Ngas Vol 1 To 6 Acctng Policies

MANUAL ON THE
NEW GOVERNMENT ACCOUNTING SYSTEM
For National Government Agencies
ACCOUNTING POLICIES
Volume I
Chapter 1. Introduction
Sec. 1. Objectives of the Manual. The New

Government Accounting System (NGAS) Manual
presents the basic policies and procedures; the new
coding system; the accounting systems, books, registries,
records, forms, reports, and financial statements; and
illustrative accounting entries to be adopted by all
national government agencies effective January 1, 2002.
The objectives of the Manual are to prescribe the
following:
a. Uniform guidelines and procedures in

accounting for government funds and
property;
b. New coding structure and chart of accounts;
c. Accounting books, registries, records, forms,
reports and financial statements; and
d. Accounting entries.
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Sec. 2. Coverage. This Manual shall be
used by all national government agencies.
Sec. 3. Legal Basis. This Manual is prescribed by

the Commission on Audit pursuant to Article IX-D,
Section 2 par. (2) of the 1987 Constitution of the
Republic of the Philippines which provides that:
“The Commission on Audit shall have

exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and
examination, establish the techniques and
methods required therefor, and promulgate
accounting and auditing rules and regulations,
including those for the prevention and
disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures, or uses of government funds and
properties". (underscoring supplied)
Chapter 2. Basic Features and Policies
Sec. 4. Basic Features and Policies. The NGAS

has the following basic features and policies, to wit:
a. Accrual Accounting. A modified accrual basis

of accounting shall be used. Under this method,
2
all expenses shall be recognized when incurred
and reported in the financial statements in the
period to which they relate. Income shall be on
accrual basis except for transactions where
accrual basis is impractical or when other
methods are required by law.
b. One Fund Concept. This system adopts the

one fund concept. Separate fund accounting
shall be done only when specifically required
by law or by a donor agency or when otherwise
necessitated by circumstances subject to prior
approval of the Commission.
c. Chart of Accounts and Account Codes. A

new chart of accounts and coding structure
with a three-digit account numbering system
shall be adopted. (See Volume III, The
Chart of Accounts)
d. Books of Accounts. All national agencies shall

maintain two sets of books, namely:
Regular Agency (RA) Books. These

shall be used to record the receipt and
utilization of Notice of Cash Allocation (NCA)
and other income/receipts which the agencies
are authorized to use and to deposit with
Authorized Government Depository Bank
(AGDB) and the National Treasury. These shall
consist of journals and ledgers, as follows:
3
Journals
 Cash Receipts Journal (CRJ)
 Cash Disbursements Journal (CDJ)
 Check Disbursements Journal (CkDJ)
 General Journal (GJ)
Ledgers
 General Ledger (GL)
 Subsidiary Ledgers (SL) for:
 Cash
 Receivables
 Inventories
 Investments
 Property, Plant and Equipment
 Construction in Progress
 Liabilities
 Income
 Expenses
National Government (NG) Books.

These shall be used to record income which the
agencies are not authorized to use and are
required to be remitted to the National
Treasury. These shall consist of:
 Cash Journal (CJ)

 General Journal (GJ)
 General Ledger (GL)
 Subsidiary Ledger (SL)
4
With the implementation of the
computerized agency accounting system, only
the General Journal shall be used together with
the ledgers by both books.
e. Financial Statements. The following

statements shall be prepared:
 Balance Sheet
 Statement of Government Equity
 Statement of Income and Expenses
 Statement of Cash Flows
Notes to Financial Statements shall

accompany the above statements.
f. Two-Money Column Trial Balance. The two

- money column trial balance showing the
account balances shall be used.
g. Allotment and Obligation. Obligation

accounting is modified to simplify procedures
in the incurrence and liquidation of obligations
and the recording of the budgetary accounts
(allotments and obligations incurred and
liquidated). Separate registries shall be
maintained to control the allotments and
obligations for each of the four classes of
allotments, namely:
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 Registry of Allotments and Obligations -
Capital Outlay (RAOCO)
Maintenance and Other Operating
Expenses (RAOMO)
Personal Services (RAOPS)
 Registry of Allotments and Obligations-
Financial Expenses (RAOFE).
h. Notice of Cash Allocation (NCA). The receipt

of NCA by the agency shall be recorded in the
books as debit to account “Cash-National
Treasury, Modified Disbursement System
(MDS)” and credit to account “Subsidy Income
from National Government”.
i. Financial Expenses. Financial expenses such

as bank charges, interest expenses, commitment
charges and other related expenses shall be
separately classified from Maintenance and
Other Operating Expenses (MOOE).
j. Perpetual Inventory of Supplies and

Materials. Supplies and materials purchased
for inventory purpose shall be recorded using
the perpetual inventory system. Regular
purchases shall be coursed thru the inventory
account and issuances thereof shall be recorded
as they take place except those purchased out of
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Petty Cash Fund which shall be charged
directly to the appropriate expense accounts.
k. Valuation of Inventory. Cost of ending

inventory of supplies and materials shall be
computed using the moving average method.
l. Maintenance of Supplies and Property, Plant

and Equipment Ledger Cards. For
appropriate check and balance, the Accounting
Units of agencies, as well as the Property
Offices, shall maintain Supplies Ledger
Cards/Stock Cards by stock number and
Property, Plant and Equipment Ledger
Cards/Property Cards by category of property,
plant and equipment, respectively.
m. Construction of Assets. For assets under

construction, the Construction Period Theory
shall be applied for costing purposes. Bonus
paid to the contractor for completing the work
ahead of time shall be added to the total cost of
the project. Liquidated damages charged and
paid for by the contractor shall be deducted
from the total cost of the project. Any related
expenses incurred during the construction of the
project, such as taxes, interest, license fees,
permit fees, clearance fee, etc. shall be
capitalized, and those incurred after the
construction shall form part of operating cost.
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n. Registry of Public Infrastructures/Registry
of Reforestation Projects. For agencies that
construct public infrastructures, such as roads,
bridges, waterways, railways, plaza,
monuments, etc., and invest on reforestation
projects, a Registry of Public Infrastructures
(RPI)/Registry of Reforestation Projects (RRP)
shall be maintained for each category of
infrastructures/reforestation projects. Examples
are:
 Registry of Public Infrastructures -

Bridges (RPIB)
 Registry of Public Infrastructures - Roads
(RPIR)
 Registry of Public Infrastructures - Parks
(RPIP)
 Registry of Reforestation Projects (RRP)
A Summary of Public
Infrastructures/Reforestation Projects shall be
prepared and included in the Notes to Financial
Statements.
o. Depreciation. The straight-line method of

depreciation shall be used. Depreciation shall
start on the second month after purchase of the
property, plant and equipment, and a residual
value equivalent to ten percent of the purchase
cost shall be set-up. Public
infrastructures/reforestation projects as well as
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serviceable assets that are no longer being used
shall not be charged any depreciation.
p. Reclassification of Assets. Serviceable assets

no longer being used shall be reclassified to
“Other Assets” account and shall not be subject
to depreciation.
q. Allowance for Doubtful Accounts. An

Allowance for Doubtful Accounts shall be set
up for estimated uncollectible trade receivables
to allow for their fair valuation.
r. Elimination of Contingent Accounts.

Contingent accounts shall no longer be used.
All financial transactions shall be recorded
using the appropriate accounts. Cash shortages
and disallowed payments, which become final
and executory, shall be recorded under
receivable accounts “Due From Officers and
Employees” or “Receivables-Disallowances/
Charges”, as the case may be.
s. Recognition of Liability. Liability shall be

recognized at the time goods and services are
accepted or rendered and supplier/creditor bills
are received.
t. Interest Accrual. Whenever practical and

appropriate, interest income and/or expense
9
shall be accrued and recognized in the books of
accounts.
u. Accounting for Borrowings and Loans. All

borrowings and loans incurred shall be recorded
to the appropriate liability accounts.
v. Elimination of corollary and negative

journal entries. The use of corollary and
negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be
debited/credited to the appropriate asset
accounts. If an error is committed, a correcting
entry to adjust the original entry shall be
prepared.
w. Petty Cash Fund. The Petty Cash Fund shall

be maintained under the imprest system. As
such, all replenishments shall be directly
charged to the expense account and at all times,
the Petty Cash Fund shall be equal to the total
cash on hand and the unreplenished expenses.
The Petty Cash Fund shall not be used to
purchase regular inventory/items for stock.
x. Foreign Currency Adjustment. Cash deposits

in foreign currency and outstanding foreign
loans shall be computed at the exchange rate
prescribed by the Bangko Sentral ng Pilipinas
at balance sheet date. The total cash deposits
and foreign loans payable shall be adjusted at
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the end of each month and any gain or loss on
foreign exchange shall be recognized. The
subsidiary ledger for foreign currency
obligations shall reflect the appropriate foreign
currency in which the loan is payable. The
liability shall be expressed both in the foreign
and local currency.
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Chapter 3. Accounting Systems
Sec. 5. General Accounting Plan. The General

Accounting Plan (GAP) shows the overall accounting
system of a government agency/unit. It includes the
source documents, the flow of transactions and its
accumulation in the books of accounts and finally their
conversion into financial information/data presented in
the financial reports. Presented on next page is the
General Accounting Plan for national government
agencies.
The following accounting systems are:
a. Budgetary Accounts System;

b. Receipts/Income and Deposit System;
c. Disbursement System; and
d. Financial Reporting System.
A. BUDGETARY ACCOUNTS
Sec. 6. Budgetary Accounts System. The

Budgetary Accounts System encompasses the processes
of preparing Agency Budget Matrix (ABM), monitoring
and recording of allotments received by the agency from
the DBM, releasing of Sub-Allotment Release Order
(Sub-SARO) to Regional Offices (RO) by the Central
Office (CO); issuance of Sub-SARO to Operating Units
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(OU) by the RO; and recording and monitoring of
obligations.
Sec. 7. Budgetary Accounts. Budgetary

accounts consist of the appropriations, allotments and
obligations. Appropriations refer to authorizations made
by law or other legislative enactment for payments to be
made with funds of the government under specified
conditions and/or for specified purposes. Appropriations
shall be monitored and controlled through registries and
control worksheets by the DBM and COA, respectively.
Budgetary accounts allotments and obligations are
discussed in the succeeding sections.
13
INSERT GENERAL ACCOUNTING PLAN
for
National Government Agencies
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Sec. 8. Agency Budget Matrix (ABM). The
ABM refers to a document showing the disaggregation
of agency expenditures into components like, among
others, by source of appropriations, by allotment class
and by need of clearance.
Sec. 9. Procedures for the Preparation of the

ABM
Area of Seq
Responsibility . Activity
No.
Budget Unit
Concerned 1 Based on the approved General
Staff Appropriations Act (GAA) and in
coordination with the DBM,
prepares the ABM by
appropriations/financing sources
to support expenditures to be
made during the year broken
down by allotment
class/expenses.
Note 1
The ABM shall contain, among
others, the following information:
 The amount to be released
categorized under “Not
Needing Clearance” column,
and
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Area of Seq
No.
 The amount that will be

released through the issuance
of Special Allotment Release
Order (SARO) categorized
under "Needing Clearance”
column including continuing
appropriations based on the
Statement of Allotments,
Obligations and Balances
(SAOB).
2 Initials under 'Prepared by'

portion of the ABM.
Head, Budget 3 Reviews and signs ‘Prepared by’

Unit portion of the ABM.
Concerned Staff 4 Forwards the ABM together with
a transmittal letter for the DBM
to the Head of the Agency for
signature/approval.
Head of the 5 Approves/Signs the ABM and the

Agency transmittal letter.
Concerned Staff 6 Records in the logbook

maintained and submits the
signed ABM to the DBM for
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Area of Seq
No.
approval.
Sec. 10. Allotment Release Order (ARO).

