CHAPTER 1

NATURE AND SCOPE OF THE NEW

GOVERNMENT ACCOUNTING
SYSTEM
INTRODUCTION
Accounting is tool of management in
evaluating the performance of the
various agencies of government.
The performance of the public managers
would depend at most, on financial
reports generated by the use of
accounting systems.
INTRODUCTION
Cognizant of this need, a new accounting
system needs to be develop that would
help the different agencies to hit on
financial targets, and at the same time
be understood by all users of financial
reports.
INTRODUCTION
With this new development, the
Commission on Audit (COA), under the
new 1987 Constitution, promulgated the
New Government Accounting System in
the Philippines (NGAs) for use by all
government agencies.
New Government Accounting
System in the Philippines
(NGAs)
Introduced the basic policies and

procedures, the new coding system,

the accounting systems, books,
registries, records, forms, reports
and financial statements to be
adopted by all national government
agencies effective January 1, 2002.
WHY THE SHIFT TO NGAS?

1. Adoption of an accounting system that

is in conformity with the International
Accounting Standards.
2. Computerization of the accounting
systems to generate reports that will be
easy to understand by the general
public.
WHY THE SHIFT TO NGAS?

3. Preparation of regular and routine

financial reports.

4. The use of the generated financial

reports as tools of management in
decision making.
GOVERNMENT ACCOUNTING
Under Section 109, of the Presidential
Decree (PD) no. 1445, defines
Government Accounting as one that
encompasses the process of analyzing,
classifying, summarizing and
communicating all transactions that are
involved in the receipt and disbursement
of all government funds and properties,
and interpreting the results thereof
GOVERNMENT ACCOUNTING
In pursuant to this definition, objectives
were set to cover several areas in
government operations.
ACCOUNTING
RESPONSIBILITY
This is a concept implying that every
economic activity event affecting an
organization is the responsibility of and
can be traced to an individual manager.
ACCOUNTING
RESPONSIBILITY
Agencies charged by the republics
constitution:
Commission On Audit (COA)

Dept Of Budget And Management (DBM)

Bureau Of Treasury (National Treasury)

Various govt subdivisions, agencies,

including GOCCs
COMMISSION ON AUDIT
keeps the general accounts of the government,
promulgates accounting rules and regulations
and submits to the President and Congress,
within the time fixed by law (not later than last
day of September of each year)
*Authority:
- define scope
- establish techniques
- promulgates rules and regulations
- NO longer journalizes appropriation &
allotment by DBM
Q.: WHAT IS THE LEGAL BASIS
OF THE COMMISSION ON AUDIT
IN PRESCRIBING THE NGAS?
a. Presidential Decree 1445
b. COA Circular No. 2002 001
c. The Constitution of the Republic
d. PD 1445 and the Constitution
DEPARTMENT OF BUDGET &
MANAGEMENT
shall be responsible for the formulation
and implementation of the national budget
with the goal of attaining the republics
national socio-economic plans and
objectives.

shall be responsible for the efficient and

sound utilization of government funds and
revenues to effectively achieve the
countrys development objectives.
DEPARTMENT OF BUDGET &
MANAGEMENT
*Maintains:
-Registry of Appropriations (RAPAL)
-Registry of Special Purpose Fund
Appropriations and Allotments (RESPFA)
-Registry of Allotments and Notice of
Cash Allocation (RANCA)
-Control and monitoring of Notice of
Cash Allocation releases
BUREAU OF TREASURY
receives and keeps national funds,
manage and control the disbursements;
maintain accounts of financial

transactions of all national government

offices, agencies and instrumentalities.
* NGAS:
-maintain Registry of NCA and
Replenishments (RENREP)
-monitoring bank transfers it makes in
replenishing MDS accounts
Q.:WHAT IS THE ROLE OF THE
BUREAU OF TREASURY IN
RELATION TO GOVERNMENT
ACCOUNTING RESPONSIBILITY?
a. To design prepare and approve the accounting
system of the national government agencies.
b. To keep the general accts of the national government
c. To receive and keep national funds and manage or
control disbursements thereof.
d. To prepare the annual report of national government,
agencies and GOCCs
OTHER GOVT AGENCIES &
GOCCs
- these units are required by law to have
accounting units/ divisions/ department to be
supervised by the head of the agency
concerned.
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
OTHER GOVT AGENCIES &
GOCCs
Journalize Notice of Cash allocation (NCA)
No longer journalize share in income of
national govt
Maintain registries for allotments:
-Registry of allotments & obligations
personal services (RAOPS)
-RAO Maintenance & Operating
Expenses (RAOMO)
-RAO- Capital Outlay (RAOCO)
-RAO- Financial Expenses (RAOFE)
Q.: Which is not charged
with the government
accounting responsibility?
a. Upper and lower legislative houses
b. Department of Budget and Management

c. National Government Agencies and

GOCCs
d. Commission on Audit
Q.: The following are the
objectives of NGAS, which is
NOT:
a. To generate periodic and relevant
financial reports for better monitoring or
performance.
b. To simplify government accounting.

