GOVERNMENT ACCOUNTING BASICS

GOVERNMENT
ACCOUNTING
BASIC CONCEPTS IN GOVERNMENT
ACCOUNTING
Old Government New Government

Accounting System Accounting System
(NGAS)
It is designed for
manual operations; Accounts are changed;
It is a complex system; It is now similar to
commercial accounting;
It is different from
and,
commercial accounting;
and, It enables government
agencies to produce
It is not in conformity
relevant financial
with the international
information to monitor
standards in accounting.
their performance
effectively.
BASIC CONCEPTS IN GOVERNMENT
ACCOUNTING
GOVERNMENT ACCOUNTING
Encompasses the process of analyzing,

recording, classifying, summarizing,
and communicating all transactions
involving the receipts and disposition
of government funds and property
and interpreting the results thereof
(Section 109, PD 1445)
OBJECTIVES OF GOVERNMENT
ACCOUNTING
To produce information concerning past and
present condition
To provide a basis for guidance for future
operations
To provide for control of the acts of public
bodies and officers in the receipt, disposition
and utilization of funds and property
To report on the financial position and the
results of operation of government agencies
for the information of all persons concerned
Generally Accepted Government
Accounting Principles (GAGAP)
a) The accounts of an agency shall be kept in such
detail as is necessary to meet the needs of the
agency and at the same time be adequate to
furnish the information needed by fiscal or
control agencies of the government. (Sec. 111, PD
1445)
b) The highest standards of honesty, objectivity and

consistency shall be observed in the keeping of
accounts to safeguard against inaccurate or
misleading information. (Sec. 111, PD 1445)
c. The government accounting system shall be on a
double entry basis with a general ledger in which all
financial transactions are recorded. (Sec. 114, PD
1445)
d. Subsidiary records shall be kept where necessary.

(Sec. 114, PD 1445)
e. The chart of accounts for government agencies shall

be prescribed by the Commission and shall be so
designed as to: (Sec.113, PD 1445)
1) permit agency heads to review their activities according to
selected areas of responsibility;
2) allow for a clearer definition of obligation accounting leading to
more precise budgetary control;
3) provide for a wider range of analytical information designed
for use in management audit or legislative review;
4) furnish information regarding the production of income and the
investment in capital items which is of value in fiscal and
economic planning;
5) enable tighter accounting control to be exercised over
agencies' financial relationship with the Treasury;
6) permit a more simplified preparation of trial balances and a
simpler and more orderly preparation of trial balances and a
simpler and more orderly process of national consolidation;
and,
7) facilitate the application of mechanized accounting procedures
for more effective protection against error and irregularity
and yielding economies in operation.
f. To permit effective budgetary control and to

establish uniformity in financial reports, accounts
shall be classified in balanced fund groups. The
group for each fund shall include all accounts
necessary to set forth its operations and
condition. All financial statements shall follow
this classification. (Sec. 116, PD 1445)
g. A common terminology and classification shall be

used consistently throughout the budget, the
accounts and the financial reports. (Sec. 115, PD
1445)
Generally Accepted Government Accounting
Principles (GAGAP)
h. The general accounting system shall include budgetary
control accounts for revenues, expenditures and debt,
as provided by P.D. No. 1177. (Sec. 117, PD 1445)
i. Estimated revenues which remain unrealized at the

close of the fiscal year shall not be booked or
credited to the unappropriated surplus or any other
account. (Sec. 118, PD 1445)
j. All lawful expenditures and obligations incurred during

the year shall be taken up in the accounts of that
year. (Sec. 119, PD 1445)
PD 1445 governs the accounting system
in the government.
NGAS replaces the old system in

government accounting and uses similar
accounts just like in commercial
accounting.
Branches of Government
Legislative makes the laws
Executive implements the laws
Judiciary interprets the laws

THREE TYPES OF GOVERNMENT
ORGANIZATION
National government refers to the government of

the Republic of the Philippines as a whole, including
executive, legislative and judicial branches, and the
constitutional commissions
Local government political subdivisions in the

Philippines having substantial control over s local
affairs, consisting of provinces, cities, municipalities
and barangays.
THREE TYPES OF
GOVERNMENT ORGANIZATION
Government corporations agencies organized by

law or pursuant to law, vested with functions relating
to public needs whether governmental or proprietary in
nature, owned by the government directly or through
its instrumentalities either wholly or, where applicable
as in case of stock corporation.
Government Agencies with Accounting
Responsibilities
Commission on Audit (COA) a constitutional commission tasked
with the accounting and auditing functions of the national
government.
1. Examine, audit and settle all accounts pertaining to the revenues