The ARO is a formal document issued by the DBM to the
head of the agency containing the authorization,
conditions and amount of an agency allocation. The
document may be the ABM, where the amount of
allocation not needing clearance is indicated, or the
Special Allotment Release Order (SARO), where the
release of which is subject to compliance with specific
laws or regulations or is subject to separate approval or
clearance by competent authority. In the case of agencies
with decentralized accounting procedures, Sub-
ARO/Sub-SARO is issued/released.
Sec. 11. Recording of Allotments. Upon

receipt of the approved ABM and ARO, the Budget
Officer/Head of the Budget Unit/Designated Budget
Officer shall record the allotment in the respective
registries through the Allotment and Obligations Slip
(ALOBS). Separate registries shall be maintained for the
four allotment classes by Program/Project/Activity
(P/P/A), to wit:
1. Registry of Allotments and Obligations -

Capital Outlay (RAOCO)
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Maintenance and Other Operating Expenses
(RAOMO)
Personal Services (RAOPS)
Financial Expenses (RAOFE)
Sec. 12. Procedures in the Monitoring and

Recording of Allotments Received from DBM
Area of Seq
No.
Budget Unit 1 Receives the approved

Concerned ABM/SARO from the DBM.
Staff Records the same in the logbook
and forwards the ABM/SARO to
Budget Staff for preparation of an
Allotment and Obligation Slip
(ALOBS).
Budget Staff 2 Prepares ALOBS in two copies,

assigns number and initials the
same. Forwards the ALOBS and
ABM/SARO to the Head of the
Budget Unit for review and
signature.
Note 1
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Area of Seq
No.
The numbering structure of the

ALOBS shall be as follows:
PS 00 00 0000
Serial
Number
(One
series for
the
whole year)
Month
Year
Allotment Class
(PS, MOOE,
CO
and FE) shall
be
used only
when
obligations
are recorded
in the ALOBS
Note 2
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Area of Seq
No.
The ALOBS shall be prepared in

two copies and shall be
distributed as follows:
Original-Retained by the
Budget Unit to support
recording in the
registries
Copy 2 -Accounting Unit
Head of the 3 Reviews, checks the small box

Budget Unit opposite the 'Received' portion in
Box A of the ALOBS and
affixes signature certifying
receipt of allotment. Returns to
the Budget Staff for recording in
the appropriate Registry of
Allotments and Obligations
(RAOs).
Budget Staff 4 Records the ALOBS in the

appropriate RAOs. Files the
ALOBS for reference.
Note 3
The following RAOs shall be
maintained by the Budget Unit:
 Registry of Allotments and
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Area of Seq
No.
Obligations - Personal
Services (RAOPS)
Obligations -Maintenance
and Other Operating
Expenses (RAOMO)
Obligations -Capital Outlays
(RAOCO)
Obligations - Financial
Expenses (RAOFE)
5 Forwards Copy 2 of the ALOBS

to the Accounting Unit for
reference.
Sec. 13. Procedures for the Recording of
Sub-Allotment Release Order (Sub-ARO) by RO/ OU
Area of Seq
No.
Central Office/
Regional Office
Budget Unit 1 Based on the approved ABM
Budget Staff received from the DBM, prepares
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Area of Seq
No.
Sub-ARO for RO/OU. Forwards

the Sub-ARO to the Head of the
Budget Unit CO/RO for review.
Head of the 2 Reviews and signs Sub-ARO.

Budget Unit Forwards the same to the Head of
the CO/RO for approval.
Head of 3 Approves the Sub-ARO.

Central
Office/Regi
onal Office/
Authorized
Officer
Budget Staff 4 Based on the approved Sub-

ARO, prepares ALOBS in two
copies. Assigns number and
initials the ALOBS. Forwards the
same with a copy of approved
Sub-ARO to the Head of the
signature.
Note 1
Distribution of ALOBS shall be
as follows:
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Area of Seq
No.
Original - CO/RO Budget Unit

Copy 2 - CO/RO Accounting
Unit
Note 2
Refer to ALOBS numbering
structures in Note 1 Sec. 12,
Procedures in the Monitoring
and Recording of Allotments
Received from DBM

Budget Unit opposite the ‘Sub-allotted’
portion of Box A of the ALOBS
and affixes signature certifying as
to the amount sub-allotted to
RO/OU. Forwards the same with
the approved Sub-ARO to Budget
Staff for recording in the
appropriate RAOs.

appropriate RAOs. Files the
ALOBS and a copy of the Sub-
ARO.
Note 3
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Area of Seq
No.
The ALOBS covering sub-

allotment for the RO/OU shall be
entered in the RAOs as negative
entry in the ‘Allotment’ column
and shall be deducted from the
allotment balance.
Note 4
A copy of the ALOBS covering
allotment of the RO/OU shall be
furnished the Accounting Unit for
reference.
Concerned 7 Records in the logbook the

Staff release of the Sub-ARO to
RO/OU.
Regional
Offices/
Operating Units
Budget Unit
Concerned 8 Receives the approved Sub-ARO
Staff from the CO/RO. Records the
same in the logbook maintained.
Forwards the Sub-ARO to the
Budget Staff for the preparation
of ALOBS.
24
Area of Seq
No.
Budget Staff 9 Prepares ALOBS in two copies,

assigns number and initials the
same. Forwards the ALOBS and
Sub-ARO to the Head of the
signature.
Note 5
Refer to Notes 1 and 2 of Sec.12,
Procedures for the Monitoring
Received from the DBM.
Head of the 10 Reviews the ALOBS based on

Budget Unit the Sub-ARO. Checks the
small box opposite the
“Received” portion of Box A of
the ALOBS and affixes signature
certifying that the allotment was
received. Forwards the ALOBS
and Sub-ARO to the Budget Staff
for recording in the appropriate
RAOs.
Note 6
Refer to Note 3, of Sec.12,
25
Area of Seq
No.
Procedures for the Monitoring

Received from the DBM.

RAOs. Files the Sub-ARO and
original of the ALOBS.
12 Forwards copy 2 of the ALOBS

to the Accounting Unit for
reference.
26
Sec. 14. Accounting for Obligation.
Obligation refers to a commitment by a government
agency arising from an act of a duly authorized official
which binds the government to the immediate or eventual
payment of a sum of money. The agency is authorized to
incur obligations only in the performance of activities
which are in pursuits of its functions and programs
authorized in appropriation acts/laws within the limit of
the ARO.
Obligations shall be taken up in the registries

through the ALOBS prepared/processed by the Budget
Unit. The Budget Officer/ Head of the Budget
Unit/designated Budget Officer shall certify to the
availability of allotment and such is duly obligated by
signing in the appropriate box of the ALOBS. On the
other hand, the Accountant/Head of the Accounting Unit
shall certify to the correctness and validity of obligations,
and availability of funds. Both Budget and Accounting
Units shall coordinate in the filling up of the Status of the
Obligation in their respective copies of the ALOBS
Sec. 15. Procedures for the Recording of

Obligations
Area of Seq
No.
Budget Unit
Concerned 1 Receives the Disbursement
27
Area of Seq
No.
Staff Voucher/Payroll (DV/P), and

supporting documents, Contract/
Purchase Order (C/PO) from
concerned offices/personnel.
Verifies completeness of the
documents. If incomplete, returns
the documents to concerned
offices for completion. If
complete, records the same in the
logbook maintained. Forwards
the documents to Budget Staff for
the preparation of the ALOBS.
Budget Staff 2 Verifies availability of allotment

based on the RAOs. If no
allotment is available, returns the
documents to the office/personnel
concerned except as authorized
by the DBM.
3 If there is an available balance of
allotment to cover the
obligations, prepares an ALOBS
in three copies. Initials the
ALOBS and forwards the same to
the Head of the Budget Unit for
review and signature.
28
Area of Seq
No.
Note 1
Copy 3 of ALOBS shall be
attached to the DV. Refer to Note
2, Sec. 12, Procedures for the
Monitoring and Recording of
Allotments Received from DBM
for the distribution of the other
copies of ALOBS.

Budget Unit opposite the ‘Available and duly
obligated’ portion of Box A of
the ALOBS and affixes
signature. Forwards the ALOBS
and documents to the Budget
Staff for recording in the
appropriate RAOs.
Budget Staff 5 Records the amount obligated

under the ‘Obligation’ column of
the RAOs. Forwards all copies of
the ALOBS and the documents to
the Accounting Unit for
processing and signature.
Note 2
Obligations shall be posted in the
29
Area of Seq
No.
‘Obligation Incurred’ column of

the RAOs to arrive at the balance
of allotment still available at a
given period.
6 Receives original of ALOBS

from the Accounting Unit. If
there is no correction, files the
same to support the RAOs.
Otherwise, effects correction in
the RAOs or prepares a new
ALOBS, as the case may be.
Note 3
For the succeeding activities,
refer to Sec. 34, Procedures for
Disbursements By Checks.
Note 4
There is no need to prepare a
new ALOBS for
corrections/adjustments made by
the Accounting Unit after the
processing of the claims but
before payment is made.
Adjustment in the RAOs shall be
effected thru a positive entry (if
additional obligation is
30
Area of Seq
No.
necessary) or a negative entry (if

reduction) in the ‘Obligation
Incurred’ column.
Note 5
Preparation of new ALOBS for
the following adjustments of
obligations as negative entries in
the ‘Obligation Incurred’ column
shall be made:
 refund of cash advance

granted during the year
 overpayment of expenses
during the year
 disallowances/charges which
become final and executory
Certified copies of official

receipts for the
overpayments/refunds, copies of
bills for overpayments and
Notice that the disallowances
are final and executory shall be
furnished the Budget Unit by the
Accounting Unit for the
preparation of new ALOBS
31
Area of Seq
No.
taking up the adjustments.
B. INCOME/COLLECTIONS AND DEPOSITS
Sec. 16. Receipts/Income Collections and

Deposits System. The Receipts/Income Collections and
Deposits System covers the processes of acknowledging
and reporting income/collections, deposits of collections
with Authorized Government Depository Bank (AGDB)
or through the AGDB for the account of Treasurer of the
Philippines, and recording of collections and deposits in
the books of accounts of the agency.
Sec. 17. Sources of Income of the National

Government. The income of the National Government
are classified into general income accounts and specific
income accounts. The following comprise the general
income accounts, among others:
1. Subsidy Income from National Government

2. Subsidy from Central Office
3. Subsidy from Regional Office/Staff Bureaus
4. Income from Government Services
5. Income from Government Business Operations
6. Sales Revenue
7. Rent Income
32
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and Properties
12. Foreign Exchange (FOREX) Gains
13. Miscellaneous Operating and Service Income
14. Fines and Penalties-Government Services and
Business
Operations
15. Income from Grants and Donations
The specific income accounts of national

government agencies are classified as follows:
1. Income Taxes
2. Property Taxes
3. Taxes on Goods and Services
4. Taxes on International Trade and Transactions
5. Other Taxes
6. Fines and Penalties-Tax Revenue
7. Other Specific Income
The descriptions of all the accounts and the

instructions as to when these are to be debited and
credited are provided in Volume III of the NGAS
Manual.
Sec. 18. Methods of Accounting for Income.

National government agencies adopt the following
accounting methods of recording income:
33
1. Accrual Method - Accrual method of
accounting shall be used by national
government agencies when income is realized
(earned) during the accounting period
regardless of cash receipt. Accounts receivable
is set up and the general or specific income
accounts according to nature and classification
are credited.
2. Modified Accrual – Under the modified accrual

basis, income of an agency is recorded as
“Deferred Credits to Income” and the
appropriate receivable account is debited. The
income account is recognized upon receipt of
collection and the “Deferred Credits to Income”
account is adjusted accordingly.
3. Cash Basis - Cash basis of accounting shall be

used for all other taxes, fees, charges and other
revenues where accrual method is impractical.
The income account is credited upon collection
of the cash or its equivalent.
Sec. 19. Fines and Penalties. Fines and penalties,

either on tax revenues or other specific income accounts,
shall be recognized as income of the year these were
collected.
34
Sec. 20. Other Receipts. Other receipts of
national government agencies shall be comprised of, but
not limited to the following:
1. Refund of cash advances - When cash advances

for official travels are granted, the account
“Due from Officers and Employees” is debited
and when refunds are made, the same account
is credited. Cash advances for salaries and
wages shall be recorded as debits to the account
“Cash-Disbursing Officers” and any refunds
thereof shall be credited to the same account.
2. Receipts of performance/bidders/bail bonds -

Performance bond posted by contractor or
supplier to guaranty full and faithful
performance of their contract may be in the
form of cash or certified checks or surety.
Performance bond in cash or certified check
shall be acknowledged by the issuance of
official receipt and recorded in the book of
accounts by the Accountant thru a Journal
Entry Voucher (JEV) for the purpose. In case
of surety bond, an acknowledgement receipt
shall be issued by the authorized official.
3. Refund for overpayment of expenses - Refunds

as a result of overpayment of expenses shall be
recorded as a credit to the appropriate expense
account if paid in the same year or to Prior
Years’ Adjustments if paid in the ensuing year.
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This transaction shall reduce the amount of
expense previously recorded.
4. Collections made on behalf of another agency

or private companies - Collections made on
behalf of other agencies which are later
remitted to them are recorded under accounts
“Due to NGAs”, “Due to LGUs” or “ Due to
GOCCs” as the case maybe. Authorized
collections made on behalf of private entities,
like shares of proponents of Built-Operate-
Transfer (BOT) Projects are recorded as “Other
Payables”.
5. Inter-agency transferred funds - Cash received

from another agency for the purpose of
implementing projects of that agency is
recorded in the books as a credit to account
“Due to NGAs” or “Due to LGUs”, as the case
maybe.
Sec. 21. Deposit of Collections. All Collecting

Officers shall deposit intact all their collections, as well
as collections turned over to them by sub-
collectors/tellers, with AGDB daily or not later than the
next banking day. They shall record all deposits made in
the Cash Receipts Record.
Sec. 22. Reporting of Collections and Deposits.

