Ngas Vol 1

MANUAL ON THE
NEW GOVERNMENT ACCOUNTING SYSTEM

For National Government Agencies
ACCOUNTING POLICIES
Volume I
Chapter 1. Introduction
Sec. 1. Objectives of the Manual. The New Government Accounting S
ystem (NGAS) Manual presents the basic policies and procedures; the new coding
system; the accounting systems, books, registries, records, forms, reports, and
financial statements; and illustrative accounting entries to be adopted by all n
ational government agencies effective January 1, 2002. The objectives of the Man
ual are to prescribe the following:
a. Uniform guidelines and procedures in accounting for government funds
and property;
b. New coding structure and chart of accounts;
c. Accounting books, registries, records, forms, reports and financial stat
ements; and
d. Accounting entries.
Sec. 2. Coverage. This Manual shall be used by all natio
nal government agencies.
Sec. 3. Legal Basis. This Manual is prescribed by the Commission on Audi
t pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the R
epublic of the Philippines which provides that:
The Commission on Audit shall have exclusive authority, subject to the limitatio
ns in this Article, to define the scope of its audit and examination, establish
the techniques and methods required therefor, and promulgate accounting and audi
ting rules and regulations, including those for the prevention and disallowance
of irregular, unnecessary, excessive, extravagant, or unconscionable expenditure
s, or uses of government funds and properties". (underscoring supplied)
Chapter 2. Basic Features and Policies
Sec. 4. Basic Features and Policies. The NGAS has the following basic fe
atures and policies, to wit:
a. Accrual Accounting. A modified accrual basis of accounting shall be used
. Under this method, all expenses shall be recognized when incurred and reported
in the financial statements in the period to which they relate. Income shall b
e on accrual basis except for transactions where accrual basis is impractical or
when other methods are required by law.
b. 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 a
gency or when otherwise necessitated by circumstances subject to prior approval
of the Commission.
c. Chart of Accounts and Account Codes. A new chart of accounts and coding
structure with a three-digit account numbering system shall be adopted. (See Vo
lume III, The Chart of Accounts)
d. Books of Accounts. All national agencies shall maintain two sets of boo
ks, namely:
Regular Agency (RA) Books. These shall be used to record the receipt and utiliza
tion of Notice of Cash Allocation (NCA) and other income/receipts which the agen
cies are authorized to use and to deposit with Authorized Government Depository
Bank (AGDB) and the National Treasury. These shall consist of journals and ledge
rs, as follows:
Journals
Cash Receipts Journal (CRJ)
Cash Disbursements Journal (CDJ)
Check Disbursements Journal (CkDJ)
General Journal (GJ)
Ledgers
General Ledger (GL)
Subsidiary Ledgers (SL) for:
Cash
Receivables
Inventories
Investments
Property, Plant and Equipment
Construction in Progress
Liabilities
Income
Expenses
National Government (NG) Books. These shall be used to record income which the a
gencies are not authorized to use and are required to be remitted to the Nationa
l Treasury. These shall consist of:
Cash Journal (CJ)
General Journal (GJ)
General Ledger (GL)
Subsidiary Ledger (SL)
With the implementation of the computerized agency accounting system, only the G
eneral Journal shall be used together with the ledgers by both books.
e. Financial Statements. The following statements shall be prepared:
Balance Sheet
Statement of Government Equity
Statement of Income and Expenses
Statement of Cash Flows
Notes to Financial Statements shall accompany the above statements.
f. Two-Money Column Trial Balance. The two - money column trial balance sho
wing the account balances shall be used.
g. Allotment and Obligation. Obligation accounting is modified to simplify
procedures in the incurrence and liquidation of obligations and the recording
of the budgetary accounts (allotments and obligations incurred and liquidated).
Separate registries shall be maintained to control the allotments and obligati
ons for each of the four classes of allotments, namely:
Registry of Allotments and Obligations - Capital Outlay (RAOCO)
Registry of Allotments and Obligations - Maintenance and Other Operating Expense
s (RAOMO)
Registry of Allotments and Obligations - Personal Services (RAOPS)
Registry of Allotments and Obligations- Financial Expenses (RAOFE).
h. Notice of Cash Allocation (NCA). The receipt of NCA by the agency shall
be recorded in the books as debit to account Cash-National Treasury, Modified Di
sbursement System (MDS) and credit to account Subsidy Income from National Governm
ent.
i. Financial Expenses. Financial expenses such as bank charges, interest e
xpenses, commitment charges and other related expenses shall be separately class
ified from Maintenance and Other Operating Expenses (MOOE).
j. Perpetual Inventory of Supplies and Materials. Supplies and materials pu
rchased for inventory purpose shall be recorded using the perpetual inventory sy
stem. Regular purchases shall be coursed thru the inventory account and issuance
s thereof shall be recorded as they take place except those purchased out of Pet
ty Cash Fund which shall be charged directly to the appropriate expense accounts
.
k. Valuation of Inventory. Cost of ending inventory of supplies and materia
ls shall be computed using the moving average method.
l. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards.
For appropriate check and balance, the Accounting Units of agencies, as well as
the Property Offices, shall maintain Supplies Ledger Cards/Stock Cards by stock
number and Property, Plant and Equipment Ledger Cards/Property Cards by categor
y of property, plant and equipment, respectively.
m. Construction of Assets. For assets under construction, the Construction
Period Theory shall be applied for costing purposes. Bonus paid to the contracto
r 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 dedu
cted from the total cost of the project. Any related expenses incurred during th
e construction of the project, such as taxes, interest, license fees, permit fee
s, clearance fee, etc. shall be capitalized, and those incurred after the constr
uction shall form part of operating cost.
n. Registry of Public Infrastructures/Registry of Reforestation Projects.
For agencies that construct public infrastructures, such as roads, bridges, wat
erways, railways, plaza, monuments, etc., and invest on reforestation projects,
a Registry of Public Infrastructures (RPI)/Registry of Reforestation Projects (R
RP) shall be maintained for each category of infrastructures/reforestation
projects. Examples are:
Registry of Public Infrastructures - Bridges (RPIB)
Registry of Public Infrastructures - Roads (RPIR)
Registry of Public Infrastructures - Parks (RPIP)
Registry of Reforestation Projects (RRP)
A Summary of Public Infrastructures/Reforestation Projects shall be prepared and
included in the Notes to Financial Statements.
o. Depreciation. The straight-line method of depreciation shall be used.
Depreciation shall start on the second month after purchase of the property, pla
nt and equipment, and a residual value equivalent to ten percent of the purchase
cost shall be set-up. Public infrastructures/reforestation projects as well as
serviceable assets that are no longer being used shall not be charged any deprec
iation.
p. Reclassification of Assets. Serviceable assets no longer being used shal
l be reclassified to Other Assets account and shall not be subject to depreciation
.

q. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shal
l be set up for estimated uncollectible trade receivables to allow for their fai
r valuation.
r. Elimination of Contingent Accounts. Contingent accounts shall no longer
be used. All financial transactions shall be recorded using the appropriate acco
unts. Cash shortages and disallowed payments, which become final and executory,
shall be recorded under receivable accounts Due From Officers and Employees or Rec
eivables-Disallowances/ Charges, as the case may be.
s. Recognition of Liability. Liability shall be recognized at the time goo
ds and services are accepted or rendered and supplier/creditor bills are receive
d.
t. Interest Accrual. Whenever practical and appropriate, interest income an
d/or expense shall be accrued and recognized in the books of accounts.
u. Accounting for Borrowings and Loans. All borrowings and loans incurred s
hall be recorded to the appropriate liability accounts.
v. Elimination of corollary and negative journal entries. The use of coroll
ary and negative journal entries shall be stopped. Acquisition/Disposition of a
ssets shall be debited/credited to the appropriate asset accounts. If an error i
s committed, a correcting entry to adjust the original entry shall be prepared
.
w. Petty Cash Fund. The Petty Cash Fund shall be maintained under the impr
est system. As such, all replenishments shall be directly charged to the expense
account and at all times, the Petty Cash Fund shall be equal to the total cash
on hand and the unreplenished expenses. The Petty Cash Fund shall not be used t
o purchase regular inventory/items for stock.
x. Foreign Currency Adjustment. Cash deposits in foreign currency and outs
tanding foreign loans shall be computed at the exchange rate prescribed by the B
angko Sentral ng Pilipinas at balance sheet date. The total cash deposits and fo
reign loans payable shall be adjusted at the end of each month and any gain or l
oss on foreign exchange shall be recognized. The subsidiary ledger for foreign c
urrency obligations shall reflect the appropriate foreign currency in which the
loan is payable. The liability shall be expressed both in the foreign and local
currency.
Chapter 3. Accounting Systems
Sec. 5. General Accounting Plan. The General Accounting Plan (GAP) sho
ws the overall accounting system of a government agency/unit. It includes the s
ource documents, the flow of transactions and its accumulation in the books of a
ccounts and finally their conversion into financial information/data presented i
n the financial reports. Presented on next page is the General Accounting Plan
for national government agencies.
The following accounting systems are:
a. Budgetary Accounts System;
b. Receipts/Income and Deposit System;
c. Disbursement System; and
d. Financial Reporting System.
A. BUDGETARY ACCOUNTS
Sec. 6. Budgetary Accounts System. The Budgetary Accounts System encomp
asses the processes of preparing Agency Budget Matrix (ABM), monitoring and reco
rding of allotments received by the agency from the DBM, releasing of Sub-Allotm
ent Release Order (Sub-SARO) to Regional Offices (RO) by the Central Office (CO
); issuance of Sub-SARO to Operating Units (OU) by the RO; and recording and mon
itoring of obligations.
Sec. 7. Budgetary Accounts. Budgetary accounts consist of the appropria
tions, allotments and obligations. Appropriations refer to authorizations made b
y law or other legislative enactment for payments to be made with funds of the g
overnment under specified conditions and/or for specified purposes. Appropriatio
ns shall be monitored and controlled through registries and control worksheets b
y the DBM and COA, respectively. Budgetary accounts allotments and obligations a
re discussed in the succeeding sections.
Sec. 8. Agency Budget Matrix (ABM). The ABM refers to a document sho
wing the disaggregation of agency expenditures into components like, among other
s, by source of appropriations, by allotment class and by need of clearance.
Sec. 9. Procedures for the Preparation of the ABM
Area of
Responsibility Seq.
No.
Activity
Budget Unit
Concerned Staff 1 Based on the approved General Appropriations Act
(GAA) and in coordination with the DBM, prepares the ABM by appropriations/fina
ncing sources to support expenditures to be made during the year broken down by
allotment class/expenses.
Note 1
The ABM shall contain, among others, the following information:
The amount to be released categorized under Not Needing Clearance column, and
The amount that will be released through the issuance of Special
Allotment Release Order (SARO) categorized under "Needing Clearance column inclu
ding continuing appropriations based on the Statement of Allotments, Obligations
and Balances (SAOB).
2 Initials under 'Prepared by' portion of the ABM.
Head, Budget Unit 3 Reviews and signs `Prepared by' portion of the ABM.
Concerned Staff 4 Forwards the ABM together with a transmittal letter for
the DBM to the Head of the Agency for signature/approval.
Head of the Agency 5 Approves/Signs the ABM and the transmittal lette
r.
Concerned Staff 6 Records in the logbook maintained and submits the signed
ABM to the DBM for approval.
Sec. 10. Allotment Release Order (ARO). The ARO is a formal document i
ssued by the DBM to the head of the agency containing the authorization, conditi
ons and amount of an agency allocation. The document may be the ABM, where the
amount of allocation not needing clearance is indicated, or the Special Allotmen
t Release Order (SARO), where the release of which is subject to compliance with
specific laws or regulations or is subject to separate approval or clearance by
competent authority. In the case of agencies with decentralized accounting proc
edures, Sub-ARO/Sub-SARO is issued/released.
Sec. 11. Recording of Allotments. Upon receipt of the approved ABM and AR
O, the Budget Officer/Head of the Budget Unit/Designated Budget Officer shall re
cord the allotment in the respective registries through the Allotment and Obliga
tions Slip (ALOBS). Separate registries shall be maintained for the four allotm
ent classes by Program/Project/Activity (P/P/A), to wit:
1. Registry of Allotments and Obligations - Capital Outlay (RAOCO)
2. Registry of Allotments and Obligations - Maintenance and Other Operating
Expenses (RAOMO)
3. Registry of Allotments and Obligations - Personal Services (RAOPS)
4. Registry of Allotments and Obligations - Financial Expenses (RAOFE)
Sec. 12. Procedures in the Monitoring and Recording of Allotments Recei
ved from DBM
Area of
Responsibility Seq.
No.
Activity
Budget Unit
Concerned Staff 1 Receives the approved ABM/SARO from the DBM. Rec
ords the same in the logbook and forwards the ABM/SARO to Budget Staff for prep
aration of an Allotment and Obligation Slip (ALOBS).
Budget Staff 2 Prepares ALOBS in two copies, assigns number and initial
s the same. Forwards the ALOBS and ABM/SARO to the Head of the Budget Unit for r
eview and signature.
Note 1
The numbering structure of the ALOBS shall be as follows:
PS 00 00 0000
Serial Number
(One series for

the whole year)
Month

Year

Allotment Class
(PS, MOOE, CO and FE) shall be
used only when obligations are recorded in the ALOBS

