GOVERNMENT ACCOUNTING – Summary of Chapters 4-

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ACCOUNTING FOR BUDGETARY ACCOUNTS b. Produced outputs or services rendered.
c. Achieved outcomes.
1987 Philippine Constitution, Sec. 29 (1), Art. VI – “no money shall be d. Cost of programs and activities proposed.
paid out of the Treasury except in pursuance of an appropriation by
law.”  Kinds of Budget
- Legal bedrock for government accounting for budgetary As to nature
accounts that commences upon the enactment of General  Annual – covers a period of one year
Appropriations Act (GAA)  Supplemental – adjusts a previous inadequate budget
 GAA – legal authorization to use public money for national  Special – submitted in special forms when itemizations are
government’s PAPs (programs, activities and projects) not adequately provided or amounts are not included int
 Budgetary accounts – composed of appropriations, allotments, eh Appropriations Act.
and cash allocations

Accounting Systems As to basis

1. Budgetary accounts  Performance – focus us in the general character and
2. Receipts/income and deposit system nature of work or services to be rendered
3. Disbursement system  Line-item – based on the objects of expenditures
4. Financial reporting system As to approach and technique
 Zero-based – activities are analyzed and presented in
Fundamental Principles of Fiscal Operations ad Disbursements of “decision packages” or key budgetary inclusions.
Public Funds  Incremental – focuses on analysis of incremental changes
1. No money paid out of treasury or depository except in pursuit of in the budget done within the context of performance and
an appropriation law or statutory authority. program budgeting
2. Government funds to be spend or used solely for public
purposes. The Budget Cycle
3. Trust funds available and spent only for specific purpose.  Budget Preparation
4. Fiscal responsibility shared by all exercising authority over - Estimation of government revenues and determination of
financial affairs, transactions and operations of government budgetary priorities and activities within the constraints
agency. imposed by available revenues and by borrowing limits,
5. Disbursements shall bear approval of proper officials. and the translation of approved priorities and activities into
6. Claims supported with complete documentation. expenditure levels.
7. All laws and regulations re financial transactions faithfully - Begins with the issuance of a “budget call” by the DBM
adhered to. - Includes partnership with Civil Society Organizations
8. Accounting principles and practices plus sound management (CSOs)
and fiscal administration to be observed. ** “Bottom-up” budgeting approach – focuses on rural
development programs and conditional cash transfer
 National government budget program of the poorest municipalities involving DA, DAR,
- Plan for financing fiscal year government activities DENR, DSWD, DepEd, and DOH.
- Detailed proposal of estimate or statement of receipts  Legislative Authorization (Budget Legislation)
(revenues) and expenditures for the past and ensuing - Starts upon the receipt of the President’s budget by the
years House Speaker and ends with the President’s enactment of
the General Appropriations Act.
 Balanced budget  Budget Execution and Operation
- Budget where estimated revenues equal proposed - Covers the operational aspects of budgeting
expenditures - Includes the development of operating budget
- Serves as the medium through which plans for operation
 Performance-informed budgeting (PIB) can be implemented using available resources and funds.
- Uses performance information to assist in deciding where  Budget Accountability
funds will go - Monitoring of the efficiency of fund utilization, assessment
- Differs from traditional line item-based budgeting since it of agency performance, and provision of vital basis for
focuses more on outputs and outcomes with less emphasis reforms and new policies.
on the inputs.
- Links funding to results Budgetary Accounts
- Provides a framework for more informed resource  Appropriation – authorization directing payment of goods and
allocation and management. services out government funds under specific conditions or
- Financial (major final outputs or MFOs) and non-financial special purpose
performance information are presented in appropriations  Allotment – authorization from DBM allowing the incurrence of
document inclusive of the following: obligations within the appropriation
a. Purpose of required funds.