At the close of each business day, the Collecting Officers
shall accomplish the Report of Collections and Deposits
36
(RCD) in accordance with the instructions provided in
Volume II of the NGAS Manual for the RCD.
All collections shall be deposited with AGDB for the
account of the agency or the Treasurer of the Philippines
daily or not later than the next banking day.
Sec. 23. Procedures for Collections and

Deposits Through the Collecting Officer
Area of Seq
No.
Cash Unit Daily

Designated 1 Receives cash/check from payor
Staff representing collection based on
the Order of Payment (OP)
prepared by the Accounting Unit.
2 Issues Official Receipt (OR) to

acknowledge receipt of
cash/check.
Note 1
Funding Checks received by the
Cashier/ Collecting Officer of the
RO/OU for its operational
requirements shall be issued
corresponding OR..
37
Area of Seq
No.
Note 2
Separate sets of ORs shall be
used for the RA and NG Books.
Note 3
The OR shall be prepared in
three copies and shall be
distributed as follows:
Original - Payor
Copy 2 - To be attached to
the Report of
Collections and
Deposits (RCD)
Copy 3 - Cash Unit file
3 Records collections in the Cash

Receipts Record (CRR).
Note 4
Separate CRR shall be
maintained for collections under
the RA and NG Books.
4 Prepares Deposit Slip (DS) in

three copies.
38
Area of Seq
No.
Note 5
The DS shall be distributed as
follows:
Original - AGDB
Copy 2 - To be attached to
RCD
5 Deposits collections with AGDB.
Note 6
Collections pertaining to NG
Books shall be deposited with the
AGDB for the account of the
Treasurer of the Philippines
6 Based on the validated DS from

the AGDB and copy of the ORs
on file, prepares Report of
Collections and Deposits (RCD)
in two copies. Initials on the
RCD and forwards the same
together with Copy 2 of the ORs
and DS to the Head of the Cash
Unit for review and signature.
39
Area of Seq
No.
Head of the 7 Reviews and signs the RCD.

Cash Unit Forwards original of RCD, Copy
2 of the ORs and DS to the
Designated Staff for submission
to the Accounting Unit.
Note 7
The RCD shall be distributed as
follows:
Original - Accounting Unit
together with Copy
No. 2 of the ORs and
DS - to support the
JEV
Designated 8 Records the RCD in the logbook

Staff maintained and forwards the
same with the ORs and DS to the
Accounting Unit for recording in
the books of accounts.
Accounting
Unit 9 Receives original of RCD with
Accounting Copy 2 of the ORs and DS from
Staff the Cash Unit. Records receipt in
the logbook maintained for the
40
Area of Seq
No.
purpose and forwards the same to

the Bookkeeper for review and
preparation of the JEV.
Bookkeeper 10 Based on the RCD, prepares JEV

in two copies and signs “Prepared
by” portion of the JEV. Forwards
the JEV and documents to the
Head of the Accounting Unit for
Head of the 11 Reviews and signs ‘Certified
Accounting Correct by’ portion of the JEV.
Unit Forwards the JEV and documents
to the Bookkeeper for recording
in the Cash Receipt Journal
(CRJ) and/or Cash Journal (CJ)
as the case may be.
Note 8
CRJ shall be used to record
collection under the RA Books
while the CJ shall be used to
record collections under the NG
Books.
Note 9
41
Area of Seq
No.
refer to Sec. 71, Preparation

and Submission of Trial Balances
and Other Reports.
Sec. 24. Procedures for Collections through

Accredited Agent Banks (AAB)
Area of Seq
No.
Accounting
Unit
Receiving/ 1 Receives collection documents
Releasing from the AAB/AGDB. Records
Staff receipt in the logbook maintained
for the purpose. Forwards the
same to the Bookkeeper for
preparation of the JEV.
Bookkeeper 2 Based on the received collection

documents, prepares JEV in two
copies, Signs “Prepared by”
portion of the JEV. Forwards the
JEV and documents to the Head
of the Accounting Unit for
42
Area of Seq
No.
Head of the 3 Reviews and signs “Certified

Accounting Correct by” portion of the JEV.
Unit Forwards the JEV and documents
to the Bookkeeper for recording
in the General Journal (GJ).
Note 1
and Other Reports.
Sec. 25. Dishonored Checks. There are instances

that checks received by Collecting Officers in payment of
taxes, fees and other debt due the government are
dishonored by the drawee banks. A check is said to be
dishonored by non-payment when, upon its being duly
presented for payment, such payment is refused or cannot
be obtained. (Sec. 83, RA No. 2031, Negotiable
Instrument Law). It may also be defined as those checks
paid to the agency, which were dishonored by the AGDB
due to Drawn Against Insufficient Fund (DAIF) or
Drawn Against Uncleared Deposits (DAUD).
43
Sec. 26. Procedures in Recording Dishonored
Checks
Area of Seq
No.
Cash Unit
Designated 1 Receives from AGDB the Debit
Staff Memo (DM) and copies of
dishonored checks.
2 Verifies the dishonored checks

against the previous months’
RCDs maintained on file to
ascertain that the checks were
included in the previous months’
collections. If not included,
verifies from AGDB the details
of the dishonored checks.
3 If dishonored checks are included

in the RCDs, prepares Notice of
Dishonor to inform the
drawers/indorsers/payors that the
checks were dishonored by the
AGDB.
Note 1
The Notice of Dishonor shall be
prepared in three copies and
44
Area of Seq
No.
shall be distributed as follows:

Original - Drawer (To be
delivered personally or thru
registered mail)
Copy 2 - Accounting Unit file
4 Retrieves from file copy of the

OR covering the dishonored
check and indicates in the OR the
following notation:
“Cancelled (date of Notice of

Dishonor) per Bank
Debit/Voucher No._____ dated
_________”
5 Retrieves CRR on file and

records the dishonored checks
with the following notation:
“To take up Bank’s Debit Memo

No. ___ dated ____ covering
Check No. ___ for P
____________ acknowledged
under OR No. _____ dated
_______”.
45
Area of Seq
No.
6 Prepares list of dishonored

checks in two copies. Forwards
Copy 2 of the list and the
dishonored checks to the
Accounting Unit for preparation
of the JEV.
Accounting 7 Receives the list together with

Unit originals of dishonored checks
Accounting and the Debit Memo from the
Staff Cash Unit and records the same
in the logbook maintained for the
purpose.
8 Based on the list, prepares the

JEV in two copies. Signs
“Prepared by” portion of the JEV
and forwards the same to the
Head of the 9 Reviews and signs “Certified

Accounting Correct by” portion of the JEV.
Unit Forwards the JEV supported by
the list, originals of dishonored
checks and notice of dishonor to
46
Area of Seq
No.
the Bookkeeper for recording in

the books of accounts.
Note 2
refer to Sec.71, Preparation
and Submission of Trial
Balances and Other Reports.
C. DISBURSEMENTS
Sec. 27. Disbursements Defined. Disbursements

constitute all cash paid out during a given period either in
currency (cash) or by check. It may also mean the
settlement of government payables/obligations by cash or
by check. It shall be covered by Disbursement Voucher
(DV)/Petty Cash Voucher (PCV) or payroll.
Sec. 28. Basic Requirements for Disbursements.

The basic requirements applicable to all types of
disbursements made by national government agencies are
as follows:
1. Existence of a lawful and sufficient allotment

certified as available by the Budget Officer;
2. Existence of a valid obligation certified by the

Chief Accountant/Head of Accounting Unit;
47
3. Legality of transactions and conformity with
laws, rules and regulation;
4. Approval of the expense by the Chief of Office

or by his duly authorized representative; and
5. Submission of proper evidence to establish the

claim.
Sec. 29. Disbursements System. The

Disbursements System involves the preparation and
processing of disbursement voucher (DV); preparation
and issuance of check; payment by cash; granting,
utilization, and liquidation/replenishment of cash
advances.
Sec. 30. Certification on Disbursements.

Disbursements from government funds shall require the
following certifications on the DV:
1. Certification and approval of vouchers and
payrolls as to validity, propriety and legality of
the claim (Box A of DV) by head of the
department or office who has administrative
control of the fund concerned;
2. Necessary documents supporting the DV and

payrolls as certified and reviewed by the
Accountant/Head of Accounting Unit (Box B of
DV); and
48
3. Certification that funds are available for the
purpose by the Accountant/Head of Accounting
Unit (Box B of DV).
Sec. 31. Disbursements by Checks. Checks shall

be drawn only on duly approved DV or PCV. These shall
be reported and recorded in the books of accounts only
when actually released to the respective payees.
Two types of checks are being issued by

government agencies as follows:
1. Modified Disbursement System (MDS) Checks

- issued by government agencies chargeable
against the account of the Treasurer of the
Philippines, which are maintained with
different MDS - Government Servicing Banks
(GSBs). These are covered by Notice of Cash
Allocation, an authorization issued by the DBM
to government agencies to withdraw cash from
the National Treasury through the issuance of
MDS checks or other authorized mode of
disbursements.
2. Commercial Checks - issued by government

agencies chargeable against the Agency
Checking Account with GSBs. These are
covered by income/receipts authorized to be
deposited with AGDBs; and funding checks
received by RO/OUs from COs/ROs,
respectively.
49
Sec. 32. Recording of Check Disbursements in
the Check Disbursements Record (CkDR). All checks
issued including cancelled checks shall be recorded
chronologically in the CkDR. The dates checks were
actually released shall be indicated in the appropriate
column provided for in the CkDR.
Sec. 33. Reporting of Checks Issued/Released.

All checks actually released to claimants shall be
included in the Report of Checks Issued (RCI), which
shall be prepared daily by the Cashier. The RCI shall be
submitted to the Accounting Unit for the preparation of
JEV. All unreleased checks as of the report date shall be
enumerated in a “List of Unreleased Checks” to be
attached to the RCI.
Sec. 34. Procedures for Disbursements by

Checks.
Area of Seq
No.
A. Processing of Disbursement
Voucher (DV)
Accounting
Unit
Receiving/ 1 Receives Copies 1-3 of DV,
Releasing originals of supporting
Staff documents and Copies 1-3 of
50
Area of Seq
No.
ALOBS from the Budget Unit.

Checks completeness of
supporting documents. If
incomplete, returns to the
concerned party for compliance.
2 If complete, stamps “Received”

and indicates date of receipt and
initials on the stamped ‘Received’
portion of the DV.
Note 1
DV that shall be paid out of non-
budgetary receipts shall not pass
the Budget Unit. No ALOBS is
needed. (Example - refund of
cash bond).
3 Assigns DV number and records

in the logbook the DV number
and date, payee, particular and
amount. Forwards Copies 1-3 of
DV, originals of supporting
documents and Copies 1-3 of
ALOBS to the Designated Staff
for processing.
51
Area of Seq
No.
Note 2
The numbering structure for DV
shall be as follows:
00 - 00 - 0000
Serial
Number
(One series for each year)
Month of
Issue
Year of Issue
Note 3
DV number shall also be
indicated on every sheet of the
supporting documents.
Designated 4 Receives Copies 1-3 of DV,

Staff originals of supporting documents
and Copies 1-3 of ALOBS from
the Receiving/Releasing Staff.
52
Area of Seq
No.
Reviews DV for completeness

and propriety of supporting
documents.
5 Checks Index of Payments (IP)

from file and determines whether
there was prior payment of the
same claim. If the claim was
already paid, returns the DV and
supporting documents to the
Receiving/Releasing Staff to be
returned to claimant.
6 If not yet paid, records the

following in the IP: name and
address of creditor, DV date and
number, particulars and amount.
7 Accomplishes Box B of ALOBS

and initials.
8 Initials in Box B of DV and

forwards Copies 1-3 of DV,
originals of supporting documents
and Copies 1-3 of ALOBS to the
Head of Accounting Unit for
53
Area of Seq
No.
Head of the 9 Reviews DV and supporting

Accounting documents. Signs in Box B of DV
Unit and ALOBS. Forwards the
documents to the
Receiving/Releasing Staff.
Receiving/ 10 Records in the logbook the date

Releasing of release of Copies 1-3 of DV,
Staff originals of supporting documents
and Copy 3 of ALOBS. Forwards
to the Head of Agency or
Authorized Representative for
approval of the DV. Forwards
Copy 1 of ALOBS to the Budget
Unit and retains Copy 2 of
ALOBS for file.
Head of 11 Reviews and approves DV.

Agency or Forwards Copies 1-3 of DV,
Authorized Copy 3 of the ALOBS and
Representati originals of supporting
ve documents to the Cash Unit for
check preparation.
B. Preparation and Approval of

Checks
54
Area of Seq
No.
Cash Unit
Receiving/ 12 Receives Copies 1-3 of approved
Releasing DV, Copy 3 of ALOBS and
Staff originals of supporting
documents. Records in the
logbook the date of receipt, DV
number, payee, particulars and
amount.
Designated 13 Verifies completeness of

Staff signatories on the DV. Prepares
check in three copies.
14 Retrieves from file the Check

Disbursements Records (CkDR)
and records the date, reference or
check number, name of payee,
nature of payment and amount of
the DV and extract the new
balance of the NCA/bank
account. Forwards Copies 1-3 of
check, Copies 1-3 of DV, Copy 3
of ALOBS and originals of
supporting documents to Cashier
for review and signature.
55
Area of Seq
No.
Cashier 15 Verifies completeness of

signature on the DV. Reviews
the amount of the check against
the DV and supporting
documents. Signs the check.
Authorized 16 Countersigns check. Forwards

Official Copies 1-3 of check, Copies 1-3
of DV, Copy 3 of ALOBS and
Receiving/Releasing Staff for
return to the Cashier.