Note 2
The ALOBS shall be prepared in two copies and shall be distribut
ed as follows:
Original-Retained by the Budget Unit to support recording in the registries
Copy 2 -Accounting Unit
Head of the Budget Unit 3 Reviews, checks the small box opposite t
he 'Received' portion in Box A of the ALOBS and affixes signature certifying re
ceipt of allotment. Returns to the Budget Staff for recording in the appropriate
Registry of Allotments and Obligations (RAOs).
Budget Staff 4 Records the ALOBS in the appropriate RAOs. Files the ALO
BS for reference.
Note 3
The following RAOs shall be maintained by the Budget Unit:
Registry of Allotments and Obligations - Personal Services (RAOPS)
Registry of Allotments and Obligations -Maintenance and Other Operating Expenses
(RAOMO)
Registry of Allotments and Obligations -Capital Outlays (RAOCO)
Registry of Allotments and Obligations - Financial Expenses (RAOFE)
5 Forwards Copy 2 of the ALOBS to the Accounting Unit for referenc
e.
Sec. 13. Procedures for the Recording of Sub-Allotment Release Order (
Sub-ARO) by RO/ OU
Area of
Responsibility Seq.
No.
Activity
Central Office/
Regional Office
Budget Unit
Budget Staff 1 Based on the approved ABM received from the DBM, prepare
s Sub-ARO for RO/OU. Forwards the Sub-ARO to the Head of the Budget Unit CO/RO f
or review.
Head of the Budget Unit 2 Reviews and signs Sub-ARO. Forwards the
same to the Head of the CO/RO for approval.
Head of Central Office/Regional Office/ Authorized
Officer
3 Approves the Sub-ARO.
Budget Staff 4 Based on the approved Sub-ARO, prepares ALOBS in two cop
ies. Assigns number and initials the ALOBS. Forwards the same with a copy of app
roved Sub-ARO to the Head of the Budget Unit for review and signature.
Note 1
Distribution of ALOBS shall be as follows:
Original - CO/RO Budget Unit
Copy 2 - CO/RO Accounting Unit
Note 2
Refer to ALOBS numbering structures in Note 1 Sec. 12, Procedures in the Monit
oring and Recording of Allotments Received from DBM
Head of the Budget Unit 5 Reviews, checks the small box opposite the `Sub-al
lotted' portion of Box A of the ALOBS and affixes signature certifying as to the a
mount sub-allotted to RO/OU. Forwards the same with the approved Sub-ARO to Budg
et Staff for recording in the appropriate RAOs.
Budget Staff 6 Records the ALOBS in the appropriate RAOs. Files the ALO
BS and a copy of the Sub-ARO.
Note 3
The ALOBS covering sub-allotment for the RO/OU shall be entered
in the RAOs as negative entry in the Àllotment' column and shall be deducted from
the allotment balance.
Note 4
A copy of the ALOBS covering allotment of the RO/OU shall be fur
nished the Accounting Unit for reference.
Concerned Staff 7 Records in the logbook the release of the Sub-ARO to RO/
OU.
Regional Offices/
Operating Units
Budget Unit
Concerned Staff 8 Receives the approved Sub-ARO from the CO/RO. Records th
e same in the logbook maintained. Forwards the Sub-ARO to the Budget Staff for t
he preparation of ALOBS.
Budget Staff 9 Prepares ALOBS in two copies, assigns number and initia
ls the same. Forwards the ALOBS and Sub-ARO to the Head of the Budget Unit for r
eview and signature.
Note 5
Refer to Notes 1 and 2 of Sec.12, Procedures for the Monitoring
and Recording of Allotments Received from the DBM.
Head of the Budget Unit 10 Reviews the ALOBS based on the Sub-ARO
. Checks the small box opposite the Received portion of Box A of the ALOBS and aff
ixes signature certifying that the allotment was received. Forwards the ALOBS a
nd Sub-ARO to the Budget Staff for recording in the appropriate RAOs.
Note 6
Refer to Note 3, of Sec.12, Procedures for the Monitoring and Re
cording of Allotments Received from the DBM.
Budget Staff 11 Records the ALOBS in the RAOs. Files the Sub-ARO and ori
ginal of the ALOBS.
12 Forwards copy 2 of the ALOBS to the Accounting Unit for referenc
e.
Sec. 14. Accounting for Obligation. Obligation refers to a commitment by
a government agency arising from an act of a duly authorized official which bin
ds the government to the immediate or eventual payment of a sum of money. The ag
ency is authorized to incur obligations only in the performance of activities wh
ich are in pursuits of its functions and programs authorized in appropriation ac
ts/laws within the limit of the ARO.
Obligations shall be taken up in the registries through the ALOBS prepared/proce
ssed by the Budget Unit. The Budget Officer/ Head of the Budget Unit/designated
Budget Officer shall certify to the availability of allotment and such is duly
obligated by signing in the appropriate box of the ALOBS. On the other hand, th
e Accountant/Head of the Accounting Unit shall certify to the correctness and va
lidity of obligations, and availability of funds. Both Budget and Accounting Un
its shall coordinate in the filling up of the Status of the Obligation in their
respective copies of the ALOBS
Sec. 15. Procedures for the Recording of Obligations
Area of
Responsibility Seq.
No.
Activity
Budget Unit
Concerned Staff
1
Receives the Disbursement Voucher/Payroll (DV/P), and supporting documents, Cont
ract/ Purchase Order (C/PO) from concerned offices/personnel. Verifies completen
ess of the documents. If incomplete, returns the documents to concerned offices
for completion. If complete, records the same in the logbook maintained. Forward
s the documents to Budget Staff for the preparation of the ALOBS.
Budget Staff 2 Verifies availability of allotment based on the RAOs. If
no allotment is available, returns the documents to the office/personnel concer
ned except as authorized by the DBM.
3 If there is an available balance of allotment to cover the oblig
ations, prepares an ALOBS in three copies. Initials the ALOBS and forwards the s
ame to the Head of the Budget Unit for review and signature.
Note 1
Copy 3 of ALOBS shall be attached to the DV. Refer to Note 2, Se
c. 12, Procedures for the Monitoring and Recording of Allotments Received from D
BM for the distribution of the other copies of ALOBS.
Head of the Budget Unit 4 Reviews, checks the small box opposite t
he Àvailable and duly obligated' portion of Box A of the ALOBS and affixes signatu
re. Forwards the ALOBS and documents to the Budget Staff for recording in the ap
propriate RAOs.
Budget Staff 5 Records the amount obligated under the Òbligation' column
of the RAOs. Forwards all copies of the ALOBS and the documents to the Accountin
g Unit for processing and signature.
Note 2
Obligations shall be posted in the Òbligation Incurred' column of t
he RAOs to arrive at the balance of allotment still available at a given period.

6 Receives original of ALOBS from the Accounting Unit. If there is
no correction, files the same to support the RAOs. Otherwise, effects correctio
n in the RAOs or prepares a new ALOBS, as the case may be.
Note 3
For the succeeding activities, refer to Sec. 34, Procedures fo
r Disbursements By Checks.
Note 4
There is no need to prepare a new ALOBS for corrections/adjustme
nts made by the Accounting Unit after the processing of the claims but before pa
yment is made. Adjustment in the RAOs shall be effected thru a positive entry (i
f additional obligation is necessary) or a negative entry (if reduction) in the Ò
bligation Incurred' column.
Note 5
Preparation of new ALOBS for the following adjustments of obligations as negativ
e entries in the Òbligation Incurred' column shall be made:
refund of cash advance granted during the year
overpayment of expenses during the year
disallowances/charges which become final and executory
Certified copies of official receipts for the overpayments/refunds, copies of bi
lls for overpayments and Notice that the disallowances are final an
d executory shall be furnished the Budget Unit by the Accounting Unit for the pr
eparation of new ALOBS taking up the adjustments.
B. INCOME/COLLECTIONS AND DEPOSITS
Sec. 16. Receipts/Income Collections and Deposits System. The Receipts/In
come Collections and Deposits System covers the processes of acknowledging and r
eporting income/collections, deposits of collections with Authorized Government
Depository Bank (AGDB) or through the AGDB for the account of Treasurer of the P
hilippines, and recording of collections and deposits in the books of accounts o
f the agency.
Sec. 17. Sources of Income of the National Government. The income of the
National Government are classified into general income accounts and specific inc
ome accounts. The following comprise the general income accounts, among others:
1. Subsidy Income from National Government
2. Subsidy from Central Office
3. Subsidy from Regional Office/Staff Bureaus
4. Income from Government Services
5. Income from Government Business Operations
6. Sales Revenue
7. Rent Income
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and Properties
12. Foreign Exchange (FOREX) Gains
13. Miscellaneous Operating and Service Income
14. Fines and Penalties-Government Services and Business
Operations
15. Income from Grants and Donations
The specific income accounts of national government agencies are classif
ied as follows:
1. Income Taxes
2. Property Taxes
3. Taxes on Goods and Services
4. Taxes on International Trade and Transactions
5. Other Taxes
6. Fines and Penalties-Tax Revenue
7. Other Specific Income
The descriptions of all the accounts and the instructions as to when the
se are to be debited and credited are provided in Volume III of the NGAS Manual.

