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Manuel on the New Government Accounting System for National Government Agencies

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.

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, 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:

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)

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:

Registry of Allotments and Obligations - Capital Outlay (RAOCO)

Registry of Allotments and Obligations - Maintenance and Other Operating Expenses (RAOMO)

Registry of Allotments and Obligations - 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 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.

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 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 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 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.

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 (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.

INSERT GENERAL ACCOUNTING PLAN

for

National Government Agencies

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

ResponsibilitySeq.

No.Activity

Budget Unit

Concerned Staff1Based on the approved General 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

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).

2Initials under 'Prepared by' portion of the ABM.

Head, Budget Unit3Reviews and signs Prepared by portion of the ABM.

Concerned Staff4Forwards the ABM together with a transmittal letter for the DBM to the Head of the Agency for signature/approval.

Head of the Agency5Approves/Signs the ABM and the transmittal letter.

Concerned Staff6Records in the logbook maintained and submits the signed ABM to the DBM for 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)

2. Registry of Allotments and Obligations - Maintenance and Other Operating Expenses (RAOMO)

3. Registry of Allotments and Obligations - Personal Services (RAOPS)

4. Registry of Allotments and Obligations - Financial Expenses (RAOFE)

Sec. 12. Procedures in the Monitoring and Recording of Allotments Received from DBMArea of

ResponsibilitySeq.

No.Activity

Budget Unit

Concerned Staff1Receives the approved ABM/SARO from the DBM. Records the same in the logbook and forwards the ABM/SARO to Budget Staff for preparation of an Allotment and Obligation Slip (ALOBS).

Budget Staff2Prepares 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

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

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 Budget Unit3Reviews, checks the small box 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 Staff4Records 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 Obligations - Personal Services (RAOPS)

Registry of Allotments and Obligations -Maintenance and Other Operating Expenses (RAOMO)

Registry of Allotments and Obligations -Capital Outlays (RAOCO)

Registry of Allotments and Obligations - Financial Expenses (RAOFE)

5Forwards 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

ResponsibilitySeq.

No.Activity

Central Office/

Regional Office

Budget Unit

Budget Staff1Based on the approved ABM received from the DBM, prepares Sub-ARO for RO/OU. Forwards the Sub-ARO to the Head of the Budget Unit CO/RO for review.

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

Head of Central Office/Regional Office/ Authorized

Officer

3Approves the Sub-ARO.

Budget Staff4Based 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 Budget Unit for review and signature.

Note 1

Distribution of ALOBS shall be as follows:

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

Head of the Budget Unit5Reviews, checks the small box 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.

Budget Staff6Records the ALOBS in the appropriate RAOs. Files the ALOBS and a copy of the Sub-ARO.

Note 3

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 Staff7Records in the logbook the release of the Sub-ARO to RO/OU.

Regional Offices/

Operating Units

Budget Unit

Concerned Staff8Receives the approved Sub-ARO from the CO/RO. Records the same in the logbook maintained. Forwards the Sub-ARO to the Budget Staff for the preparation of ALOBS.

Budget Staff9Prepares ALOBS in two copies, assigns number and initials the same. Forwards the ALOBS and Sub-ARO to the Head of the Budget Unit for review and signature.

Note 5

Refer to Notes 1 and 2 of Sec.12, Procedures for the Monitoring and Recording of Allotments Received from the DBM.

Head of the Budget Unit10Reviews the ALOBS based on 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, Procedures for the Monitoring and Recording of Allotments Received from the DBM.

Budget Staff11Records the ALOBS in the RAOs. Files the Sub-ARO and original of the ALOBS.

12Forwards copy 2 of the ALOBS to the Accounting Unit for reference.

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

ResponsibilitySeq.

No.Activity

Budget Unit

Concerned Staff1Receives the Disbursement 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 Staff2Verifies 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.

3If 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.

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.

Head of the Budget Unit4Reviews, checks the small box 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 Staff5Records 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 Obligation Incurred column of the RAOs to arrive at the balance of allotment still available at a given period.