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 Obligation – commitment binding the government to the **Re-enacted budget – allows the use of public funds for regular
immediate or eventual payment of a sum of money operations pending approval of the GAA

Registries for Budget Monitoring  Allotment release program (ARP) – may be established upon
1. Registry of Revenue and Other Receipts (RROR) GAA’s effective date (15 days following completion if
- To monitor revenue and other budgeted, collected, and publication in the Official Gazette or newspaper of general
deposited receipts circulation
2. Registry of Appropriations and Allotments (RAPAL)  All programmed automatic appropriations shall be available for
- To monitor appropriations and allotments release, obligation and disbursement within the budget year;
3. Registry of Allotments, Obligations and Disbursements (RAOD) any deficiency may be proposed for inclusion in succeeding
- To record allotments, obligations and disbursements year’s budget
4. Obligation Request and Status (ORS)  Unprogrammed appropriations (stand-by) are funded form
5. Registry of Budget Utilization and Disbursements (RBUD) excess revenues or from new revenue sources or when
- To record approved special budget and the corresponding additional foreign loan and proceeds are realized within the
utilizations and disbursements charged to retained income budget year
for SUCs and other NGAs.  After the specified validity period, all unreleased appropriations
or unexpended or undisbursed funds shall be reverted to
Objects of Expenditures unappropriated surplus of the General Fund and shall not be
1. Personnel services (PS) available for expenditure except by subsequent legislative
2. Maintenance and other operating expenses (MOOE) enactment.
3. Financial expenses (FE)  Obligational authority for items of appropriations shall be
4. Capital outlays (CO) released through GAAAO for FCR and SARO or GARO for
FLR items
 Funds are released directly to the regional office or operating
Fund Release Documents unit
A. Obligational authority or allotment  Obligational and disbursement authority shall be in accordance
 GAA as the Allotment Order (GAAAO) with targets set forth under DBM evaluated BED
- Obligational authority for comprehensive release of
appropriated budgetary items categorized as for  Modification – any changes within an activity or project,
comprehensive release (FCR) operating unit, allotment class, object of expenditure within an
 Special Allotment Release Order (SARO) or General Allotment agency or department budget
Release Order (GARO)  Augmentation – use of savings in appropriations to cover actual
- Classified as for later release (FLR) and considered as deficiencies incurred for the current year
withheld portion of the budget  Savings – portion or balances or any released appropriation
- SARO covers budgetary items in the submitted budget which have not been obligated due to
execution documents (BED) a) Completion
- GARO is an obligational authority to incur obligations not b) Final discontinuance
exceeding an authorized amount during a specified period c) Abandonment of a program, activity or project
and covers automatically appropriated expenditure d) Implementation of measured resulting in improved system
common to most agencies without need of special and efficiencies at a lesser cost
clearance or approval ** savings from final discontinuance or abandonment cannot
be proposed for funding in the next two fiscal years.
B, Disbursement authority ** priority shall be for compensation, mid-year and year-end
 Notice of Cash Allocation (NCA) bonuses, cash gift, retirement gratuity, terminal leave benefits,
- Authority to pay operating expenses through modified old-age pension of veterans and other personnel benefits, and
disbursements systems (MDS) checks, authority to debit implementation of priority projects or activities
account (ADA) or other modes of disbursements.  Deficiency – occurs when there is an unforeseen modification
 Non-Cash Availment Authority (NCAA) or adjustment in the P/A/P or reassessment in the use,
- Covers liquidation of actual obligations against allotments prioritization and/or distribution of resources.
for availment of proceeds from loans/grants through
supplier’s credit/cash Government Agencies Authorized to Utilize their Income Collected
 Cash Disbursement Ceiling (CDC)  DOF – Insurance Commission - (PS, MOOE, CO)
- Authority to DFA and DOLE to utilize their income  DOTr - Office for Transportation Security - (PS, MOOE)
collected/retained to cover their operating requirements not  DOLE – Office of the Secretary (verification fees) – (MOOE)
exceeding released allotments  DOJ – Land Registration Authority – (MOOE)

General Guidelines of Fund Release Release of Disbursement Authorities Guidelines

