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Chapter 1.

THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL

For Local Government Units

INTRODUCTION

Sec. 01. Objectives of the Manual. The New Government Accounting System Manual
presents the basic policies and procedures; the new coding system and chart of accounts;
the accounting books, reports/forms and financial statements, and illustrative accounting
entries to be adopted by all local government units effective January 1, 2002. The
objectives of the Manual are to prescribe the following:
a)
b)
c)

Uniform guidelines and procedures in accounting for government funds and


property;
New coding structure and new chart of accounts; and
New accounting books, reports/forms, financial statements and accounting
entries.

Sec. 02. Coverage. This Manual shall be used by all local government units (LGUs).

4.

Chart of Accounts and Account Codes. A new coding structure and a new chart
of accounts with a three-digit account numbering system shall be adopted.

5.

Books of Accounts. The Books of Accounts are as follows:

6.

Journals

Cash Receipts Journal (CRJ)


Cash Disbursements Journal (CDJ)
Check Disbursements Journal (CKDJ)
General Journal (GJ)

7.

Ledgers

General Ledger (GL)


Subsidiary Ledgers, where applicable for:
Cash
Receivables
Inventories
Investments
Property, Plant and Equipment
Liabilities
Income
Expenses

8.

All the above records shall be maintained by the accounting unit of the LGUs.
However, treasurers and disbursing officers shall also maintain their respective
cash records such as:

Sec. 03. Legal Basis. This Manual is prescribed by the Commission on Audit pursuant to
Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines
which provides that:
"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)
Chapter 2.

BASIC FEATURES AND POLICIES

Sec. 04. Basic Features and Policies. The new government accounting system has the
following basic features and policies, to wit:
1.

2.

3.

Accrual Accounting. A modified accrual basis of accounting is used. Under this


method, all expenses shall be recognized when incurred. Income shall be on
accrual basis (e.g. Share from Internal Revenue Collections) except for
transactions where accrual basis is impractical (e.g. Market Fees) or when other
methods may be 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. As required under Sections 308, 309 and 310 of the
Local Government Code, separate books shall be maintained for the General
Fund, Special Education Fund and Trust Fund.
Special Accounts in the General Fund. Special accounts in the General Fund
complete with subsidiary ledgers, shall be maintained for the following:

Public utilities and other economic enterprises;

Loans, interests, bonds issued, and other contributions for specific


purposes;
Development projects funded from the Share in the Internal
Revenue Collections; and
Such other special accounts which may be created by law or
ordinance.

9.

Cashbook Cash in Treasury


Cashbook Cash in Bank
Cashbook Cash Advances

The Treasurers/Collectors shall prepare the Report of Collections and Deposits


(RCD) daily and the Report of Accountability for Accountable Forms (RAAF)
monthly.

10. Financial Statements. The following statements shall be prepared:

Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows

11. Notes to Financial Statements shall accompany the above statements.


12. Trial Balance. The two money-column trial balance shall be used.
13. Appropriations, Allotments and Obligations. Journal entry shall no longer be
prepared to record the appropriations, receipt of allotments and incurrence of
obligations. In lieu of this, separate registries shall be maintained by the

Accounting Unit to control the appropriations, allotments and obligations for each
of the four classes of expenditures, namely:

Registry of Appropriations, Allotments and Obligations Capital


Outlay (RAAOCO)
Registry of Appropriations, Allotments and Obligations
Maintenance and Other Operating Expenses (RAAOMO)
Registry of Appropriations, Allotments and Obligations Personal
Services (RAAOPS)
Registry of Appropriations, Allotments and Obligations Financial
Expenses (RAAOFE).

21. Completed public infrastructures funded out of a loan shall, however, be retained
in the books of accounts until the loan is fully paid.
22. A Summary of all Public Infrastructures (based on the different registries) shall be
prepared annually and included in the Notes to Financial Statements.
23. Depreciation. The straight-line method of depreciation shall be used. A residual
value equivalent to ten percent (10%) of the cost shall be set-up and depreciation
shall start on the second month after purchase/completion of the property, plant
and equipment. Public infrastructures shall not be charged any depreciation.

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

24. Reclassification of Obsolete and Unserviceable Assets, as well as Assets No


Longer Used by the Agency to Other Assets Account. Assets declared by proper
authorities as obsolete and unserviceable, including assets of the agency no
longer used, shall be reclassified to Other Assets account from the
corresponding inventory and property, plant and equipment accounts.

15. 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 for immediate use and not for stock. Such case shall be
charged immediately to the appropriate expense accounts.

25. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set
up for estimated uncollectible receivables. This will allow for a fair valuation of
receivables. Allowance for Doubtful Accounts shall be provided only for trade
receivables.

16. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be
computed using the moving average method.
17. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. The
Accounting Unit shall maintain Supplies Ledger Cards by stock number and
Property, Plant and Equipment Ledger Cards by category of assets.
18. 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 asset. Any related expenses incurred during the
construction of the project, such as, license fees, permit fees, clearance fees, etc.
shall be capitalized.
19. Public Infrastructures. Public infrastructures are assets for use of the general
public, such as roads, bridges, waterways, railways, plazas, monuments, etc. A
Registry of Public Infrastructures (RPI) shall be maintained according to
classification to record all infrastructures for use of the general public. The
following are the Registries to be maintained, classified by category of property,
plant and equipment:

Registry of Public Infrastructure Bridges (RPIB)


Registry of Public Infrastructure Roads (RPIR)
Registry of Public Infrastructure Plazas, Monuments, etc. (RPIP)

20. During construction these infrastructures shall be recorded in the books under the
account Construction in Progress. Upon completion, the completed asset shall
be transferred to the account Public Infrastructure. At the end of the year,
completed assets under Public Infrastructure shall be transferred to the
respective registry.

26. 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 shall be recorded under receivable accounts
Due From Officers and Employees and Receivables Disallowances/Charges,
as the case may be.
27. Recognition of Liability. Liability shall be recognized at the time goods and
services are accepted or rendered and supplier/creditor bills are received.
28. Interest Accrual. Whenever applicable and appropriate, interest income and/or
expense shall be accrued and recognized in the books of accounts.
29. Accounting for Borrowings and Loans. All borrowings and loans incurred shall be
recorded direct to the appropriate liability accounts.
30. Elimination of corollary and negative entries. The use of corollary and negative
entries shall be stopped. Acquisition/Disposition of assets shall be
debited/credited direct to the appropriate asset accounts. If an error is
committed, a correcting entry shall be prepared to adjust the original entry.

Chapter 3. ACCOUNTING SYSTEM


A. GENERAL ACCOUNTING PLAN
Sec. 05. General Accounting Plan. The General Accounting Plan shows the overall
accounting cycle in the Local Government Unit. Transactions shall emanate from the
different offices/departments of the local government units (LGUs). These
offices/departments will provide/produce the source documents and other accounting
forms leading to the perfection of the transaction, whether it be budgetary, collections or

disbursements. The source documents and accounting forms shall be the basis for the
preparation of reports by the Office of the Treasurer. The Office of the Accountant shall
record the transactions to the registries or to the corresponding books of original entry.
Posting to the books of final entry and preparation of the financial reports shall also be
undertaken by the Office of the Accountant.
The General Accounting Plan (Table 1) is presented as to the following type of
transactions:
1)
2)
3)
4)
B.

Appropriations, Allotments and Obligations


Collections and Deposits
Disbursements
a) By cash
b) By check
Miscellaneous and Other transactions

BUDGETARY ACCOUNTS

Sec. 06. Budgetary Accounts. Budgetary accounts are composed of appropriations,


allotments and obligations.
Sec. 07. Accounting for Appropriations. Appropriation refers to an authorization
made by ordinance, directing the payment of goods and services from local government
funds under specified conditions or for specific purposes.

GENERAL ACCOUNTING PLAN (MS Excel file)

The local sanggunian approves the annual budget thru the issuance of appropriation
ordinance. On the first business day of the fiscal year, the entire annual budget of the local
government unit shall be recorded in the Registry of Appropriations, Allotments and
Obligations (RAAO). The appropriations, in the amounts approved by the legislative body
and confirmed by the reviewing authorities, are recorded in the registries maintained by
the accountant where they may be compared with the actual developments of the period.
Budgetary reserves which are stand by appropriations ready for release in case of
calamities, as well as supplemental budget are similarly recorded in the RAAO. In case the
LGU is operating on a re-enacted budget, said re-enacted budget shall likewise be
recorded in the registry. Once current budget is approved, the necessary adjustments shall
be made in the registry.
Separate registries shall be maintained for the four classes of expenditures per
responsibility center, to wit:
1.
2.
3.
4.

Registry of Appropriations, Allotments


Registry of Appropriations, Allotments
Operating Expenses (RAAOMO)
Registry of Appropriations, Allotments
(RAAOPS)
Registry of Appropriations, Allotments
(RAAOFE)

and Obligations - Capital Outlays (RAAOCO)


and Obligations - Maintenance and Other
and Obligations - Personal Services
and Obligations - Financial Expenses

Sec. 08. Accounting for Allotments. Allotment is the authorization issued by the
Local Chief Executive (LCE) to a department/office of the LGU, which allows it to incur
obligations, for specified amounts, within the appropriation ordinance. Allotments are
released quarterly based on the Work and Financial Plan and Request for Release of
Allotment. The Accountant, upon receipt of the Advice of Allotment, shall enter the
allotment in the RAAOs.
Sec. 09. Accounting for Obligations. Obligations refer to the amounts committed to
be paid by the LGU for any lawful act made by an accountable officer for and in behalf of
the local government unit concerned.
Obligations shall be taken up in the registries as they are incurred. For each obligation, the
requesting department/office shall prepare the Allotment and Obligation Slip (ALOBS)
signed by the department or office head as requesting official and forward this, together
with the supporting documents, to the Budget Officer.
The Budget Officer shall certify to the existence of appropriation that has been legally
made for the purpose by signing the appropriate box in the ALOBS and assign the ALOBS
number thereto. The Accountant shall review the ALOBS and certify as to obligation of the
allotment by signing the appropriate box in the ALOBS. He shall also fill up the Status of
Obligation. The Accountant shall record the amount of obligation in the RAAOs.
Sec. 10. Adjustment of Obligations. The Chief Accountant shall record paid
disbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Any
balance appearing in the ALOBS after full payment of obligations shall form part of
unobligated allotment. The Chief Accountant shall adjust accordingly the amount of
recorded obligations in the RAAO using the same ALOBS number as reference. At the end
of each month, the Chief Accountant and the Budget Officer shall reconcile their records on
allotments available for obligation.

Sec. 11. Accounting Procedures for Budgetary Accounts. Summarized hereunder


is the process in accounting for budgetary accounts:
PROCESS

PERSON / UNIT
RESPONSIBLE

a)

Records in the appropriate RAAOs the


approved appropriation per Appropriation
Ordinance.

Office of the
Accountant

b) Forwards the advice of allotments to


the Office of the Accountant and returns
the work plan to the concerned
departments/ offices.

Office of the Budget


Officer

c)

Office of the
Accountant

Enters the allotments in the RAAOs.

d) Prepares ALOBS based on


disbursement vouchers/purchase
requests and/or supporting documents.
Signs the appropriate box for requesting
office. Forwards the same to the Office of
the Budget Officer.

Heads of
departments/offices

e) Certifies the ALOBS as to the


existence of appropriations based on the
appropriation ordinance. Assigns ALOBS
number and forwards the same to the
Office of the Accountant.

Budget Officer

f)
Certifies the ALOBS as to the
obligations of allotments. Records the
obligation in the appropriate column of
the RAAOs and in the Status of Obligation
portion (Obligation) of the ALOBS.

Chief Accountant

g) Records paid disbursement vouchers


in the Status of Obligation portion
(Payments) of the ALOBS. Any balance
appearing in the ALOBS after full payment
of obligations shall form part of
unobligated allotment. Adjust accordingly
the amount of recorded obligations in the
RAAOs.

Office of the
Accountant

h) At the end of each month, reconcile


records on allotments available for
obligation.

Budget Officer and


Chief Accountant

Sec. 12. Terminology and Classification. A common terminology and classification


shall be used consistently throughout the budget, the accounts and the financial reports.

For this purpose, the following specific expenditures shall be recorded in the appropriate
RAAOs:
a. RAAOCO

b. RAAOPS

c. RAAOMO

Investments outlay (e.g. stocks, bonds)


Land, Land Improvements and Leasehold Improvements outlay
Buildings and Other Structures outlay (e.g. school buildings, markets and
slaughterhouses, hospital and health centers, etc.)
Public Infrastructures outlay (e.g. parks, plaza, monuments, bridges etc.)
Furniture and Fixtures outlay
Work Animals outlay
Breeding stocks
Machineries and Equipment outlay (e.g. dump trucks, construction
equipment, industrial machineries, technical and scientific equipment,
etc.)
Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars, vans,
etc.)
Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay
Books outlay
Ordnance outlay
IT Equipment and Software outlay
Other Property, Plant and Equipment outlay
Reforestation Projects
Arts, Archeological Specimen and Other Exhibits
Salaries and Wages (e.g. regular pay, part-time pay, overtime and night
pay, holiday pay, etc.)
Allowances (e.g. PERA, hazard pay, RATA, etc.)
Benefits (e.g. bonus, cash gifts, productivity, pension, etc.)
Government Shares on Employees Contributions
Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.)
Livestock (e.g. swine, hogs, chicken, goats, etc.)
Crops
Supplies (e.g. office, medical, dental and laboratories, spare parts,
gasoline and oil, etc.)
Repairs and Maintenance
Printing and Binding
Travel
Consultancy
Light, Water and Gas
Communication (e.g. telephone, telegraph, internet, postage, etc.)
Auditing Services
Other Services (e.g. janitorial, security, hauling, etc.)
Extraordinary and Miscellaneous Expenses
All other expenditures in the Chart of Accounts for MOOE, except
depreciation, obsolescence, bad debts, loss on sale of assets, loss of
assets, discount on Real Property Tax and Special Education Tax.

d. RAAOFE

C.

Bank Charges
Interest Expenses
Commitment Charges
Other Financial Charges (e.g. underwriting fees, guarantee fees)
Loan Amortization

INCOME/COLLECTIONS AND DEPOSITS

Sec. 13. Separation of Books and Depository Accounts. Local accountants and
treasurers shall maintain separate books and depository accounts, respectively, for each
fund in their custody or administration.
Sec. 14. Depository Accounts. Local treasurer shall maintain depository accounts in
the name of their respective local government units with banks, preferably governmentowned, located in or nearest to their respective areas of jurisdiction. Earnings of its
depository accounts shall accrue exclusively thereto.
Sec. 15. Remittance of Government Monies to the Local Treasury. Officers of the
local government authorized to receive and collect monies arising from taxes, revenue, or
receipts of any kind shall remit the full amount received and collected to the treasury of
such local government unit which shall be credited to the particular account or accounts to
which the monies in question properly belong.
Sec. 16. Sources of Income of LGUs. The main sources of income of LGUs are as
follows:
a.
b.
c.

