INTRODUCTION TO GOVERNMENT

ACCOUNTING
PROCESS

KEY TERMS

Analyzing

Transactions

Recording

Receipts

Classifying

Disposition

Summarizing

Government

Communicating

Funds

Interpreting

Property

Sec. 109, PD 1445

Concerns OF Government accounting

the maintenance of records that reflect the
propriety of transactions and gives evidence
of accountability for assets and other
resources available for use;
the classification of data in such a way that
provides useful information for control and
efficient management of government
program operations;
the preparation of report on government
operations and their results.

Important FUNCTIONS
Records, measures, analyzes the
financial and operational
performance
Attest to the integrity of
transactions through verification
and evaluation
Communicates to management
information vital for decisionmaking, control and supervision

AS A SERVICE ACTIVITY
It has a primary function of providing
quantitative information , mainly financial in
nature, for informed management action
AS A COMPONENT OF PUBLIC FISCAL
ADMINISTRATION
Serves as informational and processual base
for:
macroeconomic fiscal planning
(fiscal planners use accounting
information . . . in estimating national
revenue and expenditure targets)

government budgeting
(budget authorities rely on
accounting system to monitor and
control expenditures)
debt management
(finance and monetary officials
monitor disbursement of loans and
grants through the accounting
system)
state auditing
(auditors review accounting books
and records as basis for their
analysis and recommendations

OTHER USES
AS A TOOL OF MANAGEMENT/EXECUTIVES
Agency administrators depends on accounting
processes to enforce the system of checks and
control on agency operations particularly in
the use of resources
Provides accurate , timely and relevant
information
for
evaluation
of
agency
operations and programs
Provides information to check the activities of
subordinate officers and agencies, to control
current expenditures and to plan for the future

THE LEGISLATIVE BODY USES THE

ACCOUNTS

to check the progress of the

financial programs and the
stewardship of responsible officials;
as guide in framing new acts
relating to finance; and
to determine compliance with
limitations setup in the budget and
appropriations acts.

The general public or the

citizens

find the accounts as the sources of

information on how the money they
supplied in form of taxes had been
used
determine from the accounts
whether adequate procedures in all
matters relative to accounting are
set up in accordance with sound
principles and that they are
consistently followed.

THE NEED FOR STUDY OF GOVERNMENT ACCOUNTING

With the knowledge of government accounting,

Citizens will understand published government
financial statements so they can better judge
how well the administration had managed the
government business.
There is a general preference for employment in
government accounting than in commercial
accounting because employment in the
government is more secure and it offers better
benefits such as retirement and life insurance
plans, and vacation and sick leave pay, as well
as better working conditions.

Need for the knowledge of government accounting is

not confined to those employed in the accounting
offices of the government. .
The government accounting system, characterized by
the employment of the budget and the separation of
funds, is also adopted by several non-governmental
organizations such as religious organizations,
charitable organizations, fraternities and sororities,
labor unions, private schools and hospitals.
The examination given by the Civil Service
Commission and the Board of Examiners for Certified
Public Accountants includes questions on government
accounting.

FACTORS THAT INFLUENCE

GOVERNMENT ACCOUNTING
Authority and limitation
a)
b)
c)

Constitution
Laws
Accounting Rules and Regulations

Environment

ENVIRONMENT OF GOVERNMENT
ACCOUNTING
Characteristics of government
Forms and structure of the
Philippine government
Decision-making process in
government
Government entities

ENVIRONMENT OF GOVERNMENT
ACCOUNTING
Economic activities of
government entities
Users of government financial
accounting information
Accounting information

PECULARITIES OF GOVERNMENT
BUSINESS AND THEIR EFFECTS TO THE
ACCOUNTING SYSTEM
1. PURPOSE
The primary purpose of the government
business is to render service to the public at
the lowest cost possible as distinguished
from the usual profit motive of the private
business.
Accounting devices for the accurate
determination of the profit or loss are not
required. For this reason, and on account of
certain legal provisions, the accrual basis of
accounting is not strictly followed.

2. OWNERSHIP

Individual ownership does not exist in

the government business.
Accounts which express ownership
interests, such as individual capital,
partners capital and capital stock, are
not required in the government accounts
(except for some government-owned or
control corporations). The accounts
expressing
proprietorship
of
a
government body simply consists of
various
cumulative
results
of
operations/equity accounts.

3. MANAGEMENT

Officers and administrators of the

government business are governed in
almost every act by specific laws, rules
and regulations.
To provide evidence of compliance or
lack of compliance with the controls over
financial
operations,
government
accounting requires budgetary accounts
to indicate the progress and status of
the budget.

4. INCOME
The government derives most of its income
from taxes and fees. The amounts are based on
the annual outlay for the services it would
render during each fiscal period. Some of these
charges are directly related to the specific
services to be rendered while others do not
have any relation but governmental bodies
have the power to enforce their collection.
Many of these charges are authorized to be
levied and collected for specific purpose.
Borrowings are likewise authorized to provide
funds for definite purposes. Gifts and trusts are
received with restrictions on how they should
be used

4. INCOME

Limitations on the ways by which

government may secure and use its
income require that its accounting be
carried by funds.
A separate fund is set up for each
restricted item so that money and other
resources received for the specific
purpose are properly earmarked. Each
fund is a complete accounting entity,
having its own assets, liabilities, residual
equity accounts.