6Receives 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 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 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 Office3. Subsidy from Regional Office/Staff Bureaus4. Income from Government Services5. Income from Government Business Operations6. Sales Revenue7. Rent Income8. Insurance Income9. Dividend Income10. Interest Income11. Sale of Confiscated Goods and Properties12. Foreign Exchange (FOREX) Gains13. Miscellaneous Operating and Service Income14. 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 Taxes2. Property Taxes3. Taxes on Goods and Services4. Taxes on International Trade and Transactions5. Other Taxes6. Fines and Penalties-Tax Revenue7. 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:

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.

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. 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 (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

ResponsibilitySeq.

No.Activity

Cash UnitDaily

Designated Staff1Receives cash/check from payor representing collection based on the Order of Payment (OP) prepared by the Accounting Unit.

2Issues 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..

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

3Records collections in the Cash Receipts Record (CRR).

Note 4

Separate CRR shall be maintained for collections under the RA and NG Books.

4Prepares Deposit Slip (DS) in three copies.

Note 5

The DS shall be distributed as follows:

Original - AGDB

Copy 2 - To be attached to RCD


5Deposits 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

6Based 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.

Head of the Cash Unit7Reviews and signs the RCD. 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 Staff8Records the RCD in the logbook maintained and forwards the same with the ORs and DS to the Accounting Unit for recording in the books of accounts.

Accounting Unit

Accounting Staff9Receives original of RCD with Copy 2 of the ORs and DS from the Cash Unit. Records receipt in the logbook maintained for the purpose and forwards the same to the Bookkeeper for review and preparation of the JEV.

Bookkeeper10Based 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 review and signature.

Head of the Accounting Unit11Reviews and signs Certified Correct by portion of the JEV. 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

For the succeeding activities, 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

ResponsibilitySeq.

No.Activity

Accounting Unit

Receiving/ Releasing Staff1Receives collection documents from the AAB/AGDB. Records receipt in the logbook maintained for the purpose. Forwards the same to the Bookkeeper for preparation of the JEV.

Bookkeeper2Based 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 review and signature.

Head of the Accounting Unit3Reviews and signs Certified Correct by portion of the JEV. Forwards the JEV and documents to the Bookkeeper for recording in the General Journal (GJ).

Note 1


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).

Sec. 26. Procedures in Recording Dishonored Checks

Area of

ResponsibilitySeq.

No.Activity

Cash Unit

Designated Staff1Receives from AGDB the Debit Memo (DM) and copies of dishonored checks.

2Verifies 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.

3If 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 shall be distributed as follows:

Original - Drawer (To be delivered personally or thru registered mail)

Copy 2 - Accounting Unit file


4Retrieves 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 _________

5Retrieves CRR on file and records the dishonored checks with the following notation:

To take up Banks Debit Memo No. ___ dated ____ covering Check No. ___ for P ____________ acknowledged under OR No. _____ dated _______.

6Prepares 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 Unit

Accounting Staff7Receives the list together with originals of dishonored checks and the Debit Memo from the Cash Unit and records the same in the logbook maintained for the purpose.

8Based 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 Accounting Unit for review and signature.

Head of the Accounting Unit9Reviews and signs Certified Correct by portion of the JEV. Forwards the JEV supported by the list, originals of dishonored checks and notice of dishonor to the Bookkeeper for recording in the books of accounts.

Note 2

For the succeeding activities, 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;

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

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.

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

ResponsibilitySeq.

No.Activity

A. Processing of Disbursement Voucher (DV)

Accounting Unit

Receiving/ Releasing Staff1Receives Copies 1-3 of DV, originals of supporting documents and Copies 1-3 of ALOBS from the Budget Unit. Checks completeness of supporting documents. If incomplete, returns to the concerned party for compliance.

2If 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).

3Assigns 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.

Note 2

The numbering structure for DV shall be as follows:

00 - 00 - 0000

Serial Number

Month of Issue

Year of Issue

Note 3

DV number shall also be indicated on every sheet of the supporting documents.

Designated Staff4Receives Copies 1-3 of DV, originals of supporting documents and Copies 1-3 of ALOBS from the Receiving/Releasing Staff. Reviews DV for completeness and propriety of supporting documents.

5Checks 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.

6If not yet paid, records the following in the IP: name and address of creditor, DV date and number, particulars and amount.

7Accomplishes Box B of ALOBS and initials.

8Initials 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 review and signature.