Releasing of release of Copies 1-3 of
Staff check, Copies 1-3 of DV, Copy 3
of ALOBS and supporting
documents.
Cashier 18 Releases the original of check

and Copy 3 of DV to the payee.
Attaches OR/Invoice on Copy 1
of DV. Files Copies 2-3 of
check, Copies 1-2 of DV,
originals of supporting
documents.
56
Area of Seq
No.
C. Preparation of Report of
Checks Issued (RCI)
Daily,
19 With Copies 1-2 of DV, Copy 3
of ALOBS, supporting documents,
Copies 2-3 of checks, prepares
RCI in two copies.
Note 6:
RCI shall include only those
checks actually released to the
payees during the day including
cancelled ones.
Note 7:
The RCI shall be distributed as
follows:
together with the
originals of the paid
DVs/payroll and
supporting
57
Area of Seq
No.
documents for JEV

preparation
20 Initials in ‘Certification’ portion

of the RCI.
Head of the 21 Reviews RCI and signs in

Cash Unit ‘Certification’ portion.
Designated 22 Forwards original of RCI

Staff together with Copy 2 of checks,
Copy 1 of DVs, Copy 3 of
ALOBS and supporting
documents to the Accounting
Unit for the preparation of JEV.
Retains Copy 2 of RCI, Copy 3
of checks and Copy 2 of DVs for
file.
Note 8:
The “List of Unreleased Checks”
shall be attached to the RCI to be
submitted to Accounting Unit for
reference.
58
D. Preparation of JEV
Accounting Daily
Unit
Receiving/ 23 Records receipt of Copy 1 of RCI
Releasing together with Copy 2 of checks,
Staff Copy 1 of DVs, Copy 3 of
ALOBS and originals of
supporting documents from Cash
Unit in the logbook. Forwards
the documents to the Designated
Staff for JEV preparation.
Designated 24 Examines DVs and checks

Staff against RCI. Verifies if the serial
number of checks actually issued,
including spoiled and cancelled
ones, are all accounted for.
25 Prepares JEV in two copies and

signs in the “Prepared by”
portion.
59
Head of the 26 Reviews correctness of the
Accounting journal entries and signs on
Unit/Authori ‘Certified Correct by’ portion of
zed the JEV. Forwards Copies 1-2 of
Signatory JEV and Copy 1 of RCI, Copy 2
of checks, Copy 1 of DVs, Copy
3 of ALOBS and originals of
supporting documents to
Designated Staff for recording in
the Check Disbursements Journal
(CkDJ).
E. Recording in the CkDJ
Designated 27 Receives Copies 1-2 of JEV and

Staff Copy 1 of RCI, Copy 2 of
checks, Copy 1 of DVs, Copy 3
of ALOBS and supporting
documents. Records the JEV in
the CkDJ. Retains Copy 2 of
JEV for file. Forwards Copy 1 of
JEV, RCI and DV, Copy 2 of
checks, Copy 3 of ALOBS and
Receiving/Releasing Staff for
submission to COA for audit.
60
Releasing of submission of Copy 1 of JEV,
Staff RCI, DVs, Copy 3 of ALOBS,
Copy 2 of checks and originals of
supporting documents. Forwards
the documents to COA for audit.
Note 9:
and Other Reports.
Sec. 35. Disbursements by Cash.

Disbursements by cash shall be made from cash advances
drawn and maintained in accordance with COA rules and
regulations. Cash payments shall be made based on duly
approved payrolls/disbursements vouchers.
Sec. 36. Cash Advances for Travel. Cash

advances granted for travel shall be accounted for as Due
from Officers and Employees and these are subject to
liquidation upon travel completion. For liquidation of
travel where the amount of cash advance is equal to or
more than the travel expenses incurred, the Liquidation
Report form shall be prepared by the officers/employees
concerned and submitted to the Accounting Unit as basis
for JEV preparation. The excess cash advance shall be
refunded and an OR shall be issued to acknowledge
receipt thereof. In case the amount of cash advance is less
61
than the travel expenses incurred, a Liquidation Report
shall be submitted to liquidate the cash advance
previously granted and a DV shall be prepared to claim
reimbursement of the deficiency in amount.
Sec. 37. Procedures for Disbursements by Cash

- Payment for Payroll and Other Expenses
Area of Seq
No.
Cash Unit
Accountable/ 1 Receives the approved check
Disbursing from the Cashier. Records in the
Officer Cash Disbursements Record
(CDR) the date, reference, name
of payee, particulars and the
amount of check in the debit
column.
2 Encashes check in a GSB.
3 Pays officials and

employees/other payees.
Note 1
Employees/payees shall sign on
the received portion of the
payroll/DV to acknowledge
receipt of payment.
62
Area of Seq
No.
Note 2
If there are unclaimed salaries,
refund the same within a
reasonable time. OR representing
the refund shall be issued by the
Cashier.
4 Records payment including the

refund for unclaimed salary in the
credit column of the CDR.
At the End of the Month
5 Based on the paid payroll/DV and

supporting documents, prepares
Report of Disbursements (RD) in
two copies. Signs the
“Certification” portion of the RD.
Note 3
The RD shall serve as the
liquidation report of the cash
advance granted to the
Disbursing Officer.
63
Area of Seq
No.
Note 4
The RD shall be distributed as
follows:
together with the originals
of the paid DVs/Payrolls
and supporting documents
for JEV preparation
Accounting
Unit
Releasing/ 6 Records in the logbook, indicates
Receiving ‘Received’ and signs all copies,
Clerk forwards the RD to the
Bookkeeper for JEV preparation,
and returns Copy 2 to the Cash
Unit.
Bookkeeper 7 Prepares JEV based on the RD

and supporting documents
received.
Note 5
refer to Sec.71, Preparation and
Submission of Trial Balances and
64
Area of Seq
No.
Other Reports.
8 Records payroll payment in the

individual Index of Payments (IP)
of officials and employees.
65
Sec. 38. Disbursements Through Bank - Payroll
Payment
Area of Seq
No.
Cash Unit
Cash Staff 1 Receives the approved check, DV
and Following Months' Payroll
(FMP), signs the logbook of the
releasing office, and forwards the
documents to the Cashier.
2 Deposits the check to the Bank

Payroll Account together with the
original of the Summary of
Employees Net Earnings (SENE)
received from Accounting Unit.
Files temporarily Copies 1-2 of
FMP, copy 2 of the check, and
Copies 1-3 of DV for the
preparation of RCI.
Note 1
The payee of the check is the
Servicing Bank whose authorized
representative shall acknowledge
receipt of the check by signing on
the original of the DV.
66
Area of Seq
No.
Note 2
Refer to Seq. No. 19, Sec.34,
Procedures for Disbursements by
Checks.
Note 3
Payroll payment through bank
shall also be recorded in the IP
maintained by the Accounting
Unit.
Sec. 39. Disbursements Through Petty Cash
Fund. Petty Cash Fund shall be maintained under the
imprest system. The fund shall be sufficient for the non-
recurring, emergency and petty expenses of the agency.
Disbursements from the fund shall be through the Petty
Cash Voucher (PCV) which shall be approved by
authorized officials and signed by the payee to
acknowledge the amount received. The official receipt or
its equivalent is attached to the PCV.
Sec. 40. Procedures for Disbursements

Through Petty Cash Fund
Area of Seq
No.
67
Area of Seq
No.
Receipt of Check for the

Various Unit Establishment/ Replenishment of
Petty Cash Petty Cash Fund
Custodian 1
Receives check from Cashier for
the establishment/replenishment
of petty cash fund. Retrieves
Cash Disbursement Record
(CDR) and records the date,
reference and the amount of
check in the ‘Disbursements’
column.
2 Encashes check in GSB and

keeps the cash in a safety vault.
Utilization of Petty Cash Fund
Requesting 3 Accomplishes Box A ‘Requested

Personnel by’ portion of the Petty Cash
Voucher (PCV).
Immediate 4 Signs Box A ‘Approved by’

Supervisor portion of the PCV and returns to
Requesting Personnel.
Requesting 5 Submits to the Petty Cash
68
Area of Seq
No.
Personnel Custodian for the release of fund.
Petty Cash 6 Receives from the Requesting

Custodian Personnel the PCV duly approved
by concerned official.
7 Upon granting of the petty cash

advance and signs in Box B ‘Paid
by’ portion of the PCV.
Requesting 8 Receives petty cash and signs in

Personnel Box B ‘Cash Received by’
portion of the PCV.
Petty Cash 9 Issues Copy 2 of the PCV to

Custodian requesting personnel
10 Retrieves CDR from file and
records paid PCVs. Fills up the
following columns: date,
reference, name of payee, nature
of payment, amount in the credit
column and cash advance
balance.
11 Files the original of PCV

awaiting liquidation.
69
Area of Seq
No.
Liquidation of Petty Cash

Advance
12 Receives from Requesting

Personnel Copy 2 of the PCV
together with supporting
documents. Checks and reviews
completeness of documents such
as the date, amount and nature of
expenses paid as shown in the
supporting documents.
13
If incomplete, returns to
Requesting Personnel for
completion of needed supporting
documents.
If complete, retrieves the original

of PCV from file and fills up Box
D ‘Liquidation Submitted’
portion of the original and Copy
2 of PCVs.
14 Checks the appropriate boxes for
‘Received Refund’ or
‘Reimbursement Paid’ portion
and signs Box C of the PCV.
70
Area of Seq
No.
Requesting 15 Checks and fills up the

Personnel appropriate boxes for
‘Liquidation Submitted’ and
‘Reimbursement Paid’ upon
submission of necessary
supporting documents and receipt
or reimbursement of cash, if any,
and signs the PCV.
Petty Cash 16 Returns Copy 2 of the PCV to the

Fund Requesting Personnel.
Custodian
17 If the amount granted is equal to

the amount paid as shown in the
liquidated PCV, proceeds to
Sequence No. 18.
If the amount is not equal to the

amount paid, retrieves from file
the CDR and records the
necessary adjustments based on
the liquidated PCV. Fills up the
following columns: date,
reference, name of payee, and
nature of payment, amount in
71
Area of Seq
No.
the appropriate debit, credit and

balance columns.
18 Files the original of the PCV

together with the supporting
documents awaiting
replenishment.
Replenishment of Petty Cash

Fund
Petty Cash 19 Retrieves from file the original of

Fund the PCV together with the
Custodian supporting documents. Checks
the completeness of all PCVs for
replenishment.
20 Prepares the Petty Cash

Replenishment Report (PCRR) in
72
Area of Seq
No.
two copies based on PCVs in

numerical sequence and fills up
the following columns: date,
PCV No., particulars and amount.
21 Signs in the ‘Certified Correct

by’ portion of the PCRR.
22 Based on the PCRR, prepares DV

in three copies. Forwards Copies
1-3 of the DV, original of the
PCRR and PCV, and supporting
documents to Authorized Official
for review and signature.
Authorized 23 Signs in Box A portion of the

Official DV.
Petty Cash 24 Forwards Copies 1-3 of the DV,

Fund originals of PCRR and PCVs and
Custodian supporting documents to Budget
Division for preparation of the
ALOBS.
Note 1
refer to Sec.15, Procedures in the
73
Area of Seq
No.
Recording of Obligations.
G. PROPERTY, PLANT AND EQUIPMENT, AND

INVENTORY ACCOUNTS
Sec. 41. Purchase or Construction of

Property, Plant and Equipment. Property, plant and
equipment acquired through purchase shall include all
costs incurred to bring them to the location necessary for
their intended use, like transportation costs, freight
charges, installation costs, etc. These are recorded in the
books of accounts as Assets after inspection and
acceptance of delivery.
During construction period, property, plant and

equipment shall be classified and recorded as
“Construction in Progress” with the appropriate asset
classification. As soon as these are completed, the
74
"Construction in Progress" account shall be transferred to
the appropriate asset accounts.
Accounts “Public Infrastructures” and

“Reforestation Projects” are closed to “Government
Equity” account and the asset is recorded in the Registry
of Public Infrastructures/Reforestation Projects at the end
of the year.
Sec. 42. Property and Inventory Accounting

System. The Property and Inventory Accounting System
consists of the system of monitoring, controlling and
recording of acquisition and disposal of property and
inventory.
The system starts with the receipt of the purchased

inventory items and equipment. The requesting office in
need of the inventory items and equipment after
determining that the items are not available in stock shall
prepare and cause the approval of the Purchase Request
(PR). Based on the approved PR and after accomplishing
all the required procedures adopting a particular mode of
procurement, the agency shall issue a duly approved
Purchase Order. Procedures relative to the obligation of
the purchase order and payment of the deliveries are
discussed under Sections 14 and 31, Accounting for
Obligation and Disbursements by Check, respectively.
The sub-systems are as follows:
75
1. Receipt, Inspection, Acceptance and Recording
Deliveries of Inventory Items and Equipment
2. Requisition and Issuance of Inventory Items
3. Requisition and Issuance of Equipment
Sec. 43. Perpetual Inventory Method. Purchase

of supplies and materials for stock, regardless of whether
or not they are consumed within the accounting period,
shall be recorded as Inventory account. Under the
perpetual inventory method, an inventory control account
is maintained in the General Ledger on a current basis.
Regular purchases shall be recorded under the