c. To conform to IAS.

d. To comply with the requirement of Word

Bank and International Monetary Board

WHAT IS NGAS? (NEW GOVT
ACCTG SYSTEM)
It is a set of accounting concepts,
guidelines and procedures designed to
ensure correct,complete and timely
recording of government financial
transactions and the production of
accurate and relevant financial reports.
FEATURES OF THE NGAS
ACCOUNTING METHODS:
MODIFIED ACCRUAL BASIS OF

ACCOUNTING
ONE FUND CONCEPT

CHART OF ACCOUNTS AND ACCOUNT

CODES
RESPONSIBILITY ACCOUNTING

BOOKS OF ACCOUNTS

FINANCIAL STATEMENTS
FEATURES OF THE NGAS
TWO- MONEY COLUMN TRIAL BALANCE
ALLOTMENT AND OBLIGATION -
NOTICE OF CASH ALLOCATION
FINANCIAL EXPENSES
PERPETUAL INVENTORY OF SUPPLIES &
MATERIALS
MAINTENANCE OF LEDGER CARDS FOR
SUPPLIES, PROPERTY, PLANT &
EQUIPMENT
FEATURES OF THE NGAS
CONSTRUCTION OF ASSETS -
REGISTRY OF PUBLIC INFRASTRUCTURES -
REGISTRY OF REFORESTATION PROJECTS -
DEPRECIATION
RECLASSIFICATION OF ASSETS
RECOGNITION OF LIABILITY
ELIMINATION OF CONTINGENT ACCOUNTS

INTEREST ACCRUAL
FEATURES OF THE NGAS
ACCOUNTING FOR BORROWINGS AND
LOANS-
PETTY CASH FUND AND
FOREIGN CURRENCY ADJUSTMENTS
ACCOUNTING METHODS
Modified accrual basis shall be used all
expenses shall be recognized when
incurred . Income shall be recognized on
accrual basis except in case of taxes, it is
difficult to determine how much and from
whom to collect, so cash basis is observed.

OLD: the basis of accounting are accrual

and cash basis.
ONE FUND CONCEPT
OLD:
All income for the agency shall accrue to general

fund
All money collected by the agency is treated as

special fund
Under NGAS (starting Jan 1, 2002) one fund
concept
General fund is available for all functions of govt

Separate fund accounting is done only when

necessitated by circumstances, or approved by

COA
ONE FUND CONCEPT
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 within an
agency.
CHART OF ACCOUNTS AND
ACCOUNT CODES
From 6 digits, down to only 3 digits
Some account titles have been changed,
added
No more contingent accounts
Expenses charged to catpital are no
longer shown as expenses
Separate expense items
Income accounts further categorized to
general income; or agency-specific accts
CHART OF ACCOUNTS AND
ACCOUNT CODES
Cash
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
RESPONSIBILITY
ACCOUNTING
In the government it measures the
plans referring to the budget and actual
results of each responsibility center.
RESPONSIBILITY ACCTG IN
GOVT
Concepts under NGAS:
1. Responsibility accounting involves
accumulating and reporting data on revenues
and costs o the basis of the managers action.

2. Evaluation of managers performance.

3. Responsibility accounting can be used at every

level of management in which conditions exist.
RESPONSIBILITY ACCTG IN
GOVT
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 managers performance for cost

centers.
RESPONSIBILITY ACCTG IN
GOVT
6. Evaluation of a managers performance
for cost centers.
BOOKS OF ACCOUNTS
Use of general journal
Use of journal entry voucher
Maintenance of regular agency books
Maintenance of national government
books
BOOKS OF ACCOUNTS
Regular Agency Books
Journals:
-Cash Receipts Journal (CRJ)
-Cash Disbursements Journal
(CDJ)
-Check Disbursements Journal
(CkDJ)
-General Journal (GJ)
BOOKS OF ACCOUNTS
Regular Agency Books
-General Ledgers (GL)
-Subsidiary Ledgers (SL):
-Cash
-Receivables
-Inventories
-Investments
-Property, Plant and Equipment
-Construction in Progress
-Liabilities
-Income
-Expenses
BOOKS OF ACCOUNTS
National Government (NG) Books
Q: THE BOOKS OF ACCOUNTS
OF THE GOVERNMENT ARE
COMPOSED OF THE
FOLLOWING:
a. Regular agency books and National
Government books.
b. National government books and books
of original entry.
c. Journals and general/ subsidiary ledgers
d. Regular agency books and books of
original entry.
FINANCIAL STATEMENTS
(REQUIRED)
Balance Sheet
Statement Of Income And Expenses
Statement Of Government Equity
Statement Of Cash Flows
Notes To Financial Statements
TWO MONEY COLUMN TRIAL
BALANCE
Adoption of trial balance under
commercial accounting