Head of the Accounting Unit

9Reviews DV and supporting documents. Signs in Box B of DV and ALOBS. Forwards the documents to the Receiving/Releasing Staff.

Receiving/

Releasing Staff10

Records in the logbook the date of release of Copies 1-3 of DV, 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 Agency or Authorized Representative

11Reviews and approves DV. Forwards Copies 1-3 of DV, Copy 3 of the ALOBS and originals of supporting documents to the Cash Unit for check preparation.

B. Preparation and Approval of Checks

Cash Unit

Receiving/ Releasing Staff12Receives Copies 1-3 of approved DV, Copy 3 of ALOBS and originals of supporting documents. Records in the logbook the date of receipt, DV number, payee, particulars and amount.

Designated Staff13Verifies completeness of signatories on the DV. Prepares check in three copies.

14Retrieves 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.

Cashier15Verifies completeness of signature on the DV. Reviews the amount of the check against the DV and supporting documents. Signs the check.

Authorized Official16Countersigns check. Forwards Copies 1-3 of check, Copies 1-3 of DV, Copy 3 of ALOBS and supporting documents to the Receiving/Releasing Staff for return to the Cashier.

Receiving/

Releasing Staff17Records in the logbook the date of release of Copies 1-3 of check, Copies 1-3 of DV, Copy 3 of ALOBS and supporting documents.

Cashier18Releases 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.

C. Preparation of Report of Checks Issued (RCI)

Daily,

19With 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:

Original - Accounting Unit together with the originals of the paid DVs/payroll and supporting documents for JEV preparation


20Initials in Certification portion of the RCI.

Head of the Cash Unit21Reviews RCI and signs in Certification portion.

Designated Staff

22Forwards original of RCI 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.

Accounting UnitD. Preparation of JEV

Daily

Receiving/

Releasing Staff23Records receipt of Copy 1 of RCI together with Copy 2 of checks, 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 Staff24Examines DVs and checks against RCI. Verifies if the serial number of checks actually issued, including spoiled and cancelled ones, are all accounted for.

25Prepares JEV in two copies and signs in the Prepared by portion.

Head of the Accounting Unit/Authorized Signatory26Reviews correctness of the journal entries and signs on Certified Correct by portion of the JEV. Forwards Copies 1-2 of 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 Staff27Receives Copies 1-2 of JEV and 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 supporting documents to the Receiving/Releasing Staff for submission to COA for audit.

Receiving/ Releasing Staff28Records in the logbook the date of submission of Copy 1 of JEV, RCI, DVs, Copy 3 of ALOBS, Copy 2 of checks and originals of supporting documents. Forwards the documents to COA for audit.

Note 9:


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 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

ResponsibilitySeq.

No.Activity

Cash Unit

Accountable/ Disbursing Officer1Receives the approved check from the Cashier. Records in the Cash Disbursements Record (CDR) the date, reference, name of payee, particulars and the amount of check in the debit column.

2Encashes check in a GSB.

3Pays officials and employees/other payees.

Note 1

Employees/payees shall sign on the received portion of the payroll/DV to acknowledge receipt of payment.

Note 2

If there are unclaimed salaries, refund the same within a reasonable time. OR representing the refund shall be issued by the Cashier.

4Records payment including the refund for unclaimed salary in the credit column of the CDR.

At the End of the Month

5Based 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.

Note 4

The RD shall be distributed as follows:

Original - Accounting Unit together with the originals of the paid DVs/Payrolls and supporting documents for JEV preparation


Accounting Unit

Releasing/

Receiving Clerk6Records in the logbook, indicates Received and signs all copies, forwards the RD to the Bookkeeper for JEV preparation, and returns Copy 2 to the Cash Unit.

Bookkeeper7Prepares JEV based on the RD and supporting documents received.

Note 5

For the succeeding activities, refer to Sec.71, Preparation and Submission of Trial Balances and Other Reports.

8Records payroll payment in the individual Index of Payments (IP) of officials and employees.

Sec. 38. Disbursements Through Bank - Payroll Payment Area of

ResponsibilitySeq.

No.Activity

Cash Unit

Cash Staff

1Receives the approved check, DV and Following Months' Payroll (FMP), signs the logbook of the releasing office, and forwards the documents to the Cashier.