1. Release of NCA

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- Initial comprehensive NCA issued directly to operating units 5. Statement of Approved Budget, Utilizations,
covering one quarter (January to March) operating cash Disbursements and Balances (SABUDB) – FAR No. 2 (for
requirements excluding provision for prior year’s’ obligations Off-Budget fund)
- Succeeding NCAs issued to cover requirements for second 6. Summary of Approved Budget, Utilizations,
quarter (April to June) Disbursements and Balances by Object of Expenditures
- Additional NCAs issued for second semester requirement (July (SABUDBOE) – FAR No. 2-A (for Off-Budget Fund)
to December) 7. Aging of Due and Demandable Obligations (ADDO) – FAR
- Agencies advised to use the ADA to settle payables No. 3
- NCA shall be issued to three government servicing banks (LBP, - Reflects the balance of unpaid obligations as indicated in
DBP and PBV) the obligation request and the aging of due and
- Payment of mandatories such as PS, MOOE and Co demandable obligations as of year-end.
requirements shall take precedence over accounts payable in 8. Monthly Report of Disbursements (MRD) – FAR No. 4
the utilization of NCAs 9. Quarterly Report of Revenue and Other Receipts
2. Other disbursement authorities (QRROR) – FAR No. 5
- Valid from the date of issuance until the last working day of
the year Validity of Appropriations
a. Release of non-cash availment authority (NCAA)  PS – until Dec. 31 of the current year
b. Cash disbursement ceiling (CDC)  MOOE and CO – until Dec. 31 of the ensuing year
 Continuing appropriations of the previous year for MOOE and
Reporting Requirements CO – until the end of the current year
 Supplemental budget for MOOE and CO – until the end of the
 Budget Execution Documents (BED) current year
1. BED No. 1 – Financial Plan (FP)
- Include comparative obligation levels for budget and ** Conduct of mid-year and end-year agency performance review –
current years by DBM
2. BED No. 2 – Physical Plan (PP)
- Consists of the performance indicators and targets for Accountabilities/Timelines
operations, major programs and projects committed to the  November 15 – deadline for submission to DBM for request or
President release of SAROs and additional NCAs
3. BED No. 3 – Monthly Disbursement Program (MDP)  Within 30 days after the end of each quarter – submission of
- Used as basis for determining monthly level of NCAs BFARs
- Reflects total cash and non-cash program for the budget  On or before the 10th day of the month immediately following
year such as the covered period:
a. CDC - Monthly RAAOD
b. NCAA - Monthly RD using FAR
c. Tax Remittance Advice (TRA) for remittance of
withheld taxes estimated as follows: ACCOUNTING FOR DISBURSEMENTS AND RELATED
PS – 8%; MOOE – 5%; CO – 5% TRANSACTIONS
d. Others such as custom duties and taxes, and BTr
documentary stamps Disbursement
4. BED No. 4 – Annual Procurement Plan for Commmon-Use - All cash paid out during a given period either in cash or by
Supplies and Equipment (APP-CSE) check
- Reflects the monthly quantity and cash requirements by - Activities start from receipt of NCA from DBM
items categorized into those available at procurement
 NCA
service stores, and other items not available but regularly
- may be net of amount of tax withheld
purchased from other sources.
- used for payments of all financial transactions
 Budget and Financial Accountability Reports (BFARs)
1. Quarterly Physical Report of Operation (QPRO – BAR No. Disbursements Basic Requirements and Certifications
– reflects actual physical accomplishments as of a given  availability of allotment/budget – Budget Officer
quarter  obligations/utilizations properly charged against available
2. Statement of Appropriations, Allotments, Obligations, allotment/budget – Accountant
Disbursements and Balances (SAAODB) – FAR NO. 1  availability of funds – Accountant
3. Summary of Appropriations, Allotments, Obligations,  availability of cash – Accountant
Disbursements and Balances by Object of Expenditures  legality of transactions and conformity with existing rules and
(SAAODBOE) – FAR No. 1-A regulations – requesting and approving officials
4. List of Allotments and Sub-allotments (LASA) – FAR No.  submission of proper evidence to establish validity of claim –
1-B Head of Requesting Unit
 approval of the disbursement – Head of Agency or authorized
representative