Inventory account and issuance thereof shall be recorded
based on the Report of Supplies and Materials Issued.
Purchases out of the Petty Cash Fund shall be charged
immediately to the appropriate expense accounts.
The Accounting Unit shall maintain perpetual

inventory records, such as the Supplies Ledger Cards
for each inventory stock, Property, Plant and Equipment
Ledger Cards for each category of plant, property and
equipment including work and other animals, livestock,
etc. The subsidiary ledger cards shall contain the details
of the General Ledger accounts.
For check and balance, the Property and Supply

Office/Unit shall maintain Property Cards (PC) for
property, plant and equipment, and Stock Cards (SC) for
inventories. The balance in quantity per PC and SC
76
should always reconcile with the ledger cards of the
Accounting Unit.
Sec. 44. Moving Average Method. The moving

average method of costing shall be used for costing
inventories. This is a method of calculating cost of
inventory on the basis of weighted average on the date of
issue. The Accounting Unit shall be responsible in
computing the cost of inventory on a regular basis.
Sec. 45. Procedures in the Receipt, Inspection,

Acceptance and Recording Deliveries of Inventory
Items and Equipment
Area of Seq
No.
Property and Delivery of Equipment and

Supply Unit Inventory Items
Property/
Supply 1 Signs “Received” portion of the
Officer original and Copy 2 of the
Delivery Receipt (DR). Files the
original and returns Copy 2 of the
DR to the Supplier/Procurement
Service.
2 Prepares Inspection and
77
Area of Seq
No.
Acceptance Report (IAR) in three

copies. Forwards IAR, original
of DR, and Copy 2 of approved
PO from file to Property
Inspector for inspection of
deliveries.
Note 1
Distribution of the IAR shall be
as follows:
Original - Supplier (to be
attached to the DV)
Copy 2 - Property Inspector/
Inspection Committee
Copy 3 - Property and Supply
Unit file
Property 3 Inspects and verifies items as to

Inspector quantity and conformity with
specifications based on the DR
and approved PO. If in order,
signs and indicates date of
inspection in the “Inspection”
column of the IAR. Retains copy
3 of IAR and forwards the items
and Copy 1-2 of IAR, original of
DR and Copy 2 of PO to
78
Area of Seq
No.
Property/Supply Officer for

acceptance.
4 If specifications are not in order

or delivery is not complete,
indicates notation on the IAR that
the deliveries are not in
conformity with specifications
agreed under the approved PO or
deliveries are not complete.
Forwards the IAR to the
Property/Supply Officer.
Property/Supp 5 Signs in ‘Acceptance’ column,

ly Officer acknowledging receipt of the
items delivered. Checks the
appropriate box whether
complete or partial (indicate
quantity received) delivery, and
indicate the date of receipt and
remarks, if any.
Forwards items to
Property/Supply Custodian for
safe-keeping/storage.
79
Area of Seq
No.
6 Prepares DV indicating the

Supplier as Payee. Attaches the
original IAR, Copy 2 of DR, PO
and photocopy of PR. Forwards
documents to Budget Unit for the
preparation of ALOBS. Forwards
copy 2 of IAR and copy of PO to
the Property/Stock Card Keeper
for recording in the Property/
Stock Cards.
Note 2
For succeeding activities on
processing of payment for
delivered inventory items and
equipment, refer to Sec.15,
Procedures in the Recording of
Obligations and Sec. 34
Procedures in Disbursements by
Checks.
Note 3
For purchases made through the
Procurement Service (PS), the
80
Area of Seq
No.
DV shall be prepared on the

basis of the Approved Agency
Procurement Request. The
payment shall be made directly to
the PS.
Accounting After Payment of Deliveries

Unit
PPELC/SLC 7 Posts necessary information to
Keeper the Property, Plant and
Equipment Ledger Card
(PPELC)/Supply Ledger Card
(SLC) based on the paid
documents forwarded by the
Cash Unit.
Sec. 46. Procedures in the Requisition and

Issuance of Inventory Items
Area of Seq
No.
Concerned Inquiry for the availability of

Office supplies
Requesting 1
81
Area of Seq
No.
Personnel Prepares the Supplies

Availability Inquiry (SAI) in two
copies. Accomplishes the form
for item description, unit and
quantity.
2 Fills up the ‘Inquired by’ portion

of SAI and forwards the same to
Accounting Unit for processing.
Accounting
Unit 3 Receives SAI from Requesting
Accounting Personnel. Reviews and verifies
Staff the completeness of information.
4 Retrieves from file the SLC and
determines availability/status of
stocks.
5 Fills up the number, stock

number, status of stock and
‘Status provided by’ portion of
the SAI. Returns the original to
the Requesting Personnel and
files Copy 2 of the SAI.
Concerned
Office
Requesting
82
Area of Seq
No.
Personnel 6 Receives the original of SAI from

the Accounting Staff. If stock is
not available, prepares Purchase
Request (PR) for the item
requested and forwards the same
to Property and Supply Unit for
processing of the request. If stock
is available, prepares Requisition
and Issue Slip (RIS) in three
copies. Fills up all the necessary
information except for the
issuance portion and signs
‘Requested by’ portion of the
RIS. Forwards the RIS to
Authorized Official for approval.
Note 1
The RIS shall be distributed as
follows:
Copy 2 - Property and Supply
Unit
Copy 3 - Requesting Office
Authorized 7 Signs the ‘Approved by’ portion

Official of the RIS.
83
Area of Seq
No.
Requesting 8 Receives signed RIS and

Personnel forwards to the Property and
Supply Unit together with the
original of SAI for withdrawal of
inventory items requested.
Property and
Supply Unit
Supply 9 Reviews and verifies RIS as to
Officer completeness of information.
Fills up the RIS No./Date, and
Quantity, Remarks and initials
‘Approved by’ portion of the
RIS, and records RIS in the
logbook.
Head of the 10 Signs the ‘Approved by’ portion

Property and of RIS and returns to the Supply
Supply Unit Officer for issuance of the stock.
Supply 11 Fills up and signs the ‘Issuance’

Officer portion of the RIS and issues
inventory items requested to the
Requesting Personnel.
Concerned
Office 12 Receives supplies requested and
Requesting sign in the ‘Received by’ portion
84
Area of Seq
No.
Personnel of the RIS.
13 Files permanently in numerical

order Copy 2 of RIS and files
temporarily the originals of RIS
and SAI for the preparation of
Report of Supplies and Materials
Issued (RSMI).
Preparation of RSMI
14 Retrieves the original copies of

RIS and SAI from temporary file.
Checks the completeness of the
RIS. If not complete, verifies
with the Supply Officer. If
complete, prepares RSMI in three
copies.
15 Initials in the ‘Certified by’

portion of the RSMI.
Property and
Supply Unit
Head of the 16 Signs in the ‘Certified by’
Property and portion of the RSMI.
Supply Unit
85
Area of Seq
No.
Stock Card 17 Receives signed RSMI and

Keeper forwards to Accounting Unit the
original and Copy 2 of RSMI
together with originals of RIS
and SAI. Files Copy 3 of RSMI.
At the Start of the Day

Accounting Unit
Accounting 18 Receives original and Copy 2 of
Staff RSMI, and original SAI and
RIS. Checks and verifies the
completeness of information.
Retrieves SLC from file and fills
up the ‘To be filled up in the
Accounting Unit’ portion of
RSMI. Records RSMI in the
SLC.
19 Signs in the ‘Posted by/date’

portion of the RSMI.
20 Files permanently in numerical

order Copy 2 of RSMI and files
temporarily the original RIS, SAI
and RSMI for recording issuance
of inventory items in the books of
86
Area of Seq
No.
accounts.
At Month End
21 Retrieves the original RIS, SAI

and RSMI from temporary file.
22 Prepares JEV in two copies based

on the RSMI to record the
issuance of stock.
23 Signs in the ‘Prepared by’
portion of the JEV.
Head of the 24 Sign in the ‘Certified Correct by’

Accounting portion of the JEV.
Unit
Accounting 25 Receives signed JEV and
Staff forwards to Bookkeeper the JEV,
RSMI, RIS, and SAI for
recording in the General Journal.
Files copy 2 of JEV.
Note 2:
For succeeding activities, refer to
Sec. 71, Preparation and
Submission of Trial Balances and
Other Reports.
87
Sec. 47. Procedures in the Requisition and
Issuance of Equipment
Area of Seq
No.
Concerned
Office
Requesting 1 Upon receipt of notice of
Personnel availability of the equipment
requested, prepares RIS in three
copies.
Fills up the necessary information

pertaining to requisition, except
‘Issuance’ column of the RIS.
Authorized 2 Reviews RIS and signs

Official ‘Requested By’ in the Requisition
column.
Requesting 3 Records the signed RIS in the

Personnel logbook and indicate date,
particulars and remarks.
Forwards the same to Property
and Supply Unit for processing of
the requisition.
Property and
88
Area of Seq
No.
Supply Unit
Receiving 4 Receives signed RIS from
Staff Requesting Office. Records the
date, particulars and Requesting
Office in the logbook. Assigns
number on RIS and issues Copy 3
to Requesting Personnel for file.
Property 5 Verifies RIS and checks against

Officer the PR.
6 Initials RIS and forwards the

original and Copy 2 of RIS to the
Head of the Property and Supply
Unit for review and approval.
Head of the 7 Reviews RIS and signs the

Property and ‘Approved By’ portion of RIS.
Supply Unit Forwards Copies 1-2 of RIS to
Property Custodian.
Property 8 Based on the approved RIS,

Custodian assigns number on the property
being transferred/ issued.
Indicates the number in the RIS.
9 Prepares Acknowledgment
89
Area of Seq
No.
Receipt of Equipment (ARE).

Indicates the quantity, unit,
description and property number
of the items being issued. Signs
in the ‘Received from’ and
‘Issued by’ portions of the ARE
and RIS, respectively. Records
the date, number and particulars
in the ARE logbook.
Note 1
ARE shall be distributed as
follows:
Original - Property and Supply
Unit file
Copy 2 - Recipient or user of
the property file
Concerned
Office 11 Retrieves Copy 3 of RIS. Checks
Requesting item if it is in conformity with
Personnel RIS. Signs ‘Received By’
portion of original and Copy 2 of
ARE and RIS.
12 Returns original ARE and Copies
90
Area of Seq
No.
1-2 of RIS to Property

Custodian/Officer for recording
in the Property Card. Files Copy
2 of ARE and Copy 3 of RIS.
Supply and
Property Unit
Property 13 Files original of ARE per
Officer accountable officer/employee and
Copy 2 of RIS. Forwards the
original RIS to the Accounting
Unit.
Accounting 14 Receives original of the RIS.

Unit Retrieves the PPELC and posts
PPELC information pertaining to
Keeper issuance/transfer of property.
E. MISCELLANEOUS TRANSACTIONS
Sec. 48. Miscellaneous

Transactions. Miscellaneous transactions are transactions
types that are unique and not recurring in the ordinary
course of government operations. These seldom take
place or should not happen at all. Some of the
miscellaneous transactions are as follows:
1. Loss of Cash and Property
91
2. Request for Relief from Accountability
3. Cash Overage
4. Stale MDS and Commercial Checks
5. Set-up and Settlement of Disallowances
6. Refund of Overpayments
Sec. 49. Accounting for Loss of Cash and

Property. Loss of cash and property 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 an 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, fire, etc., 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 of request for relief from accountability.
Sec. 50. Grant of Relief from Accountability.

When a request for relief from accountability for
shortages or loss of funds is granted, a copy of the
92
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 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 Accountable Officer. 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, force majeure or
other causes 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 from accountability is
denied, the loss shall be taken up as a receivable from the
Accountable Officer or employee liable for the loss and
shall be credited to the appropriate asset account.
Sec. 51. Accounting for Cash Overage. In case
the cash examination disclosed cash overage, as
determined by the Auditor during cash examination, 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.
93
Sec. 52. Accounting for Stale Checks. Checks
may be cancelled when they become stale. The
depository bank considers a check stale, if it has been
outstanding for over six months from date of issue or as
prescribed.
reported in the RC
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 may be issued
upon submission of the 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.
Sec. 53. Accounting for Disallowances.

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-Disallowances/Charges and credit the
appropriate expense account for the current year or Prior
94
Years’ Adjustment account if pertaining to expenses of
previous years.
Cash settlement of disallowances shall be

acknowledged through the issuance of an official receipt
and reported by the Cashier in the RCD.
Sec. 54. Accounting for Overpayments.