Sec. 18. Methods of Accounting for Income. National government agencies
adopt the following accounting methods of recording income:
1. Accrual Method - Accrual method of accounting shall be used by national
government agencies when income is realized (earned) during the accounting perio
d regardless of cash receipt. Accounts receivable is set up and the general or
specific income accounts according to nature and classification are credited.
2. Modified Accrual Under the modified accrual basis, income of an agency i
s recorded as Deferred Credits to Income and the appropriate receivable account is
debited. The income account is recognized upon receipt of collection and the De
ferred Credits to Income account is adjusted accordingly.
3. Cash Basis - Cash basis of accounting shall be used for all other taxes,
fees, charges and other revenues where accrual method is impractical. The incom
e account is credited upon collection of the cash or its equivalent.
Sec. 19. Fines and Penalties. Fines and penalties, either on tax revenue
s or other specific income accounts, shall be recognized as income of the year t
hese were collected.
Sec. 20. Other Receipts. Other receipts of national government agencies
shall be comprised of, but not limited to the following:
1. Refund of cash advances - When cash advances for official travels are gr
anted, the account Due from Officers and Employees is debited and when refunds ar
e made, the same account is credited. Cash advances for salaries and wages shal
l be recorded as debits to the account Cash-Disbursing Officers and any refunds th
ereof shall be credited to the same account.
2. Receipts of performance/bidders/bail bonds - Performance bond posted by
contractor or supplier to guaranty full and faithful performance of their contra
ct may be in the form of cash or certified checks or surety. Performance bond i
n cash or certified check shall be acknowledged by the issuance of official rece
ipt and recorded in the book of accounts by the Accountant thru a Journal Entr
y Voucher (JEV) for the purpose. In case of surety bond, an acknowledgement rec
eipt shall be issued by the authorized official.
3. Refund for overpayment of expenses - Refunds as a result of overpayment
of expenses shall be recorded as a credit to the appropriate expense account if
paid in the same year or to Prior Years' Adjustments if paid in the ensuing year.
This transaction shall reduce the amount of expense previously recorded.
4. Collections made on behalf of another agency or private companies - Coll
ections made on behalf of other agencies which are later remitted to them are re
corded under accounts Due to NGAs, Due to LGUs or Due to GOCCs as the case maybe.
Authorized collections made on behalf of private entities, like shares of propo
nents of Built-Operate-Transfer (BOT) Projects are recorded as Other Payables.
5. Inter-agency transferred funds - Cash received from another agency for t
he purpose of implementing projects of that agency is recorded in the books as
a credit to account Due to NGAs or Due to LGUs, as the case maybe.
Sec. 21. Deposit of Collections. All Collecting Officers shall deposit i
ntact all their collections, as well as collections turned over to them by sub-
collectors/tellers, with AGDB daily or not later than the next banking day. The
y shall record all deposits made in the Cash Receipts Record.
Sec. 22. Reporting of Collections and Deposits. At the close of each bu
siness day, the Collecting Officers shall accomplish the Report of Collections a
nd Deposits (RCD) in accordance with the instructions provided in Volume II of t
he NGAS Manual for the RCD. All collections shall be deposited wit
h AGDB for the account of the agency or the Treasurer of the Philippines daily o
r not later than the next banking day.
Sec. 23. Procedures for Collections and Deposits Through the Collecting O
fficer
Area of
Responsibility Seq.
No.
Activity
Cash Unit Daily
Designated Staff 1 Receives cash/check from payor representing coll
ection based on the Order of Payment (OP) prepared by the Accounting Unit.
2 Issues Official Receipt (OR) to acknowledge receipt of cash/chec
k.
Note 1
Funding Checks received by the Cashier/ Collecting Officer of th
e RO/OU for its operational requirements shall be issued corresponding OR..
Note 2
Separate sets of ORs shall be used for the RA and NG Books.
Note 3
The OR shall be prepared in three copies and shall be distribute
d as follows:
Original - Payor
Copy 2 - To be attached to the Report of Collections and
Deposits (RCD)
Copy 3 - Cash Unit file
3 Records collections in the Cash Receipts Record (CRR).
Note 4
Separate CRR shall be maintained for collections under the RA an
d NG Books.
4 Prepares Deposit Slip (DS) in three copies.
Note 5
The DS shall be distributed as follows:
Original - AGDB
Copy 2 - To be attached to RCD
5 Deposits collections with AGDB.
Note 6
Collections pertaining to NG Books shall be deposited with the A
GDB for the account of the Treasurer of the Philippines
6 Based on the validated DS from the AGDB and copy of the ORs on f
ile, prepares Report of Collections and Deposits (RCD) in two copies. Initials o
n the RCD and forwards the same together with Copy 2 of the ORs and DS to the He
ad of the Cash Unit for review and signature.
Head of the Cash Unit 7 Reviews and signs the RCD. Forwards original of
RCD, Copy 2 of the ORs and DS to the Designated Staff for submission to the Acco
unting Unit.
Note 7
The RCD shall be distributed as follows:
Original - Accounting Unit together with Copy No. 2 of the ORs a
nd DS - to support the JEV
Designated Staff 8 Records the RCD in the logbook maintained and fo
rwards the same with the ORs and DS to the Accounting Unit for recording in the
books of accounts.
Accounting Unit
Accounting Staff
9
Receives original of RCD with Copy 2 of the ORs and DS from the Cash Unit. Reco
rds receipt in the logbook maintained for the purpose and forwards the same to t
he Bookkeeper for review and preparation of the JEV.
Bookkeeper 10 Based on the RCD, prepares JEV in two copies and signs Pr
epared by portion of the JEV. Forwards the JEV and documents to the Head of the A
ccounting Unit for review and signature.
Head of the Accounting Unit 11 Reviews and signs `Certified Correct by' por
tion of the JEV. Forwards the JEV and documents to the Bookkeeper for recording
in the Cash Receipt Journal (CRJ) and/or Cash Journal (CJ) as the case may be.
Note 8
CRJ shall be used to record collection under the RA Books while
the CJ shall be used to record collections under the NG Books.
Note 9
For the succeeding activities, refer to Sec. 71, Preparation
and Submission of Trial Balances and Other Reports.
Sec. 24. Procedures for Collections through Accredited Agent Banks (AAB)
Area of
Responsibility Seq.
No.
Activity
Accounting Unit
Receiving/ Releasing Staff 1 Receives collection documents from the A
AB/AGDB. Records receipt in the logbook maintained for the purpose. Forwards the
same to the Bookkeeper for preparation of the JEV.
Bookkeeper 2 Based on the received collection documents, prepares JEV
in two copies, Signs Prepared by portion of the JEV. Forwards the JEV and documen
ts to the Head of the Accounting Unit for review and signature.
Head of the Accounting Unit 3 Reviews and signs Certified Correct by por
tion of the JEV. Forwards the JEV and documents to the Bookkeeper for recording
in the General Journal (GJ).
Note 1
For the succeeding activities, refer to Sec. 71, Preparation a
nd Submission of Trial Balances and Other Reports.
Sec. 25. Dishonored Checks. There are instances that checks received by
Collecting Officers in payment of taxes, fees and other debt due the government
are dishonored by the drawee banks. A check is said to be dishonored by non-pa
yment when, upon its being duly presented for payment, such payment is refused o
r cannot be obtained. (Sec. 83, RA No. 2031, Negotiable Instrument Law). It may
also be defined as those checks paid to the agency, which were dishonored by the
AGDB due to Drawn Against Insufficient Fund (DAIF) or Drawn Against Uncleared D
eposits (DAUD).
Procedures in Recording Dishonored Checks
Area of
Responsibility Seq.
No.
Activity
Cash Unit
Designated Staff 1 Receives from AGDB the Debit Memo (DM) and copie
s of dishonored checks.
2 Verifies the dishonored checks against the previous months' RCDs m
aintained on file to ascertain that the checks were included in the previous mon
ths' collections. If not included, verifies from AGDB the details of the dishonore
d checks.
3 If dishonored checks are included in the RCDs, prepares Notice o
f Dishonor to inform the drawers/indorsers/payors that the checks were dishonore
d by the AGDB.
Note 1
The Notice of Dishonor shall be prepared in three copies and sha
ll be distributed as follows:
Original - Drawer (To be delivered personally or thru registe
red mail)
Copy 2 - Accounting Unit file
4 Retrieves from file copy of the OR covering the dishonored check
and indicates in the OR the following notation:
Cancelled (date of Notice of Dishonor) per Bank Debit/Voucher No.
_____ dated _________
5 Retrieves CRR on file and records the dishonored checks with the
following notation:
To take up Bank's Debit Memo No. ___ dated ____ covering Check No.
___ for P ____________ acknowledged under OR No. _____ dated _______.
6 Prepares list of dishonored checks in two copies. Forwards Copy
2 of the list and the dishonored checks to the Accounting Unit for preparation o
f the JEV.
Accounting Unit
Accounting Staff 7 Receives the list together with originals of dis
honored checks and the Debit Memo from the Cash Unit and records the same in the
logbook maintained for the purpose.
8 Based on the list, prepares the JEV in two copies. Signs Prepared
by portion of the JEV and forwards the same to the Head of the Accounting Unit f
or review and signature.
Head of the Accounting Unit 9 Reviews and signs Certified Correct by por
tion of the JEV. Forwards the JEV supported by the list, originals of dishonored
checks and notice of dishonor to the Bookkeeper for recording in the books of a
ccounts.
Note 2
For the succeeding activities, refer to Sec.71, Preparation a
nd Submission of Trial Balances and Other Reports.
C. DISBURSEMENTS
Sec. 26. Disbursements Defined. Disbursements constitute all cash paid ou
t during a given period either in currency (cash) or by check. It may also mean
the settlement of government payables/obligations by cash or by check. It shall
be covered by Disbursement Voucher (DV)/Petty Cash Voucher (PCV) or payroll.
Sec. 27. Basic Requirements for Disbursements. The basic requirements app
licable to all types of disbursements made by national government agencies are a
s follows:
1. Existence of a lawful and sufficient allotment certified as available by
the Budget Officer;
2. Existence of a valid obligation certified by the Chief Accountant/Head o
f Accounting Unit;
3. Legality of transactions and conformity with laws, rules and regulation;
4. Approval of the expense by the Chief of Office or by his duly authorized
representative; and
5. Submission of proper evidence to establish the claim.
Sec. 28. Disbursements System. The Disbursements System involves the prep
aration and processing of disbursement voucher (DV); preparation and issuance of
check; payment by cash; granting, utilization, and liquidation/replenishment of
cash advances.
Sec. 29. Certification on Disbursements. Disbursements from government f
unds shall require the following certifications on the DV:
1. Certification and approval of vouchers and payrolls as to validity, prop
riety and legality of the claim (Box A of DV) by head of the department or offic
e who has administrative control of the fund concerned;
2. Necessary documents supporting the DV and payrolls as certified and revi
ewed by the Accountant/Head of Accounting Unit (Box B of DV); and
3. Certification that funds are available for the purpose by the Accountant
/Head of Accounting Unit (Box B of DV).
Sec. 30. Disbursements by Checks. Checks shall be drawn only on duly appr
oved DV or PCV. These shall be reported and recorded in the books of accounts on
ly when actually released to the respective payees.
Two types of checks are being issued by government agencies as follows:
1. Modified Disbursement System (MDS) Checks - issued by government agencie
s chargeable against the account of the Treasurer of the Philippines, which are
maintained with different MDS - Government Servicing Banks (GSBs). These are cov
ered by Notice of Cash Allocation, an authorization issued by the DBM to governm
ent agencies to withdraw cash from the National Treasury through the issuance of
MDS checks or other authorized mode of disbursements.
2. Commercial Checks - issued by government agencies chargeable against the
Agency Checking Account with GSBs. These are covered by income/receipts authori
zed to be deposited with AGDBs; and funding checks received by RO/OUs from COs/R
Os, respectively.
Sec. 31. Recording of Check Disbursements in the Check Disbursements Reco
rd (CkDR). All checks issued including cancelled checks shall be recorded chron
ologically in the CkDR. The dates checks were actually released shall be indicat
ed in the appropriate column provided for in the CkDR.
Sec. 32. Reporting of Checks Issued/Released. All checks actually releas
ed to claimants shall be included in the Report of Checks Issued (RCI), which sh
all be prepared daily by the Cashier. The RCI shall be submitted to the Account
ing Unit for the preparation of JEV. All unreleased checks as of the report dat
e shall be enumerated in a List of Unreleased Checks to be attached to the RCI.
Sec. 33. Procedures for Disbursements by Checks.
Area of
Responsibility Seq.
No.
Activity
A. Processing of Disbursement Voucher (DV)
Accounting Unit
Receiving/ Releasing Staff 1 Receives Copies 1-3 of DV, originals of
supporting documents and Copies 1-3 of ALOBS from the Budget Unit. Checks comple
teness of supporting documents. If incomplete, returns to the concerned party fo
r compliance.