and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government
2. Promulgate accounting and auditing rules and regulations including
those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant or unconscionable
expenditures, or uses of government funds and properties
3. Submit annual reports to the President and the Congress on the
financial condition and operation of the government,
4. Recommend measures to improve the efficiency and
effectiveness of government operations.
5. Keep the general accounts of government and preserve the
vouchers and supporting papers pertaining thereto.
6. Decide any case brought before it within 60 days.
7. Performs such other duties and functions as may be provided by
law
Responsibilities
Department of Budget and Management (DBM) mandated to
promote the sound, efficient and effective management of
government resources as instrument in the achievement of
national socio-economic and political development. It is
responsible for the formulation and implementation of the
National Budget.
1. Formulates the overall resource application strategy to match
the governments macro economic policy
2. Prepares the medium term expenditure plan indicating the
programming, prioritization, and financing of capital
investment and current operating expenditure requirements
of medium term sectoral development plans
3. Undertakes the formulation of the annual national budget in a
way that ensures the appropriate prioritization and allocation
of funds to support the annual program of government
4. Develops and administers a national accounting system
essential to fiscal management and control.
Responsibilities
Department of Budget and Management (DBM) (cont)
5. Conducts a continuing study of the bureaucracy and
assesses as well as makes policy recommendation on its
role, size, composition, structure and functions to
establish a government bureaucracy imbued with a spirit
of public service
6. Establishes the rules and procedures for the management
of government organization resources, i.e., physical,
manpower and other resources, formulates standards of
organization program performance; and undertakes or
provides services in work simplification or streamlining of
systems and procedures to improve efficiency and
effectiveness in government operations
7. Conceptualizes and administers the governments
compensation and position classification plan
8. Monitors and assesses the physical as well as the financial
operations of LGUs and GOCCs
Responsibilities
Bureau of the Treasury (BTR) performs banking
functions for the NG. It receives and keeps
government funds, controls the disbursements
thereof, and maintains accounts of financial
transactions with each of the NGAs.
1. Assist in the formulation of policies on borrowing,
investment and capital market development
2. Formulate adequate operations guidelines for fiscal and
financial policies
3. Assist in the preparation by government agencies
concerned of an annual program for revenue and
expenditure targets, borrowing levels and cash balances of
NG
4. Maintains books of accounts of the cash transactions
5. Manage the cash resources, collect taxes made by NG and
guarantee forward cover fees due NG, control and
services its public debts, both foreign or domestic
Responsibilities
Bureau of the Treasury (BTR) cont.
6. Issue, service, redeems government securities for the
account of NG as maybe authorized by the President
pursuant to law
7. Administer the Securities Stabilization Fund by purchase
and sale in the open market of government bills and bonds to
increase the liquidity and stabilize the value of said
securities in order to promote private investment in
government securities
8. Act as principal custodian of financial assets of the NG, its
agencies and instrumentalities
9. Bond all accountable public officials and employees pursuant
to the provisions of the Public Bonding Law and issue
appropriate guidelines therefore
10. Perform such other related functions as may be assigned to
it by competent authorities.
USERS OF GOVERNMENT
ACCOUNTING INFORMATION
The general public or the citezenry
The legislative body which uses the financial data to

see to it that policies are being carried and that
funds are being properly handled as a guide in
formulating future policies
The managers/administrators who are in charge of

carrying out the policy and daily conduct of
government affairs
USERS OF GOVERNMENT
ACCOUNTING INFORMATION
The students of public finance and political scientists
and other social scientists who need financial
information in the pursuit of their studies
The resource providers of the government:

a. Donors and grantors would like to assess how well the
objective of a donation or grant have been accomplished
b. Taxpayer would like to know how the services provided by the
government are likely to affect the amount of taxes and fees
they will be required to pay
c. Lenders, suppliers and employees whose main concern is to know
whether the government can pay its obligations to them
Government budgeting proceed
NEW GOVERNMENT ACCOUNTING SYSTEM
(NGAS)
Effective January 1, 2002, the New Government Accounting
System (NGAS) was adopted by all government agencies.
It is a simplified set of accounting concepts, guidelines and
procedures designed to ensure correctness, completeness,
and timeliness in the recording of government financial
transactions, and production of financial reports.
It is a simple system that can be understood by all users,
accountants or non-accountants.
It is in conformity with international standards.
It is designed for the computerization in the accounting
system of all government agencies.
Objectives
Uniform guidelines and procedures in accounting

for government funds and property;
New coding structure and chart of accounts;
Accounting books, registries, records, forms,
reports and financial statements; and
Accounting entries.
Coverage all national government agencies

Legal Basis
The Commission on Audit shall have exclusive

authority, subject to the limitations in this
Article, to define the scope of its audit and
examination, establish the techniques and methods
required therefor, and promulgate accounting and
auditing rules and regulations, including those for
the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of
government funds and properties". (underscoring
supplied) - Article IX-D, Section 2 par. (2) of the 1987
Constitution of the Republic of the Philippines
Basic Features and Policies
Accrual Accounting. A modified accrual basis

of accounting shall be used. Under this method,
all expenses shall be recognized when incurred
and reported in the financial statements in the
period to which they relate. Income shall be on
accrual basis except for transactions where
accrual basis is impractical or when other
methods are required by law.
One Fund Concept. This system adopts the one

fund concept. Separate fund accounting shall be
done only when specifically required by law or
by a donor agency or when otherwise
necessitated by circumstances subject to prior
approval of the Commission.
Chart of Accounts and Account Codes. A new

chart of accounts and coding structure with a
three-digit account numbering system shall be
adopted. (See Volume III, The Chart of
Accounts)
Books of Accounts. All national agencies shall

maintain two sets of books, namely:
Regular Agency (RA) Books. These shall be used to

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. These shall consist of journals
and ledgers, as follows:
Journals
Cash Receipts Journal (CRJ)

Cash Disbursements Journal (CDJ)
Check Disbursements Journal (CkDJ)
General Journal (GJ)
Ledgers
General Ledger (GL)