Tax revenues, fees and charges


Share from Internal Revenue Collections
Share from National Wealth

The sources of income are further classified into general income accounts and specific
income accounts.
Sec. 17. General Income Accounts. The following shall comprise the General Income
Accounts applicable to LGUs:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.

Subsidy from Other LGUs


Subsidy from Other Funds
Subsidy from Special Accounts
Sales Revenue
Dividend Income
Interest Income
Gain on Sale of Securities
Gain on Sale of Assets
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

Sec. 18. Specific Income Accounts. The following major classification comprise the
specific income accounts for LGUs:

1.
2.
3.
4.

Property Taxes
Taxes on Goods and Services
Other Taxes
Other Specific Income

Sec. 19. Methods of Accounting for Income. The following accounting methods
shall be adopted in recording income:
a.

Accrual Method Accrual method of accounting shall be used to record


Share from Internal Revenue Collections in the books of accounts. Upon
receipt of the Notice of Funding Check Issued from Department of
Budget and Management (DBM), Share from Internal Revenue
Collections shall be taken up as Due from NGAs and credited to Share
from Internal Revenue Collections. However, Cash in Bank shall be
debited upon receipt of Bank Credit Advice as to receipt of the Share
from Internal Revenue Collections regardless of whether or not the
Notice of Funding Check Issued has been received from DBM.

b.

Modified Accrual Modified accrual method of accounting shall be used


for real property taxes. At the beginning of the year, Real Property Tax
Receivable and Special Education Tax Receivable shall be established.
This is in view of the need to record in the books not mere income
estimates from real property taxes but actual receivables from said
taxes. However, to avoid appropriating uncollected revenues which
might result to huge cash overdraft, the same shall be credited to
Deferred Real Property Taxes Income/Deferred Special Education Tax
Income. Real Property Tax Income/Special Education Tax Income shall be
recognized upon receipt of collection.

c.

Cash Basis Cash basis of accounting shall be used for all other taxes,
fees, charges and other revenues.

Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. Real
Property Tax Receivables/Special Education Tax Receivables shall be established at the
beginning of the year based on Real Property Tax Account Register/Taxpayers index card.
At the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly
certified list showing the name of taxpayers and the amount due and collectible for the
year. Based on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to
record the debit to Real Property Tax Receivable/Special Education Tax Receivable and
crediting to Deferred Real Property Tax Income/Deferred Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the account Deferred Real Property
Tax Income/Deferred Special Education Tax Income shall be debited while the Real Property
Tax Income due to the municipality is recognized/credited. The share of the Province and
Barangay shall also be credited to Due to LGUs.
Every end of the week, thereafter the Municipal Accountant shall furnish the Provincial
Accountant with a summary of the JEVs showing the breakdown of the amounts Due to
LGUs. The summary, which shall be supported with copies of the JEVs, shall be the basis
of the Provincial Accountant to draw the JEV taking up the RPT Income. The account Due
from LGU shall be debited and Real Property Tax Income credited.
At the end of the month, the Municipal Accountant shall likewise prepare the Abstract of
Real Property Tax to facilitate the distribution of real property tax collection. A copy of the

abstract shall be furnished the Provincial Accountant, for purposes of reconciliation with
the weekly summary of JEVs.
Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior to CY
2002. Payment of delinquencies for real property taxes/special education taxes prior to
CY 2002 shall be recognized as a direct credit to Real Property Tax Income/Special
Education Tax Income account.
Sec. 22. Discount on Real Property Tax/Special Education Tax. Discounts for
advance and prompt payment of Real Property Tax and the additional one percent (1%) tax
accruing to the Special Education Fun shall be recognized in the year the taxes are due.
Said discounts shall be apportioned to the concerned LGUs in accordance with the sharing
prescribed for real property tax and additional one percent (1%) tax under the Local
Government Code.
Sec. 23. Fines and Penalties. Fines and Penalties, either from tax revenue or other
specific income, shall be recognized as income of the year it was collected.
Fines and Penalties arising from real property taxes shall be distributed to concerned LGUs
in accordance with the sharing prescribed under the Local Government Code for Real
Property Tax and the additional one percent (1%) tax for the Special Education Fund.
Sec. 24. Other Receipts. Other receipts of the local government units shall be
comprised of, but not limited to, the following:
a.
b.
c.
d.

Borrowings
Sale of Property, Plant and Equipment
Refund of Cash Advances
Receipt of Performance/Bidders Bonds

Sec. 25. Borrowings. Borrowings are proceeds of repayable obligations, generally with
interest from the bank, national agency, another local government unit, and private sector.
All borrowings incurred shall be recorded direct to the appropriate liability accounts. Upon
receipt of the advice from the bank or lending agency informing the release of the
proceeds, the Accountant shall draw a Journal of Entry Voucher taking up the transaction.
Sec. 26. Sale of Property, Plant and Equipment. Sale of property, plant and
equipment refers to the proceeds from the sale of land, buildings, equipment, furniture and
other similar property which are recorded in the books as Property, Plant and Equipment.
The appropriate Property, Plant and Equipment account shall be credited upon transfer of
ownership.
Sec. 27. Refund of Cash Advances. Cash advances for official travel shall be taken
up as a receivable from the concerned official or employee. Refunds made shall be
credited to the receivable account previously set up. Cash advances for salaries and
wages shall be recorded as debits to the account Cash Disbursing Officer. Any refund
made shall be credited to this account.
Sec. 28. Receipt of Performance Bonds. Performance bond posted by contractor or
supplier to guaranty full and faithful performance of the their work may be in the form of
cash, certified check or surety. Performance bond in cash or certified check shall be
acknowledged by the issuance of official receipt and recorded in the books by the
Accountant drawing a JEV for the purpose. In case of surety bond, an acknowledgment
receipt shall be issued by the authorized official.

Sec. 29. Reporting for Collections and Deposits. Collectors/tellers shall issue a
receipt to acknowledge collections made. The receipt maybe in the form of pre-numbered
Official Receipts, or cash tickets and the like. At the close of each business day, these
collectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four
copies. The original and two copies, together with the duplicates of the official receipts
issued, shall be submitted to the treasurer/cashier to whom the cash collected shall be
turned over. The fourth copy of the RCD shall be retained by the collector/teller
concerned. Barangay Treasurers deputized to collect taxes imposed by provinces, cities
and municipalities shall follow the same procedures in turning over their collections to the
treasurer/cashier concerned.
In the case of collectors assigned to the field, where travel time from their places
of assignment to the Treasurers Office is more than one day, turnover of collections shall
be made at least once a week or as soon as the collections reach P5,000.00.
Sec. 30. Verification of Collections and Accountable Forms. The Treasurer/Cashier
shall verify the Report of Collections and Deposits; check the statement of accountable
forms as to initial balances on hand, receipts, issues and the ending balances on hand;
make a physical count of the accountable forms remaining in the custody of the
collector/teller and check the same against the new balances on hand column. He shall
indicate his verification by affixing his signature at the back of the triplicate copy of the
last official receipt issued. He shall count the money turned over to him and sign the
certification and receipt portion of all copies of RCD.
Sec. 31. Designation of Liquidating Officers. The Treasurer may designate
liquidating officers from among the collectors/tellers whenever necessary.
a.

b.

c.

Collectors/telle
rs shall turn over their collections to their designated liquidating officer. The
RCD shall however be prepared in five copies, four copies to be submitted to
the liquidating officer, the fifth copy to be retained by the collector/teller.
The liquidating
officer shall perform the procedures for the receipt and verification of
collections turned over to him. He shall also accomplish the RCD in four
copies to summarize the collections turned over to him by the
collectors/tellers as well as his own collections.
The liquidating
officer shall turn over intact the cash collections to the Treasurer/Cashier
together with the originals and two copies of the RCDs of collectors/tellers
and the duplicates of the official receipts issued. The Treasurer/Cashier shall
acknowledge receipt of the cash and all accompanying documents by signing
all copies of the RCD of liquidating officer on the certification and receipt
portion of the form. The fourth copy of the RCD of the liquidating officer and
RCDs of collectors/tellers shall be retained by the liquidating officer.

Sec. 32. Deposit of Collections. The Treasurer/Cashier shall deposit intact all his
collections as well as all collections turned over to him by the collectors/tellers with the
authorized depository bank daily or not later than the next banking day. He shall record all
deposits made in the cashbook and prepare the RCD.
The barangay treasurer shall deposit all collections intact with the city/municipal treasurer,
or in a depository bank account maintained in the name of the barangay, within five (5)
days from receipt thereof.

Sec. 33. Deposit of Field Collections. Collections by field collectors shall be


remitted to the Cashier or designated liquidating officer of the field office of the LGU.
When travel distance of the field office to the local treasury may expose government funds
to the risk of loss while in transit, the Cashier or designated liquidating officer, upon
authorization by the Treasurer, may deposit the collections in the authorized depository
bank near the field office of the LGU. The procedures in reporting collections and deposits
prescribed in this Chapter shall be observed.
Sec. 34. Accounting for Collections and Deposits. The Accountant shall
determine the account classification of the collections covered by the RCD and the
supporting papers submitted by the Treasurer/Cashier and shall accomplish the Journal
Entry Voucher. The accountant shall also maintain the Abstract of Real Property Tax
Collections to facilitate the distribution and remittance of the shares of the different
government units concerned in the real property tax collections.
Sec. 35. Receipts and Collection Process. The following is a summary of the receipt
and collection process in the LGU:
PROCESS

PERSON / UNIT
RESPONSIBLE

Receive payment from taxpayers/ creditors


and issue Official Receipt (OR). Prepare
Report of Collections and Deposits. Remit to
the Liquidating Officer (if one is designated)
or Treasurer.

Collector/Teller

Check remittances and verifies accountable


forms of collectors/tellers. Consolidates
collections and remits to the
Treasurer/Cashier. Prepares RCD.

Liquidating Officer

Receive remitted collections, consolidates the


same and prepares RCD. Records in the
Cashbook Cash in Treasury.

Treasurer

Deposit collections in the appropriate bank


account per authorized depository bank.
Records deposit in the Cashbook Cash in
Bank.

Treasurer

Forward RCD to Accounting Unit with copies of


ORs and validated deposit slips.

Treasurer

Prepare Journal of Entry Voucher and record in


the Cash Receipt Journal.

Accountant

Sec. 36. Proforma Accounting Entries. The following are pro-forma accounting
entries for income, collection and deposit:

Particulars

Account Title

Acct
.
Cod
e

Debit

Credi
t

Particulars

Receipts from
Markets
Garbage Fees

INCOME
1. Real Property Tax Basic
A. Books of the
Municipality

b. Deposit of
Collections

a. Setting-up of RPT
Receivable
RPT = P1,000
RPT Sharing: Municipal
- 40%
Province - 35%
Barangay - 25%

Real Property Tax


Receivable
Deferred Real
Property Tax Income

b. Receipt of
Payment

Cash in Treasury
Real Property Tax
Receivable

c. Distribution of
Collection
RPT Sharing:
Municipal - 40%
Province - 35%
Barangay - 25%

Deferred Real
Property Tax Income
Real Property Tax
Due to LGUs

d. Deposit of
Collections

Cash in Bank LCCA


Cash in Treasury

110
101

100

e. Remittance of Share
(Province)

Due to LGUs
Cash in Bank LCCA

431
110

35

f. Remittance of Share
(Barangay)

Due to LGUs
Cash in Bank LCCA

431
110

25

B.

124
448

101

1,000

100

124
448
711
431

100
100

Cash in Bank LCCA


Cash in Treasury

Acct
.
Cod
e
783
772

Debit

Credi
t
90
10

110
101

100

1,000

100

3. Share from Internal Revenue Collections

1,000

40
60

a. Receipt of Notice of
Funding Check Issued
from the DBM and
credit memo from
the bank for Share
from Internal Revenue
Collections

Cash in Bank LCCA


Share from Internal
Revenue Collections

110

b. Receipt of Notice of
Funding Check Issued
from the DBM for
Share from Internal
Revenue Collections

Due from NGAs


Share from Internal
Revenue Collections

130

746

1,000

1,000

746

1,000

4. Grants and Donations


100
35

a. Upon receipt of the


Summary of the JEV
from the Municipal
Accountant

Due from LGUs


Real Property Tax

b. Upon receipt of
share

Cash in Bank LCCA


Due from LGUs

131
711

110
131

35
35

35

Cash in Treasury
Income from Grants
and Donations

101

b. Receipt of grants
and donations in kind Motor Vehicle:
Original Cost
P1,000
Less: Acc. Depn.
200
Book Value
P
800

Motor Vehicles
Invested Equity

218
537

800

(At the end of Year)


Invested Equity

537

800

Government Equity

501

35

101

100

Cash in Bank LCCA


Loans Payable
Current, Domestic

110

651

100

800

800

5. BORROWINGS
a. Receipt of borrowed
funds from bank -

2. Operating and Service Income


Cash in Treasury

a. Receipt of grants
and donations in cash
(Donations in kind shall
be booked-up using the
appropriate asset
account)

25

Books of the
Province

a. Receipt of Income

Account Title

403

1,000
1,000

100

Acct
.
Cod
e
951
952
110

Particulars

Account Title

Debit

Principal P1,000
Bank Charges 10
Interest Expense12

Bank Charges
Interest Expenses
Cash in Bank LCCA

b. Receipt of borrowed
funds from other
agency Principal P1,000
Interest Expense 6

Cash in Treasury
Loans Payable
Current, domestic
Interest Expenses

101

1,000

403
952

Cash in Bank LCCA

110

c. Payment of loan
amortization

Loans Payable
Current, Domestic
Cash in Bank - LCCA

Credi
t

10
12

Debit

Credi
t
500

BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)

403
110

Receipt of subsidy
from
General Fund Proper

Subsidy to Other
Funds
Cash in Bank LCCA

897
110

200

Due from Officers &


Employees
Cash in Bank LCCA

b. To take up refund of
cash advance

Cash in Treasury
Due from Officers &
Employees

200

500

BOOKS OF GENERAL FUND PROPER


Subsidy to Special
Accounts

898

500

128
110

10

101

10

128

10

10

Cash Disbursing
Officers
Cash in Bank LCCA
Cash in Treasury
Cash Disbursing
Officers

107
110

10

101

10

10

107

10

8. RECEIPT OF CASH BONDS


500

b. Special Accounts (subsidy from General Fund proper to


Operation of Public Market)

500

b. Cash Advance by a Disbursing Officer for Salaries and Wages


a. To take up the cash
advance

500

605

606

a. To take up the cash


advance

SPECIAL EDUCATION FUND BOOKS


101

Accounts

500

a. Cash Advance by an Officer for Local Travel

b. To take up refund of
cash advance

Cash in Treasury
Subsidy from Other
Funds

110

7. REFUND OF CASH ADVANCES


6

500

Cash in Bank LCCA


Subsidy from Special

1,000

GENERAL FUND BOOKS

Transfer of subsidy to
Special Account

Acct
.
Cod
e
110

22

a. Subsidy from Other Funds (General Fund to Special Education


Fund)

Receipt of subsidy
funds from Other funds

Account Title
Cash in Bank LCCA

6. SUBSIDIES

Transfer of subsidy
to Special Education
Fund (Aid to SEF to
finance its projects)

Particulars

a. To take up receipt of
performance bond in
cash

Cash in Treasury
Performance/
Bidders/ Bail Bonds
Payable

101

50

b. To take up deposit of
performance bond

Cash in Bank LCCA


Cash in Treasury

110
101

50

c. To take up refund of
performance bond

Performance/
Bidders/ Bail Bonds
Payable
Cash in Bank LCCA

414

50

414

110

50

50

50

D. DISBURSEMENTS
Sec. 37. Disbursements. Disbursements refer to the settlement of government
payables/obligations by cash or by check.
Typical transactions for which disbursements are made are as follows:
1.
2.
3.
4.