2 If complete, stamps Received and indicates date of receipt and ini
tials on the stamped `Received' portion of the DV.
Note 1
DV that shall be paid out of non-budgetary receipts shall not pass the Budget Un
it. No ALOBS is needed. (Example - refund of cash bond).
3 Assigns DV number and records in the logbook the DV number and d
ate, payee, particular and amount. Forwards Copies 1-3 of DV, originals of supp
orting documents and Copies 1-3 of ALOBS to the Designated Staff for processing.
Note 2
The numbering structure for DV shall be as follows:
00 - 00 - 0000

Serial Number
Month of Issue

Year of Issue
Note 3
DV number shall also be indicated on every sheet of the supporting documents.
Designated Staff 4 Receives Copies 1-3 of DV, originals of supporti
ng documents and Copies 1-3 of ALOBS from the Receiving/Releasing Staff. Reviews
DV for completeness and propriety of supporting documents.
5 Checks Index of Payments (IP) from file and determines whether t
here was prior payment of the same claim. If the claim was already paid, return
s the DV and supporting documents to the Receiving/Releasing Staff to be returne
d to claimant.
6 If not yet paid, records the following in the IP: name and addre
ss of creditor, DV date and number, particulars and amount.
7 Accomplishes Box B of ALOBS and initials.
8 Initials in Box B of DV and forwards Copies 1-3 of DV, originals
of supporting documents and Copies 1-3 of ALOBS to the Head of Accounting Unit
for review and signature.
Head of the Accounting Unit

9 Reviews DV and supporting documents. Signs in Box B of DV and AL
OBS. Forwards the documents to the Receiving/Releasing Staff.
Receiving/
Releasing Staff 10
Records in the logbook the date of release of Copies 1-3 of DV, original
s of supporting documents and Copy 3 of ALOBS. Forwards to the Head of Agency or
Authorized Representative for approval of the DV. Forwards Copy 1 of ALOBS to t
he Budget Unit and retains Copy 2 of ALOBS for file.
Head of Agency or Authorized Representative
11 Reviews and approves DV. Forwards Copies 1-3 of DV, Copy 3 of t
he ALOBS and originals of supporting documents to the Cash Unit for check prepar
ation.
B. Preparation and Approval of Checks
Cash Unit
Receiving/ Releasing Staff 12 Receives Copies 1-3 of approved DV, Copy
3 of ALOBS and originals of supporting documents. Records in the logbook the d
ate of receipt, DV number, payee, particulars and amount.
Designated Staff 13 Verifies completeness of signatories on the DV.
Prepares check in three copies.
14 Retrieves from file the Check Disbursements Records (CkDR) and r
ecords the date, reference or check number, name of payee, nature of payment and
amount of the DV and extract the new balance of the NCA/bank account. Forward
s Copies 1-3 of check, Copies 1-3 of DV, Copy 3 of ALOBS and originals of suppor
ting documents to Cashier for review and signature.
Cashier 15 Verifies completeness of signature on the DV. Reviews the amoun
t of the check against the DV and supporting documents. Signs the check.
Authorized Official 16 Countersigns check. Forwards Copies 1-3 of check
, Copies 1-3 of DV, Copy 3 of ALOBS and supporting documents to the Receiving/R
eleasing Staff for return to the Cashier.

Receiving/
Releasing Staff 17 Records in the logbook the date of release of C
opies 1-3 of check, Copies 1-3 of DV, Copy 3 of ALOBS and supporting documents.

Cashier 18 Releases the original of check and Copy 3 of DV to the payee. A
ttaches OR/Invoice on Copy 1 of DV. Files Copies 2-3 of check, Copies 1-2 of DV
, originals of supporting documents.
C. Preparation of Report of Checks Issued (RCI)
Daily,
19 With Copies 1-2 of DV, Copy 3 of ALOBS, supporting documents, Co
pies 2-3 of checks, prepares RCI in two copies.
Note 6:
RCI shall include only those checks actually released to the payees during the d
ay including cancelled ones.
Note 7:
The RCI shall be distributed as follows:
Original - Accounting Unit together with the originals of the paid DVs/payroll a
nd supporting documents for JEV preparation
20 Initials in `Certification' portion of the RCI.
Head of the Cash Unit 21 Reviews RCI and signs in `Certification' portion.
Designated Staff
22 Forwards original of RCI together with Copy 2 of checks, Copy
1 of DVs, Copy 3 of ALOBS and supporting documents to the Accounting Unit for t
he preparation of JEV. Retains Copy 2 of RCI, Copy 3 of checks and Copy 2 of D
Vs for file.
Note 8:
The List of Unreleased Checks shall be attached to the RCI to be submitted to Acco
unting Unit for reference.
Accounting Unit D. Preparation of JEV
Daily
Receiving/
Releasing Staff 23 Records receipt of Copy 1 of RCI together with
Copy 2 of checks, Copy 1 of DVs, Copy 3 of ALOBS and originals of supporting doc
uments from Cash Unit in the logbook. Forwards the documents to the Designated
Staff for JEV preparation.
Designated Staff 24 Examines DVs and checks against RCI. Verifies if
the serial number of checks actually issued, including spoiled and cancelled on
es, are all accounted for.
25 Prepares JEV in two copies and signs in the Prepared by portion.
Head of the Accounting Unit/Authorized Signatory 26 Reviews correctn
ess of the journal entries and signs on `Certified Correct by' portion of the JEV.
Forwards Copies 1-2 of JEV and Copy 1 of RCI, Copy 2 of checks, Copy 1 of DVs,
Copy 3 of ALOBS and originals of supporting documents to Designated Staff for re
cording in the Check Disbursements Journal (CkDJ).
E. Recording in the CkDJ
Designated Staff 27 Receives Copies 1-2 of JEV and Copy 1 of RCI, Co
py 2 of checks, Copy 1 of DVs, Copy 3 of ALOBS and supporting documents. Record
s the JEV in the CkDJ. Retains Copy 2 of JEV for file. Forwards Copy 1 of JEV,
RCI and DV, Copy 2 of checks, Copy 3 of ALOBS and supporting documents to the R
eceiving/Releasing Staff for submission to COA for audit.
Receiving/ Releasing Staff 28 Records in the logbook the date of submi
ssion of Copy 1 of JEV, RCI, DVs, Copy 3 of ALOBS, Copy 2 of checks and original
s of supporting documents. Forwards the documents to COA for audit.
Note 9:
For the succeeding activities, refer to Sec. 71, Preparation and Submission
of Trial Balances and Other Reports.
Sec. 34. Disbursements by Cash. Disbursements by cash shall be made fro
m cash advances drawn and maintained in accordance with COA rules and regulation
s. Cash payments shall be made based on duly approved payrolls/disbursements vo
uchers.
Sec. 35. Cash Advances for Travel. Cash advances granted for travel shal
l be accounted for as Due from Officers and Employees and these are subject to l
iquidation upon travel completion. For liquidation of travel where the amount of
cash advance is equal to or more than the travel expenses incurred, the Liquida
tion Report form shall be prepared by the officers/employees concerned and submi
tted to the Accounting Unit as basis for JEV preparation. The excess cash advanc
e shall be refunded and an OR shall be issued to acknowledge receipt thereof. In
case the amount of cash advance is less than the travel expenses incurred, a Li
quidation Report shall be submitted to liquidate the cash advance previously gra
nted and a DV shall be prepared to claim reimbursement of the deficiency in amou
nt.
Sec. 36. Procedures for Disbursements by Cash - Payment for Payroll and O
ther Expenses
Area of
Responsibility Seq.
No.
Activity
Cash Unit
Accountable/ Disbursing Officer 1 Receives the approved check from the Cas
hier. Records in the Cash Disbursements Record (CDR) the date, reference, name o
f payee, particulars and the amount of check in the debit column.
2 Encashes check in a GSB.
3 Pays officials and employees/other payees.
Note 1
Employees/payees shall sign on the received portion of the payroll/DV to acknowl
edge receipt of payment.
Note 2
If there are unclaimed salaries, refund the same within a reasonable time. OR re
presenting the refund shall be issued by the Cashier.
4 Records payment including the refund for unclaimed salary in the
credit column of the CDR.
At the End of the Month
5 Based on the paid payroll/DV and supporting documents, prepares
Report of Disbursements (RD) in two copies. Signs the Certification portion of the
RD.
Note 3
The RD shall serve as the liquidation report of the cash advance granted to th
e Disbursing Officer.
Note 4
The RD shall be distributed as follows:
Original - Accounting Unit together with the originals of the paid DVs/Payrolls
and supporting documents for JEV preparation
Accounting Unit
Releasing/
Receiving Clerk 6 Records in the logbook, indicates `Received' and sig
ns all copies, forwards the RD to the Bookkeeper for JEV preparation, and return
s Copy 2 to the Cash Unit.
Bookkeeper 7 Prepares JEV based on the RD and supporting documents re
ceived.
Note 5
For the succeeding activities, refer to Sec.71, Preparation and Submission of
Trial Balances and Other Reports.
8 Records payroll payment in the individual Index of Payments (IP)
of officials and employees.
Sec. 37. Disbursements Through Bank - Payroll Payment
Area of
Responsibility Seq.
No.
Activity
Cash Unit
Cash Staff
1
Receives the approved check, DV and Following Months' Payroll (FMP), signs the l
ogbook of the releasing office, and forwards the documents to the Cashier.
2 Deposits the check to the Bank Payroll Account together with the
original of the Summary of Employees Net Earnings (SENE) received from Accounti
ng Unit. Files temporarily Copies 1-2 of FMP, copy 2 of the check, and Copies 1-
3 of DV for the preparation of RCI.
Note 1
The payee of the check is the Servicing Bank whose authorized representative sha
ll acknowledge receipt of the check by signing on the original of the DV.
Note 2
Refer to Seq. No. 19, Sec.34, Procedures for Disbursements by Checks.
Note 3
Payroll payment through bank shall also be recorded in the IP ma
intained by the Accounting Unit.
Sec. 38. Disbursements Through 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 agency. Disbursements from the f
und shall be through the Petty Cash Voucher (PCV) which shall be approved by aut
horized officials and signed by the payee to acknowledge the amount received. T
he official receipt or its equivalent is attached to the PCV.
Sec. 39. Procedures for Disbursements Through Petty Cash Fund
Area of
Responsibility Seq.
No.
Activity
Various Unit
Petty Cash Custodian
1 Receipt of Check for the Establishment/ Replenishment of Petty Cash Fund
Receives check from Cashier for the establishment/replenishment of petty cash fu
nd. Retrieves Cash Disbursement Record (CDR) and records the date, reference and
the amount of check in the `Disbursements' column.
2 Encashes check in GSB and keeps the cash in a safety vault.
Requesting Personnel
3
Utilization of Petty Cash Fund
Accomplishes Box A `Requested by' portion of the Petty Cash Voucher (PCV).

Immediate Supervisor 4 Signs Box A Àpproved by' portion of the PCV and ret
urns to Requesting Personnel.
Requesting Personnel 5 Submits to the Petty Cash Custodian for the rele
ase of fund.
Petty Cash Custodian 6 Receives from the Requesting Personnel the PCV d
uly approved by concerned official.
7 Upon granting of the petty cash advance and signs in Box B `Paid b
y' portion of the PCV.
Requesting Personnel 8 Receives petty cash and signs in Box B `Cash Recei
ved by' portion of the PCV.
Petty Cash Custodian 9 Issues Copy 2 of the PCV to requesting personnel
10 Retrieves CDR from file and records paid PCVs. Fills up the foll
owing columns: date, reference, name of payee, nature of payment, amount in the
credit column and cash advance balance.
11
Files the original of PCV awaiting liquidation.
Liquidation of Petty Cash Advance
12
13
Receives from Requesting Personnel Copy 2 of the PCV together with su
pporting documents. Checks and reviews completeness of documents such as the dat
e, amount and nature of expenses paid as shown in the supporting documents.
If incomplete, returns to Requesting Personnel for completion of needed supporti
ng documents.
If complete, retrieves the original of PCV from file and fills up Box D `Liquidati
on Submitted' portion of the original and Copy 2 of PCVs.
14 Checks the appropriate boxes for `Received Refund' or `Reimbursement P
aid' portion and signs Box C of the PCV.
Requesting Personnel 15 Checks and fills up the appropriate boxes for `Liq
uidation Submitted' and `Reimbursement Paid' upon submission of necessary supporting d
ocuments and receipt or reimbursement of cash, if any, and signs the PCV.

