Ngas Vol 1 To 6 Acctng Policies

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 System
(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
national government agencies effective January 1, 2002.
The objectives of the Manual 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 statements; and
d.
Accounting entries.
Sec. 2. Coverage.
This Manual
used by all national government agencies.
shall be
Sec. 3. Legal Basis. This Manual is prescribed by

the Commission on Audit pursuant to Article IX-D,
Section 2 par. (2) of the 1987 Constitution of the
Republic of the Philippines which provides that:
The Commission on Audit shall have
exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and
examination, establish the techniques and
methods required therefor, and promulgate
accounting and auditing rules and regulations,
including those for the prevention and
disallowance
of
irregular,
unnecessary,
excessive, extravagant, or unconscionable
expenditures, or uses of government funds and
properties". (underscoring supplied)
Chapter 2. Basic Features and Policies
Sec. 4. Basic Features and Policies. The NGAS
has the following basic features 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 be on
2
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 agency 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 Volume III,
The
Chart of Accounts)
d. Books of Accounts. All national agencies shall
maintain two sets of books, namely:
Regular Agency (RA) Books. These
shall be used to record the receipt and
utilization of Notice of Cash Allocation (NCA)
and other income/receipts which the agencies
are authorized to use and to deposit with
Authorized Government Depository Bank
(AGDB) and the National Treasury. These shall
consist of journals and ledgers, as follows:
Journals
Cash Receipts Journal (CRJ)
3
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
agencies are not authorized to use and are
required to be remitted to the National 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
4
the General Journal shall be used together with

the ledgers by both books.
e. Financial
Statements.
The
statements shall be prepared:
following
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 showing 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
obligations 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
Expenses (RAOMO)
Registry of Allotments and Obligations Personal Services (RAOPS)
Registry of Allotments and ObligationsFinancial 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 Disbursement System
(MDS) and credit to account Subsidy Income
from National Government.
i. Financial Expenses. Financial expenses such
as bank charges, interest expenses, commitment
charges and other related expenses shall be
separately classified from Maintenance and
Other Operating Expenses (MOOE).
j. 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 charged

directly to the appropriate expense accounts.
k. Valuation of Inventory. Cost of ending
inventory of supplies and materials 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 category 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 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 project. Any related
expenses incurred during the construction of the
project, such as taxes, interest, license fees,
permit fees, clearance fee, etc. shall be
capitalized, and those incurred after the
construction 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,
waterways,
railways,
plaza,
monuments, etc., and invest on reforestation
projects, a Registry of Public Infrastructures
(RPI)/Registry of Reforestation Projects (RRP)
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, plant 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 depreciation.
p. Reclassification of Assets. Serviceable assets
no longer being used shall be reclassified to
Other Assets account and shall not be subject
to depreciation.
q. Allowance for Doubtful Accounts. An
Allowance for Doubtful Accounts shall be set
up for estimated uncollectible trade receivables
to allow for their fair valuation.
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, which become final
and executory, shall be recorded under
receivable accounts Due From Officers and
Employees or 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 practical 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
to the appropriate liability accounts.
v. Elimination of corollary and negative
journal entries. The use of corollary and
negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be
debited/credited to the appropriate asset
accounts. If an error is 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 imprest 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 to
purchase regular inventory/items for stock.
x. Foreign Currency Adjustment. Cash deposits
in foreign currency and outstanding foreign
loans shall be computed at the exchange rate
prescribed by the Bangko Sentral ng Pilipinas
at balance sheet date. The total cash deposits
and foreign loans payable shall be adjusted at
10
the end of each month and any gain or loss on

foreign exchange shall be recognized. The
subsidiary ledger for foreign currency
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.
11
Chapter 3. Accounting Systems

Sec. 5. General Accounting Plan. The General
Accounting Plan (GAP) shows the overall accounting
system of a government agency/unit. It includes the
source documents, the flow of transactions and its
accumulation in the books of accounts and finally their
conversion into financial information/data presented in
the financial reports. Presented on next page is the
General Accounting Plan for national government
agencies.
The following accounting systems are:
a.
b.
c.
d.
Budgetary Accounts System;

Receipts/Income and Deposit System;
Disbursement System; and
Financial Reporting System.
A. BUDGETARY ACCOUNTS
12
Sec. 6. Budgetary Accounts System.

The
Budgetary Accounts System encompasses the processes
of preparing Agency Budget Matrix (ABM), monitoring
and recording of allotments received by the agency from
the DBM, releasing of Sub-Allotment 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 monitoring of
obligations.
Sec. 7. Budgetary Accounts. Budgetary accounts
consist of the appropriations, allotments and obligations.
Appropriations refer to authorizations made by law or
other legislative enactment for payments to be made with
funds of the government under specified conditions
and/or for specified purposes. Appropriations shall be
monitored and controlled through registries and control
worksheets by the DBM and COA, respectively.
Budgetary accounts allotments and obligations are
discussed in the succeeding sections.
13
INSERT GENERAL ACCOUNTING PLAN

for
National Government Agencies
14
Sec. 8. Agency Budget Matrix (ABM). The

ABM refers to a document showing the disaggregation
of agency expenditures into components like, among
others, by source of appropriations, by allotment class
and by need of clearance.
Sec. 9.
Procedures for the Preparation of the
ABM
Area of
Responsibility
Budget Unit
Concerned
Staff
Seq
.
No.
1
Activity
Based on the approved General

Appropriations Act (GAA) and in
coordination with the DBM,
prepares
the
ABM
by
appropriations/financing 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,
15
Area of
Responsibility
Seq
.
No.
Activity
and
The amount that will be
released through the issuance
of Special Allotment Release
Order (SARO) categorized
under "Needing Clearance
column including continuing
appropriations based on the
Statement
of
Allotments,
Obligations and Balances
(SAOB).
Initials under 'Prepared

portion of the ABM.
Head, Budget
Unit
Concerned Staff
Reviews and signs Prepared by

portion of the ABM.
Forwards the ABM together with
a transmittal letter for the DBM
to the Head of the Agency for
signature/approval.
Head of
Agency
the
Approves/Signs the ABM and the

transmittal letter.
Concerned Staff
Records
in
the
logbook
maintained and submits the
16
by'
Area of
Responsibility
Seq
.
No.
Activity
signed ABM to the DBM for
approval.
Sec. 10.
Allotment Release Order (ARO).
The ARO is a formal document issued by the DBM to the
head of the agency containing the authorization,
conditions 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 Allotment 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 procedures, SubARO/Sub-SARO is issued/released.
Sec. 11.
Recording of Allotments. Upon
receipt of the approved ABM and ARO, the Budget
Officer/Head of the Budget Unit/Designated Budget
Officer shall record the allotment in the respective
registries through the Allotment and Obligations Slip
(ALOBS). Separate registries shall be maintained for the
four allotment classes by Program/Project/Activity
(P/P/A), to wit:
1. Registry of Allotments and Obligations Capital Outlay (RAOCO)
17
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 Received from DBM
Area of
Responsibility
Seq
.
No.
Budget Unit
Concerned
Staff
Receives
the
approved
ABM/SARO from the DBM.
Records the same in the logbook
and forwards the ABM/SARO to
Budget Staff for preparation of an
Allotment and Obligation Slip
(ALOBS).
Budget Staff
Prepares ALOBS in two copies,

assigns number and initials the
same. Forwards the ALOBS and
ABM/SARO to the Head of the
Budget Unit for review and
signature.
Activity
Note 1
18
Area of
Responsibility
Seq
.
No.
Activity
The numbering structure of the
ALOBS shall be as follows:
PS 00 00 0000
Serial
Number
(One
series for
the
whole year)
Month
Year
Allotme
nt Class
(PS, MOOE,
CO
and
FE)
shall
be
used
only
when
obligations
are recorded
in
the
ALOBS
19
Area of
Responsibility
Seq
.
No.
Activity
Note 2
The ALOBS shall be prepared in
two copies and shall be
distributed as follows:
Original-Retained by the
Budget Unit to support
recording
in
the
registries
Copy 2 -Accounting Unit
Head of the
Budget Unit
Reviews, checks the small box

opposite the 'Received' portion in
Box A of the ALOBS and affixes
signature certifying receipt of
allotment. Returns to the Budget
Staff for recording in the
appropriate
Registry
of
Allotments
and
Obligations
(RAOs).
Budget Staff
Records the ALOBS in the

appropriate RAOs. Files the
ALOBS for reference.
Note 3
The following RAOs shall be
maintained by the Budget Unit:
20
Area of
Responsibility
Seq
.
No.
Activity
Registry of Allotments and

Obligations
Personal
Services (RAOPS)
Obligations
-Maintenance
and
Other
Operating
Expenses (RAOMO)
Obligations -Capital Outlays
(RAOCO)
Obligations
Financial
Expenses (RAOFE)
5
Forwards Copy 2 of the ALOBS

to the Accounting Unit for
reference.
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
21
Area of
Responsibility
Budget Unit
Budget Staff
Seq
.
No.
Activity
Based on the approved ABM

received from the DBM, prepares
Sub-ARO for RO/OU. Forwards
the Sub-ARO to the Head of the
Budget Unit CO/RO for review.
Head of the
Budget Unit
Reviews and signs Sub-ARO.

