Government Accounting Defined

Government Accounting encompasses the processes of analyzing, recording, classifying,

summarizing and communicating all transactions involving the receipt and disposition of
government funds and property, and interpreting the results thereof (Sec. 109, PD 1445).
Objectives of Government Accounting:
1. Produce information concerning past operations and present conditions;
2. Provide a basis for guidance for future operations;
3. Provide for control of the acts of public bodies and officers in the receipt, disposition and
utilization of funds and property; and
4. Report on the financial position and the results of operation of government agencies for
the information of all persons concerned.
On Accounting Responsibility
This fiscal responsibility emanates from the Constitution and its governing laws, rules and
promulgations. The mandate as prescribed under the said Constitution of the Philippines calls for
the keeping of the general accounts, as well as the promulgation and submission of financial
reports that would cover the operations of government.
The government officers that are mandated to discharge the above-stated Accounting
responsibilities are the Commission on Audit (COA), the Department of Budget and
Management (DBM) and the Bureau of Treasury (BTr) - to discharge the functions of
government in consonance with its commitment to all Filipinos.
Agencies tasked by the Constitution with Accounting Responsibility
1. Commission on Audit (COA) - as mandated by the 1987 Constitution, the COA shall
have the exclusive authority to - do audit and examination, establish audit techniques,
implement accounting rules and regulations, that includes disallowances on the use of
government funds and properties.
2. Department of Budget and Management (DBM) is the department responsible for
the planning and implementation of the National Budget for the sound utilization of
government funds in achieving the national governments agenda on reform and growth.
The DBM is tasked to monitor all government allotments and appropriations through
maintenance of registries for better control and monitoring.
3. Bureau of Treasury (BTs) - the department is the keeper of national funds and
disbursements. It is the lead agency in monitoring transactions affecting the national
government, agencies, and other instrumentalities. It maintains the registry on the
releases by the DBM, as well as the bank transfers between agencies.
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4. Government Agencies would include government instrumentalities like bureaus,

Congress, Judiciary, constitutional bodies and self-contained institutions, among others,
which are required to have an accounting division, which are of equal level with that of
other agencies that are tasked to do maintenance of accounts and submit financial
statements on a regular basis.
Generally Accepted Accounting Principles
Each government agency shall record its financial transactions and operations conformably with
generally accepted accounting principles and in accordance with pertinent laws and regulations.
(Sec. 112, PD 1445)
1. The accounts of an agency shall be kept in such detail as is necessary to meet the needs of
the agency and at the same time be adequate to furnish the information needed by fiscal
or control agencies of the government. (Sec 111, PD 1445)
2. The highest standards of honesty, objectivity, and consistency shall be observed in the
keeping of accounts to safeguard against inaccurate or misleading information. (Sec 111,
PD 1445).
3. The government accounting system shall be on a double entry basis with a general ledger
in which all financial transactions are recorded. Subsidiary records shall be kept where
necessary. (Sec. 114 PD 1445).
4. The chart of accounts for government agencies shall be prescribed by the Commission on
Audit and shall be designed as to:
a. Permit agency heads to review their activities according to selected areas of
responsibility;
b. Allow for a clearer definition of obligation accounting leading to more precise
budgetary control;
c. Provide for a wider range of analytical information designed for use in
management audit or legislative review;
d. Furnish information regarding the production of income and the investment in
capital items which is of value in fiscal and economic planning;
e. Enable tighter accounting control to be exercised over agencies financial
relationship with the Treasury;
f. Permit a more simplified preparation of trial balances and simpler and more
orderly process of national consolidation; and
g. Facilitate the application of mechanized accounting procedures for more effective
protection against error and irregularity and yielding economies in operation. (Sec
113, PD 1445)
5. To permit effective budgetary control and to establish uniformity in financial reports,
accounts shall be classified in balanced fund groups. The group for each fund shall
include all accounts necessary to set forth its operations and condition. All financial
statements shall follow this classification. (Sec. 116, PD 1445).
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6. A common terminology and classification shall be used consistently throughout the

