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MISCELLANEOUS EXPENSES

These are the transactions that are unique and not recurring in the ordinary course of
government operations. These seldom take place or should not happen at all.

1. Issuances of office supplies, equipment, and materials. To be recorded it shall be supported by


a Monthly Report of Supplies and Materials Issued (MRSMI) prepared by the property custodian
regularly. This summarizes all requisitioned and issued inventory items to various requisitioner.
For issued equipment to an employee, a Memorandum Receipt (MR) must be issued to evidence
that the recipient must keep the property with utmost care since it will be his accountability and
responsibility. The MR is renewable every 3 years to update the current ownership if ever there
are transfers made.

Office supplies expense 50203010 xx


Office supplies inventory 10404010 xx

2. Depreciation for Property, Plant, and Equipment. The cost 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 assets over
its useful life.

To compute and record depreciation,


(a) shall use straight-line method.
(b) shall start on the second month after purchase of the property.
(c) apply 5% residual value of the purchase cost.
(d) serviceable assets that are no longer used shall not be charged any depreciation.

Annual Depreciation = Asset Cost less Estimated Residual or Salvage Value


Estimated Useful Life

where: asset cost – purchase or acquired value of the asset


estimated salvage value – 5 percent of the asset cost
estimated useful life – estimated number of years the asset shall be
used as determined by the Commission on Audit
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Example #1.

DSWD purchased an equipment costing P 25 000 last 05/12/2015. The usefulness of the
equipment was determined for 6 years. Compute the depreciation as of 09/30/2018. No
depreciation was recognized and recorded in prior years from the date of purchase.

Depreciation = P 25 000 – (5 % × P 25 000) = P 4 750 per year


5 years

= P 4 750 ÷ 12 months = P 395.83 per month

Depreciation as of 09/30/2018:

2015 = 7 months × P 395.83 = P 2 770.81


2016 – 2017 = P 4 750 × 2 years = P 9 500.00
2018 = P 395.83 × 9 months = P 3 562.47
Depreciation – Machinery and equipment 50501050 3 562.47
Accumulated surplus 30101010 12 270.81
AD – Office equipment* 10605021 15 833.28
*Accumulated depreciation – Office equipment

Example #2.

On December 31, 2018, the agency transfers the equipment to other region.

Requirement:
(1) Journal entry recording the transferred equipment.
(2) Journal entry to be made by the receiving agency.

Transferor Book

Accumulated surplus 30101010 12 270.81


AD – Office equipment 10605021 12 729.19
Office equipment 10605020 25 000.00
To record the transfer

Transferee Book

Office equipment 10605020 12 270.41


Accumulated surplus 30101010 12 270.41
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3. Bad Debts. Bad debts shall be recorded for uncollectibles from trade/business receivables. The
determination of bad debts expense is derived from percentage and aging of accounts
receivables as follows:

Age of accounts Percentage

1 to 60 days 1%
61 to 180 days 2%
181 days to 1 year 3%
More than one year 5%

Example #3.

A national government agency has a total accounts receivable of P 50 000 which remained
outstanding for 3 years and was approved by COA for write-off.

(1) To record the corresponding allowance for bad debts

Impairment loss – loans and receivables 50503020 2 500


Allowance for impairment – A/R 10301011 2 500

(2) To record the write-off

Allowance for impairment – A/R 10301011 2 500


Accounts receivable 10301010 2 500

4. Sale of assets no longer used in operation:

Typewriter – Cost P 4 500 P 4 500


Accum. dep’n 4 050 4 050
Book value 450 450
Selling price 400 400
Gain (Loss) P ( 50) P 50
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(a) Sale at a loss

Cash – collecting officer 10101010 400


AD – Office equipment 10605021 4 050
Other losses 50504990 50
Office equipment 10605020 4 500
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To remit:

Cash – T/A D, Regular* 10104010 400


Cash – collecting officer 10101010 400
*Cash – Treasury/Agency Deposit, Regular

Accumulated surplus 30101010 400


Cash – T/A D, Regular 10104010 400

(b) Gain on sale

Cash – collecting officer 10101010 500


AD – Office equipment 10605021 4 050
Office Equipment 10605020 4 500
Other Gains 40501990 50

To remit:

Cash – T/A D, Regular 10104010 500


Cash – collecting officer 10101010 500

Accumulated surplus 30101010 500


Cash – T/A D, Regular 10104010 500

5. Accounting for overpayments. Sometimes overpayments or even double payment of


expenditures do happen in agencies. These could be avoided with proper controls but some
could not be avoided because of built-in procedures. One example is the payment of payroll.
Payrolls are prepared in advance and some agencies pay their employees through the banking
system (ATM). All these were done before reports of attendance were submitted, making it
impossible to know the exact amount to be paid in case there were absences without pay during
the pay periods. In case of overpayments, refunds shall be demanded of the employees
concern.