Forwards the same to the Head of
the CO/RO for approval.
Head
of
Central
Office/Regi
onal Office/
Authorized
Officer
Approves the Sub-ARO.
Based on the approved SubARO, prepares ALOBS in two

copies. Assigns number and
initials the ALOBS. Forwards the
same with a copy of approved
Sub-ARO to the Head of the
signature.
Budget Staff
Note 1
22
Area of
Responsibility
Seq
.
No.
Activity
Distribution of ALOBS shall be
as follows:
Original - CO/RO Budget Unit
Copy 2 - CO/RO Accounting
Unit
Note 2
Refer to ALOBS
structures in Note
Procedures in the
and Recording of
Received from DBM
numbering
1 Sec. 12,
Monitoring
Allotments
Head of the
Budget Unit

opposite
the
Sub-allotted
portion of Box A of the ALOBS
and affixes signature certifying as
to the amount sub-allotted to
RO/OU. Forwards the same with
the approved Sub-ARO to Budget
Staff for recording in the
appropriate RAOs.
Budget Staff

appropriate RAOs. Files the
ALOBS and a copy of the SubARO.
23
Area of
Responsibility
Seq
.
No.
Activity
Note 3
The ALOBS covering suballotment for the RO/OU shall be
entered in the RAOs as negative
entry in the Allotment column
and shall be deducted from the
allotment balance.
Note 4
A copy of the ALOBS covering
allotment of the RO/OU shall be
furnished the Accounting Unit for
reference.
Concerned
Staff
Regional
Offices/
Operating Units
Budget Unit
Concerned
Staff
Records in the logbook the

release of the Sub-ARO to
RO/OU.
Receives the approved Sub-ARO

from the CO/RO. Records the
same in the logbook maintained.
Forwards the Sub-ARO to the
24
Area of
Responsibility
Seq
.
No.
Activity
Budget Staff for the preparation
of ALOBS.
Budget Staff
Prepares ALOBS in two copies,

assigns number and initials the
same. Forwards the ALOBS and
Sub-ARO to the Head of the
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 affixes signature
certifying that the allotment was
received. Forwards the ALOBS
and Sub-ARO to the Budget Staff
for recording in the appropriate
RAOs.
25
Area of
Responsibility
Seq
.
No.
Activity
Note 6
Refer to Note 3, of Sec.12,
Procedures for the Monitoring
and Recording of Allotments
Received from the DBM.
Budget Staff
11

RAOs. Files the Sub-ARO and
original of the ALOBS.
12
Forwards copy 2 of the ALOBS

to the Accounting Unit for
reference.
26
Sec. 14.
Accounting
for
Obligation.
Obligation refers to a commitment by a government
agency arising from an act of a duly authorized official
which binds the government to the immediate or eventual
payment of a sum of money. The agency is authorized to
incur obligations only in the performance of activities
which are in pursuits of its functions and programs
authorized in appropriation acts/laws within the limit of
the ARO.
Obligations shall be taken up in the registries
through the ALOBS prepared/processed 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, the Accountant/Head of the Accounting Unit
shall certify to the correctness and validity of obligations,
and availability of funds. Both Budget and Accounting
Units shall coordinate in the filling up of the Status of the
Obligation in their respective copies of the ALOBS
Sec. 15.
Obligations
Area of
Responsibility
Budget Unit
Concerned
Procedures for the Recording of

Seq
.
No.
1
Activity
Receives
27
the
Disbursement
Area of
Responsibility
Seq
.
No.
Staff
Budget Staff
Activity
Voucher/Payroll (DV/P), and
supporting documents, Contract/
Purchase Order (C/PO) from
concerned
offices/personnel.
Verifies completeness of the
documents. If incomplete, returns
the documents to concerned
offices for completion. If
complete, records the same in the
logbook maintained. Forwards
the documents to Budget Staff for
the preparation of the ALOBS.
Verifies availability of allotment

based on the RAOs. If no
allotment is available, returns the
documents to the office/personnel
concerned except as authorized
by the DBM.
If there is an available balance of
allotment
to
cover
the
obligations, prepares an ALOBS
in three copies. Initials the
ALOBS and forwards the same to
the Head of the Budget Unit for
review and signature.
28
Area of
Responsibility
Seq
.
No.
Activity
Note 1
Copy 3 of ALOBS shall be
attached to the DV. Refer to Note
2, Sec. 12, Procedures for the
Monitoring and Recording of
Allotments Received from DBM
for the distribution of the other
copies of ALOBS.
Head of the
Budget Unit

opposite the Available and duly
obligated portion of Box A of the
ALOBS and affixes signature.
Forwards the ALOBS and
documents to the Budget Staff for
recording in the appropriate
RAOs.
Budget Staff
Records the amount obligated

under the Obligation column of
the RAOs. Forwards all copies of
the ALOBS and the documents to
the
Accounting
Unit
for
processing and signature.
Note 2
Obligations shall be posted in the
29
Area of
Responsibility
Seq
.
No.
Activity
Obligation Incurred column of
the RAOs to arrive at the balance
of allotment still available at a
given period.
Receives original of ALOBS

from the Accounting Unit. If
there is no correction, files the
same to support the RAOs.
Otherwise, effects correction in
the RAOs or prepares a new
ALOBS, as the case may be.
Note 3
For the succeeding activities,
refer to Sec. 34, Procedures for
Disbursements By Checks.
Note 4
There is no need to prepare a
new
ALOBS
for
corrections/adjustments made by
the Accounting Unit after the
processing of the claims but
before payment
is
made.
Adjustment in the RAOs shall be
effected thru a positive entry (if
additional
obligation
is
30
Area of
Responsibility
Seq
.
No.
Activity
necessary) or a negative entry (if
reduction) in the Obligation
Incurred column.
Note 5
Preparation of new ALOBS for
the following adjustments of
obligations as negative entries in
the Obligation 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
bills for overpayments
and
Notice that the disallowances
are final and executory shall be
furnished the Budget Unit by the
Accounting
Unit
for
the
31
Area of
Responsibility
Seq
.
No.
Activity
preparation of new ALOBS
taking up the adjustments.
B. INCOME/COLLECTIONS AND DEPOSITS

Sec. 16.Receipts/Income
Collections
and
Deposits System. The Receipts/Income Collections and
Deposits System covers the processes of acknowledging
and reporting income/collections, deposits of collections
with Authorized Government Depository Bank (AGDB)
or through the AGDB for the account of Treasurer of the
Philippines, and recording of collections and deposits in
the books of accounts of 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
income accounts. The following comprise the general
income accounts, among others:
1.
2.
3.
4.
5.
6.
7.
Subsidy Income from National Government

Subsidy from Central Office
Subsidy from Regional Office/Staff Bureaus
Income from Government Services
Income from Government Business Operations
Sales Revenue
Rent Income
32
Insurance Income
Dividend Income
Interest Income
Sale of Confiscated Goods and Properties
Foreign Exchange (FOREX) Gains
Miscellaneous Operating and Service Income
Fines and Penalties-Government Services and
Business
Operations
15.
Income from Grants and Donations
8.
9.
10.
11.
12.
13.
14.
The specific income accounts of national

government agencies are classified as follows:
1.
2.
3.
4.
5.
6.
7.
Income Taxes
Property Taxes
Taxes on Goods and Services
Taxes on International Trade and Transactions
Other Taxes
Fines and Penalties-Tax Revenue
Other Specific Income
The descriptions of all the accounts and the

instructions as to when these 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:
33
1.
Accrual Method - Accrual

method of accounting shall be used by national
government agencies when income is realized
(earned) during the accounting period
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 is recorded as Deferred Credits to
Income and the appropriate receivable account
is debited. The income account is recognized
upon receipt of collection and the Deferred
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 income account is
credited upon collection of the cash or its
equivalent.
Sec. 19.Fines and Penalties. Fines and penalties,

either on tax revenues or other specific income accounts,
shall be recognized as income of the year these were
collected.
34
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 granted, the account
Due from Officers and Employees is debited
and when refunds are made, the same account
is credited. Cash advances for salaries and
wages shall be recorded as debits to the account
Cash-Disbursing Officers and any refunds
thereof 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 contract may be in the
form of cash or certified checks or surety.
Performance bond in cash or certified check
shall be acknowledged by the issuance of
official receipt and recorded in the book of
accounts by the Accountant thru a Journal
Entry Voucher (JEV) for the purpose. In case
of surety bond, an acknowledgement receipt
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.
35
This transaction shall reduce the amount of

expense previously recorded.
4. Collections made on behalf of another agency
or private companies - Collections made on
behalf of other agencies which are later
remitted to them are recorded 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 proponents of Built-OperateTransfer (BOT) Projects are recorded as Other
Payables.
5. Inter-agency transferred funds - Cash received
from another agency for the 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 intact all their collections, as well
as
collections turned over to them by subcollectors/tellers, with AGDB daily or not later than the
next banking day. They shall record all deposits made in
the Cash Receipts Record.
36
Sec. 22.Reporting of Collections and Deposits.

At the close of each business day, the Collecting Officers
shall accomplish the Report of Collections and Deposits
(RCD) in accordance with the instructions provided in
Volume II of the NGAS Manual for the RCD.
All collections shall be deposited with AGDB for the
account of the agency or the Treasurer of the Philippines
daily or not later than the next banking day.
Sec. 23. Procedures for Collections
Deposits Through the Collecting Officer
Area of
Responsibility
Cash Unit
Designated
Staff
Seq
.
No.
1
and
Activity
Daily
Receives cash/check from payor
representing collection based on
the Order of Payment (OP)
prepared by the Accounting Unit.
Issues Official Receipt (OR) to
acknowledge
receipt
of
cash/check.
Note 1
Funding Checks received by the
Cashier/ Collecting Officer of the
37
Area of
Responsibility
Seq
.
No.
Activity
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
distributed as follows:
Original - Payor
Copy 2 - To be attached to
the
Report
of
Collections
and
Deposits (RCD)
Copy 3 - Cash Unit file
Records collections in the Cash

Receipts Record (CRR).
Note 4
Separate
CRR
shall
be
maintained for collections under
the RA and NG Books.
38
Area of
Responsibility
Seq
.
No.
4
Activity
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
Deposits collections with AGDB.

Note 6
Collections pertaining to NG
Books shall be deposited with the
AGDB for the account of the
Treasurer of the Philippines
Based on the validated DS from

the AGDB and copy of the ORs
on file, prepares Report of
Collections and Deposits (RCD)
in two copies. Initials on the
RCD and forwards the same
together with Copy 2 of the ORs
39
Area of
Responsibility
Seq
.
No.
Activity
and DS to the Head of the Cash
Unit for review and signature.
Head of the
Cash Unit
Reviews and signs the RCD.