Subsidiary Ledgers (SL) for:
Cash
Receivables
Inventories
Investments
Property, Plant and Equipment
Construction in Progress
Liabilities
Income
Expenses
National Government (NG) Books. These shall

be used to record income which the agencies are not
authorized to use and are required to be remitted to the
National Treasury. These shall consist of:
- 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.
Financial Statements. The following

statements shall be prepared:
Balance Sheet
Statement of Government Equity
Statement of Income and Expenses
Statement of Cash Flows
Notes to Financial Statements shall

accompany the above statements.
Two-Money Column Trial Balance. The two -

money column trial balance showing the account
balances shall be used.
Allotment and Obligation. Obligation

accounting is modified to simplify procedures in
the incurrence and liquidation of obligations
and the recording of the budgetary accounts
(allotments and obligations incurred and
liquidated). Separate registries shall be
maintained to control the allotments and
obligations for each of the four classes of
allotments, namely:
Allotment and Obligation.
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).
Notice of Cash Allocation (NCA). The 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.
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).
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.
Valuation of Inventory. Cost of ending inventory of

supplies and materials shall be computed using the
moving average method.
Maintenance of Supplies and Property, Plant

and Equipment Ledger Cards. For appropriate
check and balance, the Accounting Units of
agencies, as well as the Property Offices, shall
maintain Supplies Ledger Cards/Stock Cards by
stock number and Property, Plant and Equipment
Ledger Cards/Property Cards by category of
property, plant and equipment, respectively.
Construction of Assets. For assets under

construction, the Construction Period Theory shall
be applied for costing purposes. Bonus paid to the
contractor for completing the work ahead of time
shall be added to the total cost of the project.
Liquidated damages charged and paid for by the
contractor shall be deducted from the total cost
of the project. Any related expenses incurred
during the construction of the project, such as
taxes, interest, license fees, permit fees,
clearance fee, etc. shall be capitalized, and those
incurred after the construction shall form part of
operating cost.
Registry of Public Infrastructures/Registry of

Reforestation Projects. For agencies that
construct public infrastructures, such as roads,
bridges, waterways, railways, plaza, monuments,
etc., and invest on reforestation projects, a
Registry of Public Infrastructures (RPI)/Registry
of Reforestation Projects (RRP) shall be
maintained for each category of
infrastructures/reforestation projects.
Registry of Public Infrastructures/Registry of

Reforestation Projects. Examples are:
Registry of Public Infrastructures - Bridges (RPIB)

Registry of Public Infrastructures - Roads (RPIR)
Registry of Public Infrastructures - Parks (RPIP)
Registry of Reforestation Projects (RRP)
A Summary of Public
Infrastructures/Reforestation Projects shall be
prepared and included in the Notes to
Financial Statements.
Depreciation. The straight-line method of

depreciation shall be used. Depreciation shall
start on the second month after purchase of the
property, plant and equipment, and a residual value
equivalent to ten percent of the purchase cost
shall be set-up. Public
infrastructures/reforestation projects as well as
serviceable assets that are no longer being used
shall not be charged any depreciation.
Reclassification of Assets. Serviceable assets no

longer being used shall be reclassified to Other
Assets account and shall not be subject to
depreciation.
Allowance for Doubtful Accounts. An Allowance

for Doubtful Accounts shall be set up for
estimated uncollectible trade receivables to allow
for their fair valuation.
Elimination of Contingent Accounts. Contingent

accounts shall no longer be used. All financial
transactions shall be recorded using the
appropriate accounts. Cash shortages and disallowed
payments, which become final and executory, shall
be recorded under receivable accounts Due From
Officers and Employees or Receivables-
Disallowances/ Charges, as the case may be.
Recognition of Liability. Liability shall be

recognized at the time goods and services are
accepted or rendered and supplier/creditor bills are
received.
Interest Accrual. Whenever practical and
appropriate, interest income and/or expense shall
be accrued and recognized in the books of accounts.
Accounting for Borrowings and Loans. All
borrowings and loans incurred shall be recorded to
the appropriate liability accounts.
Elimination of corollary and negative journal
entries. The use of corollary and negative journal
entries shall be stopped. Acquisition/Disposition of
assets shall be debited/credited to the appropriate
asset accounts. If an error is committed, a
correcting entry to adjust the original entry shall
be prepared.
Petty Cash Fund. The Petty Cash Fund shall be
maintained under the imprest system. As such, all
replenishments shall be directly charged to the
expense account and at all times, the Petty Cash
Fund shall be equal to the total cash on hand and the
unreplenished expenses. The Petty Cash Fund shall
not be used to purchase regular inventory/items for
stock.
Foreign Currency Adjustment. Cash deposits in

foreign currency and outstanding foreign loans shall
be computed at the exchange rate prescribed by
the Bangko Sentral ng Pilipinas at balance sheet
date. The total cash deposits and foreign loans
payable shall be adjusted at the end of each month
and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign
currency obligations shall reflect the appropriate
foreign currency in which the loan is payable. The
liability shall be expressed both in the foreign and
local currency.
Accounting Systems
General Accounting Plan. The General Accounting

Plan (GAP) shows the overall accounting system
of a government agency/unit. It includes the
source documents, the flow of transactions and
its accumulation in the books of accounts and
finally their conversion into financial
information/data presented in the financial
reports. Presented on next page is the General
Accounting Plan for national government
agencies.
Accounting Systems
The following accounting systems are:
1. Budgetary Accounts System;

2. Receipts/Income and Deposit System;
3. Disbursement System; and
4. Financial Reporting System.
BUDGETARY ACCOUNTS
Budgetary Accounts System. The Budgetary