Personal Services
Maintenance and Other Operating Expenses
Capital Outlay
Financial Expenses

Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and


paid either by check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an
integral part of the DV.
Sec. 38. Certification on Disbursements. Disbursements from the general fund shall
require the following certifications on the DV:
1.

Certification and approval of vouchers and payrolls as to validity, propriety and


legality of the claim (Box A of DV) by the head of the department or office who
has administrative control of the fund concerned. In case of temporary absence or
incapacity of the department head or chief of office, the officer next-in-rank shall
automatically perform his function and shall be fully responsible therefor.

2.

Necessary documents supporting the disbursement vouchers and payrolls as


certified to and reviewed by the Accountant. (Box B of DV)

3.

Certification that funds are available for the purpose by the Local Treasurer. (Box
C of DV)

Sec. 39. Approval of Disbursements. Approval of disbursements by the Local Chief


Executive (LCE) himself shall be required whenever local funds are disbursed, except for
regularly recurring administrative expenses such as: payrolls for regular or permanent
employees, expenses for light, water, telephone and telegraph services, remittances to
government creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the
DBM and others, where the authority to approve may be delegated. Disbursement
vouchers for expenditures appropriated for the operation of the Sanggunian shall be
approved by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor,
as the case may be.
Sec. 40. Payments by Check. Checks shall be drawn only on duly approved
disbursement vouchers. It shall be drawn by the local Treasurer and countersigned by the
local Administrator. In case of temporary absence or incapacity of the aforesaid officials,
these duties shall devolve upon their immediate assistants. In the case of municipalities
where no Administrator has been appointed, checks shall be countersigned by the
municipal Mayor. In case, however, of expenditures appropriated for the operation of the
Sanggunian, checks drawn shall be countersigned by the provincial Vice Governor, the city
Vice Mayor, or the municipal Vice Mayor, as the case may be.
Sec. 41. Recording Check Disbursements in the Cashbooks. All checks issued
including cancelled checks shall be recorded chronologically in the Cashbook Cash in
Bank.

Sec. 42. Release of Checks. The Treasurer shall release the check only to the payee
or his duly authorized representative. For purposes of releasing checks, the Treasurer shall
maintain a Check Register where all checks issued shall be recorded chronologically and
where the claimants shall be required to acknowledge receipt thereof.
Sec. 43. Reporting of Checks Issued. The checks released to claimants shall be
reported in the Report of Checks Issued (RCI) which shall be prepared daily by the
Treasurer for each fund. It shall be submitted to the Accountant for preparation of Journal
of Entry Voucher based on individual checks issued and recording in the Check
Disbursements Journal.
Sec. 44. Check Disbursement Process. The steps in disbursements through
issuance of check is shown below:
PROCESS

PERSON / UNIT
RESPONSIBLE

a. Gather supporting documents, and


approved ALOBS, prepare DV and
forward to Head of Department.

Concerned Office

b.

Sign Box A of DV and submit


to the Accounting Unit.

Supervisor/Head of
Department

c.

Check completeness of
documents, assign number to
DV, sign Box B and forward to
Treasurer.

Accounting Unit

d.

Verify claim, certify cash


availability (Box C) and
forward to approving officer.

Treasurer

Note: If funds are not available,


return to Accountant for
recording in the books as
Accounts Payable (AP). For AP,
JEV shall be prepared by
Accounting Unit and JEV
number reflected in the DV.
JEV for AP is recorded in
General Journal. Accountant
retains copy of DV and
forwards to Treasurer.
e.

Approve transaction (Box D)


and forward DV to Cashier.

Local Chief Executive


or authorized
approving officer

f.

Prepare, sign check and


forward check with DV to
countersigning officer.

Treasurer

g.

Countersign check and

Administrator/ Vice-

10

PROCESS
forward to Accountant for
preparation of the
Accountants Advice of Local
Check Disbursements.
h.

i.

j.

k.

PERSON / UNIT
RESPONSIBLE
Mayor
for the Local
Sanggunian
Disbursements

Sec. 47. Cash Advances for Travel. Cash advances for travel shall be recorded as
debit to the account Due from Officers and Employees and a credit to Cash in Bank Local
Currency, Current Account.

Prepare Accountants Advice of


Local Check Disbursements
and submit to bank. Return
DV, check and supporting
documents to
Cashier/Treasurer.

Accountant

For liquidation of travel where the amount of cash advance is equal to or more than the
travel expenses incurred, the Liquidation Report form shall be prepared by the
officers/employees concerned and submitted to the accounting unit as basis for
preparation of the JEV to record liquidation. In case the amount of cash advance is less
than the travel expenses incurred, a Disbursement Voucher shall be prepared to liquidate
the previous cash advance and serve as a claim for reimbursement of the deficiency in
amount.

Record check in the Check


Register and release check to
claimant. Record
disbursement in Cashbook
Cash in Bank. Prepare Report
of Checks Issued. Forward RCI
with DV and supporting
documents to Accounting Unit.

Treasurer

Sec. 48. Payments out of the Petty Cash Fund. Petty cash fund shall be maintained
under the imprest system. The fund shall be sufficient for the non-recurring, emergency
and petty expenses of the LGU for one month. Disbursements from the fund shall be
through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge
the amount received. The official receipt shall be attached to the PCV.

Prepare the JEV based on


individual checks/voucher;
sign Prepared By portion
(approved by Chief
Accountant), and record JEV in
the Check Disbursements
Journal. Post monthly to the
General Ledger/Subsidiary
Ledgers.

Accounting Unit

Forward RCI, DV, supporting


documents and JEV to the
Office of the Auditor.

Accountant

Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be prepared
for the fund, recorded in the RAAO and obligated as Other Expenses.
Payments out of the fund shall be made through the use of PCVs duly supported by official
receipts and other required documents. Each PCV shall not exceed Php1,000.00.
A Disbursement Voucher shall be prepared for replenishments of the petty cash fund
during the year duly supported by a list/summary of PCVs, the PCVs and its supporting
documents. ALOBS shall be prepared for each replenishment and recorded in the RAAO
based on actual expenses incurred.

Sec. 45. Payments in Cash. Disbursements by cash shall be made from a cash
advance drawn and maintained in accordance with COA rules and regulations. Cash
payments shall be made only on duly approved payrolls/disbursement vouchers. Cash
advances, by regular and special disbursing officers shall be recorded through a debit to
Cash Disbursing Officers and a credit to Cash in Bank Local Currency, Current Account
(LCCA).
Sec. 46. Reporting of Cash Disbursements. To account for cash disbursements, from
regular and special cash advances, the Accountable/Disbursing Officer shall prepare the
Report of Disbursements and submit the original and duplicate copy with
vouchers/payrolls/petty cash vouchers to the Accountant. He shall ensure that receipt of
the report and supporting documents, are properly acknowledged by the Accountant. The
Accountant shall verify the report including the completeness of the supporting
documents, prepare the Journal of Entry Voucher (JEV) and record the transaction in the
Cash Disbursements Journal.

At the end of the year, the petty cash fund shall be fully liquidated by preparing a Report
of Disbursement supported by the list/summary of PCVs, the PCVs and its supporting
documents. The ALOBS setting up the fund at the beginning of the year shall be cancelled.
Another ALOBS shall be prepared taking up the liquidation and recorded in the RAAO based
on the actual expenses incurred. Unused cash shall be returned to the Treasurer who shall
issue an Official Receipt to acknowledge the amount returned. A new Cash Advance for
Petty Cash Fund shall be set up in the ensuing year.
Sec. 49. Cash Disbursement Process. Disbursement process for payment of salaries
and wages out of cash advances is as follows:
PROCESS

PERSON / UNIT
RESPONSIBLE

a)

Processing of Payrolls to be paid by


cash is the same as that of steps
(a) to (e) for check disbursements.

Concerned offices

b)

Gather duly certified and approved


payrolls to be paid out of cash
advance. Prepare DV for cash
advance corresponding to the net
amount of payroll/s. Sign Box A of
DV and submit to the Accounting
Unit.

Office of the
Treasurer

11

PROCESS
c)

d)

Check completeness of
documents/ previous cash advance
liquidated, assign number to DV,
sign Box B and forward to
Approving Officer.

PERSON / UNIT
RESPONSIBLE
Accounting Unit

Local Chief Executive

e)

Prepare and sign check, and


forward check with DV to
countersigning officer.

Treasurer

f)

Countersign check and forward to


Accountant for preparation of
Advice.

Administrator

g)

Prepare Accountants Advice of


Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.

Accountant

h)

Encash check and pay claimants.


Record disbursement in Cashbook
Cash Advances.

Treasurer/ Disbursing
Officer

Return unused cash to the


Treasurer/ Cashier. An official
receipt (OR) shall be issued by the
Treasurer/Cashier to acknowledge
the return of unused cash and
indicate check no. of cash advance
granted on the face of OR. Record
the refund as credit to cash
advance and attach OR to the
Cashbook Cash Advances.

Disbursing Officer

Prepare Report of Disbursement,


attach paid payrolls/ supporting
documents and copy of OR for
unused cash advance returned to
Treasurer/Cashier. Sign "Certified
Correct portion of Report of
Disbursement and submit to
Accounting Unit.

Disbursing Officer

Prepare JEV to record the


liquidation of cash advance.
Record JEV in the Cash
Disbursements Journal (CDJ). Post

Accountant

j)

k)

PERSON / UNIT
RESPONSIBLE

monthly to the General Ledger/


Subsidiary Ledger.
l)

Approves DV and forward to


Treasurer for preparation of
checks.

i)

PROCESS

Forward Report of Disbursement


and supporting documents
including JEV to the Office of the
Auditor.

Accountant

Sec. 50. Purchase or Construction of Property, Plant and Equipment. Property,


plant and equipment include land and land improvements, buildings, equipment, motor
vehicles, books, machineries, ordnance, etc. and public infrastructure. These are charged
against appropriations/allotments for capital outlay when obligated.
Property, plant and equipment acquired through purchase shall include all costs incurred
to bring it to the location necessary for its intended use, like transportation, freight,
installation costs, etc. In the books of accounts, the purchase is immediately recorded as
asset.
Property, plant and equipment to be constructed may be classified as agency assets and
public infrastructures. Agency assets are those to be used by the LGU concerned, like
buildings, while public infrastructures are those to be used by the general public. The
construction period theory shall be used in recording both types of assets. This means
that expenses such as license fees and bonus paid to contractor for completing the work
ahead of schedule, etc. during the construction period shall be added to the total cost of
the project. However, liquidated damages charged to the contractor for delayed
completion should be deducted from the total cost.
During the construction period, agency assets and public infrastructures shall be taken up
in the books as "Construction in Progress with the appropriate asset classification. As
soon as the project is completed, the Construction in Progress for agency asset is closed to
the appropriate asset account.
For public infrastructures funded out of regular income, the Construction in Progress
account is transferred to the Public Infrastructures account upon completion. At the end of
the year, the latter account is closed to the Government Equity and the asset is recorded
in the Registry of Public Infrastructures (RPI). However, completed public infrastructures
funded out of a loan shall be closed to the Government Equity account only upon full
payment of the loan. A disclosure of public infrastructures completed funded from loans
shall be made in the Notes to Financial Statements.
Sec. 51. Purchase of Supplies. Purchase of supplies and materials for stock
regardless of whether or not they are consumed within the accounting period shall be
recorded as assets using the Inventory account following the Perpetual Inventory Method
(refer to Chapter 7 Supplies or Property). However, supplies and materials purchased
out of the Petty Cash Fund for immediate use or for emergency shall be taken up as
expenses.
Sec. 52. Pro-forma Accounting Entries. Pro-forma accounting entries for
disbursement transactions are shown below:

12

Particulars
1.

Account Title

Acct
.
Cod
e

Debit

Credit

Payment through Cash Advances

Particulars

Account Title

Acct
.
Cod
e

Debit

Credit

Enter obligation in RAAOMO for Office Supplies P2,500, Travelling Expenses


P500, Office Equipment Maintenance P1,000 and Other Expenses of P800.

a. Cash advance for personal services


Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000
Additional Compensation, and P3,000 Personnel Economic Relief Allowance
(PERA).
1. Grant of cash
advance for payroll

Cash Disbursing
Officers
Cash in Bank LCCA

2. Liquidation of cash
advance for payroll

Salaries and Wages


Regular Pay
PERA
Additional
Compensation
Withholding Taxes
Payable
GSIS Payable
PAG-IBIG Payable
Cash Disbursing
Officers

107
110

21,000

801
804

18,000
3,000

805

5,000

21,000

Life and Retirement


Insurance
Contributions
PAG-IBIG
Contributions
GSIS Payable
PAG-IBIG Payable

3. Liquidation at year
end

410
411
412

2,000
1,500
1,500

107

21,000

817

1,500

818
411
412

1,500

105
110

6,000

500

849

2,500

882
950
110

1,000
800

4,800

Traveling Expenses
Local
Office Supplies
Expenses
Petty Cash Fund

831

1,000

849
105

4,000

5,000

4. Return of unused
Petty Cash Fund.

Cash in Treasury
Petty Cash Fund

101
105

1,000

128
110

1,000

831

900

1,000

c. Cash advance for travel


1,500
1,500

For establishment of fund, Enter obligation in RAAOMO as Other Expenses


for P6,000
Petty Cash Fund
Cash in Bank LCCA

831

Cancel RAAOMO for setting up of petty cash fund at the start of the year
and refund for a total of P6,000.

Enter obligation in RAAOMO for Travel of P1,000


1. Grant of cash
advance

b. Petty Cash Fund

1. Release of cash
advance for petty cash
fund miscellaneous
expenses

Traveling Expenses
Local
Office Supplies
Expenses
Office Equipment
Maintenance
Other Expenses
Cash in Bank LCCA

Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling


Expenses of P1,000.

Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance


Contributions and P1,500 PAG-IBIG Contributions.
3. Government share
for life and retirement
insurance and PAGIBIG Contributions

2. Replenishment of
petty cash fund during
the year

6,000

2. Liquidation of cash
advance during the
current year
(assuming only P900
was utilized and P100
was refunded)

Due from Officers


and Employees
Cash in Bank LCCA
Traveling Expenses
Local
Due from Officers
and Employees

1,000

128

900

Adjust RAAOMO for refund of cash advance of P100


3. For amount

Cash in Bank LCCA

110

100

13

Particulars
refunded where official
receipt was issued

Account Title
Due from Officers
and Employees

Acct
.
Cod
e

Debit

128

Credit

Particulars

Account Title

Acct
.
Cod
e

100

2. Receipt of office
equipment

Office Equipment
Cash in Bank LCCA

222
110

Debit

Credit

6,000
6,000

2. Payment by Check
a. Maintenance and Other Operating Expenses
Enter obligation in RAAOMO for rent P3,000
1. Payment of rent

Rent Expense
Cash in Bank LCCA

841
110

3,000

3,000

Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet


of P2,000
2. Payment of utilities
(MERALCO and PLDT)

Electricity
Telephone/Telegraph
and Internet
Cash in Bank LCCA

835

1,500

837
110

2,000

Training and
Seminar Expenses
Cash in Bank LCCA

833
110

2. Payment of second
billing 100%
accomplishment

3,500

Enter obligation in RAAOMO for training and seminar expenses of P1,000


3. Payment of
seminar fee

d. Construction of Roads by Contract Enter obligation in RAAOCO for


P800,000 for construction of road.
1. Payment of first
Construction in
billing for 50%
Progress Roads,
accomplishment
Highways and
Bridges
232
400,00
0
Withholding Taxes
Payable
410
40,000
Cash in Bank LCCA
110
360,000

3. Remittance of
taxes withheld

1,000

Construction in
Progress Roads,
Highways and
Bridges

232

Withholding Taxes
Payable
Cash in Bank LCCA

410
110

Withholding Taxes
Payable
Cash in Bank LCCA

410
110

80,000

Public Infrastructure
Construction in
Progress Roads,
Highways and
Bridges

243

800,00
0

Government Equity
Public
Infrastructures

501
243

400,00
0
40,000
360,000

80,000

1,000
If funded from regular agency income

b. Financial Expenses

4. To take up roads
completed

Enter obligation in RAAOFE for bank charges of P300


1. Bank charges upon
receipt of bank
statement

Bank Charges
Cash in Bank LCCA

951
110

300
300
5. To transfer
completed roads to
Registry of Public
Infra- structures at the
end of the year

Enter obligation in RAAOFE for interest expense of P400


2. Interest Expense

Interest Expenses
Cash in Bank LCCA

952
110

400

No entry

800,000
800,00
0

800,000

400

c. Office Equipment Enter obligation in RAAOCO for P6,000 for purchase


of equipment
1. Issuance of PO to
dealer

232

Note: Using the JEV for the above transactions, the public infrastructures
shall
be recorded in the Registry of Public Infrastructures.

If funded from a

14

Acct
.
Cod
e

Particulars
loan

Account Title

6 To record completed

Public
Infrastructures
Construction in
Progress Roads,
Highways and
Bridges

243

Government Equity
Public
Infrastructures

501
243

roads

At year end,upon
full payment of laon

Debit

Credit

800,00
0

232

800,000
800,00
0

Account Title
Progress Agency
Assets
Withholding Taxes
Payable
Cash Disbursing
Officers

7. Remittance of
withholding tax

800,000

e. General Repair/Construction of Building by Administration


1. Approval of the
project P1M

Particulars
Disbursing Officer of
paid payroll

8. Accomplishment
Report approved by
the LCE

Acct
.
Cod
e
230

Debit
380,00
0

410

30,000

107

350,000

Withholding Taxes
Payable
Cash in Bank LCCA

410

Buildings
Construction in
Progress Agency
Assets

204

30,000

110

30,000
970,00
0

230

970,000

No entry
f. Acquisition of Land

Enter obligation in RAAOCO for P600,000 for construction materials

Enter obligation in RAAOCO for P2million for purchase of land

2. Issue PO for
building materials:
Lumber, nails, cement,
sand and gravel,
paints, etc. =
P600,000

1. Payment made for


land purchased

3. Payment for
construction materials
received

4. Issuance of
materials P590,000

Credit

No Entry

Construction
Materials Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Construction in
Progress Agency
Assets
Construction
Materials Inventory

156
410
110

600,00
0

2. Remittance of
withholding tax
60,000
540,000

Cash Disbursing
Officers
Cash in Bank LCCA

6. Liquidation by

Construction in

201

2M

410
110

Withholding taxes
Payable

410

Cash in Bank LCCA

110

200,000
1.8M

200,00
0
200,000

g. Land and Building


230

590,00
0

156

590,000

Enter obligation in RAAOCO for P380,000 for labor


5. Cash advance
granted to Disbursing
Officer for payroll

Land
Withholding Taxes
Payable
Cash in Bank LCCA

107
110

350,00
0

350,000

Enter obligation in RAAOCO for P600,000 for land and P400,000 for
building
1. Payment of the
land and building
(assessed value of
land is P600,000) for
P1,000,000

Land
Building
Withholding Taxes
Payable
Cash in Bank LCCA

2. Remittance of
withholding tax

Withholding Taxes
Payable
Cash in Bank LCCA

201
204
410

600,00
0
400,00
0

110
410
110

100,000
900,000

100,00
0

100,000

15

Particulars

Account Title

Acct
.
Cod
e

Debit

Credit

h. Purchase of Inventories
Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
1. Payment of
delivered spare parts

Spare Parts
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA

155

2,500

410

250

110

2,250

i. Enter obligation in RAAOMO for purchase of office supplies


1. Payment of office
supplies delivered

Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA

149

3,000

410
110

300
2,700

j. Fund Transfers
Enter obligation in RAAOMO for subsidy to LGU XYZ
1. Cash assistance to
LGU XYZ

Subsidy to Local
Government Units
Cash in Bank LCCA

895
110

30,000
30,000

k. Enter obligation in RAAOMO for subsidy to SEF


1. Cash transfer to
SEF as subsidy

Subsidy to Other
Funds
Cash in Bank LCCA

897
110

10,000

10,000

l. Enter obligation in RAAOMO for grants and donation to Trust Fund


1. Cash transfer to
Trust Fund as
counterpart LGU
funds.

Grants and
Donations
Cash in Bank LCCA

889
110

500,00
0

500,000

Sec. 53. Miscellaneous Transactions. Miscellaneous transactions refer to transactions


that are unique and not recurring in the ordinary course of operations of the government.
These transaction types seldom take place or ideally should not happen at all. The
following maybe considered miscellaneous transactions:
1.
2.
3.
4.
5.
6.

Loss of Cash and Property Accountability


Cash Overage
Dishonored Check
Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check
Settlement of Suspensions/Disallowances/Charges
Refund of Overpayments

Sec. 54. Loss of Cash and Property. Loss of cash and property may be due to
malversation, theft, robbery or other causes.
Cash shortage discovered during cash examination conducted by auditors is reported
through the Report of Cash Examination within ten (10) working days from the completion
of examination pursuant to COA Memorandum No. 84-373A. The auditor issues an audit
report in case of shortage in property accountability. As soon as a shortage is definitely
established, the Auditor shall issue a memorandum pertaining thereto and the Accountant
shall draw a Journal of Entry Voucher to take up the shortage as a receivable from the
accountable officer concerned.
In case of loss of property due to other causes (theft, force majeure, fire, etc.), a report
thereon shall be prepared by the accountable officer concerned for purposes of requesting
relief from accountability. No accounting entry shall be made but the loss shall be
disclosed in the notes to financial statements pending result of request for relief from
accountability.
Sec. 55. Grant of Relief from Accountability. When a request for relief for shortages
or loss of funds is granted, a copy of the decision shall be forwarded to the Chief
Accountant who shall draw a JEV to record the transaction. The loss shall be debited to the
Loss of Assets account and credited to the appropriate receivable account. In case the
request for relief is denied, immediate payment of the shortage shall be demanded from
the accountable officer. Restitution shall be acknowledged by the issuance of an official
receipt.
In case the request for relief from accountability for loss of property caused by fire, theft,
force majeure or other causes is granted, a copy of the decision shall likewise be
forwarded to the Chief Accountant for the preparation of the JEV. The loss shall be debited
to the Loss of Assets account and credited to the appropriate asset account. If request for
relief from accountability is denied, the loss shall be taken up as a receivable from the
accountable officer/persons liable and shall be credited to the appropriate asset account.
Sec. 56. Cash Overage. In case the cash examination disclosed cash overage, as
determined by the auditor, the amount shall be forfeited in favor of the government and
an official receipt shall be issued by the collector/teller. The cash overage shall be taken up
as Other Specific Income.
Sec. 57. Dishonored Checks. A check is said to be dishonored when upon its being
duly presented for payment, such payment is refused or cannot be obtained.

E. MISCELLANEOUS TRANSACTIONS

Upon receipt of the debit memo and the dishonored check(s) from the bank, constructive
cancellation of the official receipt covering the dishonored check shall be immediately
effected by the Treasurer on the copy in his possession. The Treasurer shall immediately

16

photocopy the dishonored checks and record as credit in the CashbookCash in Bank and
cancel payment in the taxpayers index card. He shall also notify the collector/teller of the
dishonor and the cancellation of the official receipt. The collector/teller shall note the
cancellation in the triplicate copies of the receipt. The Treasurer shall then inform the
Auditor who shall effect the cancellation in the duplicate copy of official receipt, in case the
same has already been submitted for audit.
The Treasurer shall forward the debit memo and the photocopy of the dishonored checks
to the Accountant. The Accountant shall cancel the official receipt if still in his possession.
He shall prepare the Journal of Entry Voucher (JEV) taking up the dishonored check by
crediting the Cash in Bank account and debiting the appropriate income account. In case
of dishonor of check payments for Real Property Tax (RPT) or Special Education Tax (SET),
the RPT/SET Receivables and corresponding Deferred RPT/SET Income shall be restored.
The accounts Due to LGUs, RPT Income, Cash in Bank and RPT Discount shall be adjusted
accordingly. He shall furnish the Treasurer with a copy of the duly approved JEV. The
Treasurer shall record the JEV number in the Cashbook-Cash in Bank as reference in the
entry effecting the cancellation of the dishonored check.
Sec. 58. Cancellation of Lost Check Issued. A check is considered lost when it is
misplaced, waylaid or left behind inadvertently/negligently by the payee or holder in due
course or by the custodian/carrier thereof and after diligent search cannot be found or
located; or when it is lost due to fortuitous event, theft or robbery.
Upon submission of sworn statement from the payee that a check issued by the
LGU is lost, the treasurer shall immediately notify the bank concerned for the stoppage of
payment. He shall forward the sworn statement to the accountant who shall prepare the
JEV to cancel the payment made. Copy of the JEV shall be furnished the treasurer as basis
for him to debit the amount in the Cashbook Cash in Bank.
Sec. 59. Spoiled and Stale Checks. Checks may be cancelled when they become
spoiled or stale. A check is considered spoil when, it is torn, mutilated, defaced or with
erasures/errors affecting the genuineness of any material information contained therein.

certified copy of the DV shall be requested from the Auditor for presentation
to the Administrator/Local Chief Executive who shall countersign the check.
The cancelled check shall be reported and attached to the RCI prepared at
the period of cancellation. The replacement check shall also be reported
chronologically in the RCI.
Sec. 60. Suspensions, Disallowances and Charges. Disallowances and charges
shall be taken up in the books of accounts only when they become final and executory. The
Accountant shall prepare the Journal of Entry Voucher (JEV) to take up the Receivable
Disallowances and Charges and credit the appropriate expense account for the current
year or prior years adjustment if pertaining to expenses of previous years.
Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash in
Treasury and crediting the Receivable Disallowances and Charges account.
Suspensions in audit and settlement thereof shall not be recorded in the books of
accounts.
Sec. 61. Pro-forma Accounting Entries. The following the are pro-forma accounting
entries for miscellaneous transactions:

Particulars

1.

2.

3.

For spoiled checks which are immediately


cancelled and for which the Report of Checks Issued (RCI) has not yet been
prepared, the cancelled check shall be attached to the RCI and reported
chronologically with the other checks issued and the word Cancelled shall
be indicated on the report.
For stale checks which have been unclaimed and
thus, the original DV and supporting documents are still with the Treasurer,
the cancelled check shall be presented in the RCI after the last check issued
for the period indicated in the report. The original DV and supporting
documents shall be returned to the Accountant who shall prepare a JEV to
record the transaction as Accounts Payable.
For checks which became spoiled or stale in the
hands of the payee and which require replacement, a new check may be
issued upon submission of the spoiled or stale check to the Treasurer. A

Debit

Credi
t

1. Cash Shortage
a. Cash shortage of the of the Disbursing Officer
To take up cash
shortage

It is stale, if it has been outstanding for over six months from date of issue or as prescribed
by the depository bank. At least one month before a check becomes stale, the Treasurer
shall send a written notice to the payee of the existence of the check.
A spoiled or stale check shall be marked cancelled on its face and reported as follows:

Account Title

Acct
.
Cod
e

Due from Officers


and Employees
Cash Disbursing
Officers

128

50

107

50

b. Cash Shortage of the Treasurer


To take up cash
shortage

Due from Officers


and Employees
Cash in Treasury

128
101

50
50

2. Grant of Relief from Accountability for Loss of Government


Funds
To record the loss of
fund by a Disbursing
Officer (allegedly thru
theft ) = P50

Due from Officers


and Employees
Cash Disbursing
Officers

To take up relief from


accountability

Loss of Assets
(current year) or
Prior Years
adjustments (prior

128

50

107

948

50

50

17

Particulars

Account Title
years)
Due from Officers
and Employees

Acct
.
Cod
e

Debit

128

Credi
t

Particulars

Account Title

Acct
.
Cod
e

Debit

Credi
t

50
7. Disallowances and Charges

3. Cash Settlement in case of denial of Request for Relief from


Accountability
To take up
payment/settlement

Cash in Treasury
Due from Officers
and Employees

101

50

128

50

4. Cash Overage
To take up cash
overage discovered
during cash
examination

Cash in Treasury
Other Specific
Income of LGU

101

50

792

50

5. Dishonored Checks

Receipt of
refund/settlement

Recording of disallowance for current years transaction

When the
disallowance becomes
final and executory
Overpayment of Office
Supplies
Amount paid - P100
Should be
90
Difference
10
Settlement of
Disallowance

Receivables
Disallowances/
Charges
Office Supplies
Expense

Cash in Treasury
Receivables
Disallowances/
Charges

138

10

849

101

10

10

138

10

b. Recording of disallowance for prior years transaction

From payment of real property tax in the current year or prior year
Upon receipt of advice
of dishonored check
and cancellation of
Official Receipt

a.