Petty Cash Fund Custodian 16 Returns Copy 2 of the PCV to the Request
ing Personnel.
17
If the amount granted is equal to the amount paid as shown in the liquid
ated PCV, proceeds to Sequence No. 18.
If the amount is not equal to the amount paid, retrieves from file the CDR and r
ecords the necessary adjustments based on the liquidated PCV. Fills up the follo
wing columns: date, reference, name of payee, and nature of payment, amount in t
he appropriate debit, credit and balance columns.
18
Files the original of the PCV together with the supporting documents awa
iting replenishment.
Replenishment of Petty Cash Fund
Petty Cash Fund Custodian
19
Retrieves from file the original of the PCV together with the supporting documen
ts. Checks the completeness of all PCVs for replenishment.
20 Prepares the Petty Cash Replenishment Report (PCRR) in two copie
s based on PCVs in numerical sequence and fills up the following columns: date,
PCV No., particulars and amount.
21 Signs in the `Certified Correct by' portion of the PCRR.
22 Based on the PCRR, prepares DV in three copies. Forwards Copies
1-3 of the DV, original of the PCRR and PCV, and supporting documents to Author
ized Official for review and signature.
Authorized Official 23 Signs in Box A portion of the DV.
Petty Cash Fund Custodian 24 Forwards Copies 1-3 of the DV, originals
of PCRR and PCVs and supporting documents to Budget Division for preparation of
the ALOBS.
Note 1
For the succeeding activities, refer to Sec.15, Procedures in the Recording of
Obligations.
G. PROPERTY, PLANT AND EQUIPMENT, AND INVENTORY ACCOUNTS
Sec. 40. Purchase or Construction of Property, Plant and Equipment. Prope
rty, plant and equipment acquired through purchase shall include all costs incur
red to bring them to the location necessary for their intended use, like transpo
rtation costs, freight charges, installation costs, etc. These are recorded in t
he books of accounts as Assets after inspection and acceptance of delivery.
During construction period, property, plant and equipment shall be classified an
d recorded as Construction in Progress with the appropriate asset classification.
As soon as these are completed, the "Construction in Progress" account shall be
transferred to the appropriate asset accounts.
Accounts Public Infrastructures and Reforestation Projects are closed to Government E
quity account and the asset is recorded in the Registry of Public Infrastructures
/Reforestation Projects at the end of the year.
Sec. 41. Property and Inventory Accounting System. The Property and Inven
tory Accounting System consists of the system of monitoring, controlling and rec
ording of acquisition and disposal of property and inventory.
The system starts with the receipt of the purchased inventory items and equipmen
t. The requesting office in need of the inventory items and equipment after det
ermining that the items are not available in stock shall prepare and cause the a
pproval of the Purchase Request (PR). Based on the approved PR and after accomp
lishing all the required procedures adopting a particular mode of procurement, t
he agency shall issue a duly approved Purchase Order. Procedures relative to the
obligation of the purchase order and payment of the deliveries are discussed un
der Sections 14 and 31, Accounting for Obligation and Disbursements by Check, r
espectively.
The sub-systems are as follows:
1. Receipt, Inspection, Acceptance and Recording Deliveries of Inventory It
ems and Equipment
2. Requisition and Issuance of Inventory Items
3. Requisition and Issuance of Equipment
Sec. 42. 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 account. Under the perpetual inventory m
ethod, an inventory control account is maintained in the General Ledger on a cur
rent basis.
Regular purchases shall be recorded under the Inventory account and issuance the
reof shall be recorded based on the Report of Supplies and Materials Issued. Pur
chases out of the Petty Cash Fund shall be charged immediately to the appropriat
e expense accounts.
The Accounting Unit shall maintain perpetual inventory records, such as the Su
pplies Ledger Cards for each inventory stock, Property, Plant and Equipment Ledg
er Cards for each category of plant, property and equipment including work and o
ther animals, livestock, etc. The subsidiary ledger cards shall contain the det
ails of the General Ledger accounts.
For check and balance, the Property and Supply Office/Unit shall maintain Proper
ty Cards (PC) for property, plant and equipment, and Stock Cards (SC) for invent
ories. The balance in quantity per PC and SC should always reconcile with the l
edger cards of the Accounting Unit.
Sec. 43. Moving Average Method. The moving average method of costing sha
ll be used for costing inventories. This is a method of calculating cost of inv
entory on the basis of weighted average on the date of issue. The Accounting Uni
t shall be responsible in computing the cost of inventory on a regular basis.
Sec. 44. Procedures in the Receipt, Inspection, Acceptance and Recording
Deliveries of Inventory Items and Equipment
Area of
Responsibility Seq.
No.
Activity
Property and Supply Unit
Property/
Supply Officer
1 Delivery of Equipment and Inventory Items
Signs Received portion of the original and Copy 2 of the Delivery Receipt (DR).
Files the original and returns Copy 2 of the DR to the Supplier/Procurement Serv
ice.
2 Prepares Inspection and Acceptance Report (IAR) in three copies.
Forwards IAR, original of DR, and Copy 2 of approved PO from file to Property
Inspector for inspection of deliveries.
Note 1
Distribution of the IAR shall be as follows:
Original - Supplier (to be attached to the DV)
Copy 2 - Property Inspector/
Inspection Committee
Copy 3 - Property and Supply Unit file
Property Inspector 3 Inspects and verifies items as to quantity and c
onformity with specifications based on the DR and approved PO. If in order, sign
s and indicates date of inspection in the Inspection column of the IAR. Retains co
py 3 of IAR and forwards the items and Copy 1-2 of IAR, original of DR and Copy
2 of PO to Property/Supply Officer for acceptance.
4 If specifications are not in order or delivery is not complete,
indicates notation on the IAR that the deliveries are not in conformity with spe
cifications agreed under the approved PO or deliveries are not complete. Forward
s the IAR to the Property/Supply Officer.
Property/Supply Officer 5 Signs in Àcceptance' column, acknowledging receipt
of the items delivered. Checks the appropriate box whether complete or partial (
indicate quantity received) delivery, and indicate the date of receipt and remar
ks, if any.
Forwards items to Property/Supply Custodian for safe-keeping/storage.
6 Prepares DV indicating the Supplier as Payee. Attaches the origi
nal IAR, Copy 2 of DR, PO and photocopy of PR. Forwards documents to Budget Uni
t for the preparation of ALOBS. Forwards copy 2 of IAR and copy of PO to the Pr
operty/Stock Card Keeper for recording in the Property/ Stock Cards.
Note 2
For succeeding activities on processing of payment for delivered inventory items
and equipment, refer to Sec.15, Procedures in the Recording of Obligations and
Sec. 34 Procedures in Disbursements by Checks.
Note 3
For purchases made through the Procurement Service (PS), the DV shall be prepare
d on the basis of the Approved Agency Procurement Request. The payment shall be
made directly to the PS.

Accounting Unit
PPELC/SLC Keeper
7 After Payment of Deliveries
Posts necessary information to the Property, Plant and Equipment Ledger Card (PP
ELC)/Supply Ledger Card (SLC) based on the paid documents forwarded by the Cash
Unit.
Sec. 45. Procedures in the Requisition and Issuance of Inventory Items
Area of
Responsibility Seq.
No.
Activity
Concerned Office
1 Inquiry for the availability of supplies
Prepares the Supplies Availability Inquiry (SAI) in two copies. Accomplishes th
e form for item description, unit and quantity.
2 Fills up the Ìnquired by' portion of SAI and forwards the same to
Accounting Unit for processing.
Accounting Unit
Accounting Staff
3
Receives SAI from Requesting Personnel. Reviews and verifies the completeness of
information.
4 Retrieves from file the SLC and determines availability/status o
f stocks.
5 Fills up the number, stock number, status of stock and `Status pr
ovided by' portion of the SAI. Returns the original to the Requesting Personnel an
d files Copy 2 of the SAI.
Concerned Office
6
Receives the original of SAI from the Accounting Staff. If stock is not availabl
e, prepares Purchase Request (PR) for the item requested and forwards the same t
o Property and Supply Unit for processing of the request. If stock is available,
prepares Requisition and Issue Slip (RIS) in three copies. Fills up all the ne
cessary information except for the issuance portion and signs `Requested by' portio
n of the RIS. Forwards the RIS to Authorized Official for approval.
Note 1
The RIS shall be distributed as follows:
Original - Accounting Unit
Copy 2 - Property and Supply Unit
Copy 3 - Requesting Office
Authorized Official 7 Signs the Àpproved by' portion of the RIS.
Requesting Personnel 8 Receives signed RIS and forwards to the Property
and Supply Unit together with the original of SAI for withdrawal of inventory i
tems requested.
Supply Officer
9
Reviews and verifies RIS as to completeness of information. Fills up the RIS No
./Date, and Quantity, Remarks and initials Àpproved by' portion of the RIS, and rec
ords RIS in the logbook.
Head of the Property and Supply Unit 10 Signs the Àpproved by' portion of R
IS and returns to the Supply Officer for issuance of the stock.
Supply Officer 11 Fills up and signs the Ìssuance' portion of the RIS and is
sues inventory items requested to the Requesting Personnel.
Concerned Office
12
Receives supplies requested and sign in the `Received by' portion of the RIS.
13 Files permanently in numerical order Copy 2 of RIS and files tem
porarily the originals of RIS and SAI for the preparation of Report of Supplies
and Materials Issued (RSMI).
14 Preparation of RSMI
Retrieves the original copies of RIS and SAI from temporary file. Checks the com
pleteness of the RIS. If not complete, verifies with the Supply Officer. If comp
lete, prepares RSMI in three copies.
15 Initials in the `Certified by' portion of the RSMI.
Head of the Property and Supply Unit
16
Signs in the `Certified by' portion of the RSMI.
Stock Card Keeper 17 Receives signed RSMI and forwards to Accounting
Unit the original and Copy 2 of RSMI together with originals of RIS and SAI. Fi
les Copy 3 of RSMI.

Accounting Unit
Accounting Staff
18 At the Start of the Day
Receives original and Copy 2 of RSMI, and original SAI and RIS. Checks and ver
ifies the completeness of information. Retrieves SLC from file and fills up the
`To be filled up in the Accounting Unit' portion of RSMI. Records RSMI in the SLC.
19 Signs in the `Posted by/date' portion of the RSMI.
20 Files permanently in numerical order Copy 2 of RSMI and files te
mporarily the original RIS, SAI and RSMI for recording issuance of inventory ite
ms in the books of accounts.
21 At Month End
Retrieves the original RIS, SAI and RSMI from temporary file.
22 Prepares JEV in two copies based on the RSMI to record the issua
nce of stock.
23 Signs in the `Prepared by' portion of the JEV.
Head of the Accounting Unit 24 Sign in the `Certified Correct by' portion o
f the JEV.
Accounting Staff 25 Receives signed JEV and forwards to Bookkeeper t
he JEV, RSMI, RIS, and SAI for recording in the General Journal. Files copy 2 o
f JEV.
Note 2:
For succeeding activities, refer to Sec. 71, Preparation and Submission of Trial
Balances and Other Reports.
Sec. 46. Procedures in the Requisition and Issuance of Equipment

Area of
Responsibility Seq.
No.
Activity
Concerned Office
1
Upon receipt of notice of availability of the equipment requested, prepares RIS
in three copies.

Fills up the necessary information pertaining to requisition, except Ìssuance' colu
mn of the RIS.
Authorized Official 2 Reviews RIS and signs `Requested By' in the Requisit
ion column.
Requesting Personnel 3 Records the signed RIS in the logbook and indica
te date, particulars and remarks. Forwards the same to Property and Supply Unit
for processing of the requisition.
Receiving Staff
4
Receives signed RIS from Requesting Office. Records the date, particulars and R
equesting Office in the logbook. Assigns number on RIS and issues Copy 3 to Req
uesting Personnel for file.
Property Officer 5 Verifies RIS and checks against the PR.
6 Initials RIS and forwards the original and Copy 2 of RIS to the
Head of the Property and Supply Unit for review and approval.
Head of the Property and Supply Unit 7 Reviews RIS and signs the Àpprove
d By' portion of RIS. Forwards Copies 1-2 of RIS to Property Custodian.
Property Custodian 8 Based on the approved RIS, assigns number on the
property being transferred/ issued. Indicates the number in the RIS.
9 Prepares Acknowledgment Receipt of Equipment (ARE). Indicates th
e quantity, unit, description and property number of the items being issued. Si
gns in the `Received from' and Ìssued by' portions of the ARE and RIS, respectively. R
ecords the date, number and particulars in the ARE logbook.
Note 1
ARE shall be distributed as follows:
Original - Property and Supply Unit file
Copy 2 - Recipient or user of the property file
Concerned Office
11
Retrieves Copy 3 of RIS. Checks item if it is in conformity with RIS. Signs `Rece
ived By' portion of original and Copy 2 of ARE and RIS.