Accounts System encompasses the processes of
preparing Agency Budget Matrix (ABM),
monitoring and recording of allotments received
by the agency from the DBM, releasing of Sub-
Allotment Release Order (Sub-SARO) to
Regional Offices (RO) by the Central Office
(CO); issuance of Sub-SARO to Operating Units
(OU) by the RO; and recording and monitoring
of obligations.
BUDGETARY ACCOUNTS
Budgetary Accounts consist of:
Appropriations - refer to authorizations made by
law or other legislative enactment for payments to
be made with funds of the government under
specified conditions and/or for specified purposes.
Appropriations shall be monitored and controlled
through registries and control worksheets by the
DBM and COA, respectively.
Allotment - Authorization issued by the
Department of Budget and Management (DBM) to
an agency, which allows it to incur obligations for
specified amounts contained in a legislative
appropriation.
Obligations - Liabilities legally incurred and
committed to be paid for by the government either
immediately or in the future.
Agency Budget Matrix (ABM).
The ABM refers to a document showing the

disaggregation of agency expenditures into
components like, among others, by source of
appropriations, by allotment class and by need of
clearance
Allotment Release Order (ARO
The ARO is a formal document issued by the DBM to the head

of the agency containing the authorization, conditions and
amount of an agency allocation.
The document may be the ABM, where the amount of allocation

not needing clearance is indicated, or the Special
Allotment Release Order (SARO), where the release of
which is subject to compliance with specific laws or
regulations or is subject to separate approval or
clearance by competent authority.
In the case of agencies with decentralized accounting

procedures, Sub-ARO/Sub-SARO is issued/released.
Recording of Allotments
REGULAR AGENCY BOOKS
Account Title Account Debit Credit
Transactions Code
Receipts of allotment
1. Receipt of allotment for: Posting in allotment
Allotment Class GAA CA186 column of the
CO 3,340 Registry of Allot-
MOOE 1,010 ments & Obligations
PS 550 55 Capital Outlay,
FE 100 MOOE, Personal
Total 5,000 55 Services & Financial
Expenses
Procedures in the Monitoring and Recording of
Allotments Received from DBM
Area of Seq. Activity

Responsibility No.
Budget Unit 1 Receives the approved ABM/SARO from the
Concerned Staff DBM. Records the same in the logbook and
forwards the ABM/SARO to Budget Staff
for preparation of an Allotment and
Obligation Slip (ALOBS).
2 Prepares ALOBS in two copies, assigns
Budget Staff
number and initials the same. Forwards
the ALOBS and ABM/SARO to the Head
of the Budget Unit for review and
signature.

Responsibility No.
Note 1
The numbering structure of the ALOBS shall
be as follows:
PS - Allotment Class(PS, MOOE, CO and FE)

shall be used only when obligations are
recorded in the ALOBS
00 - Year
00 - Month
0000 - Serial Number (One series for
the whole year)


Responsibility No.
Note 2
The ALOBS shall be prepared in two copies
and shall be distributed as follows:
Original-Retained by the Budget Unit to
support recording in the registries
Copy 2 -Accounting Unit
3 Reviews, checks the small box opposite the
Head of the Budget Unit
'Received' portion in Box A of the ALOBS
and affixes signature certifying receipt of
allotment. Returns to the Budget Staff for
recording in the appropriate Registry of
Allotments and Obligations (RAOs).


Responsibility No.
4 Records the ALOBS in the appropriate
Budget Staff
RAOs. Files the ALOBS for reference.
Note 3
The following RAOs shall be maintained by
the Budget Unit:
Registry of Allotments and Obligations -
Personal Services (RAOPS)
Registry of Allotments and Obligations
-Maintenance and Other Operating
Expenses (RAOMO)
Registry of Allotments and Obligations
-Capital Outlays (RAOCO)
Registry of Allotments and Obligations -
Financial Expenses (RAOFE)


Responsibility No.
5 Forwards Copy 2 of the ALOBS to the
Accounting Unit for reference.

Procedures for the Recording of Sub-Allotment Release
Order (Sub-ARO) by RO/ OU

Responsibility No.
Central Office/Regional
Office
Budget Unit 1 Based on the approved ABM received from
Budget Staff the DBM, prepares Sub-ARO for RO/OU.
Forwards the Sub-ARO to the Head of the
Budget Unit CO/RO for review.
2 Reviews and signs Sub-ARO. Forwards the
Head of the Budget Unit
same to the Head of the CO/RO for
approval.
Head of Central 3 Approves the Sub-ARO.

Office/Regional Office/
Authorized Officer

Responsibility No.
Budget Staff 4 Based on the approved Sub-ARO, prepares
ALOBS in two copies. Assigns number and
initials the ALOBS. Forwards the same with a
copy of approved Sub-ARO to the Head of
the Budget Unit for review and signature.
Note 1
Distribution of ALOBS shall be as follows:

Original - CO/RO Budget Unit
Copy 2 - CO/RO Accounting Unit
Note 2
Refer to ALOBS numbering structures in
Note 1 Sec. 12, Procedures in the Monitoring
and Recording of Allotments Received from
DBM

Responsibility No.
Head of the Budget 5 Reviews, checks the small box opposite the
Sub-allotted portion of Box A of the ALOBS
Unit
and affixes signature certifying as to the
amount sub-allotted to RO/OU. Forwards the
same with the approved Sub-ARO to Budget
Staff for recording in the appropriate RAOs.

