LIAB ILITI ES

CURRENT LIABILITIES

Sec. 141. Accounts Payable (401). This account is used to

record obligations/ indebtedness to contractors/suppliers arising from
the purchase of goods and services. This also includes those held
under escrow by government agencies and other obligations in
connection with the agencies’ operations, trade/business.

Debit this account for:

Payment/liquidation/settlement of obligations
Settlement thru offsetting of transactions
Reversions

Credit this account for:

Amount of liabilities arising from goods

delivered or services rendered
Excess payments received from private entities
Amount of liabilities arising from the
cancellation of checks issued for which
replacement shall be made

For purposes of identifying the accounts, the

following sub-accounts shall be used:

401-1 Trade
401-2 Non-
Trade

Sec. 142. Notes Payable (402). This account is used to

record liabilities arising from promissory notes and trade
acceptances.

Debit this account for:

Payments made to settle promissory notes and

trade acceptances
Reversions

86
 Credit this account for:

Value of promissory notes issued and trade

acceptances

Sec. 143. Loans Payable - Current, Domestic (403). This

account is used to record short term loans and current portion of
long-term indebtedness from domestic creditors.

Debit this account for:

Settlement or liquidation of loan

Credit this account for:

Receipt of the proceeds of short-term loan

Current portion of long-term indebtedness

Sec. 144. Interests Payable. (406) This account is used to

record charges imposed on the use of money belonging to others,
such as interest on bonds, provisional advances, treasury bills,
treasury notes, certificates of indebtedness, and other interest bearing
obligations.

Debit this account for:

Payments made to settle liabilities on interest

Credit this account for:

Amount of interest due

87
 Sec. 145. Guaranty Deposits Payable (408). This account is
used to record cash received but which are refundable/returnable to
the depositor (such as deposits on returnable containers, rental
deposits, etc.) or which have been collected or otherwise
accumulated to be remitted to third parties (such as funds held for
others) or may be received to cover possible future damage to
property.

Debit this account for:

Refund of unused guaranty deposits

Refund/Forfeiture/Application of retention
money/guaranty deposits

Credit this account for:

Deposits to guaranty performance of contracts

Contractors’ retention money

Sec. 146. Withholding Taxes Payable (410). This account

is used to record the liability for collections received or amounts
withheld from officers and employees or other parties for remittance
to the Bureau of Internal Revenue (BIR). This consists of the
National Internal Revenue taxes due to the National Government.

Debit this account for:

Remittance to the BIR of collections received or

amounts withheld.

Credit this account for:

Amount collected/withheld from officers and

employees
Amounts collected/withheld from private
individuals/companies on the purchase of
goods and services

For the purpose of identifying the classification of

withholding taxes payable the following sub-accounts shall
be used:

410 – 11 Individual Withholding Tax

88
 410 – 12 Contractors Tax
410 – 13 Franchise Tax
410 – 14 VAT
410 – 19 Other Taxes

Sec. 147. GSIS Payable (411). This account is used to

record the liability for collections received or amounts withheld from
officers and employees and government contribution for remittance
to the Government Service Insurance Systems (GSIS).

Debit this account for:

Remittance of collections received or amount

withheld for the account of the GSIS
Remittance of government contribution to the
GSIS

Credit this account for:

Amount collected/withheld from officers and

employees for the account of the GSIS
Amount representing government contribution to
the GSIS

To identify the nature of collection withheld,

subsidiary accounts shall be used as follows:

411 - 01 Life and Retirement Insurance Premiums

411 - 02 Optional Insurance Premiums
411 - 03 Salary Loan Installments
411 - 04 Policy Loan Installments
411 - 05 Optional Loan Installments
411 - 06 Real Estate Loan Installments
411 - 07 Emergency Loan Installments
411 - 09 Others

Sec. 148. PAG-IBIG Payable (412). This account is used to

record the liability for collections received or amounts withheld from
officers and employees and government share for remittance to the
Home Development Mortgage Fund (HDMF).