Refund of overpayment taken up as receivable:

Due from Officers and employees 10305020 xx


Salaries and wages-regular 50101010 xx

Cash – collecting officer 10101010 xx


Due from Officers and employees 10305020 xx

Cash – T/A D, Regular 10401010 xx


Cash-collecting officer 10101010 xx
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Accumulated surplus 30101010 xx


Cash – T/A D, Regular 10401010 xx

6. Accounting for Cash Overage. In case the cash examination of the auditor disclosed an
overage, 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.

To take up cash overage discovered during cash examination, P 500.00.

Cash – collecting officer 10101010 500


Other business income 40202990 500

To remit

Cash – T/A D, Regular 10401010 500


Cash – collecting officer 10101010 500

7. Accounting for stale checks. A check may be cancelled when it becomes stale. The depository
bank considers a check stale, if it has been outstanding for over six months from date of issue or
as prescribed.

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 maybe issued upon submission of 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.

Stale MDS checks issued in the current year for replacement, P 15 000.

Check cancellation:

Cash – MDS, Regular 10104040 15 000


Accounts payable 20101010 15 000

Adjust obligation (check what type of expenditure being paid and the RAOD).
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Check Replacement: (If replaced, no adjustment in the obligation.)

Accounts payable 20101010 15 000


Cash – MDS, Regular 10104040 15 000

Stale MDS checks issued in prior years for replacement:

Check cancellation:

Accumulated surplus 30101010 15 000


Accounts payable 20101010 15 000

Check Replacement:

Accounts payable 20101010 15 000


Cash – MDS, Regular 10104040 15 000

Stale commercial checks issued in the current year and prior years for replacement, P 5 000.00.

Check cancellation:

CIB – LCCA 10102020 5 000


Accounts payable 20101010 5 000

Check Replacement:

Accounts payable 20101010 5 000


CIB – LCCA 10102020 5 000

8. Accounting for loss of cash and property. This 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 and 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, et cetera, 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 or request for relief from accountability.

9. Grant of Relief from Accountability. When a request for relief from accountability for shortage 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
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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 AO. 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, et
cetera, 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 is denied, the loss shall be taken as
receivable from the accountable officer and shall be credited to the appropriate asset account.

10. Accounting for Disallowance. 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-Disallowance/Charges and credit the appropriate expense account for the current
year or Prior Year’s Adjustment account if pertaining to expenses of previous years.

Cash settlement for disallowances shall be acknowledged through the issuance of an official
receipt and reported by the cashier in the RCD.

BANK RECONCILIATION STATEMENT

The preparation of the bank reconciliation statements for “Cash in Bank” and “Cash – Modified
Disbursement System (MDS)” accounts including the proposed adjusting entries.

Definition of Terms:

(1) Bank charges. Charges imposed by the bank for various services rendered excluding
interest charges. This also includes cost of checkbooks, penalties and surcharges on
overdrafts.

(2) Bank Reconciliation. A settlement of differences contained in the bank statement and the
cash account in the agency’s/entity’s books of accounts.
(3) Bank Statement. It reflects the transactions in the agency’s/entity’s (depositor’s) bank
account for a period such as deposits made to the account as well as checks/ADAs
drawn on the account, bank charges, returned items, et cetera.

(4) Canceled Check/ADA. Checks/ADAs issued and chargeable to the agency bank
account but was later voided due to expiration of validity, and other valid reasons.

(5) Credit Memorandum. A document issued by the bank informing an increase in the
depositor’s (agency’s/entity’s) account, such as previous bank debit errors and
collection directly deposited to the agency’s/entity’s bank account.

(6) Debit Memorandum. A document issued by the bank informing a decrease in the
account, such as previous bank credit errors or service charges and fees.
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(7) Deposits–in–Transit. Amounts of agency/entity deposits in the bank but which are yet to
be recorded by the bank until the next period. These usually pertain to late deposits in
the last day of business for a period.