budget, the accounts and the financial reports. (Sec 115, PD 1445).
7. The general accounting system shall include budgetary control accounts for revenues,
expenditures and debt, as provided by PD 1177 (Sec 117, PD 1445)
8. Estimated revenues which remain unrealized at the close of the fiscal year shall not be
booked or credited to the unappropriated surplus or any other account. (sec 118) PD 1445
9. All lawful expenditures and obligations incurred during the year shall be taken up in the
accounts of that year (Sec 119, PD 1445).
New Government Accounting System in the Philippines (NGAs)
Introduction
Accounting is an effective tool of management in evaluating the performance of the different
agencies of government. The performance of the public managers would depend on the most, on
financial reports generated by the use of accounting systems.
Cognizant of this need, a new accounting system needs to be developed that would help the
different agencies to hit on financial targets, and at the same time be understood by all users of
financial reports.
With this new development, the Commission on Audit (COA), under the new 1987 Constitution,
promulgated the New Government Accounting System in the Philippines (NGAs) for use by all
government agencies.
The shift to NGAs was made in response to the following need:
1. Adoption of an accounting system that is in conformity with the International Accounting
Standards.
2. Computerization of the accounting systems to generate reports that will be easy to understand
by the general public.
3. Preparation of regular and routinary financial reports.
4. The use of the generated financial reports as tools of management in decision making.

THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL

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For Local Government Units

Objectives of the Manual
a.
b.
c.

Uniform guidelines and procedures in accounting for government funds and property;
New coding structure and new chart of accounts; and
New accounting books, reports/forms, financial statements and accounting entries.

Coverage. This Manual shall be used by all local government units (LGUs).
Legal Basis. This Manual is prescribed by the Commission on Audit pursuant to Article IX-D,
Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which provides
that:
"The Commission on Audit shall have exclusive authority, subject to the limitations in this
Article, to define the scope of its audit and examination, establish the techniques and methods
required therefor, and promulgate accounting and auditing rules and regulations, including
those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and properties". (underscoring
supplied)
Basic Features and Policies
1. Accrual Accounting. A modified accrual basis of accounting is used. Under this method, all
expenses shall be recognized when incurred. Income shall be on accrual basis (e.g. Share
from Internal Revenue Collections) except for transactions where accrual basis is impractical
(e.g. Market Fees) or when other methods may be required by law.
2. One Fund Concept. This system adopts the one fund concept. Separate fund accounting
shall be done only when specifically required by law or by a donor agency or when otherwise
necessitated by circumstances subject to prior approval of the Commission. As required
under Sections 308, 309 and 310 of the Local Government Code, separate books shall be
maintained for the General Fund, Special Education Fund and Trust Fund.
3. Special Accounts in the General Fund. Special accounts in the General Fund complete
with subsidiary ledgers, shall be maintained for the following:
a) Public utilities and other economic enterprises;
b) Loans, interests, bonds issued, and other contributions for specific purposes;
c) Development projects funded from the Share in the Internal Revenue Collections; and
d) Such other special accounts which may be created by law or ordinance.
4. Chart of Accounts and Account Codes. A new coding structure and a new chart of
accounts with a three-digit account numbering system shall be adopted.
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5. Books of Accounts.
a) Journals- Cash Receipts Journal (CRJ); Cash Disbursements Journal (CDJ); Check
Disbursements Journal (CKDJ); General Journal (GJ)
b) Ledgers- General Ledger (GL); Subsidiary Ledgers, where applicable for: Cash,
Receivables, Inventories, Investments, Property, Plant and Equipment, Liabilities,
Income, Expenses
All the above records shall be maintained by the accounting unit of the LGUs. However,
treasurers and disbursing officers shall also maintain their respective cash records such as:
Cashbook Cash in Treasury; Cashbook Cash in Bank; Cashbook Cash Advances
The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD) daily and
the Report of Accountability for Accountable Forms (RAAF) monthly.
6. Financial Statements.
The following statements shall be prepared: Balance Sheet;
Statement of Income and Expenses;
Statement of Cash Flows
Notes to Financial Statements shall accompany the above statements.
7. Trial Balance. The two money-column trial balance shall be used.
8. Appropriations, Allotments and Obligations. Journal entry shall no longer be prepared to
record the appropriations, receipt of allotments and incurrence of obligations. In lieu of this,
separate registries shall be maintained by the Accounting Unit to control the appropriations,
allotments and obligations for each of the four classes of expenditures, namely: a.) Registry
of Appropriations, Allotments and Obligations Capital Outlay (RAAOCO); b.) Registry of
Appropriations, Allotments and Obligations Maintenance and Other Operating Expenses
(RAAOMO); c.) Registry of Appropriations, Allotments and Obligations Personal Services
(RAAOPS); and d.) Registry of Appropriations, Allotments and Obligations Financial
Expenses (RAAOFE).
9. Financial Expenses. Financial expenses such as bank charges, interest expenses,
commitment fees and other related expenses shall be separately classified from Maintenance
and Other Operating Expenses (MOOE).