2Deposits 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.

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

ResponsibilitySeq.

No.Activity

Various Unit

Petty Cash Custodian1Receipt of Check for the Establishment/ Replenishment of Petty Cash Fund

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.

2Encashes check in GSB and keeps the cash in a safety vault.

Requesting Personnel3

Utilization of Petty Cash Fund

Accomplishes Box A Requested by portion of the Petty Cash Voucher (PCV).

Immediate Supervisor 4Signs Box A Approved by portion of the PCV and returns to Requesting Personnel.

Requesting Personnel5Submits to the Petty Cash Custodian for the release of fund.

Petty Cash Custodian6Receives from the Requesting Personnel the PCV duly approved by concerned official.

7Upon granting of the petty cash advance and signs in Box B Paid by portion of the PCV.

Requesting Personnel8Receives petty cash and signs in Box B Cash Received by portion of the PCV.

Petty Cash Custodian9Issues Copy 2 of the PCV to requesting personnel

10Retrieves 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.

Liquidation of Petty Cash Advance

12

13

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.

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.

14Checks the appropriate boxes for Received Refund or Reimbursement Paid portion and signs Box C of the PCV.

Requesting Personnel15Checks and fills up the 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 Fund Custodian16Returns Copy 2 of the PCV to the Requesting Personnel.

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 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 Fund Custodian19Retrieves from file the original of the PCV together with the supporting documents. Checks the completeness of all PCVs for replenishment.

20Prepares the Petty Cash Replenishment Report (PCRR) in two copies based on PCVs in numerical sequence and fills up the following columns: date, PCV No., particulars and amount.

21Signs in the Certified Correct by portion of the PCRR.

22Based 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 Official23Signs in Box A portion of the DV.

Petty Cash Fund Custodian24Forwards Copies 1-3 of the DV, originals of PCRR and PCVs and supporting documents to Budget Division for preparation of the ALOBS.

Note 1

For the succeeding activities, refer to Sec.15, Procedures in the 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 "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:

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 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

ResponsibilitySeq.

No.Activity

Property and Supply Unit

Property/

Supply Officer1Delivery of Equipment and Inventory Items

Signs Received portion of the original and Copy 2 of the Delivery Receipt (DR). Files the original and returns Copy 2 of the DR to the Supplier/Procurement Service.

2Prepares Inspection and 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 Inspector3Inspects and verifies items as to 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 Property/Supply Officer for acceptance.

4If 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/Supply Officer5Signs in Acceptance column, 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.

6Prepares 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 DV shall be prepared on the basis of the Approved Agency Procurement Request. The payment shall be made directly to the PS.

Accounting Unit

PPELC/SLC Keeper7After Payment of Deliveries

Posts necessary information to 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

ResponsibilitySeq.

No.Activity

Concerned Office

Requesting Personnel1Inquiry for the availability of supplies

Prepares the Supplies Availability Inquiry (SAI) in two copies. Accomplishes the form for item description, unit and quantity.

2Fills up the Inquired by portion of SAI and forwards the same to Accounting Unit for processing.

Accounting Unit

Accounting Staff3Receives SAI from Requesting Personnel. Reviews and verifies the completeness of information.

4Retrieves from file the SLC and determines availability/status of stocks.

5Fills 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 Personnel6Receives 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:

Original - Accounting Unit

Copy 2 - Property and Supply Unit

Copy 3 - Requesting Office

Authorized Official7Signs the Approved by portion of the RIS.

Requesting Personnel8Receives signed RIS and forwards to the Property and Supply Unit together with the original of SAI for withdrawal of inventory items requested.


Supply Officer9Reviews and verifies RIS as to 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 Property and Supply Unit10Signs the Approved by portion of RIS and returns to the Supply Officer for issuance of the stock.

Supply Officer11Fills up and signs the Issuance portion of the RIS and issues inventory items requested to the Requesting Personnel.

Concerned Office

Requesting Personnel12Receives supplies requested and sign in the Received by portion of the RIS.

13Files 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).

14Preparation of RSMI

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.

15Initials in the Certified by portion of the RSMI.


Head of the Property and Supply Unit16Signs in the Certified by portion of the RSMI.