6 Records the ALOBS in the appropriate RAOs.
Budget Staff
Files the ALOBS and a copy of the Sub-ARO
Note 3
The ALOBS covering sub-allotment for the

RO/OU shall be entered in the RAOs as
negative entry in the Allotment column and
shall be deducted from the allotment balance.
Area of Seq Activity

Responsibility No.
Note 4
A copy of the ALOBS covering allotment of the

RO/OU shall be furnished the Accounting Unit
for reference.
7 Records in the logbook the release of the Sub-
Concerned Staff
ARO to RO/OU.
Regional Offices/
Operating Units
Budget Unit 8 Receives the approved Sub-ARO from the
Concerned Staff
CO/RO. Records the same in the logbook
maintained. Forwards the Sub-ARO to the
Budget Staff for the preparation of ALOBS.

Responsibility No.
9 Prepares ALOBS in two copies, assigns number
Budget Staff
and initials the same. Forwards the ALOBS and
Sub-ARO to the Head of the Budget Unit for
review and signature.
Note 5
Refer to Note 3, of Sec.12, Procedures for the
Monitoring and Recording of Allotments Received
from the DBM.
Head of the Budget 10 Reviews the ALOBS based on the Sub-
ARO. Checks the small box opposite the
Unit
Received portion of Box A of the ALOBS and
affixes signature certifying that the allotment
was received. Forwards the ALOBS and Sub-
ARO to the Budget Staff for recording in the
appropriate RAOs.

Responsibility No.
Note 6
Refer to Note 3, of Sec.12, Procedures for the
from the DBM.
Budget Staff 11 Records the ALOBS in the RAOs. Files the Sub-
ARO and original of the ALOBS.
12 Forwards copy 2 of the ALOBS to the Accounting
Unit for reference .

Accounting for
Obligation
Obligation refers to a commitment by a government agency
arising from an act of a duly authorized official which binds the
government to the immediate or eventual payment of a sum of
money. The agency is authorized to incur obligations only in the
performance of activities which are in pursuits of its functions
and programs authorized in appropriation acts/laws within the
limit of the ARO.
Obligations shall be taken up in the registries through the
ALOBS prepared/processed by the Budget Unit. The Budget
Officer/ Head of the Budget Unit/designated Budget Officer
shall certify to the availability of allotment and such is duly
obligated by signing in the appropriate box of the ALOBS. On
the other hand, the Accountant/Head of the Accounting Unit
shall certify to the correctness and validity of obligations, and
availability of funds. Both Budget and Accounting Units shall
coordinate in the filling up of the Status of the Obligation in
their respective copies of the ALOBS
Procedures for the Recording of Obligations

Responsibility No.
Budget Unit
Concerned Staff 1 Receives the Disbursement Voucher/Payroll
(DV/P), and supporting documents, Contract/
Purchase Order (C/PO) from concerned
offices/personnel. Verifies completeness of
the documents. If incomplete, returns the
documents to concerned offices for
completion. If complete, records the same in
the logbook maintained. Forwards the
documents to Budget Staff for the
Budget Staff 2 Verifies availability
preparation of allotment based on
of the ALOBS.
the RAOs. If no allotment is available,
returns the documents to the
office/personnel concerned except as
authorized by the DBM.

Responsibility No.
3 If there is an available balance of allotment to
cover the obligations, prepares an ALOBS in
three copies. Initials the ALOBS and forwards
the same to the Head of the Budget Unit for
review and signature
Note 1
Copy 3 of ALOBS shall be attached to the DV.
Refer to Note 2, Sec. 12, Procedures for the
from DBM for the distribution of the other
copies of ALOBS
Head of the Budget 4 Reviews, checks the small box opposite the
Unit Available and duly obligated portion of Box A
of the ALOBS and affixes signature. Forwards
the ALOBS and documents to the Budget Staff
for recording in the appropriate RAOs.
INCOME /COLLECTIONS
AND
DEPOSITS

Responsibility No.
Budget Staff 5 Records the amount obligated under the
Obligation column of the RAOs. Forwards all
copies of the ALOBS and the documents to the
Accounting Unit for processing and signature
Note 2
Obligations shall be posted in the Obligation
Incurred column of the RAOs to arrive at the
balance of allotment still available at a given
period.
6 Receives original of ALOBS from the Accounting
Unit. If there is no correction, files the same
to support the RAOs. Otherwise, effects
correction in the RAOs or prepares a new
ALOBS, as the case may be.

Responsibility No.
Note 3
For the succeeding activities, refer to Sec.
34, Procedures for Disbursements By Checks
Note 4
There is no need to prepare a new ALOBS for
corrections/adjustments made by the Accounting
Unit after the processing of the claims but
before payment is made. Adjustment in the
RAOs shall be effected thru a positive entry (if
additional obligation is necessary) or a negative
entry (if reduction) in the Obligation Incurred
column.