Real Property Tax


Receivable
Deferred Real
Property Tax
Income

124

When the
disallowance becomes
final and executor

50

448

Receivables
Disallowances/
Charges
Prior Years
Adjustments

138

10

533

10

50

Due to LGUs
Real Property Tax
Income
Cash in Bank LCCA

431

30

711
110

20

Cash in Treasury
Real Property Tax
Receivable

101

50

124

Settlement of
disallowance
50

Cash in Treasury
Receivables
Disallowances/
Charges

101

10

138

10

c. Settlement of Charges
50
c.1 Recording of charges which collection were made in the current
year

6. Lost/Destroyed/Stale/Obsolete Checks
Check issued in the current/prior year for replacement
Check cancellation

Cash in Bank LCCA


Accounts Payable

110
401

50

Replacement

Accounts Payable
Cash in Bank LCCA

401
110

50

50
50

When the charge


becomes final and
executory
Underpayment of
Franchise Tax
Amount Paid - P 100
Should be
110
Charge
10

Receivables
Disallowances/
Charges
Franchise Tax

138
724

10

10

18

Particulars

Account Title

Acct
.
Cod
e

Debit

Credi
t

Particulars
ensuing year
F.

Settlement

Cash in Treasury
Receivables
Disallowances/
Charges

101

10

138

10

c.2 Recording of charges which collection were made in the prior year
When the charge
becomes final and
executory

Settlement

Receivables
Disallowances/
Charges
Prior Years
Adjustments
Cash in Treasury
Receivables
Disallowances/
Charges

To record refund of
overpayment

Cash in Treasury
Due from Officers
and Employees

Credi
t
10

ADJUSTING AND CLOSING ENTRIES

Sec. 62. Adjusting Entries. Adjusting entries are accounting journal entries made in
order to ensure that revenues and expenses are recorded in the period when they are
earned or incurred following the revenue recognition and the matching principles.
Adjusting entries are required every time financial statements are prepared. The
use of the adjusting entries makes it possible to report on the Balance Sheet the
appropriate assets, liabilities and equity accounts at the statement date and the
Statement of Income and Expenses the net income/(loss) for the period.

10

533
101

10

10

Prepaid expenses are expenses paid in cash and recorded as assets before they are used
or consumed. Prepaid expenses expire either with the passage of time (e.g. rent) or
through use and consumption (e.g. supplies). The adjusting entry for prepaid expenses is a
debit to the expense account and a credit to the asset account. Examples are rent,
supplies, etc. Acquisition of productive facilities is viewed essentially as long term
prepayments, hence, periodic adjusting entries for depreciation are included in this
category. For depreciation, the entry is a debit to depreciation expense and a credit to
accumulated depreciation. The depreciable or estimated life for different types of agency
assets are presented in Table 2 (Annex 7).

10

Unearned revenues are recorded as a liability when received and considered earned upon
rendition of service (e.g. tuition fees) or the passage of time (e.g. advance payment of real
property taxes). The adjusting entry for unearned revenues is a debit to a liability account
and a credit to revenue account.

10

801
101

10

128

Prepayments; and
Accruals

Sec. 64. Prepayments. Prepayments are expenses paid or revenues received before
they are incurred or earned. Adjusting entries for prepayments are required at the
statement date to record the portion of the prepayment that represents the expense
incurred or the revenue earned in the current accounting period. Sub-categories of
prepayments are prepaid expenses and unearned revenues.

10

138

128

a.
b.

10

a. Overpayment taken up as receivable


Due from Officers
and Employees
Salaries and Wages
Regular Pay

Debit

Sec. 63. Types of Adjusting Entries. There are two types of adjusting entries:
138

8. Refund of Overpayment

To record overpayment
of salaries and wages
(When overpayment is
ascertained)

Account Title
Adjustments

Acct
.
Cod
e
533

Illustrative accounting entries:


b.

Refund of overpayment not taken up as receivable

Refund of
overpayment of
Salaries and Wages
Regular Pay during the
current year
To take up refund of
over payment in the

Cash in Treasury
Salaries and Wages
Regular Pay

Cash in Treasury
Prior Years

101

10

801

101

10

Particulars

Account Title

1. Report of supplies
utilized for P2,000.

Office Supplies
Expense
Office Supplies
Inventory

Acct
.
Cod
e

Debit

849

2,000

149

Credi
t

2,000

10

19

2.

Application
of advance
RPT for
P2,500.

Deferred Credits to
Income
Real Property Tax

440
711

4.

2,500
2,500

5.
6.

Sec. 65. Accruals. Accruals are revenues earned and expenses incurred in the current
accounting period that have not yet been recorded. Adjusting entries for accruals are
required to record revenues earned and expenses incurred in the accounting period.
Adjusting entry for accrued revenues is a debit to a receivable account and a credit to an
income account. Examples are interest, share from internal revenue collections covered
by notice of funding checks issued, etc.
Adjusting entry for accrued expenses is a debit to the appropriate expense
account and a credit to a payable account. Examples are accrued salaries, bad debts, etc.
For bad debts, the entry is a debit to Bad Debts Expense and a credit to Allowance for
Doubtful Accounts.
Illustrative accounting entries:

Particulars

Account Title

1. Receipt of the
Notice of Funding
Check Issued for the
December Share from
Internal Revenue
Collections for
P20,000.

Due from NGAs


Share from Internal
Revenue
Collections

2. Unpaid salaries
and wages of
employees, at end of
accounting period,
P50,000.

Salaries and Wages


Regular Pay
Due to Officers &
Employees

Acct
.
Cod
e

Debit

130

20,000

746

801
428

2.
3.

Illustrative accounting entries:

Particulars

Account Title

1. To close the
Revenue accounts to
the Income and
Expense Summary
account.

Real Property Tax


Share from Internal
Revenue Collections

Business Taxes &


Licenses
Registration Fees
Income and Expense
Summary

Credi
t

20,00
0

50,000
50,00
0

Sec. 66. Closing Journal Entries. Closing journal entries are the accounting entries
prepared to reduce all balances of the nominal accounts to zero at the end of the
accounting period in order to prepare the accounts for the next accounting period. The
procedure followed in the reduction of the balances is called the closing process. The
closing process is as follows:
1.

Credit the debit balance of the Income and Expense Summary account
and debit the amount in the Retained Operating Surplus account, in case
of a net loss.
Debit all credit balances of the intermediate accounts and debit the total
to the Government Equity account.
Credit all debit balances of the intermediate accounts and credit the
total to the Government Equity account.

Debit all revenue accounts balances and credit the total to the Income
and Expense Summary account.
Credit all expense accounts balances and cost of goods sold and debit
the total to the Income and Expense Summary account.
Debit the credit balance of the Income and Expense Summary account
and credit the amount in the Retained Operating Surplus account, in
case of a net income.

2.
To close the
Income and Expense
Summary to Retained
Operating Surplus
account.

Income and Expense


Summary
Retained Operating
Surplus

3.

Retained Operating
Surplus
Government Equity

To close the
Retained
Operating
Surplus to
Government
Equity
account.

Acct
.
Cod
e

Debit

711

100

746

10,000

723
761

50
20

532

532

10,170

5,670

534

534
501

Credit

5,670

5,670

5,670

Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS


AND STATEMENTS
Sec. 67. Trial Balance. Trial balance is a list of all the general ledger accounts and
their balances at a given time. The accounts are listed in the order in which they appear in
the ledger, with the debit balances in the left column and credit balances on the right
column.
Sec. 68. Purpose of the Trial Balance. The trial balance is prepared:

20

a.
b.
c.

To prove the mathematical equality of the debits and credits after


posting;
To uncover errors in journalizing and posting; and
As basis for the preparation of the financial statements.

Sec. 69. Procedures in the Preparation of the Trial Balance. The procedures in
trial balance preparation shall be:
a.
b.
c.

List the account titles and their debit/credit balances based on the
accounts and amount reflected in the general ledger;
Total the debit and credit columns; and
Prove the equality of the two columns.

The post-closing trial balance with supporting schedules shall be distributed as follows:
COA Central Office thru the Unit Auditor
COA Regional Office
COA Unit Auditor
Local Chief Executive
Local Sanggunian
Local Treasurer
Local Accountant

Sec. 73. Interim Reports. Interim reports are financial statements required to be
prepared at any given period or at a financial reporting period shorter than a full financial
year, without closing the books of accounts. The following interim financial statements and
the Notes to Financial Statements shall be prepared and submitted quarterly:

Sec. 70. Pre-Closing Trial Balance. The pre-closing trial balance is the trial balance
prepared from the general ledger accounts after the adjusting journal entries have been
journalized and posted. This is also termed as adjusted trial balance.
Monthly pre-closing trial balance for each fund shall be submitted not later than the
twentieth day after the end of the month. It shall be supported by the Status of
Appropriations, Allotments and Obligations, for both the current and continuing
appropriations.

COA Unit Auditor Original copy


Local Sanggunian
1 copy
Local Treasurer 1 copy
Local Accountant 1 copy

Sec. 71. Status of Appropriations, Allotments and Obligations. The status of


appropriations, allotments and obligations is a schedule prepared showing the
appropriation, allotments and obligations of each function, program project and activity
(See Annex 1). Separate schedules shall be prepared for current appropriation and for
continuing appropriations using the following column headings:
Allotmen
t

Obligatio
n

Unobligat
ed
Balance

Sec. 72. Post-closing Trial Balance. Post-closing trial balance is the trial balance
prepared at the end of the year after the closing entries are journalized and posted in the
general ledgers. In the Post-closing Trial Balance, all the nominal accounts (revenue,
expense and intermediate) are closed and the real accounts (assets, liability and equity)
are shown with balances. It shall be submitted not later than the fourteenth day of
February after the end of the calendar year with the following supporting schedules:
a.
b.
c.

Balance Sheet;
Statement of Income and Expenses; and
Statement of Cash Flows

The interim reports shall be prepared employing the same accounting principles used for
annual reports. Adjusting entries shall be prepared for the interim period.

Sec. 74. Worksheet. A worksheet is the accountants informal device for accumulating
and sorting information needed for the financial statements. It is a columnar sheet of
paper used to adjust the account balances and prepare the financial statements.

The trial balance at the end of the quarter shall also be supported by a schedule of
subsidiary ledger balances of the controlling accounts in the General Ledger and an
additional copy shall be submitted to the COA Regional Office thru the Unit Auditor.

Appropriation
s

a.
b.
c.

To facilitate the preparation of the interim financial statements, the use of the worksheet is
recommended.

These reports shall be submitted to the following:

Function/Program/
Project/ Activity

1 copy
1 copy
1 copy
1 copy
1 copy
1 copy
1 copy

Status of Appropriations, Allotments and Obligations;


Subsidiary Schedule of General Ledger account balances; and
Summary of Public Infrastructures (Annex 8).

The use of the worksheet facilitates the end-of-period accounting and reporting process.
Also, it helps accountants prepare the financial statements on a more timely basis. The
following worksheet format shall be used:
Name of LGU
Worksheet
As of ____________, 20_____
Accounts

Trial
Balance

Adjustment
s

Adjusted
T/B

Title

Dr.

Dr.

Dr.

1.
2.
3.
4.
5.

Cod
e

Cr.

Cr.

Cr.

Statement
of Income
&
Expenses
Dr.
Cr.

Balance
Sheet
Dr.

Cr.

Account title and code columns show the account titles/codes of the general
ledger accounts.
Trial balance column reflects amounts obtained from the general ledger balances.
Adjustment columns are the adjustments effected for the prepayments and
accruals.
Adjusted trial balance shows the balances of all the accounts after the adjustment
at the end of the accounting period.
Statement of Income and Expenses shows all the debit and credit items in the
adjusted trial balance for all the income and expense accounts. The difference
between the income and expenses shall be reflected as Net Income/Loss to be
extended to the credit column of the Balance Sheet.

21

6.

Balance Sheet show all the debit and credit items in the adjusted trial balance of
all the asset, liability, equity and intermediate accounts affecting directly the
Government Equity account.

Sec. 75. Statement of Management Responsibility for Financial Statements.


Statement of Management Responsibility for Financial Statements (Annex 2) shows the
agencies responsibility for the preparation and presentation of its financial statements.
The statement shall be signed by the Chief Accountant and the Head of the Agency or his
authorized representative. It shall form an integral part of the financial statements, all of
which shall be transmitted to the concerned agencies.
Sec. 76. Year-end Financial Statements. Local accountants shall prepare at the end
of the year the following financial statements for each fund:
a.
b.
c.

Balance Sheet;
Statement of Income and Expenses; and
Statement of Cash Flows

The Chief Accountant shall likewise prepare the consolidated financial statements for all
funds and the Notes to the Financial Statements.
Sec. 77. Balance Sheet. The Balance Sheet (Annex 3) shows the financial condition of
the agency at a specific date. It presents information on the assets, liability and the
government equity of the agency.
Sec. 78. Statement of Income and Expenses. The Statement of Income and
Expenses (Annex 4) shows the income and expenses of the agency at the end of a
particular period. It presents the detailed information of the income and expenses
recognized during the period covered.
Sec. 79. Statement of Cash Flows. The Statement of Cash Flows (Annex 5) shows
the agencys cash activities. It reports cash receipts and cash payments and net change
in cash resulting from operating, investing and financing activities of an agency during a
period, in a format that reconciles the beginning and ending cash balances.
Sec. 80. Notes to the Financial Statements. The Notes to the Financial Statements
(Annex 6) are the accountants means of amplifying or explaining the items presented in
the main body of the statements. These are explanatory notes on the accounts and/or
accounting policies which will give additional information value to the financial statements.
In the Notes, the accountant is expected to report the economic substance rather than the
legal form of the transactions and to make adequate disclosure.
The Notes to Financial Statements include the following:
1.

Summary of significant accounting policies adopted and followed by the


reporting entity;

2.

Narrative descriptions or detailed analyses of amounts shown on the face of the


balance sheet, statement of income and expenses and statement of cash flows;

3.

Customary or routine disclosure which are information about measurement


bases of important assets, restrictions on assets, contingent assets/liabilities,
important long term commitments not recognized in the body of the statements,
etc.;

4.

Disclosures of changes in accounting principles- changes in accounting


principles, practices or methods of applying them; and

5.

Disclosures of subsequent events disclosure of events that affect the agency


directly and that occur between the date of, or end of the period covered by, the
financial statements and date of completion of the statements are necessary; if
knowledge of the events might affect the interpretation of the statements, even
though the events do not affect the propriety of the financial statements
themselves.