NATURE OF GOVERNMENT ACCOUNTING

1. AS A PROCESS
Encompasses a series of activities pertaining
to the gathering of data used as the basis for
policy and management decision-making.
These activities include:
a) Bookkeeping (analysis and recording)
b) Posting, grouping or classifying similar
items (according to account
classification, liquidity, and nature)
c) Preparation of periodic financial reports
d) Analysis of the financial reports

2. AS A SYSTEM - government accounting consists

of:
a)
b)
c)
d)

Accounting
Accounting
Accounting
Accounting

Framework - the chart of accounts

Procedures - the journal entries
Records - the books of accounts
Methods - manual or mechanical

devices in production, handling and storing

accounting data and records
e) Accounting Data - recorded information of
transactions
f) Accounting Standards - the applicable laws,
rules and regulations and the generally
accepted accounting principles

OBJECTIVES OF GOVERNMENT
ACCOUNTING
To provide quantitative information about a
government entity for:
Assessing the stewardship and other aspect
of performance of public officials for which
they are accountable;
Planning, program selection and budgeting;
Making decisions involving the effective and
efficient allocation and control of
government resources.

As stated in PD 1445
1. to produce information concerning past
operations and present conditions;
2. to provide a basis for guidance for future
operations;
3. to provide for the 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 results
of operations of government agencies for the
information of all persons concerned.

NEED OF Adequate accounts

For the purpose of accountability
government accounting should establish a pattern
of control over receipts and expenditures that
permits the executive and legislative bodies to
determine whether
1. legal provisions are complied with
2. commitments and disbursements are in
accordance with appropriations, allotments
and cash allocations; and
3. custodianship of monies and assets under
the responsibility of administrative bodies is

adequate.

For the purpose of management

government accounting should be kept
on a basis that permits continuous
measurement and analysis of
government programs and the efficiency
with which they are performed.
It should provide :
1. full disclosure of financial results,
including the measurements of
revenue and cost of activities,
programs and organizations;

2. internal control of operations and

programs;
3. information for planning and
direction by all levels of
management and
4. information for the economic
analysis and planning of
governmental activities by the
legislative and executive bodies

Basic features
1. Basis
Strictly anchored on specific laws,
standards, rules and regulations
GAAP may be followed in the absence
of specific law or rules and regulations
In case of conflict between the two,
the legal provisions shall prevail

2. Organizational Responsibilities
COA
promulgates accounting rules and
regulations
Prescribed the standard government
chart of accounts
Exercises technical supervision over
accounting functions of each agency
Acts as the National Accountant by
keeping the general accounts of the
National Government

DBM

Responsible for the design and approval

of the accounting systems of government
agencies
Determines accounting and other
information necessary to monitor budget
performance and assess effectiveness of
agency operations
Prescribes forms and schedules for
submission of budget reports
NGAs/LGUs/GOCCs

Responsible for maintaining their own inhouse accounting systems

3. Accounting Entity
The object of accounting measurement and
reporting
In state accounting, the entity is the fund
Each fund is treated as an independent and
distinct fiscal entity with self-balancing set of
accounts
4. Double-Entry System
Three basic elements define the financial
position of an agency, namely:
Resources of the agency
Claims of the creditors
Equity of the government

5. Time Period
The basic time period is one year
The calendar year is the fiscal year

6. Basis of Accounting
Revenue is generally accounted for using the cash
basis
Expenditures is strictly on accrual basis pursuant to
legislative and budgetary accounting requirements

7. Recording Procedures
Transactions are usually recorded in the books of
original entry
Special journals are provided for transactions which
very common and routine

8. Books of Accounts
There are two major books of accounts
Books of original entry-records for classifying
and recording transactions in chronological order
Books of final entry-records for classifying and
summarizing the effects of transactions on
individual accounts

9. Documentation
State accounting rules and regulations require
that all transactions are to be supported by
sufficient, formal written documents, with
complete accurate description of the
transactions, its peso amount, authorization
and other substantiating information.

11.Use of Phil. Govt. Chart of Accounts

A list of ledger accounts used by national, local
and government corporations
Consists of balance sheet , income and
expenses accounts
Coding Structure

12.Coding Structure
Assignment of letters, numbers or other
symbols to an account within a given
classification to distinguish it from the rest
Systematizes recording, facilitates analysis,
expedite, consolidates, and enhances reporting.

13.Financial Statements
End products of the accounting process
Reflects the financial position at a moment in
time; the results of operations and one or more
kinds of changes in the financial position during
a certain period of time.
Principal means by which the comprehensive
information accumulated and processed in the
accounting system is periodically
communicated to end-users.
Some elements are: Balance Sheet, Statement
of Income and Expenses, Statement of Changes
in Equity and Cash Flow Statement

14.Internal Control System

Ensures that funds are utilized only for
legal purposes and are expended in
compliance with rules and regulations
The plan of organization and all the
coordinate methods and measures
adopted within an organization to
safeguard assets, check the accuracy
and reliability of its accounting data,
promote operational efficiency and
encourage compliance with prescribed
policies and regulations.