Responsibility No.
Note 5
Preparation of new ALOBS for the following
adjustments of obligations as negative entries in
the Obligation Incurred column shall be made:
refund of cash advance granted during the year
overpayment of expenses during the year
disallowances/charges which become final and
executory
Certified copies of official receipts for the
overpayments/refunds, copies of bills for
overpayments and Notice that the
disallowances are final and executory shall be
furnished the Budget Unit by the Accounting Unit
for the preparation of new ALOBS taking up the
adjustments.
Receipts/Income Collections and Deposits
System
The Receipts/Income Collections and Deposits System covers

the processes of acknowledging and reporting
income/collections, deposits of collections with Authorized
Government Depository Bank (AGDB) or through the AGDB
for the account of Treasurer of the Philippines, and
recording of collections and deposits in the books of
accounts of the agency.
Sources of Income of the National Government
A. General Income Account
Subsidy Income from National Government

Subsidy from Central Office
Subsidy from Regional Office/Staff Bureaus
Income from Government Services
Income from Government Business Operations
Sales Revenue
Rent Income
Insurance Income
Dividend Income
Interest Income
Sale of Confiscated Goods and Properties
Foreign Exchange (FOREX) Gains
Miscellaneous Operating and Service Income
Fines and Penalties-Government Services and Business
Operations
Income from Grants and Donations
Sources of Income of the National Government
B. Specific Income Account
Income Taxes
Property Taxes
Taxes on Goods and Services
Taxes on International Trade and Transactions
Other Taxes
Fines and Penalties-Tax Revenue
Other Specific Income
Methods of Accounting for Income
1. Accrual Method - Accrual method of accounting shall be
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.
Fines and Penalties
Fines and penalties, either on tax revenues or other specific

income accounts, shall be recognized as income of the
year these were collected.
Other Receipts
1. Refund of cash advances - When cash advances for official travels

are granted, the account Due from Officers and Employees is
debited and when refunds are made, the same account is credited.
Cash advances for salaries and wages shall be recorded as debits to
the account Cash-Disbursing Officers and any refunds thereof shall
be credited to the same account.
2. Receipts of performance/bidders/bail bonds - Performance bond

posted by contractor or supplier to guaranty full and faithful
performance of their contract may be in the form of cash or certified
checks or surety. Performance bond in cash or certified check shall
be acknowledged by the issuance of official receipt and recorded in
the book of accounts by the Accountant thru a Journal Entry Voucher
(JEV) for the purpose. In case of surety bond, an acknowledgement
receipt shall be issued by the authorized official.
3. Refund for overpayment of expenses - Refunds as a result of

overpayment of expenses shall be recorded as a credit to the
appropriate expense account if paid in the same year or to Prior Years
Adjustments if paid in the ensuing year. This transaction shall reduce
the amount of expense previously recorded.
Other Receipts
4. Collections made on behalf of another agency or private

companies - Collections made on behalf of other agencies which are
later remitted to them are recorded under accounts Due to NGAs,
Due to LGUs or Due to GOCCs as the case maybe. Authorized
collections made on behalf of private entities, like shares of
proponents of Built-Operate-Transfer (BOT) Projects are recorded
as Other Payables.
5. Inter-agency transferred funds - Cash received from another

agency for the purpose of implementing projects of that agency is
recorded in the books as a credit to account Due to NGAs or Due
to LGUs, as the case maybe.
Collection and
RelatedDeposits
Transactions
II Accounting for Refund of Cash Advance
Refund of Cash Advance granted during the year
A
1. Receipt
1.1 For salaries
Cash-Collecting Officers 106 1,000
Cash-Disbursing Officers 107 1,000
1.2 For TEV
Cash-Collecting Officers 106 500
Due from Officers & Employees 128 500
2. Adjustment of obligation to reduce original amount of obligation
Memo Entry in RAOPS/RAOMO
3. Deposit of collection from excess advance to BTr thru AGDB

Subsidy Income from NG 601 1,500
II Accounting for Refund of Cash Advance
B Refund of Cash Advance granted in prior year
1. Receipt
1.1 For Salaries
1.2 For TEV

2. Deposit of collection to BTr thru AGDB

Prior Years Adjustments 535 1,500
IIII Accounting for Overpayment of Salaries and Other Expenses
Overpayment is billed and refund is receipted

A
A1 Overpayment made in Current Year
1. Billing
Salaries and Wages Regular Pay 801 100
2. Adjustment of obligation to reduce original

amount of obligation
3. Receipt of Refund
Due from Officers and Employees 128 100
IIII Accounting for Overpayment of Salaries and Other Expenses
Overpayment is billed and refund is receipted

A
A1 Overpayment made in Current Year
1. Billing

Due from Officers and Employees 128 100
3. Adjustment of Obligation
Memo entry in RAOPS
4. Deposit of Collection
Subsidy Income from NG 601 100
A2 Overpayment made in Prior Year
1. Billing
Prior Years Adjustments 535 100

A2 Overpayment made in Prior Year
3. Deposit of Collection to BTr

B Overpayment of salary is not billed and refund is receipted
B1 Overpayment made in Current Year

Memo Entry in RAOPS
3. Remittance to BTr
Subsidy Income from NG 106 100
B Overpayment of salary is not billed and refund is receipted
B2 Overpayment made in Prior Year
2. Remittance to BTr
Transactions Account Title Dr Cr
Account
Code
III Accounting for Accountable Forms with Face or Market

III Value
1.Upon Obligation Memo entry in RAOMO
2.Upon delivery of Accountable Forms With Face
Accountable Forms 148 500
Value Inventory
421 500
Accounts Payable
3.Payment Accounts Payable 421 500
Cash-National Treasury-MDS 102 500
4.Issuance of Other Expenses 939 500
Accountable Forms for
Accountable Forms With Face
sale
Value Inventory 148 500
5.Sale at Face Value Cash-Collecting Officers 106 800
Sales Revenue 613 800
6.Deposit to BTr Sales Revenue 613 800
Account
Code
IV Accounting for Seized/Confiscated Goods and Properties