Chapter 5. SPECIAL FUNDS


A. ACCOUNTING FOR SPECIAL EDUCATION FUND
Sec. 81. Special Education Fund. The Special Education Fund (SEF) consist of the
proceeds of one percent (1%) tax on the assessed value of real property in addition to the
basic real property tax, which a province or city, or a municipality within the Metropolitan
Manila Area, may levy and collect.
Sec. 82. Application of Proceeds of the Additional One Percent (1%) Special
Education Fund Tax. (a) The proceeds of the additional one percent (1%) real property
tax accruing to special education fund shall be automatically released to the local school
boards.
(b) In case of provinces, the proceeds of the special education fund shall be
divided equally between the provincial and municipal school boards.
(c) Said proceeds shall be allocated as determined and approved by the local
school boards concerned only for the following purposes:
1. Operation and maintenance of public schools;
2. Construction and repair of school buildings, facilities and equipment;
3. Educational research;
4. Purchase of books and periodicals; and
5. Sports development.
(Article 363 of the IRR of the Local Government Code)
Sec. 83. Special Education Fund Budget. The Local School Board shall determine in
accordance with the criteria set by DECS, the annual supplementary budgetary needs for
the operation and maintenance of public schools within the province, city, or municipality
as the case maybe, and the supplementary local cost of meeting such needs, which shall
be reflected in the form of an annual school board budget corresponding to its share of the
proceeds of the special levy on real property constituting the special education fund and
such other sources of revenue as the Local Government Code and other laws or ordinances
may provide. (Article 184(b)(1) of the IRR of the Local Government Code)
The division superintendent, city superintendent, or district supervisor, as the
case maybe, shall prepare the budget of the school board concerned. Such budget shall be
supported by programs, projects and activities of the school board for the ensuing fiscal
year. A majority of all the members shall be necessary to approve the budget. (Article
184(f) of the IRR of the Local Government Code)

22

The annual school board shall give priority to the following:


1.
2.
3.

Construction, repair and maintenance of school buildings and other facilities of public
elementary and secondary schools;
Establishment and maintenance of extension classes when necessary; and
Holding of sports activities at the division, district, municipal, and barangay levels.

certifications of the local budget officer and the accountant thereon shall serve as their
certification of the disbursement as required by law.
Sec. 90. Certification as to Cash Availability. The Treasurer shall certify as to cash
availability for the fund in the Disbursement Voucher and Purchase Request. For
infrastructure projects undertaken by contract, the Treasurer shall also certify as to cash
availability in the contract. This certification shall serve as the required certification under
the law.

Sec. 84. Basis of Recording Special Education Tax Special Education Tax
Receivables shall be established at the beginning of the year based on Real Property Tax
Account Register/Taxpayers index card. At the beginning of the year, the Treasurer shall
furnish the Chief Accountant with a duly certified list of the name of taxpayers and the
amount due and collectible for the year. Based on the list, the Chief Accountant shall draw
a Journal Entry Voucher (JEV) to record the Special Education Tax Receivables.

Sec. 91. Disbursement Procedures. Disbursement procedures including the reports


to be submitted by the accountable officer concerned are the same as those for the
General Fund. However, disbursements shall be approved by the Local Chief Executive
concerned as co-chairman of the local school board. The division/city superintendent of
schools or the district supervisor concerned, as the case maybe, shall certify vouchers or
payrolls as to validity, propriety, and legality of the claim involved.

Sec. 85. Delinquencies for Special Education Tax prior to CY 2002. Payment of
delinquencies for special education taxes prior to CY 2002 shall be recognized as a direct
credit to Special Education Tax Income account.

Sec. 92. Inventory Process. The perpetual inventory method and the moving average
method shall likewise be adopted in the accounting and costing of inventory. The general
procedures, the forms and reports for the holding of inventory shall also be followed.
However, separate perpetual inventory records and stock cards shall be maintained by the
Accounting Unit and the General Services Officer or the Treasurer, as the case maybe.
Likewise, separate weekly Summary for Supplies and Materials Issued pertaining to the
fund shall be prepared.

Sec. 86. Collection Procedures for the Special Education Tax. The additional one
percent (1%) tax on real property shall be collected simultaneously with the basic real
property tax. A single official receipt shall be issued for both taxes, indicating therein the
amount paid for the basic tax and the additional one percent tax. However, the collecting
officer shall prepare separate reports of collections for the two taxes. Further, the proceeds
of the additional one per cent tax shall be deposited in a separate depository account.

Sec. 93. Pro-forma Accounting Entries. Pro-forma accounting entries for the fund,
follows:

Procedures for the turn over of collections, frequency of deposit of collection with
the bank, preparation of report of collections, verification of collections and accountable
forms, preparation of report of accountability for accountable forms as well as
consolidation of reports of accountable forms shall be the same as that prescribed for
collections in the General Fund.

SPECIAL EDUCATION FUND (SEF)

Sec. 87. Separate Cashbooks for Special Education Fund. The Treasurer and/or the
concerned accountable officers shall maintain separate cashbooks for the SEF which shall
be in accordance with the prescribed format.

1. Set-up Special
education Tax

Sec. 88. Separate Registries, Books of Accounts, and Financial Reports for
Special Education Fund. The Chief Accountant shall maintain separate registries for
appropriation, allotment and obligations and books of accounts for SEF. He shall likewise
prepare separate financial reports such as the Trial Balance, Balance Sheet, Statement of
Income and Expenses, Statement of Cash Flows and supporting schedules, to be submitted
within the prescribed timeframe.
For disbursements, separate set of JEVs shall also be prepared which shall be
numbered in accordance with the prescribed codes.
Sec. 89. Preparation and Control of ALOBS for Special Education Fund. The
Allotment and Obligation Slips (ALOBS) pertaining to the fund shall be prepared and signed
by authorized official of the requesting department or office. This shall be forwarded to the
Budget Officer who, based on the approved school board budget, shall verify the existence
of appropriation for the proposed expenditure. He shall certify the ALOBS to that effect and
number the same in accordance with the prescribed codes. This shall then be forwarded
to the Chief Accountant who shall certify as to obligations of allotments and shall record
the same in the appropriate Registry of Appropriations, Allotments and Obligations (RAAO).
The ALOBS shall form an integral part of the disbursement voucher/payroll and the

I.

Particulars

Receivable
Total Receivables

Account Title

Acct
.
Cod
e

Special Education
Tax Receivable

125

Deferred Special
Education Tax
Income

449

Debit

Credit

500,00
0
500,00
0

P500,000
Provincial Share
P250,000
2. Collection of
Special
Education Tax
P200,000.

Cash in Treasury
Special Education
Tax Receivable

Computation of
Shares of LGUs in RPT
50% of

Deferred Special
Education Tax
Income

P200,000 for Provincial

101

200,00
0

125

449

200,00
0

200,00
0

Special Education

23

I.

Particulars

Share

3. Deposit of
collections with
authorized depository
bank

Account Title
Tax

Acct
.
Cod
e
713

Due to LGUs

431

Cash in Bank LCCA


Cash in Treasury

110
101

Debit

200,00
0

Credit
100,00
0
100,00
0

200,00
0

I.

500

Particulars
PhilHealth

W/holding Tax 1,050


5,000
Net Pay per Payroll
P25,000
9. Remittance of salary
deductions

4. Remittance of share
to Province ( Special
Education Tax)
P100,000

Due to LGUs
(Province)

431

Cash in Bank LCCA

110

100,00
0
100,00
0

Account Title

Acct
.
Cod
e

GSIS Payable
PAG-IBIG Payable

411
412

2,850
600

PHILHEALTH
Payable

413

500

Withholding Taxes
Payable
GSIS Payable
PAG-IBIG Payable
PHILHEALTH Payable
Cash in Bank LCCA

Memo entry in
Registry of
Appropriations ,
Allotments and
Obligations
(Personal
Services (RAAOPS,
MOOE RAAOMO,
Capital Outlay
RAAOCO)

10. Obligation for


Government Share:
Life & Ret. Ins.
Contributions
P2,850
Pag-ibig
Contributions
600
PhilHealth
Contributions
500
Total
P3,950

Memo entry in
RAAOPS

6. Obligation for PS
Salaries of teachers for
extension class
P30,000

Memo entry in
RAAOPS

11. Payment of
Government Share

7. Grant of cash
advance for payroll

Cash Disbursing
Officers
Cash in Bank LCCA

Life & Retirement


Insurance
Contributions
PAG-IBIG
Contributions
PHILHEALTH
Contributions
Cash in Bank LCCA

8. Payment of Salaries
Salaries per Payroll
P 30,000
Less: Deductions
(Personal Share)
Life & Ret. P 2,850
Pag-ibig
600

Salaries and Wages


Regular Pay
Cash Disbursing
Officers
Withholding Taxes
Payable

5. Receipt of allotment
for Allotment Class:
Personal Services P50,000
MOOE
20,000
Capital Outlay
30,000
Total P100,000

107
110

801

25,000

Debit

410
411
412

1,050
2,850
600

413
110

500

817

2,850

818

500

819
110

600

128
110

500

Credit

5,000

3,950

25,000

30,000

107

25,000

410

1,050

12. Obligation of
Traveling Expenses
P500

Memo entry in
RAAOMO

13. Grant of cash


advance

Due from Officers &


Employees
Cash in Bank LCCA

500

24

I.

Particulars

14. Liquidation of cash


advance

Account Title

Traveling Expenses
Local
Due from Officers &
Employees

Acct
.
Cod
e

831

Memo entry in
RAAOMO

16. Refund of cash


advance

Cash in Treasury
Due from Officers &
Employees

101

Cash in Bank LCCA

110

Cash in Treasury

101

18. Obligation of bill


received from MERALCO

Memo entry in
RAAOMO

19. Payment of
MERALCO bill P800

Electricity
Cash in Bank LCCA

20. Obligation for the


purchase of Office
Supplies P500

Memo entry in
RAAOMO

21. Payment of office


supplies

Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA

22. Obligation of
Equipment per
Purchase Order
P30,000

Memo entry in
RAAOCO

Credit

480

128

15. Adjustment of
obligation of travel.

17. Deposit of cash


refund

Debit

I.

Particulars

Account Title

Acct
.
Cod
e

Debit
30,000

23. Payment of
equipment with
Invoice/Delivery
Receipt

Office Equipment
Withholding Taxes

222

Payable
Cash in Bank LCCA

410
110

24. Receipt of fund


transfer from General
Fund thru bank

Cash in Bank LCCA


Subsidy from Other
Funds

110

Credit

3,000
27,000

480

605

5,000

Adjusting Entries:

20

128

5,000

20
20
20

1. Depreciation of
Equipment using the
Straight Line Method:
Equipment :
Life Amount
5 yrs. P6,000

DepreciationOffice
Equipment
Accumulated
Depreciation
Office
Equipment

922

6,000

322

6,000

Closing Entries :
1. Closing of Income
835
110

Accounts

800
800

2. Closing of Expense
Accounts

149
410
110

500
20
480

Special Education
Tax
Subsidy from Other
Funds
Income and Expense
Summary
Income and Expense
Summary
Salaries & Wages
Regular Pay
Life & Retirement
Insurance
Contributions
PAG-IBIG
Contributions
PHILHEALTH
Contributions
Traveling Expenses
Local
Electricity
DepreciationOffice
Equipment

713

100,0
00

605

5,000

532

532

105,000

41,23
0

801

30,000

817

2,850

818

600

819

500

831
835

480
800

922

6,000

25

I.

Particulars

3. Closing of Income
and Expense Summary

4. Closing of Retained
Operating Surplus

Account Title

Income and Expense


Summary
Retained Operating
Surplus

Acct
.
Cod
e

532

Sec. 98. Separate Cashbooks for Trust Fund. The Treasurer and/or the concerned
accountable officers shall maintain separate cashbooks for the Trust Fund which shall be in
accordance with the prescribed format.
Debit

63,77
0

534

Retained Operating
Surplus

534

Government Equity

501

Credit

63,770

63,77
0

63,770

Sec. 99. Separate Books of Accounts and Financial Reports for Trust Fund. The
Chief Accountant shall maintain separate books of accounts for Trust Fund. He shall
likewise prepare separate financial reports such as the Trial Balance, Balance Sheet,
Statement of Cash Flows and supporting schedules, to be submitted within the prescribed
timeframe.
Sec. 100. Disbursements within Trust Agreement/Approved Budget.
Disbursements from trust funds shall be in accordance with the specific purpose stated in
the trust agreement/approved budget between the trustor and trustee (LGU) as certified
by the Chief Accountant. The certification on the DV as to existence of funds held in trust
shall serve this purpose.
Sec. 101. Certification and Approval of Disbursements from Trust
Funds. Disbursements from the Trust Fund shall require:
a.

B. TRUST FUND
Sec. 94. Definition of Trust Fund. Trust Fund shall consist of private and public
monies which have officially come into the possession of the local government or of a local
government official as trustee, agent or administrator, or which have been received as a
guaranty for the fulfillment of some obligation. A trust fund shall only be used for the
specific purpose for which it was created or for which it came into the possession of the
local government unit.
Sec. 95. Receipts Accruing to the Trust Fund. Grants and donations
coming from foreign funding institutions, other levels of government and private
institutions/individuals for specific projects/purpose shall accrue to the Trust Fund. Equity
of the LGU on projects under a trust agreement shall also accrue to the Trust Fund. These
receipts shall be credited to the Project Equity account.

b.
c.
d.

Certification and approval of vouchers and payrolls as to validity,


propriety and legality of the claim involved by the department/
office head concerned;
Certification as to existence of funds held in trust and completeness
and propriety of supporting documents by the Accountant;
Certification as to cash availability by the Treasurer; and
Approval by the Administrator of the fund.

Sec. 102. Disbursement Process. Disbursements from the Trust Fund shall be as
follows:
a.

Disbursement by check

PROCESS

PERSON / UNIT
RESPONSIBLE

Loans of LGUs for income generating projects from the Municipal Development Fund Office
(MDFO) requiring counterpart funding from LGUs shall not be recorded in the Trust Fund
but as a Special Account in the General Fund.

1.

Gather supporting documents,


prepare DV/payroll and forward to
Head of Department.

Concerned Office

Sec. 96. Collection Procedures for the Trust Fund. Cash collections for the Trust
Fund shall be acknowledged through the issuance of an official receipt. Procedures for the
turn over of collections, frequency of deposit of collection with the bank, preparation of
report of collections, verification of collections and accountable forms, preparation of
report of accountability for accountable forms as well as consolidation of reports of
accountable forms shall be the same as that prescribed for collections in the General Fund.

2.

Sign Box A of DV and submit to the


Accounting Unit.

Supervisor/Head of
Department

3.

Check completeness of documents


and verify existence of funds held in
trust, assign number to DV/Payroll,
sign Box B and forward to Treasurer.

Accounting Unit

In case of receipt of funds through the bank, the Accountant shall draw a JEV based on the
bank credit memo.

4.

Treasurer

Sec. 97. Project Expenditures. The construction period theory shall apply for
expenditures on infrastructure projects of the Trust Fund. For other projects, expenditures
shall be debited to the appropriate expenditure account. Expenditures shall be closed to
Project Equity account at year-end or upon project completion, whichever comes first.

Verify claim, certify cash availability


(Box C) and forward to approving
officer.

5.

Approve transaction (Box D) and


forward DV to Cashier.