Forwards original of RCD, Copy
2 of the ORs and DS to the
Designated Staff for submission
to the Accounting Unit.
Note 7
The RCD shall be distributed as
follows:
Original - Accounting Unit
together with Copy
No. 2 of the ORs and
DS - to support the
JEV
Designated
Staff
Accounting
Unit
Records the RCD in the logbook

maintained and forwards the
same with the ORs and DS to the
Accounting Unit for recording in
the books of accounts.
Receives original of RCD with

40
Area of
Responsibility
Seq
.
No.
Accounting
Staff
Activity
Copy 2 of the ORs and DS from
the Cash Unit. Records receipt in
the logbook maintained for the
purpose and forwards the same to
the Bookkeeper for review and
preparation of the JEV.
Bookkeeper
10
Head of the
Accounting
Unit
11
Based on the RCD, prepares JEV

in two copies and signs Prepared
by portion of the JEV. Forwards
the JEV and documents to the
Head of the Accounting Unit for
Reviews and signs Certified
Correct by portion 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.
41
Area of
Responsibility
Seq
.
No.
Activity
Note 9
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
Accounting
Unit
Receiving/
Releasing
Staff
Bookkeeper
Seq
.
No.
Activity
Receives collection documents

from the AAB/AGDB. Records
receipt in the logbook maintained
for the purpose. Forwards the
same to the Bookkeeper for
preparation of the JEV.
Based on the received collection

documents, prepares JEV in two
copies, Signs Prepared by
portion of the JEV. Forwards the
42
Area of
Responsibility
Seq
.
No.
Activity
JEV and documents to the Head
of the Accounting Unit for review
and signature.
Head of the
Accounting
Unit

Forwards the JEV and documents
to the Bookkeeper for recording
in the General Journal (GJ).
Note 1
refer to
Sec. 71, Preparation
and Other Reports.
43
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-payment when, upon its being duly
presented for payment, such payment is refused or 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 Deposits (DAUD).
44
Sec. 26. Procedures

Checks
Area of
Responsibility
Cash Unit
Designated
Staff
in
Seq
.
No.
Recording Dishonored
Activity
Receives from AGDB the Debit

Memo (DM) and copies of
dishonored checks.
Verifies the dishonored checks

against the previous months
RCDs maintained on file to
ascertain that the checks were
included in the previous months
collections. If not included,
verifies from AGDB the details
of the dishonored checks.
If dishonored checks are included

in the RCDs, prepares Notice of
Dishonor
to
inform
the
drawers/indorsers/payors that the
checks were dishonored by the
AGDB.
Note 1
The Notice of Dishonor shall be
prepared in three copies and
45
Area of
Responsibility
Seq
.
No.
Activity
shall be distributed as follows:
Original - Drawer (To be
delivered personally or thru
registered mail)
Copy 2 - Accounting Unit file
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
_________
Retrieves CRR on file and

records the dishonored checks
with the following notation:
To take up Banks Debit Memo
No. ___ dated ____ covering
Check No. ___ for P
____________ acknowledged
under OR No. _____ dated
_______.
46
Area of
Responsibility
Accounting
Unit
Accounting
Staff
Head of the
Accounting
Unit
Seq
.
No.
Activity
Prepares list of dishonored

checks in two copies. Forwards
Copy 2 of the list and the
dishonored checks to the
Accounting Unit for preparation
of the JEV.
Receives the list together with

originals of dishonored checks
and the Debit Memo from the
Cash Unit and records the same
in the logbook maintained for the
purpose.
Based on the list, prepares the

JEV in two copies. Signs
Prepared by portion of the JEV
and forwards the same to the

Forwards the JEV supported by
the list, originals of dishonored
checks and notice of dishonor to
47
Area of
Responsibility
Seq
.
No.
Activity
the Bookkeeper for recording in
the books of accounts.
Note 2
refer to
Sec.71, Preparation
and Submission
of Trial
Balances and Other Reports.
C. DISBURSEMENTS
Sec. 27.Disbursements Defined. Disbursements
constitute all cash paid out 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. 28.Basic Requirements for Disbursements.
The basic requirements applicable to all types of
disbursements made by national government agencies are
as 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 of Accounting Unit;
48
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. 29.Disbursements
System.
The
Disbursements System involves the preparation and
processing of disbursement voucher (DV); preparation
and issuance of check; payment by cash; granting,
utilization, and liquidation/replenishment of cash
advances.
Sec. 30.Certification
on
Disbursements.
Disbursements from government funds shall require the
following certifications on the DV:
1. Certification and approval of vouchers and
payrolls as to validity, propriety and legality of
the claim (Box A of DV) by head of the
department or office who has administrative
control of the fund concerned;
2. Necessary documents supporting the DV and
payrolls as certified and reviewed by the
Accountant/Head of Accounting Unit (Box B of
DV); and
49
3. Certification that funds are available for the

purpose by the Accountant/Head of Accounting
Unit (Box B of DV).
Sec. 31.Disbursements by Checks. Checks shall
be drawn only on duly approved DV or PCV. These shall
be reported and recorded in the books of accounts only
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 agencies
chargeable against the account of the Treasurer
of the Philippines, which are maintained with
different MDS - Government Servicing Banks
(GSBs). These are covered by Notice of Cash
Allocation, an authorization issued by the DBM
to government 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 authorized to be
deposited with AGDBs; and funding checks
received by RO/OUs from COs/ROs,
respectively.
50
Sec. 32.Recording of Check Disbursements in

the Check Disbursements Record (CkDR). All checks
issued including cancelled checks shall be recorded
chronologically in the CkDR. The dates checks were
actually released shall be indicated in the appropriate
column provided for in the CkDR.
Sec. 33.Reporting of Checks Issued/Released.
All checks actually released to claimants shall be
included in the Report of Checks Issued (RCI), which
shall be prepared daily by the Cashier. The RCI shall be
submitted to the Accounting Unit for the preparation of
JEV. All unreleased checks as of the report date shall be
enumerated in a List of Unreleased Checks to be
attached to the RCI.
Sec. 34.Procedures
Checks.
for
51
Disbursements
by
Area of
Responsibility
Seq
.
No.
Activity
A. Processing of Disbursement
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff
Receives Copies 1-3 of DV,

originals
of
supporting
documents and Copies 1-3 of
ALOBS from the Budget Unit.
Checks
completeness
of
supporting
documents.
If
incomplete, returns to the
concerned party for compliance.
If complete, stamps Received

and indicates date of receipt and
initials on the stamped Received
portion of the DV.
Note 1
DV that shall be paid out of nonbudgetary receipts shall not pass
the Budget Unit. No ALOBS is
needed. (Example - refund of
cash bond).
Assigns DV number and records

in the logbook the DV number
and date, payee, particular and
52
(One series for each year)
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

53
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

54
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

55
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

56
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

57
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

58
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

59
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

60
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

61
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

62
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

63
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

64
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

65
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

66
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

67
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

68
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

69
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

70
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

71
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

72
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

73
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

74
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

75
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

76
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

77
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

78
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

79
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

80
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

81
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

82
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

83
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

84
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

85
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

86
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

87
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

88
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

89
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

90
Area of
Responsibility
Seq
.
No.
Activity
Voucher (DV)
Accounting
Unit
Receiving/
Releasing
Staff

originals
of
supporting
Checks
completeness
of
supporting
documents.
If

portion of the DV.
Note 1
cash bond).

91
Sec. 35. Disbursements

by
Cash.
Disbursements by cash shall be made from cash advances
drawn and maintained in accordance with COA rules and
regulations. Cash payments shall be made based on duly
approved payrolls/disbursements vouchers.
Sec. 36. Cash Advances for Travel.
Cash
advances granted for travel shall be accounted for as Due
from Officers and Employees and these are subject to
liquidation upon travel completion. For liquidation of
travel where the amount of cash advance is equal to or
more than the travel expenses incurred, the Liquidation
Report form shall be prepared by the officers/employees
concerned and submitted to the Accounting Unit as basis
for JEV preparation. The excess cash advance 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 Liquidation Report
shall be submitted to liquidate the cash advance
previously granted and a DV shall be prepared to claim
reimbursement of the deficiency in amount.
Sec. 37. Procedures for Disbursements by Cash
- Payment for Payroll and Other Expenses
Area of
Responsibility
Seq
.
No.
Activity
Cash Unit
92
Area of
Responsibility
Seq
.
No.
Accountable/
Disbursing
Officer
Receives the approved check

from the Cashier. Records in the
Cash Disbursements Record
(CDR) the date, reference, name
of payee, particulars and the
amount of check in the debit
column.
Encashes check in a GSB.
Pays
officials
employees/other payees.
Activity
and
Note 1
Employees/payees shall sign on
the received portion of the
payroll/DV
to
acknowledge
receipt of payment.
Note 2
If there are unclaimed salaries,
refund the same within a
reasonable time. OR representing
the refund shall be issued by the
Cashier.
4
Records payment including the

93
Area of
Responsibility
Seq
.
No.
Activity
refund for unclaimed salary in the
credit column of the CDR.
At the End of the Month
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
the
Disbursing Officer.
94
Area of
Responsibility
Seq
.
No.
Activity
Note 4
The RD shall be distributed as
follows:
together with the originals
of the paid DVs/Payrolls
and supporting documents
for JEV preparation
Accounting
Unit
Releasing/
Receiving
Clerk
Bookkeeper
Records in the logbook, indicates

Received and signs all copies,
forwards the RD to the
Bookkeeper for JEV preparation,
and returns Copy 2 to the Cash
Unit.
Prepares JEV based on the RD

and
supporting
documents
received.
Note 5
refer to
Sec.71, Preparation
95
Area of
Responsibility
Seq
.
No.
Activity
and Other Reports.
Records payroll payment in the

individual Index of Payments (IP)
of officials and employees.
96
Sec. 38. Disbursements Through Bank - Payroll