IV declared in favor of the Government
1.Confiscation of goods/ No journal entry (control
properties record for items and quantity)
2. Receipt of court Other Inventory Items 159 xxx

decision/authority
Government Equity 501 xxx
(declaration in favor of
the government
3. Sale of seized/ Cash, Collecting Officers 106 xxx
confiscated goods and
Sale of Confiscated Goods
properties
and Properties 627 xxx
4.Reduction of Inventory Government Equity 159 xxx

items
Other Inventory Items 501 xxx
5. Deposit to BTr Sale of Confiscated Goods and

Properties 627 xxx
Cash, Collecting Officers 106 xxx
Deposit of Collections
All Collecting Officers shall deposit intact all their collections,

as well as collections turned over to them by sub-
collectors/tellers, with AGDB daily or not later than the
next banking day. They shall record all deposits made in the
Cash Receipts Record.
Reporting of Collections and Deposits
At the close of each business day, the Collecting Officers

shall accomplish the Report of Collections and Deposits
(RCD). All collections shall be deposited with AGDB for
the account of the agency or the Treasurer of the
Philippines daily or not later than the next banking day
VV
A check is said to be dishonored by non-payment when, upon its being duly

presented for payment, such payment is denied or cannot be obtained. In case a
check received is dishonored for any reason, by the Bank or the National Treasury,
the person who issued it to the National Government shall continue to be liable for
the sum due and for all penalties resulting from delayed payment. In such event,
the OR covering the dishonored check shall immediately be cancelled by the
collecting officer and the fact of cancellation noted on the duplicate and triplicate
copies of the OR and in subsidiary records pertaining to the transaction.
As required under GAO Circular 110, the payor shall immediately be notified by
the agency head or collecting officer/treasurer concerned of the cancellation and
dishonored by means of a Notice of Dishonor, Sec. 89 of the Negotiable
Instruments Law, provides that any drawer or endorser to whom such notice is
not given is discharged. It is therefore indispensable that notice of dishonor be
given to the drawer to protect the interest of the government. The collecting
officer neglecting or failing to give the required notice to the drawer who as a
result thereof has been discharged from liability shall be personally answerable
for the resulting loss suffered by the government.
VV
The Notice of Dishonor shall be prepared in five (5) copies and distributed
as follows:
Original Drawer, to be delivered personally or sent by registered mail
with return card
Duplicate Agency Head
Triplicate To be attached to the Report of Collection to be submitted to
the Accounting Unit
Quadruplicate Auditor
Quintuplicate File copy of the Collecting Officer
Account
Code
Accounting for Dishonored Checks NG Books

a) Dishonored during the year of deposit
1. Cancellation of Deposit Cash-Collecting Officers 106 100
Income from Govt Services 611 100
2. Cancellation of Income from Govt Services 611 100

Official Receipts Cash-Collecting Officers 106 100
3. Set-up of receivables Other Receivables 139 100

from Payor Income from Govt Services 611 100
4. Collection (Certified Cash-Collecting Officers 106 100

Check with Cash only) Other Receivables 139 100
5. Deposit to BTr Income from Govt Services 611 100

Account
Code
b) Dishonored Checks deposited in prior year

1. Cancellation of deposit Cash-Collecting Officers 106 100
2. Cancellation of Official Prior Years Adjustments 535 100
Receipts Cash-Collecting Officers 106 100
3. Set-up of Receivables Other Receivables 139 100

from Payor Prior Years Adjustments 535 100
4. Collection Cash-Collecting Officers 106 100

Other Receivables 139 100
5. Deposit to BTr Prior Years Adjustments 535 100

Account
Code
VI
VI Accounting for Cash Shortages/Overages-NG Books
1. CASH SHORTAGES
1.1 Upon detection of cash shortage during surprise cash
examination within the same year
Cash Collecting Officers 106 600
1.2 Restitution
Due from Officers &
Employees 128 600
1.3 Deposit of Income from Govt Services 611 600
collections to the
BTr
NG Books
Account
Code
2. CASH OVERAGES
2.1 Upon detection of cash Cash Collecting
overage during surprise cash Officers 106 80
examination on collection or
cash advance. Misc. Operating & 639 80
Service Income
2.2 Deposit of collection to the Misc. Operating & 639 80
BTr Service Income
Cash Collecting 106 80
Officers
Account
Code
VII
VII Accounting for Estimated Uncollectible
Receivables (Bad Debts)
1. Accounts Receivable Bad Debts Expense 893 2,000
P20,000
Allowance for Doubtful
Estimated Uncollectibles 301 2,000
Accounts
2,000
2. Condonation of Accounts Allowance for Doubtful

Receivable per Authority Accounts 301 200
Accounts Receivables 121 200
Account
Code
Accounting for Seized/Confiscated Goods and Properties

VIII
VIII declared in favor of the Government
1.Confiscation of goods/ No journal entry (control
properties record for items and quantity)
2. Receipt of court Other Inventory Items 501 xxx

decision/authority
Government Equity 159 xxx
(declaration in favor of
the government
3. Sale of seized/ Cash, Collecting Officers 106 xxx
confiscated goods and
Sale of Confiscated Goods
properties
and Properties 627 xxx
4.Reduction of Inventory Government Equity 159 xxx

items
Other Inventory Items 501 xxx
5. Deposit to BTr Sale of Confiscated Goods and

