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5 Accounting for Disbursements and Related Transactions

Ch. 5 Accounting for Disbursements and Disbursement must be from a duly approved
Related Transactions payroll or DVs
Advances for Payroll account replaced
Disbursement activities starts from the receipt of Payroll Fund Account. This account is debited
Notice of Cash Allocation (NCA) from DBM to pay for the amount granted to regular disbursing
off/incur obligations officer for payment of salaries, wages, and other
Entry for receipt of NCA: benefits of officers and employees
Cash MDS, Regular XXX Advances to Officers and Employees
Subsidy from Natl Govt replaced Cash-Disbursing Officer or as Due
XXX from Officers and Employees. This account is
used for cash advances for travel and for special
Disbursement System purpose/time bound undertaking. It is credited
Disbursements for liquidation of advances upon completion.
- all cash paid out during a given period by Due from Officers and Employees account
cash or check; settlement of govt used to record claims from officers and
payables/obligations by cash or check employees for over payment, cash shortage, loss
- covered by Disbursement Voucher (DV) or of assets, and other bills issued by the agency
Petty Cash Voucher or Payroll and credited the same for collection of this
- Involves preparation and processing of DV; receivable.
preparation and issuance of check; payment
by cash; granting, utilization, and Cash Advances for Travel
liquidation/replenishment of cash advances. Accounted for as Advances to Officers and
Basic requirements applicable to all types of Employees
govt disbursement are as follows: Subject to liquidation upon completion
1. Existence of a lawful and sufficient allotment CA > travel expenses incurred - excess cash is
certified as available by the Budget Officer refunded and OR is issued to acknowledge the
2. Existence of valid obligation certified by Chief receipt thereof. Liquidation report is prepared as
Accountant basis for Journal Expense Voucher (JEV)
3. Legality of transactions and conformity with CA < travel expenses incurred Liquidation
laws, rules and regulations
report is prepared to liquidate the CA and
4. Approval of the expense by the Chief of
disbursement voucher shall be prepared to claim
Office or by its duly authorized
reimbursement of deficient amount.
5. Submission of proper evidence to establish
Disbursement Through Petty Cash Fund
the claim
Maintained under the imprest system
Head of Accounting unit to prepare Daily Cash
Fund should be sufficient for the non-recurring,
Position Report (COA Circular 2006-003)
emergency and petty expenses of the agency.
Disbursement by Checks Disbursed through the PCV approved by
Checks shall be drawn only on duly approved DV authorized officials and signed by payee to
or PCV and reported and recorded in books of acknowledge the amount received.
accounts only when actually released to OR or equivalent is attached to the PCV for
payees. documentation requirements.
Types of checks issued by Govt Agencies Adjustment is necessary at year end in order to
1. Modified Disbursement System (MDS) Checks report the expenses incurred and the actual size
issued by GAs chargeable against the of the petty cash fund. Without this adjustment,
account of the Treasurer of the Philippines; expenses will be understated and PCF is
Covered by NCA. overstated.
2. Commercial Checks issued by GAs
chargeable against the Agency Checking Inventory Accounting System
account with government servicing banks; COA Circular # 2005-002 dated Apr 14, 2005
Covered by income/receipts authorized to be provides that small tangible items with
deposited with authorized government estimated useful life of more than 1 year are
depository banks and funding checks recorded as inventories and shall be expensed
received. upon issuance. See list in book. Tangible assets
not included are considered as PPE and subject
Disbursements by Cash to depreciation.
To conform with COA rules and regulations
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 regarding defects and deficiencies and
period. Ex. Insurance, interest, rent. suggest corrective measures appropriately (if
Entry: Prepaid Insurance XX ratifiable). If not ratifiable, Head of Agency is
Cash XX notified within 24 hours.
After audit review, auditor to forward the
Ff mo: Insurance Expense XX contract, supporting documents, and
Prepaid Insurance XX checklist of documentary requirements to
Supplies and materials purchased from PCF are Technical Audit Specialist (TAS) of assigned
expensed immediately. auditing unit or to Regional Technical
PCF should not be used to purchase supplies for Services (RTSO).
stock. TAS to complete technical as follows:
Semi-expandable items are taken up as fixed Contract Amount Period
assets or inventory depending on its nature. <P5M 5 days
Note: Inventories-Semi Expandable Supplies P5M-20M 14 days
account is no longer used. >P20 21 days
Accounts payable is recognized upon receipt of
goods and services and credited when payment Construction Period Theory
is made Used in recording fixed assets acquired through
Accrued payable salaries and wages is construction
recognized at end of year for expenses already All expenses incurred during the construction
incurred but unpaid. period shall be capitalized. (includes: interest,
Perpetual inventory Method is used for license fees, etc)
purchased supplies and materials for stock, Bonus paid to the contractor for completing the
regardless if these were consumed within the work ahead of schedule shall be added to the
accounting period. total cost of the project
Perpetual Inventory Record is maintained for Liquidation charged to the contractor for delays
each item and should provide information for is deducted from total cost
recording receipts, issues, and balance on hand Accounts used: Construction in Progress Bldg &
usually in both units and Peso amounts. Other Structures during construction phase;
Moving average method of costing shall be used Buildings upon completion.
for costing the inventories. Provides new unit
cost after each purchase and or when items are Infrastructure Assets
issued/used. Used for roads, bridges, waterways, railways,
COA Circular # 2009-001 a copy of any PO etc.
irrespective of amount and each and every During construction period, costs of construction
supporting document shall within 5 working days is debited to Construction in Progress. This is
from issuance thereof be submitted to auditor credited upon completion and debited in asset as
concerned. Auditor to conduct canvass in case entered in a separate registry, Registry of Public
of doubt in prices provided. Infrastructures (RPI).
RPI is maintained according to classification to
Purchase and Construction of Fixed Assets record all infrastructures. Examples.
Charged against RAOMO Capital Outlay Registry of Public Infrastructure Bridges
Includes purchase price and all costs to bring Registry of Public Infrastructure Roads
them to location of use. Registry of Public Infrastructure Plazas,
Recorded in books after inspection and Monument, etc
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. Capital expenditure expenditure that benefits
Auditor to review within 5-20 days from current and future periods. Reported as asset
receipt. and capitalized
Review shall include evaluation of Revenue expenditure expenditure that benefits
requirement compliance, completeness of current period. It is expensed.
doc requirements, and evaluation of Construction or general repair of fixed assets
contractual covenants that are not life of asset is extended
disadvantageous to the govt.
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