Payment
Area of
Responsibility
Cash Unit
Cash Staff
Seq
.
No.
Activity
Receives the approved check, DV

and Following Months' Payroll
(FMP), signs the logbook of the
releasing office, and forwards the
documents to the Cashier.
Deposits the check to the Bank

Payroll Account together with the
original of the Summary of
Employees Net Earnings (SENE)
received from Accounting 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 shall acknowledge
receipt of the check by signing on
the original of the DV.
97
Area of
Responsibility
Seq
.
No.
Activity
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
maintained by the Accounting
Unit.
Sec. 39. Disbursements Through Petty Cash
Fund. Petty Cash Fund shall be maintained under the
imprest system. The fund shall be sufficient for the nonrecurring, emergency and petty expenses of the agency.
Disbursements from the fund shall be through the Petty
Cash Voucher (PCV) which shall be approved by
authorized officials and signed by the payee to
acknowledge the amount received. The official receipt or
its equivalent is attached to the PCV.
Sec. 40. Procedures for Disbursements Through
Petty Cash Fund
98
Area of
Responsibility
Various Unit
Petty Cash
Custodian
Seq
.
No.
Activity
Receipt of Check for the
Establishment/ Replenishment of
Petty Cash Fund
1
Receives check from Cashier for
the establishment/replenishment
of petty cash fund. 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.
Utilization of Petty Cash Fund
Requesting
Personnel
Accomplishes Box A Requested

by portion of the Petty Cash
Voucher (PCV).
Immediate
Supervisor
Signs Box A Approved by

portion of the PCV and returns to
Requesting Personnel.
Requesting
Submits
99
to
the
Petty
Cash
Area of
Responsibility
Seq
.
No.
Personnel
Petty Cash
Custodian
Activity
Custodian for the release of fund.
Receives from the Requesting

Personnel the PCV duly approved
by concerned official.
Upon granting of the petty cash

advance and signs in Box B Paid
by portion of the PCV.
Requesting
Personnel
Receives petty cash and signs in

Box B Cash Received by
portion of the PCV.
Petty Cash
Custodian
Issues Copy 2 of the PCV to

requesting personnel
Retrieves CDR from file and
records paid PCVs. Fills up the
following
columns:
date,
reference, name of payee, nature
of payment, amount in the credit
column
and cash advance
balance.
10
11 Files the original

awaiting liquidation.
100
of
PCV
Area of
Responsibility
Seq
.
No.
Activity
Liquidation
Advance
12
of
Petty
Cash
Receives
from
Requesting
Personnel Copy 2 of the PCV
together
with
supporting
documents. Checks and reviews
completeness of documents such
as the date, amount and nature of
expenses paid as shown in the
supporting documents.
13
If
incomplete,
returns
to
Requesting
Personnel
for
completion of needed supporting
documents.
14
If complete, retrieves the original

of PCV from file and fills up Box
D
Liquidation
Submitted
portion of the original and Copy
2 of PCVs.
Checks the appropriate boxes for
Received
Refund
or
Reimbursement Paid portion
and signs Box C of the PCV.
101
Area of
Responsibility
Seq
.
No.
Requesting
Personnel
15
Checks and fills up the

appropriate
boxes
for
Liquidation Submitted and
Reimbursement Paid upon
submission
of
necessary
supporting documents 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

17
If the amount granted is equal to

the amount paid as shown in the
liquidated PCV, proceeds to
Sequence No. 18.
Activity
If the amount is not equal to the

amount paid, retrieves from file
the CDR and records the
necessary adjustments based on
the liquidated PCV. Fills up the
following
columns:
date,
reference, name of payee, and
nature of payment, amount in
102
Area of
Responsibility
Seq
.
No.
Activity
the appropriate debit, credit and
balance columns.
18
Files the original of the PCV

together with the supporting
documents
awaiting
replenishment.
Replenishment of Petty Cash
Fund
Petty Cash
Fund
Custodian
19
Retrieves from file the original of

the PCV together with the
supporting documents. Checks
the completeness of all PCVs for
replenishment.
20
Prepares
the
Petty
Cash
Replenishment Report (PCRR) in
103
Area of
Responsibility
Seq
.
No.
Activity
two copies 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 Authorized 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
refer to Sec.15, Procedures in the
104
Area of
Responsibility
Seq
.
No.
Activity
Recording of Obligations.
G. PROPERTY, PLANT AND EQUIPMENT, AND

INVENTORY ACCOUNTS
Sec. 41.
Purchase or Construction of
Property, Plant and Equipment. Property, plant and
equipment acquired through purchase shall include all
costs incurred to bring them to the location necessary for
their intended use, like transportation costs, freight
charges, installation costs, etc. These are recorded in the
books of accounts as Assets after inspection and
acceptance of delivery.
During construction period, property, plant and
equipment shall be classified and recorded as
Construction in Progress with the appropriate asset
classification. As soon as these are completed, the
105
"Construction in Progress" account shall be transferred to

the appropriate asset accounts.
Accounts
Public
Infrastructures
and
Reforestation Projects are closed to Government
Equity account and the asset is recorded in the Registry
of Public Infrastructures/Reforestation Projects at the end
of the year.
Sec. 42.
Property and Inventory Accounting
System. The Property and Inventory Accounting System
consists of the system of monitoring, controlling and
recording of acquisition and disposal of property and
inventory.
The system starts with the receipt of the purchased
inventory items and equipment. The requesting office in
need of the inventory items and equipment after
determining that the items are not available in stock shall
prepare and cause the approval of the Purchase Request
(PR). Based on the approved PR and after accomplishing
all the required procedures adopting a particular mode of
procurement, the agency shall issue a duly approved
Purchase Order. Procedures relative to the obligation of
the purchase order and payment of the deliveries are
discussed under Sections 14 and 31, Accounting for
Obligation and Disbursements by Check, respectively.
The sub-systems are as follows:
106
1.
Receipt, Inspection,
Acceptance and Recording Deliveries of
Inventory Items and Equipment
2.
Requisition and Issuance
of Inventory Items
3.
Requisition and Issuance
of Equipment
Sec. 43. 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 method, an inventory control account
is maintained in the General Ledger on a current basis.
Regular purchases shall be recorded under the
Inventory account and issuance thereof shall be recorded
based on the Report of Supplies and Materials Issued.
Purchases out of the Petty Cash Fund shall be charged
immediately to the appropriate expense accounts.
The Accounting Unit shall maintain perpetual
inventory records, such as the Supplies Ledger Cards
for each inventory stock, Property, Plant and Equipment
Ledger Cards for each category of plant, property and
equipment including work and other animals, livestock,
etc. The subsidiary ledger cards shall contain the details
of the General Ledger accounts.
For check and balance, the Property and Supply
Office/Unit shall maintain Property Cards (PC) for
107
property, plant and equipment, and Stock Cards (SC) for

inventories. The balance in quantity per PC and SC
should always reconcile with the ledger cards of the
Accounting Unit.
Sec. 44. Moving Average Method. The moving
average method of costing shall be used for costing
inventories. This is a method of calculating cost of
inventory on the basis of weighted average on the date of
issue. The Accounting Unit shall be responsible in
computing the cost of inventory on a regular basis.
Sec. 45. Procedures in the Receipt, Inspection,

Acceptance and Recording Deliveries of Inventory
Items and Equipment
Area of
Responsibility
Property and
Supply Unit
Property/
Supply
Officer
Seq
.
No.
Activity
Delivery of Equipment
Inventory Items
and
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
Service.
108
Area of
Responsibility
Seq
.
No.
2
Activity
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
Inspects and verifies items as to

quantity and conformity with
specifications based on the DR
and approved PO. If in order,
signs and indicates date of
inspection in the Inspection
column of the IAR. Retains copy
3 of IAR and forwards the items
109
Area of
Responsibility
Seq
.
No.
Activity
and Copy 1-2 of IAR, original of
DR and Copy 2 of PO to
Property/Supply
Officer
for
acceptance.
Property/Supp
ly Officer
If specifications are not in order

or delivery is not complete,
indicates notation on the IAR that
the deliveries are not in
conformity with specifications
agreed under the approved PO or
deliveries are not complete.
Forwards the IAR to the
Property/Supply Officer.
Signs in Acceptance 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
remarks, if any.
110
Area of
Responsibility
Seq
.
No.
Activity
Forwards
items
to
Property/Supply Custodian for
safe-keeping/storage.
Prepares DV indicating the

Supplier as Payee. Attaches the
original IAR, Copy 2 of DR, PO
and photocopy of PR. Forwards
documents to Budget Unit for the
preparation of ALOBS. Forwards
copy 2 of IAR and copy of PO to
the Property/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.
111
Area of
Responsibility
Seq
.
No.
Activity
Note 3
For purchases made through the
Procurement Service (PS), the
DV shall be prepared on the
basis of the Approved Agency
Procurement
Request.
The
payment shall be made directly to
the PS.
Accounting
Unit
PPELC/SLC
Keeper
After Payment of Deliveries

7
Posts necessary information to

the
Property,
Plant
and
Equipment
Ledger
Card
(PPELC)/Supply Ledger Card
(SLC) based on the paid
documents forwarded by the
Cash Unit.
112
Sec. 46. Procedures in the Requisition and

Issuance of Inventory Items
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Accounting
Unit
Accounting
Staff
Seq
.
No.
Activity
Inquiry for the availability of
supplies
1
Prepares the Supplies Availability
Inquiry (SAI) in two copies.
Accomplishes the form for item
description, unit and quantity.
2
Fills up the Inquired by portion

of SAI and forwards the same to
Accounting Unit for processing.
Receives SAI from Requesting

