A modified accrual method shall be used where expenses shall be recognized when incurred and income shall be in accrual

basis except for the transactions where accrual basis is impractical or when other methods may be require by law.

Separate fund accounting shall be done only when specifically required by law or by a donor agency or otherwise necessitated by circumstances subject to prior approval of the Commission.

-Special accounts maintained in the General Fund shall be supported by subsidiary ledgers for the following: Public utilities and other economic enterprises; Loans, interest, bond issued and other contribution for specific purpose; Development projects funded from the share in International Revenue collection; and Other special accounts, which may be created by law or ordinance

a. b. c. d.

A new coding structure and a new chart of accounts with three-digit account numbering system shall be adopted.

Journals Cash Receipt Journal (CRL) Cash Disbursement Journal (CDJ) Check Disbursement Journal (CkDJ) General Journal

Ledgers General Ledgers Subsidiary Ledgers -Cash -Receivables -Inventories -Investments - PPE -Liabilities -Income -Expenses

1)
2) 3)

In addition to the preceding records, the treasurers and disbursing officers, however, shall maintain their respective cash records such as: Cash Book- Cash in Treasury Cash Book- Cash in Bank Cash Book- Cash Advances
The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD) daily and the Report of Accountability for Accountable Forms (RAAF) monthly.

1. 2.

3.

The local Government Units shall prepare the financial statements such as: Balance Sheet Statements of Income and Expenses Statement of cash Flows Notes to Financial Statements, being integral part of the financial statements shall accompany the above statements

Journal entry shall no longer be prepared to record the appropriations, receipt of allotments and incurrence of obligations. In lieu of this, separate registries shall be maintained by the accounting unit to control the appropriations, allotments and obligations for each of the classes of expenditure namely: Registry of Appropriations, Allotments and Obligations Capital Outlay (RAAOCO) Registry of Appropriations, Allotments and Obligations Maintenance and other Expenses (RAAOMO) Registry of Appropriations, Allotments and Obligations Personal Services (RAAOPS) Registry of Appropriations, Allotments and Obligations Financial Expenses (RAAFE)

Under new accounting system financial expenses such as bank charges, interest expenses, commitment fees and other related expenses shall no longer be classified as maintenance and other operating expenses.

It shall be recorded using the perpetual inventory system. Regular purchases shall be coursed through the inventory account and issuance thereof shall be recorded as the transactions take place, except those purchased out of petty cash fund, which shall be for immediate use shall be charged to expense account.

However, there are tangibles account with serviceable life of more than one year but small enough to be considered as PPE. To address this issue, the Commission prescribed the following policies: Small tangible items with estimated useful life of more than one year shall be recorded as Inventories upon acquisition and expense upon issuance Other tangible assets not included in the list shall be classified as PPE subject to depreciation

Inventories shall be valued at cost and computed using the moving average method which is a method of calculating the value of inventory based on weighted average on the date of issue.

The accounting unit shall maintain Supplies Ledger Cards by stock number and Plant, Property and Equipment Ledger cards by category of Assets

The construction period theory shall be applied for costing purposes. Bonus paid to the contractor for early completion of work shall be added to the cost of project. Liquidated damages charged and paid for the contractor shall be deducted from the cost of the asset and not as an income. Any related expenditures incurred during the construction period shall be capitalized.

Registry of Public Infrastructures (RPI) shall be maintained according to classifications. These are the following: Registry of Public Infrastructures- Bridges Registry of Public Infrastructures- Roads Registry of Public Infrastructures- Plazas etc While under the construction, these infrastructures shall be recorded under the Construction in Progress account. Upon completion, it shall be recorded as Public Infrastructures and shall be transferred to the respective registry at the end of the year. However, completed Public Infrastructures funded out of loan shall be retained in the books of accounts until the loan is fully paid.

Depreciable assets shall be depreciated using the straight line method. A residual value equal to 10% of its cost shall be maintained. Depreciation shall start on the second month after the purchase or completion of the property, plant and equipment. Public Infrastructures shall not be charged any depreciation.

Assets declared by proper authorities as obsolete and unserviceable, including assets no longer used, shall be reclassified as Other Assets separate from inventory and plant, property and equipment account

In order to have fair valuation of receivables, allowance for doubtful accounts shall be established and shall be provided only for trade receivables.

Contingent

accounts shall no longer used. All financial transactions shall be recorded using the appropriate accounts. Cash shortages and disallowance shall be recorded under receivable accounts.

Liability

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

Whenever

applicable and appropriate, interest income and/or expenses shall be accrued and recognized in the books of accounts.

All borrowings and loans incurred shall be recorded directly to the appropriate liability accounts.

Corollary

entries and negative entries shall no longer be used. Acquisition/Disposition of Assets shall be debited or credited directly to the appropriate asset accounts.

The local government budget primarily consist of two parts:

1.

2.

The estimates of income certified collectible by the treasurer; and The total appropriations covering the current operating expenditures and the capital outlays.

The local treasurer shall submit to their local chief executive a certified statement covering the income and expenditure pertaining to the preceding fiscal year; the actual income and expenditures of the first three quarters and the estimated income for the ensuing year. The local treasurer also certifies to the reasonable probability of realizing the estimates of income for the issuing year. On the hand, each head of office shall submit a statement of the proposed expenditures recommended by him for his office of the local chief executive. Upon receipt of the statements of income and expenditures and the budget proposals, the local chief executive prepares the budget for the issuing year and submits the same to the local council on or before the deadline set for the submission of the budget.

On or before the end of the fiscal year, the local council approves through the enactment of an appropriate ordinance, the annual budget for each fund of the local government on the basis of the statement of certified estimated income and budget proposals submitted by the local chief executive. The approval by the council of local government unit requires the affirmative votes of the majority of all members thereof.

As the chief financial officer, the treasure of the local government unit shall provide technical in the staff services in execution and accountability phases of the budget process. The projects and activities under each program are performed and pursued in accordance with the functions of the government unit to realize expected results.

Changes in the annual budget may be made within the fiscal year by the way of the supplemental budget, which is enacted in the same manner as the annual budget. Whenever any change is made in the budget, the supplemental appropriation ordinance clearly indicates the various items of appropriations effected and the reason for change.

Whenever the local legislative body fails to pass the annual budget before the beginning of the ensuing fiscal year or when the enacted budget is declared unenforceable by the reviewing officer, the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations and essential operating expenses authorized in the annual budget are deemed re-enacted. The disbursements of funds is in accordance with said preceding year budgets until a new budget or revised budget meeting the objections of reviewing officer is approved.

In the implementation of a re-acted budget, the local treasurer excludes from the estimates of income for the preceding year those realized from non-recurring sources should be revised income estimates be less than the aggregate re-enacted appropriations, the treasure shall advise the local council and the legislative body shall make the necessary adjustments within 10 days from the receipt of such advice.

The fundamental state accounting principles and procedures used in recording the financial transactions and operations of the local government unit is the same to the national government accounting. Accounting is one of the principal devices through which control of budget execution is exercised. The estimated revenues, receipts and appropriations, in the amount approved by the local legislative body and confirmed by the reviewing officers, are recorded in the books, where these are compared with the actual developments during the period.

1.

2.

3.

Appropriations- it refers to the authorization made by ordinance, directing the payment of goods and services fro the local government funds under specified conditions or for specific purposes. Allotments- is the authorization issued by the local chief executive to the local government unit, which allows it to incur obligations fro specified amounts within the appropriation of the ordinance. Obligations- it refers to the amounts committed to be paid by the government unit for any lawful act made by an accountable officer for and in behalf of the local government unit concerned.