Stock Card Keeper17Receives signed RSMI and forwards to Accounting Unit the original and Copy 2 of RSMI together with originals of RIS and SAI. Files Copy 3 of RSMI.

Accounting Unit

Accounting Staff18At the Start of the Day

Receives original and Copy 2 of 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.

19Signs in the Posted by/date portion of the RSMI.

20Files 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 accounts.

21At Month End

Retrieves the original RIS, SAI and RSMI from temporary file.

22Prepares JEV in two copies based on the RSMI to record the issuance of stock.

23Signs in the Prepared by portion of the JEV.

Head of the Accounting Unit24Sign in the Certified Correct by portion of the JEV.

Accounting Staff25Receives signed JEV and 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.

Sec. 47. Procedures in the Requisition and Issuance of Equipment

Area of

ResponsibilitySeq.

No.Activity

Concerned Office

Requesting Personnel1Upon receipt of notice of 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 Official2Reviews RIS and signs Requested By in the Requisition column.

Requesting Personnel3Records the signed RIS in the logbook and indicate date, particulars and remarks. Forwards the same to Property and Supply Unit for processing of the requisition.


Receiving Staff4Receives signed RIS from 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 Officer5Verifies RIS and checks against the PR.

6Initials 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 Property and Supply Unit7Reviews RIS and signs the Approved By portion of RIS. Forwards Copies 1-2 of RIS to Property Custodian.

Property Custodian8Based on the approved RIS, assigns number on the property being transferred/ issued. Indicates the number in the RIS.

9Prepares Acknowledgment 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

Requesting Personnel11Retrieves Copy 3 of RIS. Checks item if it is in conformity with RIS. Signs Received By portion of original and Copy 2 of ARE and RIS.

12Returns original ARE and Copies 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 Officer13Files original of ARE per accountable officer/employee and Copy 2 of RIS. Forwards the original RIS to the Accounting Unit.

Accounting Unit

PPELC Keeper14Receives original of the RIS. Retrieves the PPELC and posts information pertaining to 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

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 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.

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 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: ParticularsAccount TitleAcct.

CodeDr.Cr.

1. Cash Shortage

a. Cash shortage of the Disbursing Officer

To take up cash Due from Officers and Employees128150

shortageCash-Disbursing Officers107150

b. Cash Shortage of the Collecting Officer

To take up cash Due from Officers and Employees128150

shortage Cash-Collecting Officers10650

2. Relief from Accountability for Loss of Government Funds and Property

a. Request for Relief from Accountability Granted.

To take up relief from accountability

for current year - -

for prior years - -Loss of Assets

or

Prior Years Adjustments 948

53350

Due from Officers and Employees12850

b. Request for Relief from Accountability Denied.

To record the loss of fund by a Disbursing Officer (allegedly thru theft ) - P150Due from Officers and Employees

Cash-Disbursing Officers128

107150150

c. Cash Settlement/Restitution in case of denial of Request for Relief from Accountability

To take up receipt of settlementCash-Collecting Officers


1285050

To record deposit

c.1 current yearSubsidy Income from National Government60150

Cash-Collecting Officers10650

c.2 prior yearPrior Years Adjustment53350


3. Cash Overage

To take up cash overage discovered during cash examination

Cash Collecting Officers

Due to National Treasury

Miscellaneous Operating

and Service Income 50106

433

5050

To record depositDue to National Treasury

Miscellaneous Operating

and Service Income 5043350


4. Stale Checks

a. Stale MDS check issued in the current year for replacement

Check cancellationCash-National Treasury, MDS10250

Accounts Payable40150

ReplacementAccounts Payable40150

Cash-National Treasury, MDS10250

b. Stale MDS check issued in the prior years for replacement

Check cancellationPrior Years Adjustments53350




c. Stale commercial check issued in the current and prior years for replacement

Check cancellationCash in Bank-Local Currency, Current Account11050



Cash in Bank-Local Currency, Current Account11050

5. Disallowances

a. Recording of disallowances for current years transaction

When the disallowances becomes final and executory - overpayment of office suppliesReceivables-Disallowances/ Charges

Office Supplies Expenses138849

1010

Amount paid - P100

Should be - 90

Difference - 10

Settlement of DisallowanceCash-Collecting Officers

Receivables-Disallowances/ Charges106

1381010

Deposit of collectionSubsidy Income from National Government60110


ParticularsAccount TitleAcct.