89
 Debit this account for:

Remittance of collections received or amounts

withheld for the account of the HDMF
Remittance of government contribution to
HDMF

Credit this account for:

Amounts collected/withheld from officers and

employees for the account of the HDMF
Amount representing government contribution to
the HDMF

To identify the nature of collection withheld,

subsidiary accounts shall be used as follows:

412 – 01 PAG-IBIG Contributions (Personal and

Government Share)
412 – 02 Multi-purpose Loan Installments
412 – 03 Housing Loan Installments
412 – 09 Others

Sec. 149. PHILHEALTH Payable (413). This account is

used to record the liability for collections received or amounts
withheld from officers and employees and government share for
remittance to the Philippine Health Insurance Corporation (PHIC).

Debit this account for:

Remittance of collections received or amounts

withheld for the account of the PHIC
Remittance of government contribution to the
PHIC

Credit this account for:

Amounts collected/withheld from officers and

employees for the account of PHIC
Amounts representing government contribution
to the PHIC

90
 Sec. 150. Performance/Bidders/Bail Bonds Payable (414).
This account is used to record the liability arising from receipt of
cash to guarantee performance of terms of contract, participation in
bidding and compliance with court orders.

Debit this account for:

Refund of bonds
Forfeiture in case of non-compliance

Credit this account for:

Cash Bond received to guarantee -

Performance of the terms of contract
Participation in bidding
Compliance with court orders

To identify the nature of collections withheld the

following sub-accounts shall be used:

414 – 01 Performance Bonds

414 – 02 Bidders Bonds
414 – 03 Bail Bonds

Sec. 151. Due to Officers and Employees (428). This

account is used to record amounts due to officers and employees of
the agency.

Debit this account for:

Payment or liquidation of obligations due to

officers and employees
Settlement thru offsetting of transactions

Credit this account for:

Unpaid salaries, fringe benefits and other

emoluments and other obligations due to
officials and employees of the agency

91
 Amount of liabilities arising from the
cancellation of checks issued to officers and
employees subject to replacement

Sec. 152. Due to Other Funds (429). This account is used

to record the amount payable to other funds maintained by an LGU.

Debit this account for:

Settlement of the liability

Adjustment

Credit this account for:

Liability to other funds maintained by an LGU.

Adjustment

Sec. 153 Due to NGAs (430). This account is used to

record the amount of liabilities due to national government agencies.

Debit this account for:

Payment received to settle or liquidate liabilities

due to NGAs
Settlement thru offsetting of inter-agency/inter-
office transactions
Reversion of Payables
Refund of excess transferred funds
Replacement of stale/cancelled checks

Credit this account for:

Receipt of goods delivered or services rendered

by national government agencies
Excess payments received from national
government agencies
Amounts due arising from inter-agency
transactions
Liabilities arising from the cancellation of
checks issued for which replacement shall be
made

92
 Sec. 154. Due to LGUs (431). This account is used to
record the amount of liabilities due to LGUs. These include
collections received or amounts withheld for the account of LGUs,
advances made by LGUs for specific purpose, shares of other LGUs
on Real Property Tax (basic and additional) and deposits of LGUs
with other local government treasuries.

Debit this account for:

Payment/liquidation/settlement of liabilities due

to LGUs
Remittances to the LGUs concerned of
collections received/withheld/ for the
account of another LGU
Reversion of payables
Replacement of stale/cancelled checks

Credit this account for:

Receipt of goods delivered or services rendered

by LGUs
Amounts received or collected for the account of
LGUs
Advances received from LGUs for specific
purposes or expenditures
Share of LGUs on Real Property Tax (basic and
additional)
Excess payments received from LGUs
Amount of liabilities arising from the
cancellation of checks issued for which
replacement shall be made

The following sub-accounts shall be used for other

local government units:

431 - 01 Provincial Government

431 - 02 City Government
431 - 03 Municipal Government
431 - 04 Barangay Government

93
 Sec. 155. Due to GOCCs (432). This account is used to
record liabilities to GOCCs. This includes funds advanced or
entrusted by government corporations to finance specific projects or
activities and amounts withheld from employees for the account of
government corporations other than GSIS and PHILHEALTH and
PAG-IBIG.