Local Chief Executive/


Administrator of the
Fund

26

PROCESS
6.

7.

Prepare and sign check and forward


check with DV to countersigning
officer.
Countersign check and forward to
Accountant for preparation of the
Accountants Advice.

PERSON / UNIT
RESPONSIBLE
Treasurer
Particulars
Administrator

8.

Prepare Accountants Advice of


Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.

Accountant

9.

Issue check to claimant. Record


disbursement in Cashbook Cash in
Bank. Prepare Report of Checks
Issued (RCI), forward RCI with DV
and supporting documents to
Accounting Unit.

Treasurer

10. Prepare the JEV based on individual


checks/voucher; sign Prepared By
portion (approved by Chief
Accountant), and record JEV in the
Check Disbursements Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers

Accounting Unit

11. Forward RCI, DV, supporting


documents and JEV to the Office of
the Auditor for final custody and
post audit.

Accountant

b.

Payments through cash advances

For payments through cash advances, procedures 1 to 5 for check disbursement shall be
followed. The rest of the procedures shall be the same as that of the General Fund.
Sec. 103. Inventory Process. The perpetual inventory method and the moving
average method shall likewise be adopted in the accounting and costing of inventory. The
general procedures, the forms and reports for the holding of inventory shall also be
followed. However, separate perpetual inventory records and stock cards shall be
maintained by the Accounting Unit and the General Services Officer or the Treasurer as the
case maybe. Likewise, separate weekly Summary for Supplies and Materials Issued
pertaining to the fund shall be prepared.
Sec. 104. Pro-forma Accounting Entries for Trust Funds. Accounting entries for
typical transactions under the trust funds are as follows:

1.

Account Title

Acct
.
Cod
e

II.
III. Debi
t

Credit

Receipt of grant from NGA

a. Receipt of grant
direct to bank from
NGA for:
a. Construction
of road P2M
b. Purcha
se of
constr
uction
Equipment
P500,000
b. Issuance of
check with approved
DV for payment to
contractor upon
receipt of first billing
50% accomplished

Cash in Bank LCCA


Project Equity
502-01
P2,500,000

Construction in
Progress
Roads, Highways
& Bridges
Withholding Taxes
Payable
Cash in Bank LCCA

110

2,500,00
0

502

232
410
110

c. Submission of
statement of
disbursements to
grantor

2,500,00
0

1,000,00
0

100,000
900,000

No entry

d. Issuance of
check with approved
DV for payment to
contractor upon
receipt of second
billing 100%
accomplished

Construction in
Progress Roads,
Highways &
Bridges
Withholding Taxes
Payable
Cash in Bank LCCA

e. Transfer of
completed
construction to
Public Infrastructure

Public
Infrastructures
Construction in
Progress
Roads, Highways
& Bridges

232

1,000,00
0

410
110

243

232

100,000
900,000

1,000,00
0
1,000,00
0

27

Particulars

Account Title

Acct
.
Cod
e

f. Remittance of
taxes w/held

Withholding Taxes
Payable
Cash in Bank LCCA

410
110

200,000

212

500,000

g. Purchase of
equipment

h. Payment of
withholding tax

i. Submission of full
liquidation to
grantor and transfer
of completed road
and equipment to
GF for LGU use

Construction and
Heavy Equipment
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
Project Equity
Public
Infrastructures
Construction and
Heavy Equipment

II.
III. Debi
t

Credit

200,000

410
110

50,000
450,000

410
110

50,000

502
243

2,500,00
0

50,000

212

2,000,00
0
500,000

Note: Under the GF books, completed infrastructure project shall be


recorded in the Registry of Public Infrastructures with the TF JEV No. as
basis. The transferred equipment shall be recorded as follows:
General Fund
Public
243
2,000,00
Books:
Infrastructures
0
Construction and
Heavy Equipment
212
500,000
Invested Equity
537
2,500,00
0

Invested Equity
Government Equity

537
502

2,500,00
0

b. Transfer of Public
Infra- structure to
RPI

Government Equity
Public
Infrastructures

502
243

2,000,00
0

2.

Account Title

II.
III. Debi
t

110
502

2,000,00
0

Credit

Grantor
Building 1.2M
Equipment .
3M
LGU Funded
Office supplies
-1M
Salaries of project
Personnel - .
4M
Total
2M
b.

Receipt of funds
from foreign
funding
institution thru
national
government
agency

Cash in Bank LCCA


Project Equity
502-01 1,500,000
502-02 500,000

2,000,00
0

Note: Entry in LGU General Fund books shall be


Grants and
Donations
Cash in Bank LCCA

2,500,00
0

c. Issuance of check
with approved DV
for payment to
contractor for
Construction of
Building, 50%
accomplished.

Construction in
Progress
Agency Assets
Withholding Taxes
Payable
Cash in Bank LCCA

2,000,00
0

d. Remittance of
withholding tax

Withholding Taxes
Payable
Cash in Bank LCCA

At the end of the


year:
a. Closing of
Invested Equity to
Government Equity

Particulars
a. Project budget as
agreed upon
between grantor
and LGU for project:

Acct
.
Cod
e

889

500,000

110

230

500,000

500,000

410
110

410
110

50,000
450,000

50,000

50,000

Receipt of grant with counterpart fund from LGU

28

Particulars

Account Title

Acct
.
Cod
e

e.

Cash Disbursing
Officers
Cash in Bank LCCA

107
110

Issuance of
check with
approved DV for
cash advance
on salaries and
wages of
project
administrative
personnel

f. Liquidation of
Cash Advances

g.

Remittance of
tax withheld

h. Issuance of
check with approved
DV for purchase of
supplies and
materials
i. Issuance of office
supplies

j. Purchase of IT
equipment

k.

Remittance of
withholding tax

Salaries and Wages


Casual/
Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies
Inventory
Cash in Bank LCCA

II.
III. Debi
t

Credit

Particulars

Account Title
Cash in Bank LCCA

Acct
.
Cod
e
110

170,000

l. Issuance of check
for installation of
equipment

IT Equipment and
Software
Cash in Bank LCCA

215
110

50,000

502

260,000

200,000

410

30,000

107

170,000

410
110

149
110

30,000
30,000

100,000

Succeeding year
n.
Issuance of
check with approved
DV for payment to
contractor for
Construction of
Building 100%
accomplished.

IT Equipment and
Software
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable

849

60,000

149

215

60,000

410

p.
Transfer of
construction in
progress to
property, plant and
equipment account

250,000

410
110

Project Equity
502-02 P260,000
Salaries and Wages
Casual/
Contractual
Office Supplies
Expenses

Construction in
Progress
Agency Assets
Withholding Taxes
Payable
Cash in Bank LCCA

50,000

803

200,000

849

60,000

230

700,000

410
110

70,000
630,000

100,000
o.
Remittance
of withholding tax

Office Supplies
Expenses
Office Supplies
Inventory

Credit
25,000

170,000

End of Year
m.Closing. of
expenses to Project
Equity
803

II.
III. Debi
t

25,000
225,000

q.
Issuance of
check for cash
advance on salaries
and wages

Withholding Taxes
Payable
Cash in Bank LCCA
Property Plant and
Equipment
Building
Construction in
Progress Agency
Assets
Cash Disbursing
Officers
Cash in Bank LCCA

410
110

70,000

204

1,200,00
0

70,000

230

107
110

1,200,00
0
170,000

170,000

25,000

29

Particulars
r.
Liquidation
of salaries and
wages

s. Remittance of
withholding tax

t. Issuance of office
supplies

End of Year
u. Closing of
expenses to
Project Equity

Project
Completion
v. Transfer of
building and
equipment to the
General Fund as
follows:

General Fund
Books:

At end of year:

Account Title
Salaries and Wages
Casual/Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies
Expenses
Office Supplies
Inventory

Acct
.
Cod
e

II.
III. Debi
t

803

200,000

Credit

Chapter 6.
410

30,000

107

170,000

410
110

30,000

30,000

SPECIAL ACCOUNTS

Sec. 105. Special Accounts in the General Fund. Local government units shall
maintain special accounts in the General Fund for public utilities and other economic
enterprises, loans, interests, bond issues, and other contributions for specific purposes;
and development projects funded from the share of the local government concerned from
the internal revenue collections and development of national wealth and such other
special accounts which may be created by law or ordinance.
Sec. 106. Objectives for the Maintenance of Special Accounts. Accounting
procedures for the operation of the special accounts are adopted in order to:

849

40,000

149

a.

Determine whether the income generated by the public utilities or economic


enterprises are sufficient to meet their respective operating costs.

b.

Provide adequate information as to the assets, liabilities and equity of each


special account.

40,000

Project Equity
Salaries and Wages
Casual/
Contractual
Office Supplies
Expenses

502

240,000

Project Equity
Building
IT Equipment and
Software

502
204

Building

204

IT Equipment and
Software
Invested Equity

1,200,00
0

215
537

300,000

Invested Equity

537

1,500,00
0

Government Equity

501

803

200,000

849

40,000

1,500,00
0

215

1,200,00
0
300,000

1,500,00
0

1,500,00
0

Sec. 107. Special Accounts Subsidiary Ledger. Special accounts shall be


maintained through the use of complete subsidiary ledger. In case the local government
unit maintains a number of the same economic enterprise, each shall have its own set of
subsidiary ledger (e.g. 8 markets - 8 subsidiary ledgers for the market).
Sec. 108. Sub-codes for the Special Accounts. The following shall be the sub-codes
for the special accounts:
SPECIAL ACCOUNT

SUB-CODE

General Fund Proper


Market Operation
Slaughterhouse Operation
Waterworks System
Electric, Light and Power System
Telephone System
Toll Roads, Bridges and Ferries
Transportation System
Hospital
School
Sports Center
Recreational Center
Housing Projects
Convention/Conference Center
Parking Space
Ice Plant
Cemetery

01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17

30

SPECIAL ACCOUNT

SUB-CODE

20% Development Fund


80% Share from Energy Sources
Share from Development of National Wealth
Loans
Interests
Bond Issues

Transaction
Cash in Treasury
108,500
Cash in Treasury
40,000
Discount on RPT

18
19
20
21
22
23

Discount on RPT

Sec. 109. Profit from Operation. Profits or income derived from the operation of
public utilities and other economic enterprises, after deduction of the cost of improvement,
repair and other related expenses of the public utility or economic enterprises concerned,
shall first be applied for the return of the advances or loans made therefor, any excess
shall form part of the general fund of the local government unit concerned.
Sec. 110. Reporting. At the end of the year, post-closing trial balance shall be
prepared for each special account. Also, the following financial statements shall be
prepared:
a.
b.
c.

Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows

These reports shall form part of the schedules of the General Fund trial balance.
Sec. 111. Pro-forma Accounting Entries.
Transaction

Acct.
Code

a. Receipt of Share from IRC for P100,000.


Cash in Bank LCCA

110

Cash in Bank LCCA


P80,000

Debit
100,00
0

(01)

(18)
20,000
Share from Internal Revenue Collections
(IRC)
Share from IRC
(01)
80,000
(18)
20,000

746

100,000

b. Receipt of collections for P148,500.


Distribution:
RPT- Basic 58,500 (net of 10% discount)
Market fees 40,000
Bus. Tax
50,000
Cash in Treasury

Credit

6,500
RPT Receivable
RPT Receivable
65,000
Business Taxes & Licenses
Business Taxes & Licenses
50,000
Receipts from Markets
Receipts from Markets
40,000

Acct.
Code

148,50
0

Credit

(02)
937

6,500

(01)
(01)

124

65,000

723

50,000

783

40,000

(01)
(02)

c. Requisition of Office Supplies for the


following:
Operation of Market
P10,000
Programs under the 20% Dev. Fund
2,000
Office of the Treasurer
8,000
d. Obligation of the requested supplies.

No accounting entry

Entry in the RAAOMO

e. Payment of Office Supplies for the


following:
Operation of Market
P10,000
Programs under the 20% Dev. Fund
2,000
Office of the Treasurer
8,000
Total
20,000
Less: Withholding tax
1,000
Net
19,000
Office Supplies Inventory

101

Debit

(01)

Office Supplies Inventory


(01)
Office Supplies Inventory
10,000

149

20,00
0

8,000
(02)

31

Transaction
Office Supplies Inventory
2,000
Cash in Bank LCCA
Cash in Bank - LCCA
7,600
IV.
Cash in Bank - LCCA
9,500
Cash in Bank - LCCA
1,900
Withholding Taxes Payable
400
500

Acct.
Code

Debit

Credit

(01)

110

19,000

Withholding Taxes Payable

(01)

Withholding Taxes Payable

(02)

Withholding Taxes Payable

(18)

410

1,000

2,000

20% Dev. Fund

849

Office Supplies Expense

(01)

Office Supplies Expense

(02)

3,000
2,000

6,000

149

Office Supplies Inventory

(01)

Office Supplies Inventory

(02)

Office Supplies Inventory

(18)

222

8,800

(01)
(02)

Withholding Taxes Payable (01)

240

Withholding Taxes Payable (02)

200

Cash in Bank LCCA

(18)

1,000
Office Supplies Inventory

Payment of the procured equipment:

Office Equipment
4,800
Office Equipment
4,000
Withholding Taxes Payable

1,000

Office Supplies Expenses

i.

Office of the Accountant


4,800
Office of the Market Master
4,000
Gross
8,800
Withholding Tax
440
Net
8,360
Office Equipment

Office of the Treasurer

Office Supplies Expense

Entry in the RAAOCO

Credit

(18)

Operation of Market

2,000

h. Obligation of the requested equipment

Debit

(02)

f. Report of Utilization of Office Supplies

3,000

Acct.
Code

(18)

100

3,000

Transaction

Cash in Bank LCCA

(01)

4,560

Cash in Bank LCCA

(02)

3,800

410

440

110

8,360

6,000
j.

Obligation of Subsidy to the Operation of


the
Market from the GF Proper for P12,000

Entry in the RAAOMO

1,000
k. Transfer of the funds for P12,000.
Subsidy to Special Accounts
g.

Request for procurement of office


equipment
of the following offices.
Office of the Accountant
Office of the Market Master

No accounting entry
5,000
4,000

898

Subsidy to Special Accounts (01)


12,000
Cash in Bank LCCA
Cash in Bank LCCA
12,000

110

12,00
0
12,000

(01)

32

Acct.
Code

Transaction

l.

Debit

Credit

Receipt of the transferred funds.


Cash in Bank LCCA

110

Cash in Bank LCCA


(02)
12,000
Subsidy from Special Accounts

12,00
0

606

12,000

Subsidy from Special Accounts (02)


12,000

Chapter 7.