Sometimes overpayments or even double payment of
expenditures do happen in agencies. These could be
avoided with the institution of proper controls but some
could not be avoided because of built-in procedures. One
example is the payment of payrolls. Payrolls are
prepared in advance and some agencies pay their
employees through the banking system. All these are
done before reports of attendance are submitted, making
it impossible to know the exact amount to be paid in case
there are absences without pay during the pay periods. In
case of overpayments, refunds shall be demanded of the
employees concerned.
Sec. 55. Pro-forma Accounting Entries. The

following are the pro-forma accounting entries for
miscellaneous transactions:
95
A
Particulars Account Title cc Dr. Cr.
t.
C
od
e
1. Cash Shortage
a. Cash shortage of the Disbursing Officer
To take up Due from Officers 12 15

cash and Employees 8 0
shortage Cash-Disbursing 10 15
Officers 7 0
b. Cash Shortage of the Collecting Officer
To take up Due from Officers 12 15

cash and Employees 8 0
shortage Cash-Collecting 10 50
Officers 6
2. Relief from Accountability for Loss of

Government Funds and Property
a. Request for Relief from Accountability Granted.
To take up
96
A
t.
C
od
e
relief from
accountabilit
y Loss of Assets 94
or 8
for current Prior Years’ 50
year - - Adjustments 53
3
for prior
years - -
Due from Officers
and Employees 12 50
8
b. Request for Relief from Accountability Denied.
To record the Due from Officers 12 15

loss of fund and Employees 8 0 15
by a Cash-Disbursing 10 0
Disbursing Officers 7
Officer
(allegedly
thru theft ) -
P150
97
A
t.
C
od
e
c. Cash Settlement/Restitution in case of denial of

Request for Relief from Accountability
To take up Cash-Collecting 10 50
receipt of Officers 6
settlement Due from Officers 50
and Employees 12
8
To record
deposit
c.1 current Subsidy Income from 60 50
year National 1
Government
Cash-Collecting 10 50
Officers 6
c.2 prior year Prior Years’ 53 50

Adjustment 3
Officers 6
3. Cash Overage
98
A
t.
C
od
e
To take up Cash – Collecting 10 50
cash overage Officers 6 50
discovered Due to National 43
during cash Treasury 3
examination Miscellaneous
Operating
and Service
Income 50
To record Due to National 43 50
deposit Treasury 3
Miscellaneous
Operating
and Service
Income 50
Officers 6
4. Stale Checks
a. Stale MDS check issued in the current year for

replacement
Check Cash-National 10 50
cancellation Treasury, MDS 2
99
A
t.
C
od
e
Accounts Payable 40 50
1
Replacement Accounts Payable 40 50

1
Cash-National 10 50
Treasury, MDS 2
b. Stale MDS check issued in the prior years for

replacement
Check Prior Years’ 53 50

cancellation Adjustments 3
1

1
Cash-National 10 50
Treasury, MDS 2
c. Stale commercial check issued in the current and

prior years for replacement
100
A
t.
C
od
e
Check Cash in Bank-Local
cancellation Currency, Current 11 50
Account 0
1

1
Cash in Bank-Local
Currency, Current 11 50
Account 0
5. Disallowances
a. Recording of disallowances for current year’s

transaction
When the
disallowances Receivables-
becomes final Disallowances/ 13 10
and executory Charges 88 10
- overpayment Office Supplies 49
of office Expenses
supplies
101
A
t.
C
od
e
Amount paid
- P100
Should be
- 90
Difference
- 10
Settlement of Cash-Collecting 10 10
Disallowance Officers 6
Receivables- 10
Disallowances/ 13
Charges 8
Deposit of Subsidy Income from

collection National 60 10
Government 1
Officers 6
102
A
Particulars Account Title cc Deb Cre
t. it dit
C
od
e
b. Recording of disallowance for prior year’s

transaction
When the Receivables -

disallowance Disallowances/ 13 10
becomes final Charges 85 10
and executory Prior Years’ 33
Adjustments
Settlement of Cash - Collecting 10 10

disallowance Officers 6
Receivables - 10
Disallowances/ 13
Charges 8
Deposit of Prior Years’ 53 10

collection Adjustments 3
Officers 6
6. Refund of Overpayment
a. Overpayment taken up as receivable
103
A
t. it dit
C
od
e
To record Due from Officers 12 10

overpayment and Employees 8
of salaries Salaries and Wages 10
and wages - Regular Pay 80
(When 1
overpayment
is
ascertained)
To record Cash-Collecting 10 10
refund Due from Officers 10
and Employees 12
8

Government 1
Officers 6
b. Refund of overpayment not taken up as

receivable
104
A
t. it dit
C
od
e
To record Cash - Collecting 10 10

refund of Salaries and 10
Salaries and Wages – Regular 80
Wages - Pay 1
Regular Pay
during the
current year

Government 1
Officers 6
To record Cash-Collecting 10 10
receipt of Officers 6 10
refund of Prior Years’ 53
0verpayment Adjustments 3
in the
ensuing year
Deposit of Prior Years’ 53 10

collection Adjustments 3
105
A
t. it dit
C
od
e
Officers 6
106
Chapter 4. Trial Balances, Financial
Reports
and Statements
The Financial Statements Process
Pre-
Closing Statement of
TB Income and
Unadjusted Expenses
Trial
Balance
Sec. 1. S Statement
Closing of
tateme Cash
Journal
nt of Entries Flows
Gover
Adjusting nment
Entries
Equity
. ThePost-
Closing Balance
StatemTB Sheet
ent of
Gover
nment
Equity
(Appen
dix 48) Reporting System.
Sec. 56. Financial This
shows
Financial Reporting System (FRS) includes the
the
preparation and submission
financi
of trial balances, financial
statements and other
al reports needed by fiscal and
regulatory agencies. The sub-systems are as follows:
transac
tions
which
resulte
d to
the 107
change
in
Gover
nment
Equity
accoun
t at the
end of
the
year.
TB
1. Preparation and Submission of Trial Balances
and Other Reports
2. Preparation and Submission of Financial
Statements
Sec. 57. Trial Balance. The Trial Balance shows

the equality of debit and credit balances of all general
ledger accounts as of a given period. It is prepared and
submitted monthly, quarterly and annually. At the end of
the fiscal year, the pre-closing and the post-closing trial
balances shall be prepared.
Sec. 58. Purposes of the Trial Balance. The trial

balance is prepared to:
1. prove the mathematical equality of the debits

and credits after posting;
2. uncover errors in journalizing and posting;
and
3. serve as basis for the preparation of the
financial statements.
108
Sec. 59. Pre-Closing Trial Balance. The Pre-
Closing Trial Balance (Appendix 2) shall be prepared
after recording the adjusting journal entries in the
General Journal and posting the same to the General
Ledger. It shows the adjusted balances of all accounts as
of a given period. This is also described as the adjusted
trial balance.
Sec. 60. Adjusting or Correcting Journal

Entries. Under the matching principle, adjustments shall
be made for economic activities that have taken place but
are not yet recorded at the time when the financial
statements are prepared. Such adjusting journal entries
are made to ensure that revenues and expenses are
recorded in the period when they are earned or incurred.
Adjustments are of two main types: accrued items and
deferred items.
Sec. 61. Adjustment for Accrued Item. It is an

adjusting entry for an economic activity already
undertaken but not yet recorded into an asset and revenue
accounts or a liability and expense accounts. It requires
asset/revenue adjustments and liability/expense
adjustments.
Sec. 62. Asset/Revenue Adjustment. It involves

earned revenues not yet recorded as assets and income at
the end of the accounting period. Examples are
receivables for revenues already earned but not yet
collected nor billed as of the year end.
109
Acco
Account Title unt Deb Cre
Code it dit
Interest Receivable 161 500

Interest Income 624 500
Sec. 63. Liability/Expense Adjustment. It

involves expenses, which already exist but remain unpaid
at the end of the accounting period. Examples are
salaries, wages and other expenses already incurred but
not yet paid.
Acco
Code it dit
Salaries and Wages- 801 1,00

Regular Pay 0
Due to Officers and 428 1,00
Employees 0
Sec. 64. Adjustment for Deferred Items. These

are adjusting entries transferring data previously recorded
in an asset account to an expense account, or data
previously recorded in a liability account to a revenue
account. It also requires asset/expense adjustments and
liability/revenue adjustments.
Sec. 65. Asset/Expense Adjustments. These

pertain to assets, portion of which shall be recorded as
110
expense of the agency at the end of the accounting
period. Examples are prepaid expenses, bad debts and
depreciation.
Acco
Code it dit
Original Entry:
Prepaid Rent 161 1,00
0
Cash-National 102 1,00
Treasury, MDS 0
Adjusting Entry:
Rent Expenses 841 900
Prepaid Rent 161 900
Sec. 66. Bad Debts. Trade receivables shall be

valued at their face amounts minus, whenever
appropriate, allowance for doubtful accounts. Bad Debts
expense and/or any anticipated adjustments, which in the
normal course of events will reduce the amount of
receivables from the debtors to estimated realizable
values, shall be set up at the end of the accounting period.
The Allowance for Doubtful Accounts shall be
provided in an amount based on collectibility of
receivable balances and evaluation of such factors as
aging of the accounts, collection experiences of the
agency, expected loss experiences and identified doubtful
accounts.
111
The determination of bad debts expense shall be
derived from computations based on percentages and
aging of accounts receivable as follows:
Age of Accounts Percentage
1 - 60 days 1%
61 - 180 days 2%
181- 1 year 3%
More than 1 year 5%
An adjusting journal entry to take up bad debts

expense is as follows:
Acco
Code it dit
Bad Debts 929 1,00

0
Allowance for Doubtful 301 1,00
Accounts 0
Sec. 67. Depreciation for Property, Plant and

Equipment. The costs 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 asset over its useful life. The depreciable or
estimated useful life for different types of agency assets
are presented as Appendix 1.
112
Sec. 68. Method of Depreciation.
Depreciation shall be computed using the Straight Line
Method. Depreciation shall start on the second month
from purchase. A residual value equivalent to ten
percent of the cost shall be set. Annual depreciation is
computed as follows:
Annual Depreciation = Asset Cost less Estimated

Residual/Salvage Value
Estimated Useful
Life
Asset Cost - Purchase or Acquired

Value of the Asset
Estimated Salvage Value - 10% of the asset cost
Estimated Useful Life - Estimated number of
years the asset shall be used
as determined by the
Commission on Audit
A sample adjusting journal entry for
depreciation expense is as follows:
Acco
Code it dit
Depreciation-Office 922 1,00

Equipment 0
Accumulated 322 1,00
Depreciation-Office 0
Equipment
113
Sec. 69. Closing Journal Entries. Closing
journal entries are general journal entries which close out
the balances of all nominal/ temporary and intermediate
accounts at the end of the accounting period. The
nominal and intermediate accounts that shall be closed at
the end of the accounting period are as follows:
1. Reversion of the unused or unutilized Subsidy

Income from National Government at the end
of the year due to the DBM policy that NCA
will only be valid within the year of issue
except NCA for accounts payable, which is
valid one month after its issuance. There is no
need to issue an MDS Check when reverting
the account.
Acco
Account Title unt De Cr
Code bit edi
t
Subsidy Income from 601 10

National 0
Government
Cash-National 102 10
Treasury, MDS 0
2. Close the balance of the Subsidy Income from

National Government account to Income and
Expense Summary account.
114
Acco
Code bit edi
t
Subsidy Income from 601 1,0
National 00
Government
Income and Expense 532 1,0
Summary 00
3. Close the balance of all income accounts to

Income and Expense Summary account.
Acco
Code bit edi
t
Income from Government 611 50
Services 0
Income from Government
Business Operations 612 40
0
Income and Expense 532 90
Summary 0
4. Close the balance of all expense accounts to

Income an Expense Summary account.
Income and Expense 532 800

Summary
Salaries and Wages- 801 800
Regular Pay
115
5. Close the balance of the Income and Expense
Summary Account to the Retained Operating
Surplus account.
Income and Expense 532 1,10

Summary 0
Retained Operating 534 1,10
Surplus 0
5. Close the balance of the Prior Year’s

Adjustments account to Retained Operating
Surplus account.
Prior Years’ 533 200

Adjustments
Retained Operating 534 200
Surplus
6. Close the balance of the Retained Operating

Surplus to Government Equity account.
Retained Operating 534 1,30

Surplus 0
Government Equity 501 1,30
0
7. Close Public Infrastructures or Reforestation

Projects accounts to Government Equity
account and transfer the corresponding amounts
to the respective registries.
116
Government Equity 501 1,30
0
Public Infrastructures/ 243/
Reforestation Projects 244 1,30
0
Sec. 70. Post-Closing Trial Balance. The Post-

Closing Trial Balance (Appendix 3) shall be prepared
after recording the closing journal entries in the General
Journal and posting to the General Ledger. It contains a
listing of all general ledger accounts that remain open
after the closing process is completed.
117
Sec. 71. Procedures in the Preparation and
Submission of Trial Balances and Other Reports
Area of Seq.
Responsibilit No. Activity
y
Preparation of Unadjusted Trial

