Académique Documents
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Presented below are the journal entries to be made for the major transactions entered into
by the City Government of Binan. As the subject city government is under the Commission on
Audit, it is required to strictly follow the New Government Accounting System (NGAS). The
journal entries stated below are based on the pro-forma journal entries given by the NGAS.
Revenue Cycle
The revenue cycle of the City Government Binan has fifteen major transactions. All of
to Cash in Treasury and a credit to the appropriate tax revenue account. Once it is deposited to
the authorize government bank, Cash in Treasury will be closed to Cash in Bank Local
list of taxpayers and their amount due and collectible for the year. It is recorded with a debit to
Real Property Tax Receivable and a credit to Deferred Real Property Account. Deferred Real
Property Tax Income represents the real property tax recorded at the beginning of the year. It is
to be credited only once the Real Property Tax is distributed to the LGUs.
credited upon receipt of the Notice of Funding Check Issued from DBM. However, Cash in Bank
- LCCA is to be debited if the Bank Credit Advice has been received regardless of whether or not
i. To take up the cash advance Due from Officers and Employees xxx
Cash in Bank LCCA xxx
ii. To take up refund of cash Cash in Treasury xxx
Advance Due from Officers and
Employees xxx
Cash advances made for local travel include a debit to Due from Officers and
Employees and a credit to Cash in Bank - LCCA. On the other hand, once the cash
advance is to be refunded, Due from Officers and Employees will be credited and Cash in
Treasury will be debited. Due from Officers and Employees is the amount of cash
advances given for travel as well as other receivables from the city governments officers
and employees.
Cash - Disbursing Officers and a credit to Cash in Bank - LCCA. Refund of which will
credit Cash - Disbursing Officers and debit Cash in Treasury. Cash - Disbursing Officers
represents the amount of cash advances given to designated disbursing officers for the
the terms of the contract. It is recognized upon the issuance of the receipt of the payor. Upon
recognition, a debit to Cash in Treasury and a credit to Performance Bonds Payable is recorded.
Once the contract is completed, the performance bonds are to be refunded back to the
Cash in Bank LCCA, assuming that the cash initially received are already deposited. If not,
6. Subsidies
a.
GENERAL FUND BOOKS
Transfer subsidy to Special Subsidy to Other Funds xxx Subsidy
Education Fund Cash in Bank LCCA xxx
from Other
SPECIAL EDUCATION
FUND BOOKS Funds
Receipt of subsidy funds Cash in Treasury xxx
Subsidy from Other Funds xxx (General
Subsidies from Other Funds are the transfer of funds from one fund to another. As each
fund have separate books of accounts, both receiving and subsidizing funds must record the
transfer. The subsidizing fund is to debit Subsidy to Other Funds and credit Cash in Bank - Local
Currency, Current Account. Meanwhile, the receiving agency will debit Cash in Treasury and
credit to Subsidy from Other Funds. At the close of each accounting period, Subsidy to Other
b. Special Accounts (Subsidy from General Fund proper to Operation of Public Market)
GENERAL FUND BOOKS
Transfer subsidy to Subsidy to Special Accounts xxx
Special Account Cash in Bank LCCA xxx
BOOKS OF SPECIAL
ACCOUNT
Receipt of subsidy funds Cash in Bank LCCA xxx
Subsidy from Special
Accounts xxx
The use of special accounts is allowed in local government units. They are to be
found in the General Fund complete with subsidiary ledgers. Similar to subsidies made
from one agency to another, the subsidizing fund and receiving special account must
record the receipt and transfer of the aforementioned subsidy. Subsidy to Special
Accounts represents the amount transferred to a particular special account while, Subsidy
7. Dividend Income
investee company with a debit to Dividend Receivable and a credit to Dividend Income. Upon
receipt of the dividend, Dividend Receivable will be credited and Cash in Treasury will be
debited.
8. Interest Income
and investment on bonds, treasury notes, treasury bills and promissory notes. Interest income is
recognized upon its accrual. A debit to Accrued Interest Receivable and a credit to Accrued
Interest Income will be recorded and upon receipt of the interest, Cash Collecting Officers will
Gain on sale of securities are profits realized from the sale of bonds and securities. It is
recorded by debiting Cash in Treasury with the selling price of the security, crediting Investment
Security with its carrying value, and crediting Gain on Sale of Securities for the difference
to be given up and its selling price. It is recognized upon sale of the asset. To record it, a debit to
Cash in Treasury and Accumulated Depreciation will be made and a credit to Property, Plant and
Equipment; and Gain on Sale of Property, Plant and Equipment will be made.
11. Sale of Confiscated Goods and Properties
Confiscated goods and properties or commonly known as forfeited assets are assets
subject to auction under the Tax Code. To record its acquisition, a debit to the appropriate asset
account and a credit to Due to National Treasury is made. Once sold, Cash Collecting Officer is
debited and Land and Due to National Treasury are credited. Afterwards, proceeds of the sale is
currency denomination to the local currency at balance sheet date and settlement of liability. To
recognize the gain at year end, a debit to Accounts Payable and a credit to Gain on Foreign
Exchange is made for the change in amount of the liability brought about by the change of
exchange rates at balance sheet date. Once the liability is settled, Accounts Payable is debited
and, Cash in Treasury and Gain on Foreign Exchange are credited. The gain will be the
difference between the exchange rates at balance sheet date and settlement date.
Fines and penalties are those imposed by the city government for the violation tax and
other ordinances. It is recognized upon the violation and payment of the ordinance. To record the
transaction, a debit to Cash in Treasury and a credit to Fines and Penalties is made.
kind. A grant/donation made in cash will be recorded with a debit to Cash in Treasury and a
credit to Income from Grants and Donations. If the grant/donation is in kind, a debit will be
made at the appropriate asset account and a credit to Invested Equipment. At year end,
15. Borrowings
Account and a credit to Loans Payable - Current, Domestic upon the receipt of the advice from
the bank or lending agency informing the city government of the release of the proceeds.