OLD: four money column was a

requirement consists of debit balance,
debit totals, credit totals and credit
balance
Q.: THE FOLLOWING ARE THE
SYSTEMS FOLLOWED IN THE
NGAS:
a. Commercial accounting
b. Double entry bookkeeping
c. Responsibility accounting
d. Fund accounting
ALLOTMENT AND
OBLIGATION
Allotment
the authorization issued by dbm that will
enable the agency concerned to incur
obligation up to a specified amount w/n
legislative appriation.
ALLOTMENT AND
OBLIGATION
Obligation
refers to the commitment by an agency
which binds the govt the eventual
payment of sum/s of money
ALLOTMENT AND
OBLIGATION
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).
NOTICE OF CASH
ALLOCATION
This is an authorization issued by the DBM
to govt agencies to withdraw cash from the
national treasury thru the issuance of
checks or other authorized mode of
disbursements.

Entry:
Cash-National Treasury, Modified Disbursement System
XX
Subsidy Income from National Government XX
FINANCIAL EXPENSES
Includes bank charges, interest expense,
committment charges, documentary
stamps and other related expenses.
This was removed from maintenance
and other operating expenses account.

OLD:
recognized under Maintenance and other
operating expenses (MOE)
PERPETUAL INVENTORY OF
SUPPLIES & 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.
PERPETUAL INVENTORY OF
SUPPLIES & MATERIALS
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 check and balance, property
custodians or accounting units of agency
are required to maintain hard copies of
these assets
This is classified by category of ppe.
CONSTRUCTION OF ASSETS
Construction Period Theory is applied for
costing purposes
Bonus paid to contractor is added to
cost.
Liquidated damages due from contractor
is deducted from project cost
REGISTRY OF PUBLIC INFRASTRUCTURE
AND REGISTRY OF REFORESTATION
PROJECTS
This applies to public goods roads,bridges, waterways,
railways, plaza, monuments, etc. (By the DPWH, other GOCCs)
Also for the reforestation projects (by the DENR, other GOCCs)

Examples:
Registry of Public Infrastructure-Bridges (RPIB)
Registry of Public Infrastructure-Roads(RPIR)
Registry of Public Infrastructure-Parks (RPIP)
DEPRECIATION
A variety of depreciation methods can be used:
Straight line method
Diminishing balance method
Units of productionmethod
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.
COA Circular No. 2003-007
Dec. 11,2003
RECLASSIFICATION OF
ASSETS
Other assets
- no depreciation
- obsolete assets
- unserviceable assets
Q.: UNDER THE NGAS,
SERVICEABLE ASSETS NO
LONGER BEING USED SHALL BE
CLASSIFIED
a. PPE
AS:
b. Obsolete property
c. Depreciated assets
d. Other assets
e. Assets for disposal
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
Allowance for doubtful accounts will be set up to
allow fair valuation.

Set-up Estimated Uncollectible trade receivables

Accounts Receivable xx
Est. Uncollectible T/R xx
* Provided only to Trade Receivables
RECOGNITION OF LIABILITY
Recognized if:
-Goods are accepted
-Services are rendered
-Supplier/Creditor bills are received
ELIMINATION OF CONTINGENT
ACCONTS
Disallowed payments, cash shortages
shall be recorded under receivable
accounts.
Use of contingent accounts are stopped.
INTEREST ACCRUAL
Interest income or expense, when
appropriate are to be recognized

Interest income
those earned on deposits with banks,
loans and investment bonds, treasury
notes, treasury bill and promissory notes
held
INTEREST ACCRUAL
Interest expense
to record charges imposed as a
consequence on use of money belonging
to other, such us interest in bonds,
certificates of indebtedness, treasury
bills, treasury notes
ACCOUNTING FOR LOANS AND
BORROWINGS
All loans and borrowings shall be recorded under
appropriate liability accounts
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.
ACCOUNTING FOR LOANS AND
BORROWINGS
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

JE:
Loans Payable Long term, Foreign XX
Cash XX
To record the payment for a liability account.
PETTY CASH FUND
For paying small or miscellaneous but
authorized expenditures not conveniently
paid by check voucher.
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
Shall not be used to purchase regular
inventory/items for stock
PETTY CASH FUND
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
FOREIGN CURRENCY
ADJUSTMENT
Cash deposits by the government in
foreign currency will be computed at the
exchange rate set by the Bangko Sentral
as of balance sheet date
FOREIGN CURRENCY
ADJUSTMENT
Each month, any gain or loss from
foreign exchange transactions is
computed and recognized in the books
For foreign currency liability, it is to be
expressed both in foreign and local
currency.