract or an agreement

Loans Payable – Long – term, Foreign XX
Cash XX

To record the payment for a liability account.

-All borrowings and loans are recorded under the appropriate liability accounts which includes:
a) Loans Payable – long – term, Domestic
- used to record long – term indebtedness (in cash or in kind) from domestic creditors evidenced by a contract or an agreement

JE: Loans Payable – Long – term, Domestic XX
Cash XX
To record the payment for a liability account.
Corollary Entries:
Under Old Government accounting system:
Corollary entry arises from the operation of obligation accounting (Inventories, supplies and materials, Fixed assets and long term investments)
Under Obligation accounting:
Cost acquiring inventories and those enumerated above are direct charges appropriations. Acquired assets are entered in the books of accounts by corollary entry made at the time of obligation and/or actual receipt of asset

1. To record obligations for the purchase of fixed asset.
Appropriation allotted/Expenditures XX
Obligations Incurred XX
*Corollary entry:
Fixed assets – In transit XX
Invested surplus – Purch/ or Const XX
2. To liquidate obligation.
Obligation liquidated XX
TAAC - check disbursements XX
*Corollary entry:
Fixed assets – General public service XX
Fixed assets – In transit XX

w. Petty Cash Fund
-Under Imprest system
-All replenishments shall be directly charged to the expense account
PCF shall be equal to total Cash on Hand and the unreplenished expenses
-Restricted for the use to purchased regular inventory/items for stock
Establishment of PCF (Regular or Special Disbursing Officers)
-Shall only be used for petty or miscellaneous authorized expenditures(cannot be paid by check)

To Set up Petty Cash:
Petty Cash fund XX
Cash – National treasury XX

To record replenishments:
Office supplies expense XX
Traveling Expenses XX
Cash – National Treasury – MDS XX

To record the Liquidation of expenses:
Office Supplies Expenses XX
Traveling Expense – Local XX
Petty Cash Fund XX

To record unused PCF:
Cash – Collecting Officer XX
Petty Cash Fund XX

x. Foreign Currency Adjustments
Cash deposits in foreign currency and outstanding foreign loans(computed at the exchange rate prescribed by BSP at the balance sheet)
Total cash deposit and foreign loans payable shall be adjusted at the end of each month and any gain or loss on foreign exchange shall be recognized
Liability shall be expressed both in the Foreign and local currency

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