Personnel. Reviews and verifies
the completeness of information.
Retrieves from file the SLC and
determines availability/status of
stocks.
Fills up
the number, stock
number, status of stock and
Status provided by portion of
the SAI. Returns the original to
113
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
the Requesting Personnel and
files Copy 2 of the SAI.
Concerned
Office
Requesting
Personnel
Receives the original of SAI from

the Accounting Staff. If stock is
not available, prepares Purchase
Request (PR) for the item
requested and forwards the same
to 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 necessary
information except for the
issuance portion and signs
Requested by portion of the
RIS. Forwards the RIS to
114
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
Authorized Official for approval.
Note 1
The RIS shall be distributed as
follows:
Copy 2 - Property and Supply
Unit
Copy 3 - Requesting Office
Authorized
Official
Signs the Approved by portion

of the RIS.
Requesting
Personnel
Receives signed RIS and

forwards to the Property and
Supply Unit together with the
original of SAI for withdrawal of
inventory items requested.
Property and
115
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Supply Unit
Supply
Officer
Seq
.
No.
Activity
supplies
1
9
Reviews and verifies RIS as to

completeness of information.
Fills up the RIS No./Date, and
Quantity, Remarks and initials
Approved by portion of the
RIS, and records RIS in the
logbook.
Head of the
Property and
Supply Unit
10
Signs the Approved by portion

of RIS and returns to the Supply
Officer for issuance of the stock.
Supply
Officer
11
Fills up and signs the Issuance

portion of the RIS and issues
inventory items requested to the
Concerned
116
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
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
temporarily the originals of RIS
and SAI for the preparation of
Report of Supplies and Materials
Issued (RSMI).
Preparation of RSMI
14
Retrieves the original copies of

RIS and SAI from temporary file.
Checks the completeness of the
RIS. If not complete, verifies
with the Supply Officer. If
complete, prepares RSMI in three
117
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
copies.
Property and
Supply Unit
Head of the
Property and
Supply Unit
Stock Card
Keeper
15
Initials in the Certified by

portion of the RSMI.
16
Signs in the Certified by portion

of the RSMI.
17
Receives signed RSMI and

forwards to Accounting Unit the
original and Copy 2 of RSMI
together with originals of RIS
and SAI. Files Copy 3 of RSMI.
At the Start of the Day
Accounting Unit
118
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Accounting
Staff
Seq
.
No.
Activity
supplies
1
18
Receives original and Copy 2 of

RSMI, and original SAI and
RIS. Checks and verifies 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
temporarily the original RIS, SAI
and RSMI for recording issuance
of inventory items in the books of
accounts.
119
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
At Month End
21
Retrieves the original RIS, SAI

and RSMI from temporary file.
22
Prepares JEV in two copies based

on the RSMI to record the
issuance of stock.
Signs in the Prepared by portion
of the JEV.
23
Head of the
Accounting
Unit
Accounting
Staff
24
Sign in the Certified Correct by

portion of the JEV.
25
Receives signed JEV and

forwards to Bookkeeper the JEV,
RSMI, RIS, and SAI for
recording in the General Journal.
120
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
supplies
1
Files copy 2 of JEV.
Note 2:
For succeeding activities, refer to
Sec. 71, Preparation and
Submission of Trial Balances and
Other Reports.
Sec. 47. Procedures in the Requisition and

Issuance of Equipment
Area of
Responsibility
Concerned
Office
Requesting
Personnel
Seq
.
No.
Activity
Upon receipt of notice of

availability of the equipment
121
Area of
Responsibility
Seq
.
No.
Activity
requested, prepares RIS in three
copies.
Fills up the necessary information
pertaining to requisition, except
Issuance column of the RIS.
Authorized
Official
Reviews
RIS
and
signs
Requested By in the Requisition
column.
Requesting
Personnel
Records the signed RIS in the

logbook and indicate date,
particulars
and
remarks.
Forwards the same to Property
and Supply Unit for processing of
the requisition.
Receives signed RIS from

Requesting Office. Records the
date, particulars and Requesting
Office in the logbook. Assigns
number on RIS and issues Copy 3
to Requesting Personnel for file.
Property and
Supply Unit
Receiving
Staff
122
Area of
Responsibility
Property
Officer
Seq
.
No.
Activity
Verifies RIS and checks against

the PR.
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
Reviews RIS and signs the

Approved By portion of RIS.
Forwards Copies 1-2 of RIS to
Property Custodian.
Property
Custodian
Based on the approved RIS,

assigns number on the property
being
transferred/
issued.
Indicates the number in the RIS.
Prepares
Acknowledgment
Receipt of Equipment (ARE).
Indicates the quantity, unit,
description and property number
of the items being issued. Signs
in the Received from and
Issued by portions of the ARE
and RIS, respectively. Records
the date, number and particulars
123
Area of
Responsibility
Seq
.
No.
Activity
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
Requesting
Personnel
Supply and
Property Unit
Property
Officer
11
Retrieves Copy 3 of RIS. Checks

item if it is in conformity with
RIS.
Signs Received 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 RIS.
13
Files original of ARE per

accountable officer/employee and
124
Area of
Responsibility
Seq
.
No.
Activity
Copy 2 of RIS. Forwards 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. 48.
Miscellaneous
Transactions. Miscellaneous transactions are transactions
types that are unique and not recurring in the ordinary
course of government operations. These seldom take
place or should not happen at all. Some of the
miscellaneous transactions are as follows:
1.
2.
3.
4.
5.
6.
Loss of Cash and Property

Request for Relief from Accountability
Cash Overage
Stale MDS and Commercial Checks
Set-up and Settlement of Disallowances
Refund of Overpayments
125
Sec. 49.Accounting for Loss of Cash and

Property. Loss of cash and property may be due to
malversation, theft, robbery, fortuitous event or other
causes.
Cash shortage discovered during cash examination
conducted by auditors is reported 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 definitely established, the Auditor shall issue
a memorandum pertaining thereto and the Accountant
shall draw a JEV to record the shortage as a receivable
from the Accountable 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 pending
result of request for relief from accountability.
126
Sec. 50.Grant of Relief from Accountability.

When a request for relief from accountability for
shortages or loss of funds is granted, a copy of the
decision shall be forwarded to the Chief Accountant who
shall draw a JEV to record the transaction. The loss shall
be debited to the Loss of Assets account and credited to
the appropriate receivable account. In case the request for
relief is denied, immediate payment of the shortage shall
be demanded from the Accountable Officer. Restitution
shall be acknowledged by the issuance of an official
receipt.
In case the request for relief from accountability
for loss of property caused by fire, theft, force majeure or
other causes is granted, a copy of the decision shall
likewise be forwarded to the Chief Accountant for the
preparation of the JEV. The loss shall be debited to the
Loss of Assets account and credited to the appropriate
asset account. If request for relief from accountability is
denied, the loss shall be taken up as a receivable from the
Accountable Officer or employee liable for the loss and
shall be credited to the appropriate asset account.
Sec. 51.Accounting for Cash Overage. In case
the cash examination disclosed cash overage, as
determined by the Auditor during cash examination, the
amount 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 Income.
127
Sec. 52. Accounting for Stale Checks. Checks

may be cancelled when they become stale. The
depository bank considers a check stale, if it has been
outstanding 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
and reported in the List of Unreleased Checks
as cancelled. The List of Unreleased 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 prepared to take up the cancellation.
The replacement check shall be reported in the
RCI.
128
Sec. 53.Accounting
for
Disallowances.
Disallowances shall be taken up in the books of accounts
only when they become final and executory. The
Accountant shall prepare the JEV to take up the
Receivable-Disallowances/Charges and credit the
appropriate expense account for the current year or Prior
Years Adjustment account if pertaining to expenses of
previous years.
Cash settlement of disallowances shall be
acknowledged through the issuance of an official receipt
and reported by the Cashier in the RCD.
Sec. 54.Accounting
for
Overpayments.
Sometimes overpayments or even double 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 built-in procedures. One
example is the payment of payrolls. Payrolls are
prepared in advance and some agencies pay their
employees through the banking system. All these are
done before reports of attendance are submitted, making
it impossible to know the exact amount to be paid in case
there are absences without pay during the pay periods. In
case of overpayments, refunds shall be demanded of the
employees concerned.
129
Sec. 55.Pro-forma Accounting Entries. The

following are the pro-forma accounting entries for
miscellaneous transactions:
Particulars
Account Title
A
cc Dr. Cr.
t.
C
od
e
1. Cash Shortage
a. Cash shortage of the Disbursing Officer
To take up
cash
shortage
Due from Officers

and Employees
Cash-Disbursing
Officers
12
8
10
7
15
0
15
0
b. Cash Shortage of the Collecting Officer

To take up
cash
shortage
Due from Officers

and Employees
Cash-Collecting
Officers
12
8
10
6
2. Relief from Accountability for Loss of

Government Funds and Property
130
15
0
50
Particulars
Account Title
A
cc Dr. Cr.
t.
C
od
e
a. Request for Relief from Accountability Granted.

To take up
relief from
accountabilit
y
for current
year - -
Loss of Assets
or
Prior Years
Adjustments
94
8
50
53
3
for prior
years - Due from Officers
and Employees
12
8
50
b. Request for Relief from Accountability Denied.