However, if the borrowed funds are from another agency, Cash in Treasury will be debited
instead. Payment of aforementioned borrowing will only require a reversal of the Loans Payable
Disbursement Cycle
There are three major transactions under the disbursement cycle of the City Government
of Binan such as check disbursements, advances and subsidies. Presented below are its
respective pro-forma entries and the different instances they apply to.
1. Check Disbursements
Journal entries to be made for check disbursements for Maintenance and Other
Operating Expenses and, Financial Expenses are similar. Both of which starts with
entering the obligation on their respective registries. It will then debit the appropriate
expense account and credit Cash in Bank - Local Currency, Current Account.
c. Purchase of Equipment
Enter obligation in RAAOCO for purchase of equipment
i. Issuance of PO to dealer No Entry
purchased equipment, a debit to Office Equipment and Cash in Bank - Local Currency,
equipment purchased.
d. Construction of Property, Plant and Equipment by Contract
Property, Plant and Equipment (PPE) can be built by external suppliers and
contractors. The transaction begins with the payment of the supplier/contractor of the
performance bond. The performance bond guarantees the fair and full performance of the
supplier/contractor. If the contract is followed, the bond will be released and will be given
back to the supplier/contractor. If not, the performance bond will be used to cover for any
additional expense brought about by the nonconformance to the contract. In the end, the
Minor Repairs
i. Recognize minor repair Repairs and Maintenance -
Transportation
of motor vehicle Equipment xxx
Cash in Bank LCCA xxx
Due to BIR xxx
Major Repairs
i. Recognize major repair Motor Vehicles
of motor vehicle Cash in Bank LCCA
Minor repairs are those done to the PPE to maintain the functionality and capacity of the
asset. Major repairs are those repairs that increase the functionality, capacity and life of
the asset. If the repair is minor, the cost will be expensed while if it is major, the cost will
transaction begins with the payment of the mobilization fee to the supplier/contractor.
Such fee is to be used in the start-up costs of the construction. It can also be noticed that
a retention fee is part of the progress billings. This serves as a guarantee for the city
government that the supplier/contractor will follow the stipulations in the contract
between them and the city government. If the contract is followed, the guaranty will be
refunded to the supplier/contractor. If not, the security will be used to cover for any
additional expense brought about by the nonconformance to the contract. In the end, the
g. Self-Construction of Building
Enter obligation in RAACO
i. Issue PO for building No Entry
materials
regular construction of a building by a private entity. The cost of the asset includes the
direct materials, direct labor and manufacturing overhead applied to the asset. Any
the acquired assets. The purchase price is to be distributed based on the relative fair value
of the assets purchased. Such costs will be the basis for depreciation, if any.
i. Purchase of Inventories
Enter obligation in RAAMO for purchase of inventory
i. Receipt of inventory Merchandise Inventory xxx
Withholding Taxes Payable xxx
Accounts Payable xxx
debit to Merchandise Inventory and, a credit to Withholding Taxes Payable and Accounts
Payable/Cash in Bank LCCA is recorded. The Withholding Taxes Payable will later be
2. Cash Advances
a.
ii. Liquidation of Cash Salaries and Wages Regular Pay xxx for
Advance PERA xxx
Additional Compensation xxx Personal
Withholding Taxes Payable xxx
GSIS Payable xxx Services
PAG IBIG Payable xxx
Cash Disbursing Officer xxx
and distribute the Payroll Fund. Such is to be entered first into the Registry of
advance requires a debit to Cash - Disbursing Officer and a credit to Cash - Local
On the other hand, liquidation of the cash advance will have a debit to Salaries
and Wages - Regular Pay, Personnel Economic Relief Allowance (PERA) and Addition
Compensation. Salaries and Wages - Regular Pay is the salary and wages of regular
government employees. PERA is the allowance given to appointive government
will also recognize the liability for withholding taxes, GSIS contributions, and Pag-IBIG
contributions. The city government will also recognize their share of GSIS and Pag-IBIG
Cancel RAAMO for setting up of petty cash fund at the start of the year
iii. Return of Unused Petty Cash in Treasury xxx
Cash Fund Petty Cash Fund xxx
period with a debit to Petty Cash Fund and a credit to Cash in Bank LCCA. To
recognize all expenses paid out of the fund, a debit to the appropriate expense account
and a credit to Cash in Bank LCCA will be recorded. At year end, all unreplenished
Cash advances may be done for local travels by government officials and
employees. First, the obligation must be entered into the Registry of Appropriations,
Allotments and Obligations - Maintenance and Other Operating Expense. Grant of such
advance requires a debit to Due from Officers and Employees, and a credit to Cash in
Bank - Local Currency, Current Account. Liquidation of the cash advance will reverse
Due from Officers and Employees. It will also debit Travelling Expenses - Local. Any
cash overage will be reported as Miscellaneous Income and any shortage will be recorded
3. Subsidies
Subsidy to Local Government Units represent all financial aid given by the City
Government of Binan to other city governments for their projects and programs. It is
recorded with a debit to Subsidy to Local Government Units and a credit to Cash in Bank
LCCA.
b.
Enter obligation in RAAMO for subsidy to SEF
Cash transfer to SEF as Subsidy to Other Funds xxx Subsidy to
subsidy Cash in Bank LCCA xxx
Special Education Fund
Expenses. Upon transfer, a debit to Grants and Donations, and a credit to Cash in Bank -
Local Currency, Current account is to be made. Grants and Donations represents the