Properties 627 xxx
Cash, Collecting Officers 106 xxx
IX Accounting for Disallowance
IX
1. Issuance of Notice of Disallowance No entry
on claim for travel expense
2. When disallowance becomes final Due from Officers & Employees 128 1,500
and executory or when claimant Traveling Expense-Local 831/ 1,500
agrees voluntarily to refund Prior Years' Adjustment 535
overpayment.
3. Refund in cash Cash-Collecting Officers 106 1,500
Due from Officers & Employee 128 1,500
4. Refund through payroll deduction Salaries and Wages-Regular Pay 801 20000
Due from Officers & Employees 128 1,500
Witholding Tax Payable 435 2,000
GSIS Payable 436 580
Pag-ibig Payable 437 100
Phil Health Payable 438 938
5. Remittance of refunded amount Subsidy Income from NG 601 1500

during the year the claim was paid Cash-Collecting Officers 106 1,500
6. Remittance of refunded amount Prior Years' Adjusment 535 1500

after the year the claim was paid Cash-Collecting Officers 106 1,500
XX Accounting for Sale of Fixed Assets
1. Sale of Office Equipment

Above Net Book Value Cash-Collecting Officers 106 35,000
Acquisition Cost 100,000 Accumulated Depreciation-
Accumulated Depreciation 80,000 Office Equipment 322 80,000
Net Book Value 20,000 Office Equipment 222 100,000
Selling Price 35,000 Gain on Sale of Assets 626 15,000
Gain 15,000
Due from NGA 130 20,000
Gain on Sale of Assets 626 15,000
2. Sale of Office Equipment

Below Net Book Value Cash-Collecting Officers 106 12,000
Acquisition Cost 100,000 Accumulated Depreciation-
Accumulated Depreciation 80,000 Office Equipment 322 80,000
Net Book Value 20,000 Loss on Sale of Assets 895 8,000
Selling Price 12,000 Office Equipment 222 100,000
Loss 8,000
Due from NGA 130 12,000

XI Accounting for Sale of Fully Depreciated Assets
XI
1. Sale above Net Book Value Accumulated Depreciation-
Net Book Value 1,000.00 Office Equipment 322 99,000
Selling Price 3,000.00 Fully Depreciated Assets 239 1,000
Gain 2,000.00 Office Equipment 222 100,000

Fully Depreciated Assets 239 1,000
Government Equity 501 1,000

2. Sale below Net Book Value Accumulated Depreciation-

Net Book Value 1,000.00 Office Equipment 322 99,000
Selling Price 800.00 Fully Depreciated Assets 239 1,000
Gain 200.00 Office Equipment 222 100,000

Loss on Sale of Assets 895 200
Fully Depreciated Assets 239 1,000
Government Equity 501 800

Accounting for Losses due to Fire/Calamity and Other Involuntary
XII
XII Disposition (thru theft, robbery, and other casualties)
2. Collection of receivables from Cash-Collecting Officers 106 30,000.00

Accountable Officers Due from Officers & Employee 128 30,000.00
3. Deposit of collection to the BTr Government Equity 501 30,000.00

Thru AGDB Cash-Collecting Officers 106 30,000.00
Thank You
Good Luck!!!

GOVERNMENT ACCOUNTING BASICS

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GOVERNMENT ACCOUNTING BASICS

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GOVERNMENT

Old Government New Government

Encompasses the process of analyzing,

b) The highest standards of honesty, objectivity and

d. Subsidiary records shall be kept where necessary.

e. The chart of accounts for government agencies shall

f. To permit effective budgetary control and to

g. A common terminology and classification shall be

i. Estimated revenues which remain unrealized at the

j. All lawful expenditures and obligations incurred during

NGAS replaces the old system in

Legislative makes the laws

Executive implements the laws

Judiciary interprets the laws

National government refers to the government of

Local government political subdivisions in the

Government corporations agencies organized by

1. Examine, audit and settle all accounts pertaining to the revenues

The general public or the citezenry

The legislative body which uses the financial data to

The managers/administrators who are in charge of

The resource providers of the government:

Uniform guidelines and procedures in accounting

Coverage all national government agencies

The Commission on Audit shall have exclusive

Accrual Accounting. A modified accrual basis

One Fund Concept. This system adopts the one

Chart of Accounts and Account Codes. A new

Books of Accounts. All national agencies shall

Regular Agency (RA) Books. These shall be used to

Cash Receipts Journal (CRJ)

General Ledger (GL)

National Government (NG) Books. These shall

With the implementation of the computerized

Financial Statements. The following

Notes to Financial Statements shall

Two-Money Column Trial Balance. The two -

Allotment and Obligation. Obligation

Allotment and Obligation.

Registry of Allotments and Obligations - Capital Outlay

Notice of Cash Allocation (NCA). The receipt

Financial Expenses. Financial expenses such as

Valuation of Inventory. Cost of ending inventory of

Maintenance of Supplies and Property, Plant

Construction of Assets. For assets under

Registry of Public Infrastructures/Registry of

Registry of Public Infrastructures/Registry of

Registry of Public Infrastructures - Bridges (RPIB)

Depreciation. The straight-line method of

Reclassification of Assets. Serviceable assets no

Allowance for Doubtful Accounts. An Allowance

Elimination of Contingent Accounts. Contingent

Recognition of Liability. Liability shall be

Foreign Currency Adjustment. Cash deposits in

General Accounting Plan. The General Accounting

The following accounting systems are:

1. Budgetary Accounts System;

Budgetary Accounts System. The Budgetary

The ABM refers to a document showing the

The ARO is a formal document issued by the DBM to the head

The document may be the ABM, where the amount of allocation

In the case of agencies with decentralized accounting

Area of Seq. Activity