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 Infrastructure Assets
Disbursement Authorities - Part of the system or network
 Notice of Cash Allocation (NCA) - Specialized in nature without alternative uses
 Non-cash Availment Authority (NCAA) - Immovable
 Cash Disbursement Ceiling (CDC) - Subject to constraints on disposal
 Notice of Transfer of Allocation (NTA)
- Authority of the regional and operating units to pay their Property, Plant and Equipment
operating expenses and other authorized disbursements - Recognition
though the issue of MDS checks, ADA or other modes such  Probable flow of future economic benefits
as: checks, cash, ADA, TRA, working fund/CDC, and direct  Reliable measurement of cost or fair value
payment method  Beneficial ownership and control by the government
 Asset is used to achieve government objectives
 Meets capitalization threshold of P15,000
Disbursement by Checks - Property accounting system procedures
- Drawn only on duly approved disbursement voucher or payroll 1. Recording of receipt, inspection and acceptance
- Types of government checks: 2. Recording of requisition and issue
a. MDS checks – chargeable against the account of the 3. Construction by administration
Treasurer of the Philippines 4. Construction by contract
b. Commercial checks – chargeable against agency checking - Modes of Acquisition
account with government servicing banks or authorized 1. Purchase
government depository banks (AGDB). 2. Construction
3. Exchange transaction
Accounting for Inventory 4. Non-exchange transaction
**Primary issue: amount of cost to be recognized as an asset and 5. Finance lease
carried forward until sold or consumed
 Cost of inventories – includes purchase price, cost of
conversion, taxes, and other costs
 Net realizable value – amount an entity expects to realize from Cash Disbursements
the sale of inventory in the ordinary course of business; the - Payments out of cash advances granted to regular and special
estimated selling price less estimated cost to complete and sell disbursing officers for PS, petty expenses and MOOE
 Fair value – amount for which the same inventory could be  Advances for payroll
exchanged between knowledgeable and willing parties - granted to regular disbursing officers for payment of PS
 Current replacement cost – cost the entity would incur to  overpayments
acquire the inventory on the reporting date - demand for refund mayst be made from employees concerned
**specific identification method shall be used in assigning cos to  cash advances for travel
inventories that are not ordinarily interchangeable while weighted - only for authorized officials and employees
average shall be used for interchangeable items.  petty cash fund – for recurring petty expenses
 Perpetual inventory method – used in the purchase of supplies
and materials for stock regardless of where they are or not Disbursements through List of Due and Demandable Accounts
consumed within the accounting period Payable-ADA (LDDAP-ADA)
**tangible items below the capitalization threshold of P15,000 shall - for payable and payment to suppliers an contractors
be accounted as semi-expendable property and recognized as - granting of payroll fund
expenses upon issue to the end-users. - payment of salaries through ATM
- delivery of supplies and materials for consumption
 Inventory Accounting Sub-Systems - rent
1. Receipt, inspection, acceptance and recording deliveries of
inventory items Disbursements through Electronic Modified Disbursement System
2. Requisition and issue (eMDS)
3. Transfer and/or disposal - facilitates an efficient and prompt reconciliation of spending
agencies’ disbursements vis-a-vis the accounts of BTr
Property, Plant and Equipment
- Held for use in the production or supply of goods or services, Disbursements through Cash Purchase Card (CPC) System
for rental to others or for administrative purposes - prescribed as an alternative mode of payment for goods and
- Expected to be used for more than one reporting period services of the DND, AFP and the DBM

Heritage Assets Disbursements through Tax Remittance Advice (TRA)

- Assets with historical, cultural and environmental significance - NCA released to the agency is reduced by the amount of
- Intended to be preserved in trust for future generations estimated taxed expected to be remitted by the agency through
TRA