To record the
loss of fund
by a
Disbursing
Officer
(allegedly
Due from Officers 12

and Employees
8
Cash-Disbursing
10
Officers
7
131
15
0 15
0
Particulars
Account Title
A
cc Dr. Cr.
t.
C
od
e
thru theft ) P150

c. Cash Settlement/Restitution in case of denial of
Request for Relief from Accountability
To take up
receipt of
settlement
To record
deposit
c.1 current
year
Cash-Collecting
Officers
Due from Officers
and Employees
10
6
Subsidy Income from

National
Government
Cash-Collecting
Officers
60
1
c.2 prior year Prior Years

Adjustment
Cash-Collecting
Officers
132
50
50
12
8
50
10
6
53
3
10
6
50
50
50
Particulars
Account Title
A
cc Dr. Cr.
t.
C
od
e
3. Cash Overage
To take up
cash overage
discovered
during cash
examination
To record
deposit
Cash Collecting
Officers
Due to National
Treasury
Miscellaneous
Operating
and Service
Income
50
Due to National
Treasury
Miscellaneous
Operating
and Service
Income
50
Cash-Collecting
Officers
4. Stale Checks
133
10
6
43
3
50
43
3
50
10
6
50
50
Particulars
Account Title
A
cc Dr. Cr.
t.
C
od
e
a. Stale MDS check issued in the current year for

replacement
Check
cancellation
Replacement
Cash-National
Treasury, MDS
Accounts Payable
10
2
40
1
50
Accounts Payable
40
1
10
2
50
Cash-National
Treasury, MDS
50
50
b. Stale MDS check issued in the prior years for

replacement
Check
cancellation
Replacement
Prior Years
Adjustments
Accounts Payable
53
3
40
1
50
Accounts Payable
40
1
10
50
Cash-National
134
50
50
Particulars
Account Title
Treasury, MDS
A
cc Dr. Cr.
t.
C
od
e
2
c. Stale commercial check issued in the current and

prior years for replacement
Check
cancellation
Replacement
Cash in Bank-Local
Currency, Current
Account
Accounts Payable
Accounts Payable
Cash in Bank-Local
Currency, Current
Account
11
0
40
1
50
40
1
50
50
11
0
5. Disallowances
a. Recording of disallowances for current years
transaction
When the
135
50
Particulars
Account Title
disallowances Receivablesbecomes final Disallowances/

and executory Charges
- overpayment
Office Supplies
of office
Expenses
supplies
Amount paid
- P100
Should be
- 90
Difference
- 10
Settlement of
Disallowance
Deposit of
collection
Cash-Collecting
Officers
ReceivablesDisallowances/
Charges
Subsidy Income from
National
Government
Cash-Collecting
Officers
136
A
cc Dr. Cr.
t.
C
od
e
13
88
49
10
10
6
10
10
10
13
8
60
1
10
6
10
10
Particulars
Account Title
A
cc Deb Cre
t. it dit
C
od
e
b. Recording of disallowance for prior years

transaction
When the
Receivables disallowance
Disallowances/
becomes final Charges
and executory
Prior Years
Adjustments
Settlement of
disallowance
Deposit of
collection
13
85
33
10
Cash Collecting 10
Officers
6
Receivables Disallowances/
13
Charges
8
10
Prior Years
Adjustments
Cash-Collecting
Officers
10
6. Refund of Overpayment
137
53
3
10
6
10
10
10
Particulars
Account Title
A
cc Deb Cre
t. it dit
C
od
e
a. Overpayment taken up as receivable

To record
overpayment
of salaries
and wages
(When
overpayment
is
ascertained)
Due from Officers 12

8
and Employees
Salaries and Wages
80
- Regular Pay
1
10
To record
receipt of
refund
Cash-Collecting
Officers
Due from Officers
and Employees
10
Deposit of
collection
Subsidy Income from

National
Government
Cash-Collecting
Officers
138
10
6
10
10
12
8
60
1
10
6
10
10
Particulars
Account Title
A
cc Deb Cre
t. it dit
C
od
e
b. Refund of overpayment not taken up as

receivable
To record
receipt of
refund of
Salaries and
Wages Regular Pay
during the
current year
Cash Collecting 10
Officers
6
Salaries and
Wages Regular
80
Pay
1
Deposit of
collection
Subsidy Income from

National
Government
Cash-Collecting
Officers
60
1
10
6
10
Cash-Collecting
Officers
Prior Years
Adjustments
10
6
53
3
10
To record
receipt of
refund of
0verpayment
in the
ensuing year
139
10
10
10
10
Particulars
Deposit of
collection
Account Title
Prior Years
Adjustments
Cash-Collecting
Officers
140
A
cc Deb Cre
t. it dit
C
od
e
53
3
10
6
10
10
Chapter 4. Trial Balances, Financial

Reports
and Statements
The Financial Statements Process
Unadjusted
Trial
Balance
Statement of
Income and
Expenses
PreClosing
TB
Sec. 1.
Closing Journal
Entries
Statement
of
Cash
Flows
Adjusting
Entries
PostClosing
TB
Balance
Sheet
Sec. 56. Financial Reporting System.

This
Financial Reporting System (FRS) includes the
preparation and submission of trial balances, financial
statements and other reports needed by fiscal and
regulatory agencies. The sub-systems are as follows:
141
1.
Preparation and Submission of Trial

Balances and Other Reports
2.
Preparation and Submission of Financial
Statements
Sec. 57. Trial Balance. The Trial Balance shows
the equality of debit and credit balances of all general
ledger accounts as of a given period. It is prepared and
submitted monthly, quarterly and annually. At the end of
the fiscal year, the pre-closing and the post-closing trial
balances shall be prepared.
Sec. 58. 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.
142
Sec. 59. Pre-Closing Trial Balance. The PreClosing Trial Balance (Appendix 2) shall be prepared
after recording the adjusting journal entries in the
General Journal and posting the same to the General
Ledger. It shows the adjusted balances of all accounts as
of a given period. This is also described as the adjusted
trial balance.
Sec. 60. Adjusting or Correcting Journal
Entries. Under the matching principle, 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 are
recorded in the period when they are earned or incurred.
Adjustments are of two main types: accrued items and
deferred items.
Sec. 61. Adjustment for Accrued Item. It is an
adjusting entry for an economic activity already
undertaken but not yet recorded into an asset and revenue
accounts or a liability and expense accounts. It requires
asset/revenue
adjustments
and
liability/expense
adjustments.
Sec. 62. Asset/Revenue Adjustment. It involves
earned revenues not yet recorded 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.
143
Account Title
Interest Receivable
Interest Income
Acco
unt Deb Cre
Code
it
dit
161
624
500
500
Sec. 63.
Liability/Expense Adjustment. It involves
expenses, which already exist but remain unpaid at the
end of the accounting period. Examples are salaries,
wages and other expenses already incurred but not yet
paid.
Account Title
Salaries and WagesRegular Pay
Due to Officers and
Employees
Acco
unt Deb Cre
Code
it
dit
801
428
1,00
0
1,00
0
Sec. 64.
Adjustment for Deferred Items. These are
adjusting entries transferring data previously recorded in
an asset account to an expense account, or data
previously recorded in a liability account to a revenue
account. It also requires asset/expense adjustments and
liability/revenue adjustments.
Sec. 65.
Asset/Expense Adjustments. These pertain to
assets, portion of which shall be recorded as expense of
144
the agency at the

end of the accounting period.
Examples are prepaid expenses, bad debts and
depreciation.
Account Title
Original Entry:
Prepaid Rent
Acco
unt Deb Cre
Code
it
dit
161
Cash-National
Treasury, MDS
1,00
0
102
Adjusting Entry:
Rent Expenses
Prepaid Rent
841
161
1,00
0
900
900
Sec. 66.
Bad Debts. Trade receivables shall be valued
at their face amounts minus, whenever appropriate,
allowance for doubtful accounts. Bad Debts expense
and/or any anticipated adjustments, which in the normal
course of events will reduce the amount of receivables
from the debtors to estimated realizable values, shall be
set up at the end of the accounting period.
The Allowance for Doubtful Accounts shall be
provided in an amount based on collectibility of
receivable balances and evaluation of such factors as
aging of the accounts, collection experiences of the
agency, expected loss experiences and identified doubtful
accounts.
145
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
61 - 180 days
181- 1 year
More than 1 year
1%
2%
3%
5%
An adjusting journal entry to take up bad debts

expense is as follows:
Acc
Account Title
ount Deb Cre
Cod
it
dit
e
Bad Debts
929 1,00
0
Allowance for Doubtful 301
1,00
Accounts
0
Sec. 67.
Depreciation for Property, Plant and
Equipment. The costs of property, plant and equipment
are allocated to the periods benefited through the
provision of accumulated depreciation. Depreciation is
the systematic and gradual allocation of the depreciable
amount of asset over its useful life. The depreciable or
estimated useful life for different types of agency assets
are presented as Appendix 1.
146
Sec. 68.
Method of Depreciation. Depreciation shall
be computed using the Straight Line Method.
Depreciation shall start on the second month from
purchase. A residual value equivalent to ten percent of
the cost shall be set. Annual depreciation is computed as
follows:
Annual Depreciation =
Residual/Salvage Value
Asset Cost less Estimated

Estimated Useful
Life
Asset Cost
- Purchase or Acquired
Value of the Asset
Estimated Salvage Value - 10% of the asset cost
Estimated Useful Life
- Estimated number of
years the asset shall be used
as
determined
by the
Commission on Audit
A sample adjusting journal entry for
depreciation expense is as follows:
Acc
Account Title
ount Deb Cre
Cod
it
dit
e
Depreciation-Office
922 1,00
Equipment
0
Accumulated
322
1,00
Depreciation-Office
0
Equipment
147
Sec. 69.
Closing Journal Entries. Closing journal
entries are general journal entries which close out the
balances of all nominal/ temporary and intermediate
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
Government at the end of the year due to the
DBM policy that NCA will only be valid within
the year of issue except NCA for accounts
payable, which is valid one month after its
issuance. There is no need to issue an MDS
Check when reverting the account.
Account Title
Subsidy Income from

National
Government
Cash-National
Treasury, MDS
2.
Acc
ount De
Cod bit
e
601
102
Cr
edi
t
10
0
10
0
Close the balance of the

Subsidy Income from National Government
148
account to Income and Expense Summary

account.
Account Title
Subsidy Income from
National
Government
Income and Expense
Summary
3.
Acc
ount De
Cod bit
e
601 1,0
00
532
Cr
edi
t
1,0
00
Close the balance of all

income accounts to Income and Expense
Summary account.
Account Title
Income from Government
Services
Income from Government
Business Operations
Income and Expense
Summary
149
Acc
ount De Cr
Cod bit edi
e
t
611
50
0
612
532
40
0
90
0
4.
Close the balance of all

expense accounts to Income an Expense
Summary account.
Income and Expense
Summary
Salaries and WagesRegular Pay
5.
10.
801
800
532
1,10
0
534
1,10
0
Close the balance of the Prior Years