Balance
Accounting
Unit
Bookkeeper 1 Records JEVs for the month in
the Special Journals and General
Journal.
2 Posts the journal entries from the

Special Journals and General
Journal to the respective General
Ledgers.
3 Records the source/summarizing

documents to the respective
Subsidiary Ledgers.
Note 1
The summarizing/source
documents are the following:
 Report of Checks Issued (RCI)
 Report of Collections and
Deposits (RCD)
 Report of Disbursements (RD)
118
Area of Seq.
y
 Journal Entry Voucher (JEV)

 Disbursement Voucher (DV)
 Other Supporting Documents
(OSD)
4 Foots and extracts the balances of

the General Ledgers and
Subsidiary Ledgers.
5 Based on the General Ledgers,

prepares the Unadjusted Trial
Balance (UTB) to check the
postings made on the General
Ledgers or the equality of debit
and credit balances of the general
ledger accounts. Files
temporarily.
Preparation of Pre-Closing Trial
Balance
6 Prepares adjusting journal entries

thru the JEV for unrecorded
transactions and for all accounts
that need to be adjusted/
corrected. Records the JEV in the
General Journal.
119
Area of Seq.
y
Note 2
Adjusting journal entries shall be
prepared for the following
transactions:
 Adjustment for Accrued Items

 Adjustment for Deferred Items
 Correction/Reclassification
Entries
 Provision for Allowance for
Doubtful Accounts
 Provision for Accumulated
Depreciation
7 Posts the adjusting journal entries

from the General Journal to the
General Ledgers and Subsidiary
Ledgers.
8 Foots and extracts balances of the

General Ledgers and Subsidiary
Ledgers.

prepares Pre-Closing Trial
Balance in four copies. Files
temporarily the Pre-Closing Trial
120
Area of Seq.
y
Balance.
Note 3
Use of a Worksheet to facilitate
the preparation of the trial
balances is encouraged. The
preparation of the Worksheet is
discussed in Sec. 82.
Note 4
The preparation of the adjusting
journal entries is at month end or
as necessary.
Preparation of Other Reports
10 Reconciles the totals of the

Subsidiary Ledgers with the totals
of the General Ledgers accounts.
If unreconciled, checks the
difference and prepares adjusting/
correcting entries as maybe
necessary thru the JEV.
11 If reconciled, prepares individual

supporting schedules per account
based on the Subsidiary Ledgers.
121
Area of Seq.
y
12 Initials the supporting schedules

and the Pre-Closing Trial Balance
Head of the 13 Reviews and signs the ‘Certified

Accounting Correct’ portion of the Pre-
Unit Closing Trial Balance and the
supporting schedules.
Designated 14 Submits the Pre-Closing Trial

Staff Balance to the Offices concerned.
Records submission in the
logbook maintained. Files Copy 4
of the Pre-Closing Trial Balance
and Copy 4 of supporting
schedules for preparation of
financial Statements.
Preparation of Post-Closing Trial

Balance at year-end.
Bookkeeper 15 Prepares closing journal entries
122
Area of Seq.
y
thru JEV and records the same in

the General Journal.
Note 5
The following accounts shall be
closed/reverted at year-end:
 Unused Subsidy Income from

National Government(Balance
of account Cash-National
Treasury, MDS)
 Nominal/Intermediate
Accounts
 Income accounts (including
Subsidy Income from
National Government,
RO and OU) to the
Income and Expense
Summary (IES) account
 Expense accounts to IES
account
 Prior Years’ Adjustments
account to Retained
Operating Surplus (ROS)
account
 Balance of IES account
to ROS account
123
Area of Seq.
y
 ROS account to
Government Equity
account
.
Note 6
In addition to the closing journal
entries, the account
Infrastructure Projects/
Reforestation Projects shall be
transferred at year- end to the
Registry of
Infrastructures/Registry of
Reforestation Projects.
16 Posts the journal entries from the

General Journal in the respective
General Ledgers.
17 Foots and extracts the balances of

the General Ledgers and the
Subsidiary Ledgers.

prepares Post-Closing Trial
Balance in four copies.
19 Reconciles the supporting
124
Area of Seq.
y
schedules with Post-Closing Trial

Balance. If not reconciled,
prepares the necessary corrections
thru JEV. Records the JEV in the
General Journal.
20 Initials the ‘Certified Correct by’

portion of the Post-Closing Trial
Balance and ‘Prepared by’
portion of supporting schedules.
21 Prepares transmittal letter and

forwards the same together with
the Post-Closing Trial Balance
and supporting schedules to the
Head of the Accounting Unit.
Head of the Reviews and signs ‘Certified

Accounting 22 Correct by’ portion of the Post-
Unit Closing Trial Balance, supporting
schedules and transmittal letter,
Accounting Staff for distribution.
Accounting 23 Distributes the Post-Closing Trial

Staff Balance and supporting schedules
to the Concerned Offices.
125
Area of Seq.
y
Records in the logbook the

submission of the same.
Note 7
Trial Balances and supporting
schedules shall be distributed as
follows:
Copy 1 – COA Resident Auditor
Copy 2 – Accountancy Office,
COA
Copy 3 – DBM
Copy 4 – Accounting Unit File
Note 8
The frequency of submission of
Pre-Closing Trial Balance/Post-
Closing Trial Balance and other
reports shall be as follows:
 Pre-Closing Trial Balance
and other reports – monthly,
within ten days after the end of
the month to the COA
Resident Auditor and DBM
 Year-end Pre-Closing Trial
Balance/ Post-Closing Trial
Balance and other reports –
on or before Feb. 14 of the
following year to the COA
126
Area of Seq.
y
Resident Auditor, DBM and

COA, Accountancy Office.
Sec. 72. Generation of Financial Statements

and Supporting Schedules. Financial statements and
their supporting schedules are the products of the
government accounting processes. These are the
principal comprehensive means by which the information
accumulated and processed in the state accounting
system is periodically communicated to those who use
them. The financial statements generally prepared in the
National Government are: the Balance Sheet, Statement
of Income and Expenses, Statement of Government
Equity, and Statement of Cash Flows.
127
Sec. 73. Responsibility for Financial
Statements. Responsibility for the fair presentation and
reliability of financial statements rests with the
management of the reporting agency. This responsibility
is discharged by applying generally accepted state
accounting principles that are appropriate to the entity’s
circumstances, by maintaining effective system of
internal control and by adhering to the chart of accounts
prescribed by the Commission on Audit.
To achieve fair presentation and reliable

information of the financial statements, the following
standards shall be observed.
a. Fairness of presentation. This refers to the

overall propriety in disclosing financial
information. Full disclosure in financial
aspects requires observance of the following
standards of reporting:
All essential facts relating to the scope and

purpose of each report and the period involved
shall be included and clearly displayed.
 All financial data presented shall be

accurate, reliable, and truthful. The
requirement for accuracy does not rule out
the inclusion of reasonable estimates when
the making of precise measurements is
impracticable, uneconomical, unnecessary,
or conducive to delay. All appropriate
128
steps shall be taken to avoid bias, unclear
facts, and presentation of misleading
information.
 Financial reports shall be based on official

records maintained under an adequate
accounting system that produces
information objectively and discloses the
financial aspects of all events or
transactions taking place. Where financial
data or reports based on sources other than
the accounting systems are presented, their
basis shall be clearly explained.
 The financial data reported shall be

derived from accounts that are maintained
in all material respects on a consistent
basis from period to period; material
changes in accounting policies or methods
and their effect shall be clearly explained.
 Consistent and non-technical terminology

shall be used in financial reports to
promote clarity and usefulness.
b. Compliance. The report shall be in accordance

with prescribed government requirements and
international accounting standards of reporting.
129
c. Timeliness. All needed reports shall be
produced promptly to be of maximum
usefulness.
d. Usefulness. Financial reports shall be carefully

designed to present information that is needed
and useful to reports users.
Sec. 74. Statement of Management

Responsibility for Financial Statements. The Statement
of Management Responsibility for Financial Statements
(Appendix 4) shall serve as the covering letter in
transmitting the agencies financial statements to the
Commission on Audit, Department of Budget and
Management, other oversight agencies and other parties.
It shows the agency’s responsibility for the preparation
and presentation of the financial statements. The
statement shall be signed by the Director of Finance and
Management Office or Comptrollership Office, or the
Chief of Office who has direct supervision and control
over the agency’s accounting and financial transactions,
and the Head of Agency or his authorized representative.
Sec. 75. Balance Sheet. The Balance Sheet

(Appendices 5 and 6) is a formal statement which shows
the financial condition of the agency as of a certain date.
It includes information on the three elements of financial
position - assets, liabilities and government equity. It
shall be prepared from information taken directly from
the year-end Post-Closing Trial Balance. The Balance
130
Sheet shall be supported with the following
schedules/statements:
 Schedules of Accounts Receivables (SAR)

(Appendix 7)
 Schedules of Accounts Payables (SAP)
(Appendix 8)
 Schedules of Public Infrastructures (SPI)
(Appendix 9)
 Other schedules as may be required
Although the allotments and obligations of the
agency are not recorded in the books of accounts, the
Statement of Allotments, Obligations and Balances
(SAOB) (Appendix 10) shall be submitted to the
Commission on Audit by the Budget Officer/Agency
Officer concerned. This statement shall to be included
among the aforementioned schedules for information of
government officials and oversight agencies.
Sec. 76. Statement of Income and Expenses.

The Statement of Income and Expenses (Appendices 11
& 12) shows the results of operation/performance of the
agency at the end of a particular period. This statement
shall be prepared by the Accounting Unit from
information taken directly from the Pre-Closing Trial
Balance.
Sec. 77. Statement of Government Equity.

The Statement of Government Equity (Appendix 13)
shows the financial transactions, which resulted to the
change in Government Equity account at the end of the
131
year.
Sec. 78. Statement of Cash Flows. The

Statement of Cash Flows (Appendix 14) is a statement
summarizing all the cash activities of an agency. This
includes the operating, investing and financing activities
of the entity and provides information on the cash
receipts and cash payments during the period. The
primary purpose of the Statement of Cash Flows is to
give relevant information on the agency’s overall cash
position, liquidity and solvency. Using the Statement of
Cash Flows, managers, investors and creditors could
easily assess if the agency could meet its obligations in
operating, investing and financing activities.
Sec. 79. Preparation of the Statement of

Cash Flows. To facilitate the preparation of the
Statement of Cash Flows, the use of a Working Paper is
encouraged. It shall show the increase or decrease in the
cash accounts between two periods. The net increase
in cash provided by 1) operating 2) investing and
3) financing activities in addition to the cash balance at
the beginning shall equal to the cash balance at the end of
the period.
1) Operating Activities. Operating activities

involves the principal resources producing
activities of the enterprise and other activities that
are not investing or financing (SFAS 22).
Generally, these include the cash effect on
transactions that enter in the Income and Expense
132
Summary account.
2) Investing Activities. Investing activities involves

the acquisition and disposal of long-term assets
and other investments not included in cash
equivalent (SFAS 22). These activities include
cash transactions covering non-operating assets,
such as the purchase of property, equipment,
short and long-term investments and other non-
current assets.
Non-cash investing activities are not

included in the statement of cash flows.
3) Financing Activities. Financing activities are

derived from the equity capital and borrowings
of the agency (SFAS 22). These include cash
transactions involving the government equity
and non-operational liabilities.
Non-cash financing activities are not

included in the statement of cash flows.
The increase or decrease in the cash accounts are

analyzed and the following computations are made:
Cash flows from operating activities
Cash Inflows:
 Receipt of Notice of Cash allocation
(NCA) from the DBM
133
 Receipt of Notice of Transfer of
Allocation to Agency RO/OU from CO
 Cash receipts from all sources of revenues
 Receipt of Inter – agency cash transfers
(Due to)
 Cash receipts from the sale of goods or
rendition of services
 Cash receipt of interest income, rental
income, dividend income, etc.
 Receipt of payment for liquidated damages
 Receipt of refund of deposits
 Receipt of refunds of cash advance or
excess payments
 Collection of receivables
 Cash receipt of grants and donations
 Receipt of cash dividends from enterprises
(e.g. PLDT)
Cash Outflows:
 Payments of accounts payable
 Cash purchase of merchandise for sale
 Cash advances granted for travel
 Inter-agency transfers (Due from)
 Notice of Transfer of Allocation to
Agency RO/OU issued by the NGA Main
Office to RO/OU and/or attached agencies
through Government Servicing Banks
 Return of unused NCA
 Cash payment for operating expenses
 Remittance of taxes withheld not covered
by TRA and other deductions (if any)
134
 Cash purchase of supplies and equipment
 Cash payment of retirement benefits
 Cash payment of claims for damages
 Cash payment for liabilities incurred in
operations
 Cash payments for interest
Cash flows from investing activities:
Cash Inflows:
 Proceeds from sale of marketable stocks
and bonds
 Cash proceeds from the sale/disposal of
equipment and other property, plant and
equipment
 Redemption of long-term investments or
repayment by GOCC/GFI of long-term
loans
Cash Outflows:
 Purchase of property, plant and
equipment
 Purchase of land
 Investment in stocks/bonds
 Investment in GOCC/GFI
 Exposure as other long-term
investments
Cash flows from financing activities:
Cash Inflows:
135
 Cash received from domestic and foreign
loans
 Issuance of treasury bills
Cash Outflows:
 Payment of domestic and foreign loans
 Redemption of treasury bills
outstanding
 Payment of cash dividend
The net increase in cash provided by

operating activities, investing activities and
financial activities for the year, and the cash
balance at the start of the year, shall equal the cash
balance at the end of the year. Such amount shall
tally with the total cash account shown in the
balance sheet.
Sec. 80. Notes to Financial Statements. Notes to

Financial Statements (Appendix 15) are integral parts of
financial statements, which pertain to additional
information necessary for fair presentation in conformity
with generally accepted accounting principles. These
may explain the headings captions or amounts in the
statements of present information that cannot be
expressed in money terms, and description of accounting
policies.
Information shall be presented in a way that will

facilitate understanding and avoid erroneous
implications. The headings, captions and amounts shall
136
be supplemented by enough additional data so that their
meaning would be clear and not overshadowed by so
much information that important matters are buried in
mass trivia.
Where Notes to Financial Statements appear on a

separate page, indicate the phrase “See accompanying
Notes to Financial Statements” placed at the bottom of
said statements.
Material changes in classification of accounts shall

be indicated and explained as notes to financial
statements.
The four types of disclosure considered necessary

are as follows:
a. Customary or routine disclosure.