(8) Lapsed NCAs. NCAs which are no longer valid or its validity has expired but remain
unadjusted by the bank or the agency/entity.

(9) Notice of Cash Allocation. Authority issued by the DBM to central, regional and
provincial offices and operating units to cover the cash requirements of the
agency/entity.

(10) Outstanding Checks. Checks the agency/entity has issued and recognized but which
have not been presented to the bank for payment.

(11) Returned Check. A check returned by the bank due to errors or deficiencies in the
maker’s or agency’s/entity’s account.

(12) Unrecorded Deposits. Collections of the agency/entity which are directly deposited by
the debtor/client to the bank account of the agency/entity but remain unrecorded by the
agency/entity as at the period under reconciliation.

OBJECTIVES.

The Bank Reconciliation Statement (BRS) shall be prepared in order to:

(a) check correctness of both the bank’s and agency’s/entity’s records,


(b) serve as a deterrent to fraud, and
(c) enable the agency/entity or bank to take up charges or credits recognized by the bank
or agency/entity but not yet known to the agency/entity or bank.

This shall be used in the reconciliation of bank and treasury accounts maintained with
Government Servicing Bank (GSB).

Method of Bank Reconciliation.

The monthly BRS shall be prepared by the chief accountant /designated staff for each of the
bank accounts maintained by the agency/entity using the Adjusted Balance Method. Under
this method, the book balance and the bank balance are brought to an adjusted cash
balance that must appear on the Statement of Financial Position.
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Illustrative Accounting Entries for Adjustments in the Bank Reconciliation Statement


for “Cash-Modified Disbursement System (MDS)” Accounts

The illustrative accounting entries for the adjustments are as follows:

(a) Unrecognized or understatement of notice of cash allocation (NCA) for regular and special
account with allotment release order.

Cash – MDS, Regular 10104040 xx


(or Cash – MDS, Special Account) 10104050 xx
(or Cash – MDS, Trust) 10104060 xx
Subsidy from National Government 40301010 xx

(b) Unrecognized/Understatement of NCA for special account without allotment release order
and trust account.

Cash – MDS, Special Account 10104040 xx


(or Cash- MDS, Trust) 10104050 xx
Cash – T/A D, Special Account 10104020 xx
(or Cash – T/A D, Trust) 10104030 xx

(c) Cancelled MDS checks/ADAs (without intention to replace).

Cash – MDS, Regular 10104040 xx


(or Cash – MDS, Special Account) 10104050 xx
(or Cash – MDS, Trust) 10104060 xx
Expenses or other appropriate account ×××××××× xx

(d) Understatement of “Cash in bank” account due to erroneous recording of amount of checks
issued.

Cash – MDS, Regular 10104040 xx


(or Cash- MDS, Special Account) 10104050 xx
(or Cash- MDS, Trust) 10104060 xx
Accounts payable or Other liabilities ×××××××× xx
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(e) Lapsed NCA or unused NCA at year–end.

For regular and special account with allotment release order,

Subsidy from National Government 40301010 xx


Cash- MDS, Regular 10104040 xx
(or Cash- MDS, Special Account) 10104050 xx

For regular and special account without allotment release order and trust account,

Cash – T/A D, Special Account 10104020 xx


(or Cash – T/A D, Trust) 10104030 xx
Cash – MDS, Regular 10104040 xx
(or Cash – MDS, Special Account) 10104050 xx

(f) Overstatement of “Cash in Bank” account due to erroneous recording of the amount of
checks issued.

Expenses or A/P or Other liabilities ×××××××× xx


Cash – MDS, Regular 10104040 xx
(or Cash – MDS, Special Account) 10104050 xx
(or Cash- MDS, Trust) 10104060 xx

For regular and special account with allotment release order,

Subsidy from National Government 40301010 xx


Cash – MDS, Regular 10104040 xx
(or Cash – MDS, Special Account) 10104050 xx

For regular and special account without allotment release order and trust account,

Cash – T/A D, Special Account 10104020 xx


(or Cash – T/A D, Trust) 10104030 xx
Cash – MDS, Regular 10104040 xx
(or Cash – MDS, Special Account) 10104050 xx

(g) Bank charges.

Bank charges or Any appropriate account ×××××××× xx


Cash – MDS, Regular 10104040 xx
(or Cash- MDS, Special Account) 10104050 xx
(or Cash- MDS, Trust) 10104060 xx

. . . nothing follows . . .

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