SUPPLIES OR PROPERTY

ACCOUNTING FOR SUPPLIES OR PROPERTY


Sec. 112. Definition of Supplies or Property. Supplies or property include
everything, except real property, which may be needed in the transaction of public
business or in the pursuit of any undertaking, project or activity, whether in the nature of
equipment, furniture, stationery, materials for construction or personal property of any
sort, including non-personal or contractual services such as the repair and maintenance of
equipment and furniture, as well as trucking, hauling, janitorial, security, and related
services. ( Sec. 356c of the LGC)

Sec. 114. Perpetual Inventory Method. Purchase of supplies and materials for stock,
regardless of whether or not they are consumed within the accounting period, shall be
recorded as inventory following the perpetual inventory method. Under the perpetual
inventory method, an inventory control account is maintained in the General Ledger on a
current basis. In addition, detailed inventory records are maintained for each inventory
item.
Regular purchases shall be coursed thru the inventory account and issuances
thereof shall be recorded as they take place, except those purchased out of the petty cash
fund which shall be for immediate use and for stock in which case shall be charged
immediately to the appropriate expense accounts.
The Chief Accountant shall maintain the perpetual inventory records comprising
of Supplies Ledger Cards (SLC) for each commodity/stock, Property, Plant and Equipment
Ledger Card (PPELC) for each category of plant, property and equipment and Work, Other
Animals and Breeding Stocks Ledger Card (WOABSLC) for each type of livestock. Such
ledger cards shall contain the details of the property, plant and equipment and livestock
account in the inventory control account in the general ledger.
The General Services Officer or the Municipal Treasurer, as the case maybe shall
likewise maintain stock cards and property cards for supplies; property, plant and
equipment; and work animals in their custody to account for the receipt and disposition of
the same. The balance per stock card/property cards should always reconcile with the
ledger cards of the accounting unit. They should also reconcile with other property records
like Acknowledgement Receipt for Equipment (ARE).
Sec. 115. Moving Average Method. The moving average method of costing shall be
used for costing inventories. This is a method of calculating cost of inventory on the basis
of weighted average on the date of issue. The Chief Accountant shall compute the
inventory cost monthly using the method. Illustrative calculation of inventory using this
method is as follows:

Sec. 113. Classification of Supplies or Property. Supplies or property shall have the
following classification:
a.

b.

c.

Expendable supplies or property referring to articles which are normally


consumed in use within one year or converted in the process of manufacture
or construction, or those having a life expectancy of more than one year but
which shall have decreased substantially in value after being put to use for
only one year. Examples are stationery, fuel, spare parts. Expendable
supplies forms part of the maintenance and operating expenses of the LGU.
Non-expendable supplies or property referring to articles which are not
consumed in use and ordinarily retain their original identity during the period
of use, whose serviceable life is more than one year and which add to the
assets of the government.
Examples are furniture, fixtures, transport
equipment and other equipment. Non-expendable supplies or property are
proper charges to capital outlay of the LGU.
Non-personal services includes, but is not limited to repairing, cleaning,
redecorating, and furnishing of necessary repair parts or other supplies as
part of the services performed. Examples are contractual services like
trucking, hauling, janitorial, security and related services. Non-personal
services are proper charges to maintenance and operating expenses of the
LGU.

Ball pen
Reference
Beg.
Balance
per actual
inventory
Delivery
Receipt/
Invoice
No.
RIS No.

Delivery
Receipt/
Invoice
No.
RIS No.

Date

Received

Issued

Jan.
1
Jan
12

200 @
P10
400
@ 12

4,80
0

Jan.
16
Jan.
26

Balance

600 @
11.33
500
@
11.3
3

5,66
5

300
@ 11

6,800

100 @
11.35
1,135
400 @
11.09

3,30
0
Jan.
29

P2,00
0

4,435
200
@
11.0

2,21
8

200
@11.0

2,217

33

9
Delivery
Receipt/
Invoice
No.

Jan.
30

100
@ 12

1,20
0

9
300 @
11.39

The purchase order or contract shall be released only to, and signed for by, the awardee
or his duly authorized representative.
3,417

(On Jan. 12, the new unit cost of P11.33 was found by dividing P6,800, the total
cost, by 600, the number of units at hand. Then on Jan. 16, the peso balance, P1,135
represented the previous balance P6,800 less P5,665, the cost assigned to the 500 units
issued on this date. New unit costs were calculated on Jan. 26 and 30 when additional
units were acquired. )
Sec. 116. Requisition Procedures. (a) Requirement of Requisition - Any order for
supplies shall be filled by the provincial general services officer, the city general services
officer, or the municipal treasurer, as the case maybe, for any office or department of the
LGU concerned only upon written requisition.
(b) Forms to be used - Requisitions shall be accomplished using the following
forms:
(1)
(2)

Requisition Issue Slip (RIS) - for supplies carried in stock; and


Purchase Request (PR) - for supplies not carried in stock.

(c) Preparation of Requisition - At the beginning of the year, the Office of the
General Services Officer (GSO) or the Municipal Treasurer, as the case maybe, shall
prepare a PR for supplies and materials needed for the quarter based on the approved
Annual Procurement Program. Subsequent requisition from stock shall be made by the
head of office or department needing the supplies. A Supplies Availability Inquiry (SAI)
shall be used to inquire as to availability of supplies needed from the Office of the Chief
Accountant. If supplies are available, the RIS shall be prepared and submitted to the
GSO/Local Treasurer for the issuance of supplies. If the supplies needed are not available
from stock, a PR shall be prepared.
The head of office or department needing the supplies shall certify as to their
necessity for official use and shall specify the project or activity where the supplies or
property are to be used.
(d) Certification on Allotment and Obligation Slip (ALOBS) - Every PR must be
accompanied by an ALOBS showing the certification of the local budget officer and the
local accountant, that an appropriation therefore exists; and that the estimated amount
of such expenditure has been obligated. The Local Treasurer shall certify as to cash
availability in the purchase request.
(e) Approval of Requisitions - Approval of requisitions by the head of office or
department concerned who has administrative control of the appropriation against which
the proposed expenditure is chargeable is deemed sufficient, except in case of requisition
for supplies to be carried in stock which shall be approved by the local chief concerned.
Sec. 117. Issuance of Purchase Orders or Contract. Immediately after the LGU
has performed all the required procedures adopting a particular mode of procurement, a
purchase/letter order or contract shall be issued.
The date when the purchase/letter order was received by the supplier or contractor shall
be indicated clearly.

Sec. 118. Acceptance and Inspection of Purchases. Deliveries of items purchased


by the local government units shall be accepted first by the general services officer or
municipal treasurer as the case maybe before inspection. Inspection of purchases shall be
made by the authorized inspector/s for conformity with specification in the order.
Acceptance and inspection shall be made using the Acceptance and Inspection Report
(AIR).
Sec. 119. Property Records to be Maintained. The General Services Officer or the
Local Treasurer, as the case maybe, shall number each type of supplies and maintain Stock
Cards per stock number. He shall likewise maintain Property Cards per category of
property, plant and equipment.
Deliveries of supplies or property shall be immediately recorded in the property
records on the basis of the AIR and other supporting documents. The AIR and other
supporting documents shall be forwarded to the Chief Accountant for the preparation of
the DV and recording of deliveries in the appropriate ledger cards.
Sec. 120. Recording of Deliveries of Supplies or Property in the Books of
Accounts. The Chief Accountant shall maintain Supplies Ledger Cards per stock number;
Property, Plant and Equipment Ledger Cards for each category of assets; and Real
Property Ledger Cards for land.
Upon receipt of the AIR and other supporting documents, the Chief Accountant
shall record the deliveries in the appropriate ledger cards. Upon completion of the
disbursement process pertaining thereto the Chief Accountant shall prepare the JEV taking
up the in the books the procurement made. Thereafter, the Chief Accountant shall
reconcile the JEV with the appropriate ledger cards.
Sec. 121.
Reporting on Issuance of Supplies/materials. The General Services
Officer or the Local Treasurer, as the case maybe, shall consolidate weekly the RIS for
which supplies and materials were issued using the Summary of Supplies and Materials
Issued (SSMI). The SSMI together with the original copy of the RIS shall be submitted to
the Chief Accountant, who shall compute cost of supplies issued and ending inventory
using the moving average method. Based on the SSMI, a JEV shall be prepared to record
the expenditures using appropriate expenditure accounts.
Sec. 122. Inventory Process. The following is the general process to be followed in
the control of inventory:
PROCESS
a.

Prepare Purchase Request


(PR) for supplies and
materials needed for the
quarter based on the
approved
annual
procurement program, at
the beginning of the year
and of each subsequent
quarters.

PERSON / UNIT RESPONSIBLE


Office of the General Services Officer
(GSO) or the Municipal Treasurer as the
case maybe.

34

PROCESS
b. Prepare ALOBS covering the
requisition under the PR.

PERSON / UNIT RESPONSIBLE


Office of the GSO or the Municipal
Treasurer or the office authorized to
prepare the same.

c. Approve ALOBS and the PR.

The Budget Officer and the Chief


Accountant, for the ALOBS; and the Local
Chief Executive and the Local Treasurer,
for the PR.

d. Prepare Purchase Order.

GSO/Local Treasurer

e. Approve Purchase Order.

Local Chief Executive

f.

g.

h.

i.

Receive delivered items,


prepare Acceptance and
Inspection Report (AIR)
and
signs
acceptance
portion.

PROCESS
the AIR.

j.

Prepare Stock Availability


Inquiry (SAI) and forward
to Accounting Unit.

Requisitioning Unit

k.

Verify
records,
advise
requisitioning unit.

Accounting Unit

l.

Prepare Requisition and


Issue
Slip
(RIS)
and
forward
to
Property
/Supply Unit.

Requisitioning Unit

GSO/Local Treasurer

Inspect items, and signs


inspection portion of the
AIR.

Property Unit/LGU Inspector

Record delivered items in


the stock/property cards.
Prepare
Disbursement
Voucher (DV), sign box A
and forward the same
with
the
delivery
receipt/invoice/
appropriate documents to
Accounting Unit.

GSO/Local Treasurer

Record delivered items in


Supply
Ledger
Card/Property, Plant and
Equipment
Ledger
Card/Work, Other Animals
and
Breeding
Stocks
Ledger Card, on the basis
of the AIR. Process DV and
follow
disbursement
process.
Prepare JEV.
Reconcile JEV with the
entries in the ledger cards
recorded on the basis of

Accounting Unit

PERSON / UNIT RESPONSIBLE

m. Release
supplies/equipment
and
record issuance in the
stock
cards/property
cards.

GSO/Local Treasurer

n.

Consolidate RIS for which


supplies and materials
were issued and prepare
the Summary of Supplies
and
Materials
Issued
(SSMI) and forward to
Accounting Unit.

GSO/Local Treasurer

o.

Prepare JEV on the basis


of
SSMI,
and
record
withdrawals
in
Supply
Ledger Cards (SLC).

Accounting Unit

Sec. 123. Receipts of Issuance. All issuances of supplies or property shall be properly
receipted using the forms prescribed under applicable rules and regulations on supply and
property management in local government units.
For transfer of equipment, the
Acknowledgement Receipt for Equipment (ARE) shall however be used.

35

Sec. 124. Inventory of Supplies or Property. The local chief executive shall require
periodic physical inventory of supplies or property. Physical count of inventory items by
type shall be conducted semestrally and reported in the Report of the Physical Count of
Inventories (RPCI). This shall be submitted to the Auditor concerned not later than July 31
and January 31 of each year for the first and second semesters, respectively.
Physical count of property, plant, and equipment by type shall be made annually
and reported on the Report on the Physical Count of Property, Plant and Equipment
(RPCPPE). This shall be submitted to the Auditor concerned not later than January 31 of
each year.
Sec. 125. Disposal of Supplies or Property. - Disposal procedures shall be in
accordance with applicable rules and regulations on supply and property management in
local government units. The Waste Materials Report (WMR) and the Inventory and
Inspection Report of Unserviceable Property (IIRUP) shall be used .
Sec. 126.
ProForma Accounting Entries. The following are the pro-forma
accounting entries for supplies or property:

Particulars

Account Title

1. Supplies and Materials


1.1 Spare parts
(enter Obligation in
Issuance of
the RAAOMO- P100)
PR for spare
parts
Spare
Parts
Inventory
Record delivery of
Accounts Payable
items and charge
invoice, if
procurement is on
credit
Accounts Payable
Payment of
Withholding
Taxes
Invoice
Payable
Cash in Bank LCCA

If
Procurement
is on Cash

Spare
parts worth P50
used for repairs of
motor vehicles.

Spare
Parts
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Motor Vehicles
Maintenance
Spare Parts
Inventory

Acct
.
Cod
e

155
401

401

Debit

Issuance
of PR for office
supplies P100.
Record
delivery of items
and charge
invoice, if
procurement is on
credit.
Payment of
Charge
Invoice

Credit

Account Title

Debit

Credit

Office
Supplies -

If
procurement
is on cash
basis
100

(Enter obligation in
the RAAOMO-P100)
Office Supplies
Inventory
Accounts Payable

149

Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

401

Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies
Expenses
Office Supplies
Inventory

100

401

100

100

410
110

149

20
80

100

410
110
849

80

20

100

149

100

Withdrawal of
Office
Supplies for
office use.

100
20
80
1.3

100

410
110
878
155

1.2

100

410
110
155

Particulars

Acct
.
Cod
e

80
50

20

Accountable
Forms Issuance

of PR for
accountable forms
50

Procurement
on a cash
basis

(Enter obligation in
the RAAOMO
P100.00)
Accountable Forms
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Accountable Forms
Expenses

148

100

410
110
848

20
80
100

36

Particulars
al
of
supplies

Withdraw
office

Account Title
Accountable Forms
Inventory

Acct
.
Cod
e

Debit

148

Credit
100

Office
Equipment Issuance of
PR for Office
Equipment
-P20,000
Record
charge
invoice and
Delivery of
item.

Receipt
of
monthly
Billing- P10,000

(Enter obligation in
RAAOCO-P20,000)
Office Equipment
Accounts Payable
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

222
401
401

20,000

20,000

20,0
00

410
110

2,000
18,000

Payment of
delivered
Equipment

2.2

Issuance of
PR
for
Furniture and
Fixture
P20,000
Record
Charge
Invoice and
delivery of
item
Payment of
delivered
furniture and
fixture

3.1 Security
Services Issuance of
contract for
security
services P120,000

2. Equipment
2.1

Particulars

Payment of
monthly
billing

Furniture
and
Fixtures
Accounts Payable

Receipt of
monthly
billing
P10,000

Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

224
401

20,000

401

20,000

410
110

20,000

Debit

Credit

(Enter obligation in
the RAAOMOP120,000)
Security and
Janitorial
Services
Accounts Payable

858
401

10,000

401

10,000

Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

410
110

10,000

1,000
9,000

3.2 Plumbing
Services Signing of
contract for
Plumbing
Services
P120,000

(Enter Obligation in
RAAOCO-P20,000)

Account Title

Acct
.
Cod
e

(Enter obligation in
the RAAOMOP120,000)
General Services
Accounts Payable

857
401

10,000

Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

401

10,000

410
110

10,000

1,000
9,000

Payment of
Monthly
Billing

2,000
18,000

3. Non-Personal Services

37