CodeDebitCredit

b. Recording of disallowance for prior years transaction

When the disallowance becomes final and executoryReceivables - Disallowances/ Charges

Prior Years Adjustments1385331010

Settlement of disallowanceCash - Collecting Officers

Receivables - Disallowances/ Charges

106

1381010

Deposit of collectionPrior Years Adjustments53310


6. Refund of Overpayment

a. Overpayment taken up as receivable

To record overpayment of salaries and wages (When overpayment is ascertained)Due from Officers and Employees

Salaries and Wages - Regular Pay128

8011010

To record receipt of refund Cash-Collecting Officers


1281010



b. Refund of overpayment not taken up as receivable

To record receipt of refund of Salaries and Wages - Regular Pay during the current year

Cash - Collecting Officers

Salaries and Wages Regular Pay106

8011010



To record receipt of refund of 0verpayment in the ensuing yearCash-Collecting Officers

Prior Years Adjustments106

5331010

Deposit of collectionPrior Years Adjustments53310


Chapter 4. Trial Balances, Financial Reports

and Statements

The Financial Statements Process

Sec. 56. Financial Reporting System. This Financial Reporting System (FRS) includes the preparation and submission of trial balances, financial statements and other reports needed by fiscal and regulatory agencies. The sub-systems are as follows:

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.

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.

Account TitleAccount CodeDebitCredit

Interest Receivable161500

Interest Income624500

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.


Salaries and Wages-Regular Pay8011,000

Due to Officers and Employees4281,000

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 expense of the agency at the end of the accounting period. Examples are prepaid expenses, bad debts and depreciation.


Original Entry:

Prepaid Rent1611,000

Cash-National Treasury, MDS1021,000

Adjusting Entry:

Rent Expenses841900

Prepaid Rent161900

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.

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:


Bad Debts9291,000

Allowance for Doubtful Accounts3011,000

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.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:


Depreciation-Office Equipment9221,000

Accumulated Depreciation-Office

Equipment3221,000

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.


Subsidy Income from National

Government601100


2. Close the balance of the Subsidy Income from National Government account to Income and Expense Summary account.Account TitleAccount CodeDebitCredit

Subsidy Income from National

Government6011,000

Income and Expense Summary5321,000

3. Close the balance of all income accounts to Income and Expense Summary account.Account TitleAccount CodeDebitCredit

Income from Government Services611500

Income from Government Business Operations612400

Income and Expense Summary532900

4. Close the balance of all expense accounts to Income an Expense Summary account.Income and Expense Summary532800

Salaries and Wages-Regular Pay801800

5. Close the balance of the Income and Expense Summary Account to the Retained Operating Surplus account.Income and Expense Summary5321,100

Retained Operating Surplus5341,100

5. Close the balance of the Prior Years Adjustments account to Retained Operating Surplus account6. .Prior Years Adjustments533200

Retained Operating Surplus534200

6. Close the balance of the Retained Operating Surplus to Government Equity account. Retained Operating Surplus5341,300

Government Equity5011,300

7. Close Public Infrastructures or Reforestation Projects accounts to Government Equity account and transfer the corresponding amounts to the respective registries. Government Equity501 1,300

Public Infrastructures/

Reforestation Projects 243/

2441,300

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.

Sec. 71. Procedures in the Preparation and Submission of Trial Balances and Other Reports

Area of

ResponsibilitySeq.

No.Activity

Preparation of Unadjusted Trial Balance

Accounting Unit

Bookkeeper1Records JEVs for the month in the Special Journals and General Journal.

2Posts the journal entries from the Special Journals and General Journal to the respective General Ledgers.

3Records 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)

Journal Entry Voucher (JEV)

Disbursement Voucher (DV)

Other Supporting Documents (OSD)

4Foots and extracts the balances of the General Ledgers and Subsidiary Ledgers.

5Based 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

natl ngas ch1to6 acctngpoliciesvol1

Documents

accounting books

accrual accounting

accounting systems

government funds

national agencies

separate fund accounting

new coding system

new chart of accounts