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 a. Sale of goods
Disbursements through Direct Payment Method b. Supply of services
- - covered by a non-cash availment authority (NCAA) - Straight-line basis
- Payment of goods and services made directly by lending - Percentage of completion method
institutions to the supplier or contractor c. Use by others of entity assets
- Probability of inflow of benefits
ACCOUNTING FOR REVENUE AND OTHER RECEIPTS i. Interest
- Time proportion basis that takes into account the
Revenue f=effective yield on the asset
- The gross inflow of economic benefits or service potential ii. Royalties
during the reporting period with inflows resulting to an increase - Recognized as they are earned based in relevant
in net assets/equity, other than increases relating to agreement
contributions from owners iii. Dividends
 Revenue funds – all funds derived from the income of any - Recognized when the right to receive payment is
agency of the government and available for appropriation or established
expenditure in accordance with law. **Measurement – at fair value of the consideration
 Fundamental principles: received or receivable
a. All revenues shall be deposited/remitted in the national **When goods are sold or services are rendered in
treasury exchange for dissimilar goods or services, the exchange is
b. All money and property officially received must be a transaction that generates revenue.
accounted for as government fund and property. **When uncertainty arises about the collectability of an
c. Amounts received in trust and business-type activities amount included in the revenue, the uncollectible or
may be separately recorded and disbursed. improbable amount is recognized as an expense
d. Receipts shall be recorded as special, fiduciary or trust (impairment losses).
revenues other than GF only when authorized by law. **The entity shall disclose policies adopted re recognition
e. No payment shall be received without immediately issuing of revenue.
an official receipt. 2. Non-exchange transactions
f. Mechanical devices other than accountable forms may be - Cash basis
used upon request with COA. - Recognized when it gains control of the resource and
g. Temporary receipts are not to be issued in any instance. satisfy the recognition criteria
h. Pre-numbered ORs shall be issued in strict numerical a. Gifts, donations and goods in-kind
sequence. b. Services in-kind
i. Collecting officers shall accept payment for taxes, dues or c. Fines
other indebtedness in the form of checks.
j. Treasurer of the Philippine and all AGDBs shall Measurement if Assets and Liability on Initial Recognition
acknowledge receipt of all funds received by them.  assets
- Initially measured at its fair value as at the date of acquisition
Accounting Standards for Revenue  Liability
1. Revenue includes only gross inflows of economic benefits or - The amount on initial recognition considered to be the best
service potential received. estimate of amount required to settle present obligation at
2. Receipts/collections refer to all cash actually received from all reporting date
sources.
3. Fines shall include economic benefits or service potential Tax Revenue
received as determined by the court or other laws. - Economic benefits or service potential compulsory paid or
4. Gifts and donations consist of voluntary transfers of assets. payable to public sector agencies
5. Goods in-kid are tangible assets transferred to an agency in a - Taxable events for -
non-exchange transaction.  Income tax – earning of assessable income during taxation
6. Taxes are economic benefits or service potentials compulsory period by taxpayer
paid.  VAT – undertaking of taxable activity during taxation period by
7. Transfers are inflows of future economic benefits or service taxpayer
potential from non-exchange transactions.  Goods and services tax - purchase or sale of taxable goods
and services during the taxation period
**All revenue accruing to all agencies shall be deposited in the  Customs duty – movement of dutiable goods or services across
national treasury or AGDBs and shall accrue to the general fund of the customs boundary
the Government. Receipts shall be recorded as revenue of special,  Death duty – death of a person owning taxable property
fiduciary and trust funds only when authorized by law.  Property tax – passing of the date on which tax is levied.

Sources and Recognition of Revenue and Other Receipts **Taxation revenue shall be determined at gross amount and not
1. Exchange transactions reduced for expenses paid through the tax system.

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** Tax expenditures are foregone revenue, not expenses, and do not
give rise to inflows or outflows or resources.

**An entity shall recognize an asset in respect of transfers when the

transferred resources meet the definition of an asset and satisfy the
criteria for recognition as an asset.

**Entities recognize revenue in respect of debt forgiveness when the

former debt no longer meets the definition of a liability or satisfies the
criteria for recognition as a liability.

**Fines are recognized as revenue when the receivable meets the

definition of an asset.

Bequest – a transfer made according to the provision of a deceased

person’s will

Pledges
- unenforceable undertakings to transfer assets to the recipient
entity
- do not meet the definition of an asset because the recipient
entity is unable to control the access of the transferor to future
economic benefits

Concessionary loans
- loans received by an entity at below market terms.

Dishonored checks
- payment is refused or check not accepted due to “drawn
against insufficient funds” or drawn against uncleared deposits”

**Cash overage is taken up as miscellaneous income. Cash

shortage as receivable from collecting/disbursing officer.

Performance Bond
- posted by contractor/supplier to guaranty full and faithful
performance of their contract
- may be in the form of cash or certified checks

Intra-agency fund transfer

- cash received from central office/regional office/operating units
of an entity

Inter-agency fund transfer

- cash received from another entity for the purpose of
implementing specific projects

Cancelled checks
- stale, voided or spoiled
**MDS checks have validity of only 3 months from date of issue

Disallowances
- taken up in the books of accounts only when they become final
and executory
- cash settlement shall be acknowledged through the issue of an
official receipt and reported in the RCD