Debit this account for:

Payment/liquidation/settlement of liabilities due

to GOCCs
Liquidation of advances received from GOCCs
Remittance of amount withheld from employees
for the account of government corporations
other than GSIS and PHILHEALTH and
PAG-IBIG
Replacement of stale/cancelled checks

Credit this account for:

Receipt of goods delivered or services rendered

by GOCCs
Advances received from GOCCs for specific
purposes or expenditures
Amount withheld from employees for the
account of government corporations other
than GSIS and PHILHEALTH and PAG-
IBIG
Excess payments received from GOCCs
Liabilities arising from the cancellation of
checks issued for which replacement shall be
made

Sec. 156. Retirement Gratuity Benefits Payable (439).

This account is used to record claims of retired government officers
and employees for retirement gratuity benefits.

Debit this account for:

94
 Payment/settlement of retirement gratuity claims
of retired government officers and
employees

Credit this account for:

Amount set for claims of retirement gratuity of

retired government officers and employees

Sec. 157. Deferred Credits to Income (440). This

account is used to record amount collected for revenues not yet
earned.

Debit this account for:

Income earned during the period

Credit this account for:

Collections for –
Services not yet rendered
Goods not yet delivered
Income not yet earned

Sec. 158. Other Deferred Credits (441). This account is

used to record collections received for items not specifically included
in account “Deferred Credits to Income.”

Debit this account for:

Transfer to appropriate account

Credit this account for:

Collection for items not specifically stated in

account “Deferred Credits to Income”

Sec. 159. Deferred Real Property Tax Income (448).

This is the reciprocal account for Real Property Tax Receivable and
is used to record the basic real property tax due at the beginning of
the year.

Debit this account for:

95
 Recognition of RPT income upon collection of
Real Property Tax due

Credit this account for:

Real Property Tax due

Sec. 160. Deferred Special Education Tax (449). This is

the reciprocal account for Special Education Tax (SET) receivable
and is used to record the additional levy on real property tax due at
the beginning of the year.

Debit this account for:

Recognition of SET income upon collection of

additional levy on Real Property Tax

Credit this account for:

Special Education Tax due

Sec. 161. Other Payables (450). This account is used to

record all other current liabilities not falling under any of the specific
current liability account including the current portion of other long-
term liabilities, and other liabilities of the government payment of
which are held in escrow.

Debit this account for:

Payments made to settle/liquidate the liability

Credit this account for:

Amount collected/withheld from officers and

employees for the account of private
associations/entities
Amounts which had arisen from court order
Amounts for deposits held in escrow.
Current portion of other long-term liabilities

LONG-TERM LIABILITIES

96
 Sec. 162. Loans Payable, Long-Term Domestic (451).
This account is used to record long-term indebtedness, in cash or in
kind, from domestic creditors.

Debit this account for:

Transfer of the current portion of the loan to

Current Liabilities

Credit this account for:

Receipt of the proceeds of long-term loans from

domestic sources

Sec. 163. Mortgage Payable (453). This account is used to

record long-term indebtedness covered by a contract and secured by
a collateral to guarantee payment.

Debit this account for:

Settlement/payment of the loan

Credit this account for:

Amounts received in exchange of the collateral

Sec. 164. Bonds Payable-Long-Term, Domestic (454).

This account is used to record the amount of long-term indebtedness
to domestic creditors for bonds issued.

Debit this account for:

Settlement/payment of matured bonds

Credit this account for:

Bonds issued/floated

Sec. 165. Other Long –Term Liabilities (460). This

account is used to record all other long-term obligations not falling
under any of the long-term liability accounts.

Debit this account for:

97
 Settlement/Payment of other long-term liabilities

Credit this account for:

Set up of other long-term liabilities not classified

under specific accounts

OTHER LIABILITIES

Sec. 166. Other Liabilities (465). This account is used to

record the other liabilities which cannot be classified under the
specific liability accounts.

Debit this account for:

Payment of liabilities

Credit this account for:

Set up of liabilities not classified under specific

liability accounts

EQUITY

Sec. 167. Government Equity (501). This account

represents the difference between the assets and liabilities national
government agencies and local government units.

