CHAPTER 1

OVERVIEW OF GOVERNMENT ACCOUNTING

Government Accounting encompasses the process of analyzing, recording,

classifying, summarizing, and communicating all transactions involving the receipt and
disposition of government funds and property, and interpreting the results thereof.

The objectives of government accounting are:

1. To produce information concerning past operations and present conditions;

2. To provide a basis for guidance for future operations;

3. To provide for control of the acts of public bodies and officers in the receipt,
disposition, and utilization of funds and property; and

4. To report on the financial position and the result of operations of government

agencies for the information of all persons concerned.

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Like the accounting of business entities, government accounting is also a process of

producing information that is useful in making economic decisions.

Government accounting, however, places greater emphasis on the following:

1. Sources and utilization of government funds; and

2. Responsibility, accountability, and liability of entities entrusted with government funds

and properties.

Sources of government funds include:

1. receipts from taxes and other fees

2. borrowings

3. grants from other governments and international bodies

Utilization of government funds include:

1. expenditures on programs, projects, unanticipated losses from calamities and the

like.

Responsibility over Government Funds and Property

1.The head of a government agency

- is directly responsible in implementing policies

- is primarily responsible for government resources entrusted to his agency

2. All those who are exercising authority over a government agency shall share fiscal
responsibility.

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The following offices are charged with government accounting responsibility:

1. Commission on Audit (COA)

- has the exclusive authority to promulgate accounting and auditing rules and
regulations.

- keeps the general accounts of the government, supporting vouchers, and other
documents.
 - submits financial reports to the President and Congress.

2. Department of Budget and Management (DBM)

- is responsible for the formulation and implementation of the national budget

with the goal of attaining the nation’s socio-economic objectives.

3. Bureau of Treasury (BTr)

- functions under Department of Finance

- is cash custodian of the government

- is authorized to received and keep national funds and manage and control the
disbursement thereof

- is authorized to maintain accounts of financial transactions of all national

government offices, agencies, and instrumentalities.

4. Government Agencies

- are responsible in directly implementing the projects of, and performing the
functions delegated by, the government

- shall maintain accounting books and budget registries

- are required by law to have accounting units/division/department.

 Government agency refers to any department, bureau, or office of the

national government, or any of its branches and instrumentalities, or any
political subdivision, as well as any government owned or controlled
corporation (GOCC), including its subsidiaries, or other self-governing
board or commission of the government.
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The GAM for NGAs

An “old” government accounting system had been used for about five decades before it
was replaced by the New Government Accounting System (NGAS) in 2002.

However, on 01 January 2016, the NGAS was replaced by the Government

Accounting Manual for National Government Agencies (GAM for NGAs).

The GAM for NGAs was promulgated primarily to harmonize the government
accounting standards with international accounting standards, particularly the
International Public Sector Accounting Standards (IPSAS). The IPSASs are based
on the International Financial Reporting Standards (IFRS).

The Philippine Government has adopted the IPSAS through Philippines Public Sector
Accounting Standards (PPSAS). The provisions of the PPSAS are incorporated in the
GAM for NGAs.

Legal Basis of GAM for The GAM for NGAs is promulgated by the
NGAs Commission on Audit (COA) based on the
authority conferred to it by the Philippine
Constitution.

Coverage of GAM for NGAs The GAM for NGAs provides the basis concept
to be used in:
1. Preparing general purpose financial
statements in accordance with the PPSAS and
 other financial reports as may be required by
laws, rules and regulations; and
2. Reporting of budget, revenue, and
expenditure in accordance with laws, rules, and
regulations

Objective of GAM for NGAs The GAM for NGAs aims to update the
following:
1. Standards, policies, guidelines, and
procedures in accounting for government funds
and property;
2. Coding structure and accounts; and
3. Accounting books, registries, records, forms,
reports, and financial statements.
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Basic Accounting and Budget Reporting Principles

The financial records and reports of government entities shall comply with the following:

1. Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules, and
regulations;

2. Accrual basis of accounting;

Under accrual basis of accounting, transactions are recognized when they occur
(and not only when cash is received or paid). Therefore, transactions are recognized in
the periods to which they relate.

3. Budget basis for presentation of budget information in the financial statements;

4. Revised Chart of Accounts prescribed by COA;
5. Double entry bookkeeping;
6. Financial statements based on accounting and budgetary records;
7. Fund cluster accounting
 The books of accounts are maintained by fund cluster (i.e., according to the
types of funds being accounted for) as follows:

Code Fund Cluster

01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/ Domestic Grants Fund
04 Special Account-Foreign Assisted/ Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipt

For example, separate accounting books (Journals and Ledger) and budget registries
shall be maintained for Regular Agency Fund. Another separate accounting books and
budget registries shall be maintained for Foreign Assisted Project Funds, and so on.

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Components of General-Purpose Financial Statements

General-Purpose Financial Statements are those intended to meet the needs of users
who are not in a position to demand reports tailored to meet their particular information
needs.

The complete set of general-purpose financial statements consists of:

1. Statement of Financial Position

2. Statement of Financial Performance

3. Statement of Changes in Net Assets/ Equity

4. Statement of Cash Flows

5. Statement of Comparison of Budget and Actual Amounts

6. Notes to the Financial Statements, comprising a summary of significant accounting

policies and other explanatory notes.