Information about measurement bases of
important assets, restrictions on assets and
government equity, important long-term
commitments not recognized in the body of the
statements, information on terms of owner’s
equity and long-term debt, and certain other
disclosures required by pronouncements of the
Philippine Institute of Certified Public
Accountants, Accounting Standards Council,
and regulatory bodies that have jurisdiction are
necessary for full disclosure.
137
b. Disclosure of changes in accounting
principles. Changes in accounting principles,
practices, or the methods of applying them,
together with the financial effect, and the
justification for the change shall be disclosed in
the financial statements or a note thereto.
In particular, it shall include any of the

following:
 Selection from existing acceptable

alternatives
 Principles and methods peculiar to the
agency
 Unusual application of generally
accepted accounting principles.
c. Disclosure of subsequent events. Disclosure

of events that affect the agency directly and that
occur between the date of, or end of the period
covered by, the financial statements and the
date of completion of the statements is
necessary if knowledge of the events might
affect the interpretation of the statements, even
though the events do not affect the propriety of
the statements themselves.
d. Disclosure of accounting policies. Description

of the accounting policies adopted by the
reporting entity is required as an integral part of
the financial statements. It is usually captioned
138
“Summary of Significant Accounting Policies”,
and placed as first item in the Notes. It shall be
limited to description of the policies and no
quantitative data shall be included.
Examples of accounting policy

disclosures commonly required:
 Consolidation principles
 Accounting for long-term investments
 Adoption of policy on increasing
benefit entitlements of the program
members. The effect of the increase
shall be disclosed.
 Basis of revenue recognition
In general, disclosures shall include

important judgment as to appropriateness of
principles relating to recognition of revenues
and allocation of asset costs to current and
future periods.
Sec. 81. Interim Reports. Interim reports are the

financial statements required to be prepared at any given
period or at a financial reporting period without closing
the books of accounts. The following interim financial
statements shall be prepared and submitted quarterly with
the Notes to Financial Statements:
a. Statement of Income and Expenses;

b. Balance Sheet; and
139
c. Statement of Cash Flows.
The interim financial statements shall be prepared

employing the same accounting principles used for
annual reports. Adjusting and closing journal entries
shall be prepared. However, only the adjusting journal
entries are recorded in the books of accounts. To
facilitate the preparation of the interim financial
statements, the use of the worksheet is recommended.
Sec. 82. Worksheet. A worksheet is a tool

for accumulating and sorting information needed for the
preparation of the financial statements. It is a columnar
sheet used to adjust and close account balances in
preparation for the preparation of the financial
statements. The format of the worksheet shall be as
follows:
Agency Name
Worksheet
As of __________, 20__
State Post
Unadj Adjuste ment -
Clos Bala
usted d/Pre- of Closi
Acco Adjust ing nce
Trial Closing Incom ng
unts ments Entri She
Balanc Trial e and Trial
es et
e Balance Expe Bala
nses nce
Tit Co Dr. Cr. Dr. Cr. Dr. Cr. D C Dr. Cr. Dr Cr Dr Cr
140
le de r. r. . . . .
a. Account Title and Code columns show the

accounts of the General Ledger.
b. The Unadjusted Trial Balance columns reflect

the amount balances of the General Ledger
accounts.
c. Adjustments columns show adjusting journal

entries effected for the accounts.
d. Adjusted/Pre-Closing Trial Balance columns

show the balances of all the accounts after
adjustments are added/deducted from the
balances of accounts in the unadjusted trial
balance.
e. Closing Entries debit and credit columns show

the amounts debited and credited to close the
nominal accounts.
f. Statement of Income and Expenses columns

show all the debit and credit amount balances
of the nominal accounts (subsidies, income and
expenses) and intermediate accounts.
g. Post-Closing Trial Balance columns show the

debit and credit amount balances of all accounts
after posting the closing entries.
141
h. Balance Sheet columns show all the debit and
credit amount balances of all real accounts in
the post-closing trial balance (assets, liabilities
and government equity).
Chapter 5. Responsibility Accounting
Sec. 83. Responsibility Accounting Defined.

Responsibility accounting is a system that relates the
financial results to a responsibility center, which provides
access to cost and revenue information under the
supervision of a manager having a direct responsibility
for its performance. It is a system that measures the
plans (by budgets) and actions (by actual results) of each
responsibility center.
Sec. 84. Responsibility Center Defined. It is a

part, segment, unit or function of a government agency,
headed by a manager, who is accountable for a specified
set of activities. Except for some, which derive most of
their income from collection of taxes and fees, national
government agencies are basically cost centers whose
primary purpose is to render service to the public at the
lowest possible cost. Cost centers are established to
provide each government agency accessibility to cost
information and to facilitate cost monitoring at any given
period. While the use of Subsidiary Ledgers is sufficient
to control cost, it requires considerable time to
summarize the cost incurred by agency for its different
programs, projects, activities and offices/divisions,
142
hence, responsibility accounting shall be done only under
the computerized accounting system.
Sec. 85. Objectives of Responsibility

Accounting. Responsibility accounting aims to: a)
ensure that all costs and revenues are properly
charged/credited to the correct responsibility center so
that deviations from the budget can be readily attributed
to managers accountable therefore; b) provide a basis
for making decisions for future operations; and c)
facilitate review activities, monitoring the performance of
each responsibility center and evaluation of the
effectiveness of agency’s operations.
Sec. 86. Concepts of Responsibility

Accounting. The following are the concepts of
responsibility accounting:
a. Responsibility accounting involves accumulating

and reporting data on revenues and costs on the
basis of the manager’s action who has authority
to make the day-to-day decisions about the
items;
b. Evaluation of a manager’s performance is based

on the matters directly under his control;
c. Responsibility accounting can be used at every

level of management in which the following
conditions exist:
143
1. Cost and revenues can be directly
associated with the specific level of
management responsibility;
2. Costs and revenues are controllable at the

level of responsibility with which they
are associated.
3. Budget data can be developed for

evaluating the manager’s effectiveness in
controlling the costs and revenues.
d. The reporting of costs and revenues under

responsibility accounting differs from budgeting
in two respects:
1. A distinction is made between

controllable and non-controllable costs.
a) A cost is considered controllable at a

given level of managerial
responsibility if that manager has the
power to incur it within a given period
of time. It follows that (1) all costs
are controllable by top management
because of the broad range of its
activity; (2) fewer costs are
controllable as one moves down to
lower level of managerial
responsibility because of the
manager’s decreasing authority.
144
b) Non-controllable costs are costs
incurred indirectly and allocated to a
responsibility level.
2. Performance reports either emphasize or

include only items controllable by
individual manager.
e. A responsibility reporting system involves the

preparation of a report for each level of
responsibility. Responsibility reports usually
compare actual costs with flexible budget data.
The reports show only controllable costs and no
distinction is made between variable and fixed
costs.
f. Evaluation of a manager’s performance for cost

centers is based on his ability to meet budgeted
goals for controllable costs.
Sec. 87. Responsibility Center Code Structure.

Each government agency shall be assigned a
responsibility center code. The coding structure shall be
as follows:
000-00-
000-000-000
Department/Agency/Province/City
Responsibility Area (CO/RO)
Sub-responsibility Area (District/ 145

Division)
Sub-responsibility Area
(Office/Unit/Program/Project)
Account Code
Examples:
Example 1
000 -01-
000 -122 - 831
Department of ABC
Office of the Secretary
Central Office
None
146
Accounting Unit
Travelling Expense-Local
Example 2
000 - 06-
021 - 401 - 831
Department
Office of the Secretary
Regional Office III
Operating Unit I
Local Project -
Computerization
Travelling Expense - Local
Sec. 88. Computerized Accounting System.

Since responsibility accounting cannot be done under the
manual system, the details of this shall be discussed on
the Manual for Computerized Accounting system to be
issued by the Commission on Audit.
147
Chapter 6. Illustrative Accounting Entries
Sec. 89. Illustrative Accounting Entries in

Regular Agency (RA) Books.
a. Illustrative Accounting Entries for Typical

Transactions of Central/Regional Offices and
Operating Units (CO/RO/OU) receiving Notice
of Cash Allocation (NCA) from the Department
of Budget and Management (DBM).
Central/Regional Offices and Operating Units

receiving NCA directly from the DBM shall be
guided by the illustrative accounting entries
shown in Annex A.
b. Illustrative Accounting Entries for

Decentralized Agencies
Regional Offices and Operating Units receiving

NCA directly from the DBM and funding
checks from CO/RO shall be guided by the
illustrative accounting entries shown in Annex
B.
Sec. 90. Illustrative Accounting Entries in

National Government (NG) Books.
148
National Government Agencies whose
income/collections are required to be recorded in the NG
Books and remitted to the National Treasury through
Authorized Government Depository Banks shall follow
the illustrative accounting entries shown in Annex C.
LEGEND: YELLOW MEANS LAST READ

RED MEANS NEEDS TO TAKE NOTE
149

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MANUAL ON THE

NEW GOVERNMENT ACCOUNTING SYSTEM

For National Government Agencies

Sec. 1. Objectives of the Manual. The New

a. Uniform guidelines and procedures in

Sec. 3. Legal Basis. This Manual is prescribed by

“The Commission on Audit shall have

Chapter 2. Basic Features and Policies

Sec. 4. Basic Features and Policies. The NGAS

a. Accrual Accounting. A modified accrual basis

b. One Fund Concept. This system adopts the

c. Chart of Accounts and Account Codes. A

d. Books of Accounts. All national agencies shall

Regular Agency (RA) Books. These

National Government (NG) Books.

 Cash Journal (CJ)

e. Financial Statements. The following

Notes to Financial Statements shall

f. Two-Money Column Trial Balance. The two

g. Allotment and Obligation. Obligation

h. Notice of Cash Allocation (NCA). The receipt

i. Financial Expenses. Financial expenses such

j. Perpetual Inventory of Supplies and

k. Valuation of Inventory. Cost of ending

l. Maintenance of Supplies and Property, Plant

m. Construction of Assets. For assets under

 Registry of Public Infrastructures -

o. Depreciation. The straight-line method of

p. Reclassification of Assets. Serviceable assets

q. Allowance for Doubtful Accounts. An

r. Elimination of Contingent Accounts.

s. Recognition of Liability. Liability shall be

t. Interest Accrual. Whenever practical and

u. Accounting for Borrowings and Loans. All

v. Elimination of corollary and negative

w. Petty Cash Fund. The Petty Cash Fund shall

x. Foreign Currency Adjustment. Cash deposits

Sec. 5. General Accounting Plan. The General

The following accounting systems are:

a. Budgetary Accounts System;

Sec. 6. Budgetary Accounts System. The

Sec. 7. Budgetary Accounts. Budgetary

Sec. 9. Procedures for the Preparation of the

 The amount that will be

2 Initials under 'Prepared by'

Head, Budget 3 Reviews and signs ‘Prepared by’

Head of the 5 Approves/Signs the ABM and the

Concerned Staff 6 Records in the logbook

Sec. 10. Allotment Release Order (ARO).

Sec. 11. Recording of Allotments. Upon

1. Registry of Allotments and Obligations -

Sec. 12. Procedures in the Monitoring and

Budget Unit 1 Receives the approved

Budget Staff 2 Prepares ALOBS in two copies,

The numbering structure of the

The ALOBS shall be prepared in

Head of the 3 Reviews, checks the small box

Budget Staff 4 Records the ALOBS in the

5 Forwards Copy 2 of the ALOBS

Sub-ARO for RO/OU. Forwards

Head of the 2 Reviews and signs Sub-ARO.

Head of 3 Approves the Sub-ARO.

Budget Staff 4 Based on the approved Sub-