Ch.
5 Accounting for Disbursements and Related Transactions
Ch. 5 Accounting for Disbursements and
Related Transactions
Disbursement activities starts from the receipt of
Notice of Cash Allocation (NCA) from DBM to pay
off/incur obligations
Entry for receipt of NCA:
Cash MDS, Regular XXX
Subsidy from Natl Govt
XXX
Disbursement System
Disbursements
- all cash paid out during a given period by
cash or check; settlement of govt
payables/obligations by cash or check
- covered by Disbursement Voucher (DV) or
Petty Cash Voucher or Payroll
- Involves preparation and processing of DV;
preparation and issuance of check; payment
by cash; granting, utilization, and
liquidation/replenishment of cash advances.
Basic requirements applicable to all types of
govt disbursement are as follows:
1. Existence of a lawful and sufficient allotment
certified as available by the Budget Officer
2. Existence of valid obligation certified by Chief
Accountant
3. Legality of transactions and conformity with
laws, rules and regulations
4. Approval of the expense by the Chief of
Office or by its duly authorized
representative
5. Submission of proper evidence to establish
the claim
Head of Accounting unit to prepare Daily Cash
Position Report (COA Circular 2006-003)
Disbursement by Checks
Checks shall be drawn only on duly approved DV
or PCV and reported and recorded in books of
accounts only when actually released to
payees.
Types of checks issued by Govt Agencies
1. Modified Disbursement System (MDS) Checks
issued by GAs chargeable against the
account of the Treasurer of the Philippines;
Covered by NCA.
2. Commercial Checks issued by GAs
chargeable against the Agency Checking
account with government servicing banks;
Covered by income/receipts authorized to be
deposited with authorized government
depository banks and funding checks
received.
Disbursements by Cash
To conform with COA rules and regulations
Disbursement must be from a duly approved
payroll or DVs
Advances for Payroll account replaced
Payroll Fund Account. This account is debited
for the amount granted to regular disbursing
officer for payment of salaries, wages, and other
benefits of officers and employees
Advances to Officers and Employees
replaced Cash-Disbursing Officer or as Due
from Officers and Employees. This account is
used for cash advances for travel and for special
purpose/time bound undertaking. It is credited
for liquidation of advances upon completion.
Due from Officers and Employees account
used to record claims from officers and
employees for over payment, cash shortage, loss
of assets, and other bills issued by the agency
and credited the same for collection of this
receivable.
Cash Advances for Travel
Accounted for as Advances to Officers and
Employees
Subject to liquidation upon completion
CA > travel expenses incurred - excess cash is
refunded and OR is issued to acknowledge the
receipt thereof. Liquidation report is prepared as
basis for Journal Expense Voucher (JEV)
CA < travel expenses incurred Liquidation
report is prepared to liquidate the CA and
disbursement voucher shall be prepared to claim
reimbursement of deficient amount.
Disbursement Through Petty Cash Fund
Maintained under the imprest system
Fund should be sufficient for the non-recurring,
emergency and petty expenses of the agency.
Disbursed through the PCV approved by
authorized officials and signed by payee to
acknowledge the amount received.
OR or equivalent is attached to the PCV for
documentation requirements.
Adjustment is necessary at year end in order to
report the expenses incurred and the actual size
of the petty cash fund. Without this adjustment,
expenses will be understated and PCF is
overstated.
Inventory Accounting System
COA Circular # 2005-002 dated Apr 14, 2005
provides that small tangible items with
estimated useful life of more than 1 year are
recorded as inventories and shall be expensed
upon issuance. See list in book. Tangible assets
not included are considered as PPE and subject
to depreciation.
 Ch. 5 Accounting for Disbursements and Related Transactions

Asset method is followed in recording Auditor to call managements attention

expenditures apply to more than one accounting
period. Ex. Insurance, interest, rent.
Entry: Prepaid Insurance XX
Cash XX
Ff mo: Insurance Expense XX
Prepaid Insurance XX
Supplies and materials purchased from PCF are
expensed immediately.
PCF should not be used to purchase supplies for
stock.
Semi-expandable items are taken up as fixed
assets or inventory depending on its nature.
Note: Inventories-Semi Expandable Supplies
account is no longer used.
Accounts payable is recognized upon receipt of
goods and services and credited when payment
is made
Accrued payable salaries and wages is
recognized at end of year for expenses already
incurred but unpaid.
Perpetual inventory Method is used for
purchased supplies and materials for stock,
regardless if these were consumed within the
accounting period.
Perpetual Inventory Record is maintained for
each item and should provide information for
recording receipts, issues, and balance on hand
usually in both units and Peso amounts.
Moving average method of costing shall be used
for costing the inventories. Provides new unit
cost after each purchase and or when items are Infrastructure Assets
issued/used.
COA Circular # 2009-001 a copy of any PO
irrespective of amount and each and every
supporting document shall within 5 working days
from issuance thereof be submitted to auditor
concerned. Auditor to conduct canvass in case
of doubt in prices provided.
Purchase and Construction of Fixed Assets
Charged against RAOMO Capital Outlay
Includes purchase price and all costs to bring
them to location of use.
Recorded in books after inspection and
acceptance of delivery
COA Circular # 2009-001 within 5 working days General Repair/Construction of Fixed Assets
from execution of contract, a copy of it is by Administration
furnished to the auditor.
Auditor to review within 5-20 days from
receipt.
Review shall include evaluation of Revenue expenditure expenditure that benefits
requirement compliance, completeness of
doc requirements, and evaluation of Construction or general repair of fixed assets
contractual covenants that are not
disadvantageous to the govt.
regarding defects and deficiencies and
suggest corrective measures appropriately (if
ratifiable). If not ratifiable, Head of Agency is
notified within 24 hours.
After audit review, auditor to forward the
contract, supporting documents, and
checklist of documentary requirements to
Technical Audit Specialist (TAS) of assigned
auditing unit or to Regional Technical
Services (RTSO).
TAS to complete technical as follows:
Contract Amount Period
<P5M 5 days
P5M-20M 14 days
>P20 21 days
Construction Period Theory
Used in recording fixed assets acquired through
construction
All expenses incurred during the construction
period shall be capitalized. (includes: interest,
license fees, etc)
Bonus paid to the contractor for completing the
work ahead of schedule shall be added to the
total cost of the project
Liquidation charged to the contractor for delays
is deducted from total cost
Accounts used: Construction in Progress Bldg &
Other Structures during construction phase;
Buildings upon completion.
Used for roads, bridges, waterways, railways,
etc.
During construction period, costs of construction
is debited to Construction in Progress. This is
credited upon completion and debited in asset as
entered in a separate registry, Registry of Public
Infrastructures (RPI).
RPI is maintained according to classification to
record all infrastructures. Examples.
Registry of Public Infrastructure Bridges
Registry of Public Infrastructure Roads
Registry of Public Infrastructure Plazas,
Monument, etc
Capital expenditure expenditure that benefits
current and future periods. Reported as asset
and capitalized
current period. It is expensed.
life of asset is extended
 Ch. 5 Accounting for Disbursements and Related Transactions

Construction Materials Inventory account It is incorrect to maintain a single

used for materials purchased account for land and building because
land does not depreciate
Purchase of Land and Building If land with an old building, which is to be
When land and building are purchased at a demolished, is a acquired at a single cost, the
single cost, the basket price is allocated to single cost is allocated to land account only.
the land and building on the basis of their fair
value or appraised value.
Assessed value not FV, but may be used for
purpose of allocation