Adjustments account to Retained Operating
Surplus account
.
Prior Years Adjustments
Retained Operating
Surplus
6.
800
Close the balance of the

Income and Expense Summary Account to the
Retained Operating Surplus account.
Income and Expense
Summary
Retained Operating
Surplus
5.
532
533
534
200
Close the balance of the Retained Operating

Surplus to Government Equity account.
150
200
Retained Operating
Surplus
Government Equity
7.
534
1,30
0
501
1,30
0
Close Public Infrastructures or Reforestation

Projects accounts to Government Equity
account and transfer the corresponding amounts
to the respective registries.
Government Equity
Public Infrastructures/
Reforestation Projects
501
243/
244
1,30
0
1,30
0
Sec. 70. Post-Closing Trial Balance. The PostClosing Trial Balance (Appendix 3) shall be prepared
after recording the closing journal entries in the General
Journal and posting to the General Ledger. It contains a
listing of all general ledger accounts that remain open
after the closing process is completed.
151
Sec. 71. Procedures in the Preparation and

Submission of Trial Balances and Other Reports
Area of
Responsibilit
y
Seq.
No.
Activity
Preparation of Unadjusted Trial
Balance
Accounting
Unit
Bookkeeper
Records JEVs for the month in

the Special Journals and General
Journal.
Posts the journal entries from the

Special Journals and General
Journal to the respective General
Ledgers.
Records the source/summarizing

documents to the respective
Subsidiary Ledgers.
Note 1
The
summarizing/source
documents are the following:
Report of Checks Issued (RCI)
Report of Collections and
Deposits (RCD)
152
Area of
Responsibilit
y
Seq.
No.
Activity
Report of Disbursements (RD)

Journal Entry Voucher (JEV)
Disbursement Voucher (DV)
Other Supporting Documents
(OSD)
Foots and extracts the balances of

the
General
Ledgers
and
Subsidiary Ledgers.
Based on the General Ledgers,

prepares the Unadjusted Trial
Balance (UTB) to check the
postings made on the General
Ledgers or the equality of debit
and credit balances of the general
ledger
accounts.
Files
temporarily.
Preparation of Pre-Closing Trial
Balance
Prepares adjusting journal entries

thru the JEV for unrecorded
transactions and for all accounts
that need to be adjusted/
corrected. Records the JEV in the
153
Area of
Responsibilit
y
Seq.
No.
Activity
General Journal.
Note 2
Adjusting journal entries shall be
prepared for the following
transactions:
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.
Foots and extracts balances of the

General Ledgers and Subsidiary
Ledgers.
154
Area of
Responsibilit
y
Seq.
No.
Activity
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
balances 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 prepares adjusting/
correcting entries as maybe
necessary thru the JEV.
11
If reconciled, prepares individual

155
Area of
Responsibilit
y
Seq.
No.
Activity
supporting schedules per account
based on the Subsidiary Ledgers.
12
Initials the supporting schedules

and the Pre-Closing Trial Balance
Head of the
Accounting
Unit
13
Reviews and signs the Certified

Correct portion of the PreClosing Trial Balance and the
supporting schedules.
Designated
Staff
14
Submits the Pre-Closing Trial

Balance to the Offices concerned.
Records submission in the
logbook maintained. Files Copy 4
of the Pre-Closing Trial Balance
and Copy 4 of supporting
schedules for preparation of
financial Statements.
Preparation of Post-Closing Trial

156
Area of
Responsibilit
y
Seq.
No.
Activity
Balance at year-end.
Bookkeeper
15
Prepares closing journal entries

thru JEV and records the 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 account Cash-National
Treasury, MDS)
Nominal/Intermediate
Accounts
Income
accounts
(including
Subsidy
Income from National
Government, RO and
OU) to the Income and
Expense Summary (IES)
account
Expense accounts to IES
account
Prior Years Adjustments
157
Area of
Responsibilit
y
Seq.
No.
Activity
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
Infrastructures/Registry
of
Reforestation Projects.
16
Posts the journal entries from the

General Journal in the respective
General Ledgers.
17
Foots and extracts the balances of

the General Ledgers and the
Subsidiary Ledgers.
158
Area of
Responsibilit
y
Seq.
No.
Activity
18

prepares
Post-Closing
Trial
Balance in four copies.
19
Reconciles
the
supporting
schedules with Post-Closing Trial
Balance. 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 Trial
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 Accounting Unit.
Head of the
Accounting 22
Unit

Correct by portion of the PostClosing Trial Balance, supporting
schedules and transmittal letter,
159
Area of
Responsibilit
y
Seq.
No.
Activity
Accounting Staff for distribution.
Accounting
Staff
23
Distributes the Post-Closing Trial

Balance and supporting schedules
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/PostClosing 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
160
Area of
Responsibilit
y
Seq.
No.
Activity
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. 72. Generation of Financial Statements

and Supporting Schedules. Financial statements and
their supporting schedules are the products of the
government accounting processes.
These are the
principal comprehensive means by which the information
accumulated and processed in the state accounting
system is periodically 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.
161
Sec. 73. Responsibility

for
Financial
Statements. Responsibility for the fair presentation and
reliability of financial statements rests with the
management of the reporting agency. This responsibility
is discharged by applying generally accepted state
accounting principles that are appropriate to the entitys
circumstances, 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 statements, the following
standards shall be observed.
a.
Fairness
of
presentation.
This refers to the overall
propriety in disclosing financial information.
Full disclosure in financial aspects requires
observance of the following standards of
reporting:
All essential facts relating to the scope and
purpose of each report and the period involved
shall be included and clearly displayed.
All financial data

presented shall be accurate, reliable, and
truthful. The requirement for accuracy
does not rule out the inclusion of
reasonable estimates when the making of
precise measurements is impracticable,
162
uneconomical, unnecessary, or conducive

to delay. All appropriate steps shall be
taken to avoid bias, unclear facts, and
presentation of misleading information.
b.
Financial reports
shall be based on official records
maintained under an adequate accounting
system
that
produces
information
objectively and discloses the financial
aspects of all events or transactions taking
place. Where financial data or reports
based on sources other than the accounting
systems are presented, their basis shall be
clearly explained.
The financial data

reported shall be derived from accounts
that are maintained in all material respects
on a consistent basis from period to period;
material changes in accounting policies or
methods and their effect shall be clearly
explained.
Consistent and
non-technical terminology shall be used in
financial reports to promote clarity and
usefulness.
Compliance. The
report shall be in accordance with prescribed
163
government requirements and international

accounting standards of reporting.
c.
Timeliness.
All
needed reports shall be produced promptly to
be of maximum usefulness.
d.
Usefulness.
Financial reports shall be carefully designed to
present information that is needed and useful to
reports users.
Sec. 74. 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 statements to the
Commission on Audit, Department of Budget and
Management, other oversight agencies and other parties.
It shows the agencys responsibility for the preparation
and presentation of the financial statements. The
statement shall be signed by the Director of Finance and
Management Office or Comptrollership Office, or the
Chief of Office who has direct supervision and control
over the agencys accounting and financial transactions,
and the Head of Agency or his authorized representative.
164
Sec. 75. Balance Sheet.

The Balance Sheet
(Appendices 5 and 6) is a formal statement which shows
the financial condition of the agency as of a certain date.
It includes information on the three elements of financial
position - assets, liabilities and government equity. It
shall be prepared from information taken directly from
the year-end Post-Closing Trial Balance. The Balance
Sheet shall 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 books 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 aforementioned schedules for information of
government officials and oversight agencies.
Sec. 76. Statement of Income and Expenses.

The Statement of Income and Expenses (Appendices 11
& 12) shows the results of operation/performance of the
agency at the end of a particular period. This statement
165
shall be prepared by the Accounting Unit from

information taken directly from the Pre-Closing Trial
Balance.
Sec. 77. Statement of Government Equity. The
Statement of Government Equity (Appendix 13) shows
the financial transactions, which resulted to the change in
Government Equity account at the end of the year.
Sec. 78. Statement of Cash Flows.
The
Statement of Cash Flows (Appendix 14) is a statement
summarizing all the cash activities of an agency. This
includes the operating, investing and financing activities
of the entity and provides information on the cash
receipts and cash payments during the period. The
primary purpose of the Statement of Cash Flows is to
give relevant information on the agencys overall cash
position, liquidity and solvency. Using the Statement of
Cash Flows, managers, investors and creditors could
easily assess if the agency could meet its obligations in
operating, investing and financing activities.
166
Sec. 79.
Preparation of the Statement of
Cash Flows. To facilitate the preparation of the
Statement of Cash Flows, the use of a Working Paper is
encouraged. It shall show the increase or decrease in the
cash accounts between two periods. The net increase
in cash provided by 1) operating 2) investing and
3) financing activities in addition to the cash balance at
the beginning shall equal to the cash balance at the end of
the period.
1) Operating Activities. Operating activities
involves the principal resources producing
activities of the enterprise and other activities that
are not investing or financing (SFAS 22).
Generally, these include the cash effect on
transactions 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
equivalent (SFAS 22). These activities include
cash transactions covering non-operating assets,
such as the purchase of property, equipment,
short and long-term investments and other noncurrent assets.
Non-cash investing activities are
included in the statement of cash flows.
not
3) Financing Activities. Financing activities are