Debit this account for:

Transfer of completed, turned over and

discontinued public infrastructures to the
Registry of Public Infrastructures at end of
accounting period and/or full payment of loan
Closing of the debit balance of Invested Equity
account
Year-end closing of the debit balance of Retained
Operating
Surplus account

98
 Credit this account for:

Closing of the credit balance of Invested Equity

account
Year-end closing of the credit balance of Retained
Operating Surplus account

Sec. 168. Project Equity (502). This account represents the

equity of national government agencies, local government agencies,
government owned and controlled corporations, foreign funding
corporations and private individuals for funds granted to local
government agencies under specific conditions and/or for specific
purposes and projects. This account shall be used in the Trust Fund
books of LGUs only.

Debit this account for:

Transfer of completed projects to the General

Fund of LGUs
Closing of expenditures at year end or upon
project completion

Credit this account for:

Receipt of funds for specific purposes and

projects under the Trust Fund

For purposes of identifying the accounts, the

following sub-accounts shall be used:

502 – 01 National Government Agency

502 – 02 Local Government Unit
502 – 03 Government Owned and Controlled
Corporation
502 – 09 Others

INTERMEDIATE ACCOUNTS

Sec. 169. Cost of Goods Sold (531). This account is used to

record the cost of goods or merchandise sold in the course of
business operation of a government agency or local government unit

99
such as drugs and medicines, supplies and materials, accountable
forms with face value, etc.

Debit this account for:

Cost of merchandise/accountable forms sold

Credit this account for:

Year-end closing to Income and Expenses

Summary

Sec. 170. Income and Expense Summary (532). This

account is used as a summary account for subsidy received, revenues
earned and expenses incurred during the year.

Debit this account for:

Year-end closing of the balances of –

Expenses incurred during the year
Cost of Goods Sold
Year-end closing of the credit balance (net result)
of this account to Retained Operating
Surplus account

Credit this account for:

Year-end closing of the balance Revenue earned

during the year
Year-end closing of the debit balance (net result)
of this account to Retained Operating
Surplus account

Sec. 171. Prior Years’ Adjustments (533). This account is

used to record the adjustment of prior years’ transactions affecting
revenue and expenses and other adjustments which increase or
decrease the Retained Operating Surplus account of the Government.

Debit this account for:

Adjustment of excess revenue recorded in prior

years

100
 Payment of unrecorded expenses of prior years
Other adjustments of prior years’ transactions
which result in the decrease of the Retained
Operating Surplus account
Year-end closing of the debit balance (net result)
of this account to Retained Operating Surplus
account

Credit this account for:

Setting up of receivable account for

disallowances of prior years expenses
Collection of prior years’ disallowances and
refund of overpayments of expenses
pertaining to prior years
Other adjustments of prior years’ transactions
which result in the increase of the Retained
Operating Surplus
Year-end closing of the credit balance (net result)
of this account to Retained Operating
Surplus account

Sec. 172. Retained Operating Surplus (534). This account

reflects the net result of Income and Expense Summary and Prior
Years’ Adjustments accounts prior to closing to the Government
Equity account.

Debit this account for:

Year-end closing of the credit balance (net result)

of this account to Government Equity
account
Year-end closing of the debit balance (net result)
of Prior Years’ adjustments account

Credit this account for:

Year-end closing of the debit balance (net result)

of this account to Government Equity
account
Year-end closing of the credit balance of Prior
Years’ Adjustments account

101
 Sec. 173. Invested Equity (537). This account is used to
record the increases or decreases of equity resulting from donation or
transfer of property, plant and equipment, birth of work animals, and
discovery of mines and quarries.

Debit this account for:

Property, plant and equipment transferred to

national government agencies, local
government units and/or government
corporations
Property, plant and equipment donated to other
entities
Year-end closing to Government Equity account

Credit this account for:

Property, plant and equipment transferred from

national government agencies, local
government units and/or government
corporations
Property, plant and equipment received from
other entities as donations or contributions
Property, plant and equipment found at station
and those confiscated and used in the
operations of the agency
Increase in the value of fixed assets as a result of
appraisal
Offspring of work animals
Mines and quarries discovered and recorded in
the books
Adjustment
Year-end closing to Government Equity account

102