12 Returns original ARE and Copies 1-2 of RIS to Property Custodian
/Officer for recording in the Property Card. Files Copy 2 of ARE and Copy 3 of R
IS.
Supply and Property Unit
Property Officer
13
Files original of ARE per accountable officer/employee and Copy 2 of RIS. Forwa
rds the original RIS to the Accounting Unit.
Accounting Unit
PPELC Keeper 14 Receives original of the RIS. Retrieves the PPELC and
posts information pertaining to issuance/transfer of property.
E. MISCELLANEOUS TRANSACTIONS
Sec. 47. Miscellaneous Transactions. Miscellaneous transactions are tran
sactions types that are unique and not recurring in the ordinary course of gover
nment operations. These seldom take place or should not happen at all. Some of
the miscellaneous transactions are as follows:
1. Loss of Cash and Property
2. Request for Relief from Accountability
3. Cash Overage
4. Stale MDS and Commercial Checks
5. Set-up and Settlement of Disallowances
6. Refund of Overpayments
Sec. 48. Accounting for Loss of Cash and Property. Loss of cash and prope
rty may be due to malversation, theft, robbery, fortuitous event or other causes
.
Cash shortage discovered during cash examination conducted by auditors is report
ed through the Report of Cash Examination. The Auditor issues an audit report in
case of shortage in property accountability. As soon as a shortage is definitel
y established, the Auditor shall issue a memorandum pertaining thereto and the A
ccountant shall draw a JEV to record the shortage as a receivable from the Accou
ntable Officer concerned.
In case of loss of property due to other causes like, 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 pe
nding result of request for relief from accountability.
Sec. 49. Grant of Relief from Accountability. When a request for relief f
rom accountability for shortages or loss of funds is granted, a copy of the deci
sion shall be forwarded to the Chief Accountant who shall draw a JEV to record t
he transaction. The loss shall be debited to the Loss of Assets account and cred
ited to the appropriate receivable account. In case the request for relief is de
nied, immediate payment of the shortage shall be demanded from the Accountable O
fficer. Restitution shall be acknowledged by the issuance of an official receip
t.
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 th
e appropriate asset account. If request for relief from accountability is denie
d, the loss shall be taken up as a receivable from the Accountable Officer or em
ployee liable for the loss and shall be credited to the appropriate asset accoun
t.
Sec. 50. Accounting for Cash Overage. In case the cash examination discl
osed cash overage, as determined by the Auditor during cash examination, the amo
unt shall be forfeited in favor of the government and an official receipt shall
be issued by the Cashier. The cash overage shall be taken up as Miscellaneous I
ncome.
Sec. 51. Accounting for Stale Checks. Checks may be cancelled when they
become stale. The depository bank considers a check stale, if it has been outst
anding for over six months from date of issue or as prescribed.
reported in the RC
A stale check shall be marked cancelled on its face and reported as follows:
1. Unclaimed stale checks which are still with Cashier shall be cancelled a
nd reported in the List of Unreleased Checks as cancelled. The List of Unreleas
ed Checks is attached to the RCI.
2. For stale checks which are in the hands of the payees or holders in due
course and requested for replacements, new checks may be issued upon submission
of the stale checks to the Accounting Unit. A certified copy of the previously
paid DVs shall be attached to the request for replacement. A JEV shall be prepa
red to take up the cancellation. The replacement check shall be reported in the
RCI.
Sec. 52. Accounting for Disallowances. Disallowances shall be taken up i
n the books of accounts only when they become final and executory. The Accounta
nt shall prepare the JEV to take up the Receivable-Disallowances/Charges and cre
dit the appropriate expense account for the current year or Prior Years' Adjustmen
t account if pertaining to expenses of previous years.
Cash settlement of disallowances shall be acknowledged through the issuance of a
n official receipt and reported by the Cashier in the RCD.
Sec. 53. Accounting for Overpayments. Sometimes overpayments or even dou
ble payment of expenditures do happen in agencies. These could be avoided with
the institution of proper controls but some could not be avoided because of buil
t-in procedures. One example is the payment of payrolls. Payrolls are prepared
in advance and some agencies pay their employees through the banking system. A
ll these are done before reports of attendance are submitted, making it impossib
le to know the exact amount to be paid in case there are absences without pay du
ring the pay periods. In case of overpayments, refunds shall be demanded of the
employees concerned.
Sec. 54. Pro-forma Accounting Entries. The following are the pro-forma a
ccounting entries for miscellaneous transactions:
Particulars
Account Title Acct.
Code
Dr.
Cr.
1. Cash Shortage
a. Cash shortage of the Disbursing Officer
To take up cash Due from Officers and Employees 128 150
shortage Cash-Disbursing Officers 107 150
b. Cash Shortage of the Collecting Officer
To take up cash Due from Officers and Employees 128 150
shortage Cash-Collecting Officers 106 50
2. Relief from Accountability for Loss of Government Funds and Property
a. Request for Relief from Accountability Granted.
To take up relief from accountability
for current year - -
for prior years - -
Loss of Assets
or
Prior Years' Adjustments
948
533
50
Due from Officers and Employees
128
50
b. Request for Relief from Accountability Denied.
To record the loss of fund by a Disbursing Officer (allegedly thru theft ) - P
150 Due from Officers and Employees
Cash-Disbursing Officers 128
107 150
150
c. Cash Settlement/Restitution in case of denial of Request for Relief from Acco
untability
To take up receipt of settlement Cash-Collecting Officers
Due from Officers and Employees 106
128 50
50
To record deposit
c.1 current year Subsidy Income from National Government 601 50
Cash-Collecting Officers 106 50
c.2 prior year Prior Years' Adjustment 533 50
3. Cash Overage
To take up cash overage discovered during cash examination
Cash Collecting Officers
Due to National Treasury
Miscellaneous Operating
and Service Income 50 106
433
50
50
To record deposit Due to National Treasury
Miscellaneous Operating
and Service Income 50 433 50
4. Stale Checks
a. Stale MDS check issued in the current year for replacement
Check cancellation Cash-National Treasury, MDS 102 50
Accounts Payable 401 50
Replacement Accounts Payable 401 50
Cash-National Treasury, MDS 102 50
b. Stale MDS check issued in the prior years for replacement
Check cancellation Prior Years' Adjustments 533 50
c. Stale commercial check issued in the current and prior years for replacement
Check cancellation Cash in Bank-Local Currency, Current Account
110
50
Cash in Bank-Local Currency, Current Account
110
50
5. Disallowances
a. Recording of disallowances for current year's transaction
When the disallowances becomes final and executory - overpayment of office suppl
ies
Receivables-Disallowances/ Charges
Office Supplies Expenses
138849
10
10
Amount paid - P100
Should be - 90
Difference - 10
Settlement of Disallowance Cash-Collecting Officers
Receivables-Disallowances/ Charges 106
138 10
10
Deposit of collection Subsidy Income from National Government
601
10
Particulars
Account Title Acct.
Code
Debit
Credit
b. Recording of disallowance for prior year's transaction
When the disallowance becomes final and executory Receivables - Disallowan
ces/ Charges
138533
10
10
Settlement of disallowance Cash - Collecting Officers
Receivables - Disallowances/ Charges
106
138 10
10
Deposit of collection Prior Years' Adjustments 533 10
6. Refund of Overpayment
a. Overpayment taken up as receivable
To record overpayment of salaries and wages (When overpayment is ascertained)
Salaries and Wages - Regular Pay 128
801 10
10
To record receipt of refund
Cash-Collecting Officers
106
128
10
10
601
10
b. Refund of overpayment not taken up as receivable
To record receipt of refund of Salaries and Wages - Regular Pay during the curre
nt year
Cash - Collecting Officers
Salaries and Wages Regular Pay 106
801 10
10
601
10
To record receipt of refund of 0verpayment in the ensuing year Cash-Collecting
Officers
Prior Years' Adjustments 106
533 10
10
Deposit of collection Prior Years' Adjustments 533 10

Chapter 4. Trial Balances, Financial Reports
and Statements
The Financial Statements Process
Sec. 55. Financial Reporting System. This Financial Reporting System (FR
S) includes the preparation and submission of trial balances, financial statemen
ts and other reports needed by fiscal and regulatory agencies. The sub-systems a
re as follows:
1. Preparation and Submission of Trial Balances and Other Reports
2. Preparation and Submission of Financial Statements
Sec. 56. Trial Balance. The Trial Balance shows the equality of debit an
d credit balances of all general ledger accounts as of a given period. It is pr
epared and submitted monthly, quarterly and annually. At the end of the fiscal y
ear, the pre-closing and the post-closing trial balances shall be prepared.
Sec. 57. Purposes of the Trial Balance. The trial balance is prepared to
:
1. prove the mathematical equality of the debits and credits after posting;
2. uncover errors in journalizing and posting; and
3. serve as basis for the preparation of the financial statements.
Sec. 58. Pre-Closing Trial Balance. The Pre-Closing Trial Balance (Appen
dix 2) shall be prepared after recording the adjusting journal entries in the Ge
neral Journal and posting the same to the General Ledger. It shows the adjust
ed balances of all accounts as of a given period. This is also described as the
adjusted trial balance.
Sec. 59. Adjusting or Correcting Journal Entries. Under the matching pri
nciple, adjustments shall be made for economic activities that have taken place
but are not yet recorded at the time when the financial statements are prepared.
Such adjusting journal entries are made to ensure that revenues and expenses ar
e recorded in the period when they are earned or incurred. Adjustments are of tw
o main types: accrued items and deferred items.
Sec. 60. Adjustment for Accrued Item. It is an adjusting entry for an ec
onomic activity already undertaken but not yet recorded into an asset and revenu
e accounts or a liability and expense accounts. It requires asset/revenue adjust
ments and liability/expense adjustments.
Sec. 61. Asset/Revenue Adjustment. It involves earned revenues not yet re
corded as assets and income at the end of the accounting period. Examples are
receivables for revenues already earned but not yet collected nor billed as of
the year end.
Account Title Account Code
Debit
Credit
Interest Receivable 161 500
Interest Income 624 500
Sec. 62. Liability/Expense Adjustment. It involves expenses, which alread
y exist but remain unpaid at the end of the accounting period. Examples are sala
ries, wages and other expenses already incurred but not yet paid.

Debit
Credit
Salaries and Wages-Regular Pay 801 1,000
Due to Officers and Employees 428 1,000
Sec. 63. Adjustment for Deferred Items. These are adjusting entries trans
ferring data previously recorded in an asset account to an expense account, or d
ata previously recorded in a liability account to a revenue account. It also req
uires asset/expense adjustments and liability/revenue adjustments.
Sec. 64. Asset/Expense Adjustments. These pertain to assets, portion of w
hich shall be recorded as expense of the agency at the end of the accoun
ting period. Examples are prepaid expenses, bad debts and depreciation.
Debit
Credit
Original Entry:
Prepaid Rent 161 1,000
Cash-National Treasury, MDS 102 1,000
Adjusting Entry:
Rent Expenses 841 900
Prepaid Rent 161 900
Sec. 65. Bad Debts. Trade receivables shall be valued at their face amou
nts minus, whenever appropriate, allowance for doubtful accounts. Bad Debts expe
nse and/or any anticipated adjustments, which in the normal course of events wil
l reduce the amount of receivables from the debtors to estimated realizable valu
es, shall be set up at the end of the accounting period.
The Allowance for Doubtful Accounts shall be provided in an amount based on coll
ectibility of receivable balances and evaluation of such factors as aging of the
accounts, collection experiences of the agency, expected loss experiences and i
dentified doubtful accounts.
The determination of bad debts expense shall be derived from computations based
on percentages and aging of accounts receivable as follows:
Age of Accounts Percentage
1 - 60 days 1 %
61 - 180 days 2 %
181- 1 year 3 %
More than 1 year 5 %
An adjusting journal entry to take up bad debts expense is as follows:
Debit
Credit
Bad Debts 929 1,000
Allowance for Doubtful Accounts 301 1,000
Sec. 66. Depreciation for Property, Plant and Equipment. The costs of pr
operty, plant and equipment are allocated to the periods benefited through the p
rovision of accumulated depreciation. Depreciation is the systematic and gradua
l allocation of the depreciable amount of asset over its useful life. The depr
eciable or estimated useful life for different types of agency assets are presen
ted as Appendix 1.
Sec. 67. Method of Depreciation. Depreciation shall be computed using t
he Straight Line Method. Depreciation shall start on the second month from purch
ase. A residual value equivalent to ten percent of the cost shall be set. Annu
al depreciation is computed as follows:
Annual Depreciation = Asset Cost less Estimated Residual/Salvage Value
Estimated Useful L
ife
Asset Cost - Purchase or Acquired Value of th
e Asset
Estimated Salvage Value - 10% of the asset cost
Estimated Useful Life - Estimated number of years the asset s
hall be used as determined by the Commission on Audit
A sample adjusting journal entry for depreciation expense is as follows:
Debit
Credit
Depreciation-Office Equipment 922 1,000
Accumulated Depreciation-Office
Equipment 322 1,000
Sec. 68. Closing Journal Entries. Closing journal entries are general jou
rnal entries which close out the balances of all nominal/ temporary and intermed
iate accounts at the end of the accounting period. The nominal and intermediate
accounts that shall be closed at the end of the accounting period are as follows
:
1. Reversion of the unused or unutilized Subsidy Income from National Gover
nment at the end of the year due to the DBM policy that NCA will only be valid w
ithin the year of issue except NCA for accounts payable, which is valid one mont
h after its issuance. There is no need to issue an MDS Check when reverting the
account.
Debit
Credit
Subsidy Income from National
Government 601 100
2. Close the balance of the Subsidy Income from National Government accoun
t to Income and Expense Summary account.
Debit
Credit
Subsidy Income from National
Government 601 1,000
Income and Expense Summary 532 1,000
3. Close the balance of all income accounts to Income and Expense Summary a
ccount.
Debit
Credit
Income from Government Services 611 500
Income from Government Business Operations
612
400
Income and Expense Summary 532 900
4. Close the balance of all expense accounts to Income an Expense Summary a
ccount.
Income and Expense Summary 532 800
Salaries and Wages-Regular Pay 801 800
5. Close the balance of the Income and Expense Summary Account to the Retai
ned Operating Surplus account.
Income and Expense Summary
532
1,100
Retained Operating Surplus 534 1,100
5. Close the balance of the Prior Year's Adjustments account to Retained Oper
ating Surplus account.
533
200
Retained Operating Surplus 534 200
6. Close the balance of the Retained Operating Surplus to Government Equity
account.
Retained Operating Surplus
534
1,300
Government Equity 501 1,300
7. Close Public Infrastructures or Reforestation Projects accounts to Gover
nment Equity account and transfer the corresponding amounts to the respective re
gistries.
Government Equity
501
1,300
Public Infrastructures/
Reforestation Projects 243/
244
1,300
Sec. 69. Post-Closing Trial Balance. The Post-Closing Trial Balance (App
endix 3) shall be prepared after recording the closing journal entries in the Ge
neral Journal and posting to the General Ledger. It contains a listing of all g
eneral ledger accounts that remain open after the closing process is completed.