10. Perpetual Inventory of Supplies and Materials. Supplies and materials purchased for
inventory purpose shall be recorded using the perpetual inventory system. Regular purchases
shall be coursed thru the inventory account and issuances thereof shall be recorded as they
take place except those purchased out of petty cash fund which shall be for immediate use
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and not for stock. Such case shall be charged immediately to the appropriate expense
accounts.
11. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be
computed using the moving average method.
12. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. The
Accounting Unit shall maintain Supplies Ledger Cards by stock number and Property, Plant
and Equipment Ledger Cards by category of assets.
13. Construction of Assets. For assets under construction, the Construction Period Theory shall
be applied for costing purposes. Bonus paid to the contractor for completing the work ahead
of time shall be added to the total cost of the project. Liquidated damages charged and paid
for by the contractor shall be deducted from the total cost of the asset. Any related expenses
incurred during the construction of the project, such as, license fees, permit fees, clearance
fees, etc. shall be capitalized.
14. Public Infrastructures. Public infrastructures are assets for use of the general public, such
as roads, bridges, waterways, railways, plazas, monuments, etc. A Registry of Public
Infrastructures (RPI) shall be maintained according to classification to record all
infrastructures for use of the general public. The following are the Registries to be
maintained, classified by category of property, plant and equipment: a.) Registry of Public
Infrastructure Bridges (RPIB); b.) Registry of Public Infrastructure Roads (RPIR);c.)
Registry of Public Infrastructure Plazas, Monuments, etc. (RPIP)
During construction these infrastructures shall be recorded in the books under the account
Construction in Progress. Upon completion, the completed asset shall be transferred to the
account Public Infrastructure. At the end of the year, completed assets under Public
Infrastructure shall be transferred to the respective registry.
Completed public infrastructures funded out of a loan shall, however, be retained in the
books of accounts until the loan is fully paid.

A Summary of all Public Infrastructures (based on the different registries) shall be prepared
annually and included in the Notes to Financial Statements.

o.
Depreciation. The straight-line method of depreciation shall be used. A residual value
equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start on the
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second month after purchase/completion of the property, plant and equipment.

infrastructures shall not be charged any depreciation.

Public

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

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

r.
Elimination of Contingent Accounts. Contingent accounts shall no longer be used. All
financial transactions shall be recorded using the appropriate accounts. Cash shortages and
disallowed payments shall be recorded under receivable accounts Due From Officers and
Employees and Receivables Disallowances/Charges, as the case may be.

s.
Recognition of Liability. Liability shall be recognized at the time goods and services are
accepted or rendered and supplier/creditor bills are received.

t.
Interest Accrual. Whenever applicable and appropriate, interest income and/or expense
shall be accrued and recognized in the books of accounts.

u.
Accounting for Borrowings and Loans. All borrowings and loans incurred shall be
recorded direct to the appropriate liability accounts.

v.
Elimination of corollary and negative entries. The use of corollary and negative entries
shall be stopped. Acquisition/Disposition of assets shall be debited/credited direct to the
appropriate asset accounts. If an error is committed, a correcting entry shall be prepared to adjust
the original entry.
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Accounting Method Used

The modified accrual basis of accounting shall be used where expenses are recognized when
incurred and income recognizes on an accrual basis unless other methods are required by law.
The old government system uses both cash and accrual basis.
Recommendation
The need for timely preparation of financial reports in government is necessary to evaluate the
performance of the different agencies of government. The result of the reports would indicate the
areas that may still need improvement, as well as come up with the budgetary requirements for
these agencies if needed.
Public officers are managers of funds, that are entrusted to them by the national government. The
financial reports would clearly show if the agencies are achieving what is mandated by them.
These reports would also show the extent in the use of agency assets and resources, as well as the
need for an additional infusion of funds if required.
The accounting data would show how the funds of government were used. This would also
reveal the inflow and outflow of funds and the need for stiffer fund management and control,
when necessary.
Briones, Leonor M., Philippine Public Fiscal Administration, Volumes 1, 2nd ed.,
(Mandaluyong City: Fiscal Administration Foundation, Inc, 1996)
Domingo, Eufemio C., Government Accounting and Auditing Manual, Volume 2, 1992 ed.,
Mejorada, Nenita D., Advanced Accounting, Part 1, 5th Edition ( Goodwill Trading Company
Inc.)
WEBSITES:
http://csmiravite-blogs.hubpages.com/hub/New-Government-Accounting-System-in-thePhilippines-NGAa
http://www.picpammr.com/technical/materials/m22.pdf
http://www.asosai.org/journal2003/articles_3.htm

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