167
derived from the equity capital and borrowings

of the agency (SFAS 22). These include cash
transactions involving the government equity
and non-operational liabilities.
Non-cash financing activities are
included in the statement of cash flows.
not
The increase or decrease in the cash accounts are

analyzed and the following computations 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
168
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 to 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:
169
Cash Inflows:
Proceeds from sale of marketable

stocks and bonds
Cash proceeds from the sale/disposal

of equipment and other property, plant
and 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
170
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
tally with the total cash account shown in the
balance sheet.
Sec. 80.
Notes to Financial Statements. Notes to
Financial Statements (Appendix 15) are integral parts of
financial statements, which pertain to additional
information necessary for fair presentation in conformity
with generally accepted accounting principles. These
may explain the headings captions or amounts in 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
avoid
erroneous
implications. The headings, captions and amounts shall
be supplemented by enough additional data so that their
meaning would be clear and not overshadowed by so
much information that important matters are buried in
mass trivia.
171
Where Notes to Financial Statements appear on a

separate page, indicate the phrase See accompanying
Notes to Financial Statements placed at the bottom of
said statements.
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 terms of owners
equity and long-term debt, and certain other
disclosures required by pronouncements of the
Philippine Institute of Certified Public
Accountants, Accounting Standards Council,
and regulatory bodies that have jurisdiction are
necessary for full disclosure.
b. Disclosure of changes in accounting
principles. Changes in accounting principles,
practices, or the methods of applying them,
together with the financial effect, and the
justification for the change shall be disclosed in
the financial statements or a note thereto.
172
In particular, it shall include any of the

following:
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 agency 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
necessary if knowledge of the events might
affect the interpretation of the statements, even
though the events do not affect the propriety of
the statements themselves.
d. Disclosure of accounting policies. Description
of the accounting policies adopted by the
reporting entity is required as an integral part of
the financial 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 the policies and no
quantitative data shall be included.
173
Examples of accounting policy

disclosures commonly required:
Consolidation principles
Accounting
for
long-term
investments
Adoption
of
policy
on
increasing benefit entitlements of the
program members. The effect of the
increase shall be disclosed.
Basis of revenue recognition

In general, disclosures shall include
important judgment as to appropriateness of
principles relating to recognition of revenues
and allocation of asset costs to current and
future periods.
Sec. 81. Interim Reports. Interim reports are the
financial statements required to be prepared at any given
period or at a financial reporting period without closing
the books of accounts. The following interim financial
statements shall be prepared and submitted quarterly with
the Notes to Financial Statements:
a.
b.
c.
Statement of Income and Expenses;

Balance Sheet; and
Statement of Cash Flows.
174
The interim financial statements shall be prepared

employing the same accounting principles used for
annual reports. Adjusting and closing journal entries
shall be prepared. However, only the adjusting journal
entries are recorded in the books of accounts. To
facilitate the preparation of the interim financial
statements, the use of the worksheet is recommended.
Sec. 82.
Worksheet. A worksheet is a tool
for accumulating and sorting information needed for the
preparation of the financial statements. It is a columnar
sheet used to adjust and close account balances in
preparation for the preparation of the financial
statements. The format of the worksheet shall be as
follows:
Agency Name
Worksheet
As of __________, 20__
State Post
Unadj
Adjuste
ment Clos
Bala
usted
d/Preof Closi
Acco
Adjust
ing
nce
Trial
Closing
Incom ng
unts
ments
Entri
She
Balanc
Trial
e and Trial
es
et
e
Balance
Expe Bala
nses nce
Tit Co
DC
Dr Cr Dr Cr
le de Dr. Cr. Dr. Cr. Dr. Cr. r. r. Dr. Cr. . . . .
175
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 accounts.
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 the unadjusted trial
balance.
e. Closing Entries debit and credit columns show
the amounts debited and credited to close the
nominal accounts.
f. Statement of Income and Expenses columns
show all the debit and credit amount balances
of the nominal accounts (subsidies, income and
expenses) and intermediate accounts.
g. Post-Closing Trial Balance columns show the
debit and credit amount balances of all accounts
after posting the closing entries.
176
h. Balance Sheet columns show all the debit and

credit amount balances of all real accounts in
the post-closing trial balance (assets, liabilities
and government equity).
Chapter 5. Responsibility Accounting
Sec. 83.
Responsibility
Accounting
Defined.
Responsibility accounting is a system that relates the
financial results to a responsibility center, which provides
access to cost and revenue information under the
supervision of a manager having a direct responsibility
for its performance. It is a system that measures the
plans (by budgets) and actions (by actual results) of each
responsibility center.
Sec. 84.
Responsibility Center Defined. It is a part,
segment, unit or function of a government agency,
headed by a manager, who is accountable for a specified
set of activities. Except for some, which derive most of
their income from 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 accessibility to cost
information and to facilitate cost monitoring at any given
period. While the use of Subsidiary Ledgers is sufficient
to control cost, it requires considerable time to
summarize the cost incurred by agency for its different
programs, projects, activities and offices/divisions,
177
hence, responsibility accounting shall be done only under

the computerized accounting system.
Sec. 85.
Objectives of Responsibility Accounting.
Responsibility accounting 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 making decisions for
future operations; and c) facilitate review activities,
monitoring the performance of each responsibility center
and evaluation of the effectiveness of agencys
operations.
Sec. 86.
Concepts of Responsibility Accounting. The
following are the concepts of responsibility accounting:
a. Responsibility accounting involves accumulating
and reporting data on revenues and costs on the
basis of the managers action who has authority
to make the day-to-day decisions about the
items;
b. Evaluation of a managers performance is based
on the matters directly under his control;
c. Responsibility accounting can be used at every
level of management in which the following
conditions exist:
178
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 managers
effectiveness in controlling the costs and
revenues.
d. The reporting of costs and revenues under

responsibility accounting differs 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
responsibility 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 the broad range of its
activity; (2) fewer costs are
controllable as one moves down to
179
lower
level
of
managerial
responsibility
because
of
the
managers decreasing authority.
b) Non-controllable costs are costs
incurred indirectly and allocated to a
responsibility level.
2.
Performa
nce reports either emphasize or include
only items controllable by individual
manager.
e. A responsibility reporting system involves the

preparation of a report for each level of
responsibility. Responsibility reports usually
compare actual costs with flexible budget data.
The reports show only controllable costs and no
distinction is made between variable and fixed
costs.
f. Evaluation of a managers performance for cost
centers is based on his ability to meet budgeted
goals for controllable costs.
Sec. 87.
Responsibility Center Code Structure. Each
government agency shall be assigned a responsibility
center code. The coding structure shall be as follows:
000-00000-000-000
Department/Agency/Province/City
180
Responsibility Area (CO/RO)
Sub-responsibility Area (District/ Division)

Sub-responsibility Area
(Office/Unit/Program/Project)
Account Code
Examples:
Example 1
181
000 -01000 -122 - 831

Department of ABC
Office of the Secretary
Central Office
None
Accounting Unit
Travelling Expense-Local
Example 2
000 - 06021 - 401 - 831
Department
Office of the Secretary
Regional Office III

Operating Unit I
Local Project Computerization
Travelling Expense - Local

182
Sec. 88.
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. 89.
Illustrative Accounting Entries in Regular
Agency (RA) Books.
a.
Illustrative Accounting Entries for

Typical Transactions of Central/Regional
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.
183
b.
Illustrative Accounting Entries for

Decentralized Agencies
Regional Offices and Operating Units receiving
NCA directly from the DBM and funding
checks from CO/RO shall be guided by the
illustrative accounting entries shown in Annex
B.
Sec. 90.
Illustrative Accounting Entries in National
Government (NG) Books.
National Government Agencies whose
income/collections are required to be recorded in the NG
Books and remitted to the National Treasury through
Authorized Government Depository Banks shall follow
the illustrative accounting entries shown in Annex C.
LEGEND: YELLOW MEANS LAST READ

RED MEANS NEEDS TO TAKE NOTE
184

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MANUAL ON THE

NEW GOVERNMENT ACCOUNTING SYSTEM

Sec. 1. Objectives of the Manual. The New

Uniform guidelines and procedures in

Sec. 3. Legal Basis. This Manual is prescribed by

accrual basis except for transactions where

Cash Disbursements Journal (CDJ)

Cash Journal (CJ)

the General Journal shall be used together with

Registry of Allotments and Obligations Capital Outlay (RAOCO)

Petty Cash Fund which shall be charged

n. Registry of Public Infrastructures/Registry

serviceable assets that are no longer being used

shall be accrued and recognized in the books of

the end of each month and any gain or loss on

Chapter 3. Accounting Systems

Budgetary Accounts System;

Sec. 6. Budgetary Accounts System.

INSERT GENERAL ACCOUNTING PLAN

Sec. 8. Agency Budget Matrix (ABM). The

Procedures for the Preparation of the

Based on the approved General

Initials under 'Prepared

Reviews and signs Prepared by

Approves/Signs the ABM and the

2. Registry of Allotments and Obligations Maintenance and Other Operating Expenses

Prepares ALOBS in two copies,

Reviews, checks the small box

Records the ALOBS in the

Registry of Allotments and

Forwards Copy 2 of the ALOBS

Based on the approved ABM

Reviews and signs Sub-ARO.

Approves the Sub-ARO.

Based on the approved SubARO, prepares ALOBS in two

Reviews, checks the small box

Records the ALOBS in the

Records in the logbook the

Receives the approved Sub-ARO

Prepares ALOBS in two copies,

Reviews the ALOBS based on

Records the ALOBS in the

Forwards copy 2 of the ALOBS

Procedures for the Recording of

Verifies availability of allotment

Reviews, checks the small box

Records the amount obligated

Receives original of ALOBS

refund of cash advance

B. INCOME/COLLECTIONS AND DEPOSITS

Subsidy Income from National Government

The specific income accounts of national

The descriptions of all the accounts and the

Accrual Method - Accrual

Modified Accrual Under

Cash Basis - Cash basis of

Sec. 19.Fines and Penalties. Fines and penalties,

Sec. 20.Other Receipts.

This transaction shall reduce the amount of

Sec. 22.Reporting of Collections and Deposits.

Records collections in the Cash

Prepares Deposit Slip (DS) in

Deposits collections with AGDB.