Sec. 70. Procedures in the Preparation and Submission of Trial Balances a
nd Other Reports
Area of
Responsibility Seq.
No.
Activity
Preparation of Unadjusted Trial Balance
Accounting Unit
Bookkeeper 1 Records JEVs for the month in the Special Journals and G
eneral Journal.
2 Posts the journal entries from the Special Journals and General
Journal to the respective General Ledgers.
3 Records the source/summarizing documents to the respective Subsi
diary Ledgers.
Note 1
The summarizing/source documents are the following:
Report of Checks Issued (RCI)
Report of Collections and Deposits (RCD)
Report of Disbursements (RD)
Journal Entry Voucher (JEV)
Disbursement Voucher (DV)
Other Supporting Documents (OSD)
4 Foots and extracts the balances of the General Ledgers and Subsi
diary Ledgers.
5 Based on the General Ledgers, prepares the Unadjusted Trial Bala
nce (UTB) to check the postings made on the General Ledgers or the equality of d
ebit and credit balances of the general ledger accounts. Files temporarily.
Preparation of Pre-Closing Trial Balance
6 Prepares adjusting journal entries thru the JEV for unrecorded t
ransactions and for all accounts that need to be adjusted/ corrected. Records th
e JEV in the General Journal.
Note 2
Adjusting journal entries shall be prepared for the following tr
ansactions:
Adjustment for Accrued Items
Adjustment for Deferred Items
Correction/Reclassification Entries
Provision for Allowance for Doubtful Accounts
Provision for Accumulated Depreciation
7 Posts the adjusting journal entries from the General Journal to
the General Ledgers and Subsidiary Ledgers.
8 Foots and extracts balances of the General Ledgers and Subsidiar
y Ledgers.
9 Based on the General Ledgers, prepares Pre-Closing Trial Balance
in four copies. Files temporarily the Pre-Closing Trial Balance.
Note 3
Use of a Worksheet to facilitate the preparation of the trial ba
lances is encouraged. The preparation of the Worksheet is discussed in Sec. 82.
Note 4
The preparation of the adjusting journal entries is at month end or as necessary
.
Preparation of Other Reports
10 Reconciles the totals of the Subsidiary Ledgers with the totals
of the General Ledgers accounts. If unreconciled, checks the difference and prep
ares adjusting/ correcting entries as maybe necessary thru the JEV.
11 If reconciled, prepares individual supporting schedules per acco
unt based on the Subsidiary Ledgers.
12 Initials the supporting schedules and the Pre-Closing Trial Bala
nce and forwards the same to the Head of the Accounting Unit for review and sign
ature.
Head of the Accounting Unit 13 Reviews and signs the `Certified Correct' po
rtion of the Pre-Closing Trial Balance and the supporting schedules.
Designated Staff 14 Submits the Pre-Closing Trial Balance to the Off
ices concerned. Records submission in the logbook maintained. Files Copy 4 of th
e Pre-Closing Trial Balance and Copy 4 of supporting schedules for preparation o
f financial Statements.
Preparation of Post-Closing Trial Balance at year-end.
Bookkeeper 15 Prepares closing journal entries thru JEV and records th
e same in the General Journal.
Note 5
The following accounts shall be closed/reverted at year-end:
Unused Subsidy Income from National Government(Balance of accoun
t Cash-National Treasury, MDS)
Nominal/Intermediate Accounts
Income accounts (including Subsidy Income from National Government, RO and OU) t
o the Income and Expense Summary (IES) account
Expense accounts to IES account
Prior Years' Adjustments account to Retained Operating Surplus (ROS) account
Balance of IES account to ROS account
ROS account to Government Equity account.
Note 6
In addition to the closing journal entries, the account Infrastructure Projects/
Reforestation Projects shall be transferred at year- end to the Registry of I
nfrastructures/Registry of Reforestation Projects.
16 Posts the journal entries from the General Journal in the respec
tive General Ledgers.
17 Foots and extracts the balances of the General Ledgers and the S
ubsidiary Ledgers.
18 Based on the General Ledgers, prepares Post-Closing Trial Balanc
e in four copies.
19 Reconciles the supporting schedules with Post-Closing Trial Bala
nce. If not reconciled, prepares the necessary corrections thru JEV. Records the
JEV in the General Journal.
20 Initials the `Certified Correct by' portion of the Post-Closing Tria
l Balance and `Prepared by' portion of supporting schedules.
21 Prepares transmittal letter and forwards the same together with
the Post-Closing Trial Balance and supporting schedules to the Head of the Accou
nting Unit.
Head of the Accounting Unit 22 Reviews and signs `Certified Correct by' por
tion of the Post-Closing Trial Balance, supporting schedules and transmittal let
ter, and forwards the same to the Accounting Staff for distribution.
Accounting Staff
23 Distributes the Post-Closing Trial Balance and supporting schedu
les to the Concerned Offices. Records in the logbook the submission of the same.
Note 7
Trial Balances and supporting schedules shall be distributed as
follows:
Copy 1 COA Resident Auditor
Copy 2 Accountancy Office, COA
Copy 3 DBM
Copy 4 Accounting Unit File
Note 8
The frequency of submission of Pre-Closing Trial Balance/Post-Cl
osing Trial Balance and other reports shall be as follows:
Pre-Closing Trial Balance and other reports monthly, within ten
days after the end of the month to the COA Resident Auditor and DBM
Year-end Pre-Closing Trial Balance/ Post-Closing Trial Balance and other reports
on or before Feb. 14 of the following year to the COA Resident Auditor, DBM and
COA, Accountancy Office.
Sec. 71. Generation of Financial Statements and Supporting Schedules. Fi
nancial statements and their supporting schedules are the products of the govern
ment accounting processes. These are the principal comprehensive means by which
the information accumulated and processed in the state accounting system is per
iodically communicated to those who use them. The financial statements generally
prepared in the National Government are: the Balance Sheet, Statement of Income
and Expenses, Statement of Government Equity, and Statement of Cash Flows.
Sec. 72. Responsibility for Financial Statements. Responsibility for the
fair presentation and reliability of financial statements rests with the managem
ent of the reporting agency. This responsibility is discharged by applying gene
rally accepted state accounting principles that are appropriate to the entity's ci
rcumstances, by maintaining effective system of internal control and by adhering
to the chart of accounts prescribed by the Commission on Audit.
To achieve fair presentation and reliable information of the financial statement
s, the following standards shall be observed.
a. Fairness of presentation. This refers to the overall propriety in disc
losing financial information. Full disclosure in financial aspects requires obs
ervance of the following standards of reporting:
All essential facts relating to the scope and purpose of each report and the per
iod involved shall be included and clearly displayed.
All financial data presented shall be accurate, reliable, and truthful. The req
uirement for accuracy does not rule out the inclusion of reasonable estimates wh
en the making of precise measurements is impracticable, uneconomical, unnecessar
y, or conducive to delay. All appropriate steps shall be taken to avoid bias, u
nclear facts, and presentation of misleading information.
Financial reports shall be based on official records maintained under an adequat
e accounting system that produces information objectively and discloses the fina
ncial aspects of all events or transactions taking place. Where financial data
or reports based on sources other than the accounting systems are presented, the
ir basis shall be clearly explained.
The financial data reported shall be derived from accounts that are maintained i
n all material respects on a consistent basis from period to period; material ch
anges in accounting policies or methods and their effect shall be clearly explai
ned.
Consistent and non-technical terminology shall be used in financial reports to
promote clarity and usefulness.
b. Compliance. The report shall be in accordance with prescribed government
requirements and international accounting standards of reporting.
c. Timeliness. All needed reports shall be produced promptly to be of maxi
mum usefulness.
d. Usefulness. Financial reports shall be carefully designed to present inf
ormation that is needed and useful to reports users.
Sec. 73. Statement of Management Responsibility for Financial Statements.
The Statement of Management Responsibility for Financial Statements (Appendix 4
) shall serve as the covering letter in transmitting the agencies financial stat
ements to the Commission on Audit, Department of Budget and Management, other ov
ersight agencies and other parties. It shows the agency's responsibility for the p
reparation and presentation of the financial statements. The statement shall be
signed by the Director of Finance and Management Office or Comptrollership Offi
ce, or the Chief of Office who has direct supervision and control over the agenc
y's accounting and financial transactions, and the Head of Agency or his authorize
d representative.
Sec. 74. Balance Sheet. The Balance Sheet (Appendices 5 and 6) is a for
mal statement which shows the financial condition of the agency as of a certain
date. It includes information on the three elements of financial position - asse
ts, liabilities and government equity. It shall be prepared from information ta
ken directly from the year-end Post-Closing Trial Balance. The Balance Sheet sh
all be supported with the following schedules/statements:
Schedules of Accounts Receivables (SAR) (Appendix 7)
Schedules of Accounts Payables (SAP) (Appendix 8)
Schedules of Public Infrastructures (SPI) (Appendix 9)
Other schedules as may be required
Although the allotments and obligations of the agency are not recorded in the b
ooks of accounts, the Statement of Allotments, Obligations and Balances (SAOB) (
Appendix 10) shall be submitted to the Commission on Audit by the Budget Officer
/Agency Officer concerned. This statement shall to be included among the aforeme
ntioned schedules for information of government officials and oversight agencies
.
Sec. 75. Statement of Income and Expenses. The Statement of Income and E
xpenses (Appendices 11 & 12) shows the results of operation/performance of the a
gency at the end of a particular period. This statement shall be prepared by the
Accounting Unit from information taken directly from the Pre-Closing Trial Bala
nce.
Sec. 76. Statement of Government Equity. The Statement of Government Eq
uity (Appendix 13) shows the financial transactions, which resulted to the chang
e in Government Equity account at the end of the year.
Sec. 77. Statement of Cash Flows. The Statement of Cash Flows (Appendix
14) is a statement summarizing all the cash activities of an agency. This inclu
des the operating, investing and financing activities of the entity and provides
information on the cash receipts and cash payments during the period. The prima
ry purpose of the Statement of Cash Flows is to give relevant information on the
agency's overall cash position, liquidity and solvency. Using the Statement of
Cash Flows, managers, investors and creditors could easily assess if the agenc
y could meet its obligations in operating, investing and financing activities.
Sec. 78. Preparation of the Statement of Cash Flows. To facilitate the p
reparation of the Statement of Cash Flows, the use of a Working Paper is encoura
ged. It shall show the increase or decrease in the cash accounts between two per
iods. The net increase in cash provided by 1) operating 2) inv
esting and 3) financing activities in addition to the cash balance at the beginn
ing shall equal to the cash balance at the end of the period.
1) Operating Activities. Operating activities involves the principal resour
ces producing activities of the enterprise and other activities that are not inv
esting or financing (SFAS 22). Generally, these include the cash effect on trans
actions that enter in the Income and Expense Summary account.
2) Investing Activities. Investing activities involves the acquisition and
disposal of long-term assets and other investments not included in cash equivale
nt (SFAS 22). These activities include cash transactions covering non-operating
assets, such as the purchase of property, equipment, short and long-term inves
tments and other non-current assets.

Non-cash investing activities are not included in the statement of cash flows.
3) Financing Activities. Financing activities are derived from the equity c
apital and borrowings of the agency (SFAS 22). These include cash transactions i
nvolving the government equity and non-operational liabilities.
Non-cash financing activities are not included in the statement of cash flows.
The increase or decrease in the cash accounts are analyzed and the following co
mputations are made:
Cash flows from operating activities
Cash Inflows:
Receipt of Notice of Cash allocation (NCA) from the DBM
Receipt of Notice of Transfer of Allocation to Agency RO/OU from CO
Cash receipts from all sources of revenues
Receipt of Inter agency cash transfers (Due to)
Cash receipts from the sale of goods or rendition of services
Cash receipt of interest income, rental income, dividend income, etc.
Receipt of payment for liquidated damages
Receipt of refund of deposits
Receipt of refunds of cash advance or excess payments
Collection of receivables
Cash receipt of grants and donations
Receipt of cash dividends from enterprises (e.g. PLDT)
Cash Outflows:
Payments of accounts payable
Cash purchase of merchandise for sale
Cash advances granted for travel
Inter-agency transfers (Due from)
Notice of Transfer of Allocation to Agency RO/OU issued by the NGA Main Office t
o RO/OU and/or attached agencies through Government Servicing Banks
Return of unused NCA
Cash payment for operating expenses
Remittance of taxes withheld not covered by TRA and other deductions (if any)
Cash purchase of supplies and equipment
Cash payment of retirement benefits
Cash payment of claims for damages
Cash payment for liabilities incurred in operations
Cash payments for interest
Cash flows from investing activities:
Cash Inflows:
Proceeds from sale of marketable stocks and bonds
Cash proceeds from the sale/disposal of equipment and other property, plant a
nd equipment
Redemption of long-term investments or repayment by GOCC/GFI of long-term loans
Cash Outflows:
Purchase of property, plant and equipment
Purchase of land
Investment in stocks/bonds
Investment in GOCC/GFI
Exposure as other long-term investments
Cash flows from financing activities:
Cash Inflows:
Cash received from domestic and foreign loans
Issuance of treasury bills
Cash Outflows:
Payment of domestic and foreign loans
Redemption of treasury bills outstanding
Payment of cash dividend
The net increase in cash provided by operating activities, investing activities
and financial activities for the year, and the cash balance at the start of the
year, shall equal the cash balance at the end of the year. Such amount shall tal
ly with the total cash account shown in the balance sheet.
Sec. 79. Notes to Financial Statements. Notes to Financial Statements (Ap
pendix 15) are integral parts of financial statements, which pertain to addition
al information necessary for fair presentation in conformity with generally acce
pted accounting principles. These may explain the headings captions or amounts i
n the statements of present information that cannot be expressed in money terms,
and description of accounting policies.
Information shall be presented in a way that will facilitate understanding and a
void erroneous implications. The headings, captions and amounts shall be supplem
ented by enough additional data so that their meaning would be clear and not ove
rshadowed by so much information that important matters are buried in mass trivi
a.
Where Notes to Financial Statements appear on a separate page, indicate the phra
se See accompanying Notes to Financial Statements placed at the bottom of said sta
tements.
Material changes in classification of accounts shall be indicated and explained
as notes to financial statements.
The four types of disclosure considered necessary are as follows:
a. Customary or routine disclosure. Information about measurement bases of
important assets, restrictions on assets and government equity, important long-
term commitments not recognized in the body of the statements, information on te
rms of owner's equity and long-term debt, and certain other disclosures required b
y pronouncements of the Philippine Institute of Certified Public Accountants, Ac
counting Standards Council, and regulatory bodies that have jurisdiction are nec
essary for full disclosure.
b. Disclosure of changes in accounting principles. Changes in accounting p
rinciples, practices, or the methods of applying them, together with the financi
al effect, and the justification for the change shall be disclosed in the financ
ial statements or a note thereto.
In particular, it shall include any of the followi
ng:
Selection from existing acceptable alternatives
Principles and methods peculiar to the agency
Unusual application of generally accepted accounting principles.
c. Disclosure of subsequent events. Disclosure of events that affect the a
gency directly and that occur between the date of, or end of the period covered
by, the financial statements and the date of completion of the statements is nec
essary if knowledge of the events might affect the interpretation of the stateme
nts, even though the events do not affect the propriety of the statements themse
lves.
d. Disclosure of accounting policies. Description of the accounting policie
s adopted by the reporting entity is required as an integral part of the financi
al statements. It is usually captioned Summary of Significant Accounting Policies,
and placed as first item in the Notes. It shall be limited to description of th
e policies and no quantitative data shall be included.
Examples of accounting policy disclosures com
monly required:
Consolidation principles
Accounting for long-term investments
Adoption of policy on increasing benefit entitlements of the program members. T
he effect of the increase shall be disclosed.
Basis of revenue recognition
In general, disclosures shall include important ju
dgment as to appropriateness of principles relating to recognition of revenues a
nd allocation of asset costs to current and future periods.
Sec. 80. Interim Reports. Interim reports are the financial statements re
quired to be prepared at any given period or at a financial reporting period wit
hout closing the books of accounts. The following interim financial statements
shall be prepared and submitted quarterly with the Notes to Financial Statements
:
a. Statement of Income and Expenses;
b. Balance Sheet; and
c. Statement of Cash Flows.
The interim financial statements shall be prepared employing the same ac
counting principles used for annual reports. Adjusting and closing journal entri
es shall be prepared. However, only the adjusting journal entries are recorded i
n the books of accounts. To facilitate the preparation of the interim financial
statements, the use of the worksheet is recommended.
Sec. 81. Worksheet. A worksheet is a tool for accumulating and sorting
information needed for the preparation of the financial statements. It is a col
umnar sheet used to adjust and close account balances in preparation for the pre
paration of the financial statements. The format of the worksheet shall be as f
ollows:
Agency Name
Worksheet
As of __________, 20__
Accounts Unadjusted Trial Balance Adjustments Adjusted/Pre-Clo
sing Trial Balance Closing Entries Statement of Income and Expenses
Post-Closing Trial Balance Balance Sheet
Title Code Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Dr. Cr. Dr. Cr. Dr. Cr.
a. Account Title and Code columns show the accounts of the General Ledger.
b. The Unadjusted Trial Balance columns reflect the amount balances of the
General Ledger accounts.
c. Adjustments columns show adjusting journal entries effected for the acco
unts.
d. Adjusted/Pre-Closing Trial Balance columns show the balances of all the
accounts after adjustments are added/deducted from the balances of accounts in t
he unadjusted trial balance.
e. Closing Entries debit and credit columns show the amounts debited and cr
edited to close the nominal accounts.

f. Statement of Income and Expenses columns show all the debit and credit a
mount balances of the nominal accounts (subsidies, income and expenses) and inte
rmediate accounts.
g. Post-Closing Trial Balance columns show the debit and credit amount bala
nces of all accounts after posting the closing entries.
h. Balance Sheet columns show all the debit and credit amount balances of a
ll real accounts in the post-closing trial balance (assets, liabilities and gove
rnment equity).
Chapter 5. Responsibility Accounting
Sec. 82. Responsibility Accounting Defined. Responsibility accounting is
a system that relates the financial results to a responsibility center, which p
rovides access to cost and revenue information under the supervision of a manage
r having a direct responsibility for its performance. It is a system that measu
res the plans (by budgets) and actions (by actual results) of each responsibilit
y center.
Sec. 83. Responsibility Center Defined. It is a part, segment, unit or f
unction of a government agency, headed by a manager, who is accountable for a sp
ecified set of activities. Except for some, which derive most of their income fr
om collection of taxes and fees, national government agencies are basically cost
centers whose primary purpose is to render service to the public at the lowest
possible cost. Cost centers are established to provide each government agency a
ccessibility to cost information and to facilitate cost monitoring at any given
period. While the use of Subsidiary Ledgers is sufficient to control cost, it r
equires considerable time to summarize the cost incurred by agency for its diffe
rent programs, projects, activities and offices/divisions, hence, responsibility
accounting shall be done only under the computerized accounting system.
Sec. 84. Objectives of Responsibility Accounting. Responsibility account
ing aims to: a) ensure that all costs and revenues are properly charged/credited
to the correct responsibility center so that deviations from the budget can be
readily attributed to managers accountable therefore; b) provide a basis for m
aking decisions for future operations; and c) facilitate review activities, mon
itoring the performance of each responsibility center and evaluation of the effe
ctiveness of agency's operations.
Sec. 85. Concepts of Responsibility Accounting. The following are the co
ncepts of responsibility accounting:
a. Responsibility accounting involves accumulating and reporting data on re
venues and costs on the basis of the manager's action who has authority to make th
e day-to-day decisions about the items;
b. Evaluation of a manager's performance is based on the matters directly und
er his control;
c. Responsibility accounting can be used at every level of management in wh
ich the following conditions exist:
1. Cost and revenues can be directly associated with the specific level of
management responsibility;
2. Costs and revenues are controllable at the level of responsibility with
which they are associated.
3. Budget data can be developed for evaluating the manager's effectiveness in
controlling the costs and revenues.
d. The reporting of costs and revenues under responsibility accounting diff
ers from budgeting in two respects:
1. A distinction is made between controllable and non-controllable costs.
a) A cost is considered controllable at a given level of managerial respons
ibility if that manager has the power to incur it within a given period of time.
It follows that (1) all costs are controllable by top management because of th
e broad range of its activity; (2) fewer costs are controllable as one moves dow
n to lower level of managerial responsibility because of the manager's decreasing
authority.
b) Non-controllable costs are costs incurred indirectly and allocated to a
responsibility level.
2. Performance reports either emphasize or include only items controllable
by individual manager.
e. A responsibility reporting system involves the preparation of a report f
or each level of responsibility. Responsibility reports usually compare actual
costs with flexible budget data. The reports show only controllable costs and n
o distinction is made between variable and fixed costs.
f. Evaluation of a manager's performance for cost centers is based on his abi
lity to meet budgeted goals for controllable costs.
Sec. 86. Responsibility Center Code Structure. Each government agency sh
all be assigned a responsibility center code. The coding structure shall be as
follows:
000-00-000-000-
000

Examples:
Example 1
000 -01- 000 -122
- 831
Example 2
000 - 06- 021 - 401
- 831
Travelling Expense - Local
Sec. 87. Computerized Accounting System. Since responsibility accounting
cannot be done under the manual system, the details of this shall be discussed
on the Manual for Computerized Accounting system to be issued by the Commission
on Audit.
Chapter 6. Illustrative Accounting Entries
Sec. 88. Illustrative Accounting Entries in Regular Agency (RA) Books.
a. Illustrative Accounting Entries for Typical Transactions of Central/Regi
onal Offices and Operating Units (CO/RO/OU) receiving Notice of Cash Allocation
(NCA) from the Department of Budget and Management (DBM).
Central/Regional Offices and Operating Units receiving NCA directly from the DBM
shall be guided by the illustrative accounting entries shown in Annex A.
b. Illustrative Accounting Entries for Decentralized Agencies
Regional Offices and Operating Units receiving NCA directly from the DBM and fun
ding checks from CO/RO shall be guided by the illustrative accounting entries sh
own in Annex B.
Sec. 89. Illustrative Accounting Entries in National Government (NG) Book
s.
National Government Agencies whose income/collections are required to be reco
rded in the NG Books and remitted to the National Treasury through Authorized Go
vernment Depository Banks shall follow the illustrative accounting entries shown
in Annex C.

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