trial balance and adjusting and closing entries(demie)

Trial Balance and Adjusting and Closing Entries

Trial Balance. The trial balance (TB) is a list of all the accounts with balances in the GL. The accounts

shall be listed following the sequence in the charts of accounts. The TB is prepared to check the quality of

the debit and credit balances of all GL accounts as of a given period and to serve as basis for the

preparation of Financial Statements (FSs).

Purposes of the Trial Balancce. The TB is prepared for the following purposes:

1. Prove the mathematical equality of the debit and credit coolumns;

2. Serve as a basis for the preparation of FSs.

Types of Trial Balance. Two types of TB shall be prepared at yearend, the Pre-Closing and

Post-Closing TBs.

The Pre-Closing TB shall be prepared after all the adjusting entries have been recorded in the GJ

and the accounts posted to the GL and respective SL.

The Post-Closing TB shall be prepared at yearend after all the closing journal entries have been

recorded in the GJ and the accounts posted to the GL.

Submission of Trial Balance. TB shall be prepared in four copies and shall be submitted within

thirty (30) days after the close of each month. The yearend Pre-Closing and Post-Closing TBs shall be

submitted on or before February 14 of each year to be distributed as follows:

Original – COA Auditor who has supervision over the City/Municipality where the barangay is

located

2nd copy – Sangguniang Barangay

3rd copy – PB/BRK

4th copy - City/Municipal Accountant

Adjusting Journal Entries. Prior to the preparation of the Pre-Closing TB, adjusting journal

entries shall be prepared to recognize all revenues and expenses earned and incurred during the period but

not yet recorded.

Depreciation expenses for PPE shall be taken up monthly. Depreciation is the systematic and

gradual allocation of cost.

Adjusting Journal Entries

Pro-forma Accounting Entries

1. Accrued Items

a. Asset/Revenue Adjustments

Rent Receivables 133 xx

Rent Income 642 xx

To record receivable for the rental of barangay equipment.

b. Liability/Expense adjustments

Honoraria 720 xx

Due to Officers and Employees 403 xx

To record unpaid honoraria of the Punong Barangay.

2. Prepaid Items

a. Asset/Expense adjustments

Rent Expenses 782 xx

Prepaid Rent 177 xx

To record the expired portion of the advance rental paid to the ABC

company.

b. Liability/Revenue Adjustments

Other Deferred Credits 455 xx

Rent Income 642 xx

To adjust the rental collected in advance from the lessee.

3. Depreciation

Depreciation – Office Equipment 921 xx

Accumulated Deprn. – Office Equipment 321 xx

To record depreciation expense of office equipment for the month.

4. Transfer of Public Infrastractures and Reforestration Projects to the registries

Government Equity 501 xx

Roads, Highways and Bridges 251 xx

Other Public Infrastractures 260 xx

To transfer completed public infrastructures to the specific registries.

Closing Journal Entries. These journal entries shall be prepared to close the balances of all

nominal/intermediate accounts at the end of the accounting period prior to the preparation of the Post-

Closing TB and generation of the FSs.

Closing Journal Entries

Pro-forma Accounting Entries

1. Closing of Income Accounts

Account Title Account Dr. Cr.

Code

Internal Revenue Allotment 665 xx

Real Property Tax 588 xx

Tax on Sand, Gravel and Other Quary Products 593 xx

Permit Fees 605 xx

Fines and Penalties – Permits and Licences 609 xx

Clearance and Certification Fees 613 xx

Garbage Fees 616 xx

Other Service Income 628 xx

Rent Income 642 xx

Income from Grants and Donations 662 xx

Income and Expense Summary 512 xx

To close the income accounts to the Income and Expense Summary

account.

2. Closing of the Expense accounts


Salaries and Wages - Regular 701 xx

Honoraria 720 xx

Travelling Expense 751 xx

Office Supplies Expenses 755 xx

Gasoline, Oil and Lubricants 761 xx

Telephone Expenses - Landline 772 xx

Repairs and Maintenance – Office Equipment 821 xx

Depreciation – Office Building 911 xx

Depreciation – Motor Vehicles 941 xx

To close the expense accounts to the Income and Expense Summary

account.

3. Closing of the balance of the Income and Expense Summary account

a. Income exceeds the expenses


Retained Operating Surplus 513 xx

To close Income and Expense Summary account to Retained Operating

Surplus account.

b. Expenses exceeds the income



To close Income and Expense Summary account to Retained Operating

Surplus account.

4. Closing of Prior Years’ Adjustment account

a. Account with credit balance

Prior Years’ Adjustment 684 xx


To close the credit balance of Prior Years’ Adjustments account to

Retained Operating Surplus account.

b. Account with debit balance


Prior Years’ Adjustment 684 xx

To close the debit balance of Prior Years’ Adjustments account to

Retained Operating Surplus account.

5. Closing of Retained Operating Surplus account

a. Account with credit balance



To close the credit balance of Retained Operating Surplus account to

Government Equity.

c. Account with debit balance



To close the debit balance of Retained Operating Surplus account to

Government Equity.

Working Trial Balance. It is a tool for sorting and accumulating information needed for the

preparation of the financial statements. It is a columnar sheet used to adjust and close the account

balances. The suggested format is as follows:

AccountsUnadjusted

Trial Balance

Adjustments

Pre-Closing

Trial Balance

Statement of Income

and Expenses

Closing Entries

Post-Closing

Trial Balance

Balance Sheet

TitleCod

eDr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

A B C D E F G H

a. The account title and code columns. The accounts shall be presented following the sequence in

the Chart of Accounts.

b. The Unadjusted TB columns shall show the debit and credit balance of the GL accounts.

c. Adjustment columns shall show the adjusting/correcting entries effected to the accounts.

d. Pre-Closing TB columns shall show the balances of all the accounts after the adjustments are

effected.

e. Statement of Income and Expenses columns shall show the debit and credit balances of all the

nominal accounts.

f. Closing entries columns shall show the amounts debited and credited to close the nominal

accounts.

g. Post-Closing TB columns shall show the debit and credit balances of the accounts after posting

the closing entries.

h. Balance Sheet columns shall show the debit and credit balances of all the real accounts in the

Post-Closing TB.

Preparation of Pre-Closing Trial Balance

Narrative Procedures

Area of Responsibility/ Person Responsible

Seq Activity

Barangay Bookkeeper

A

1

2

Unadjusted TB

Totals, rules and extracts the balances of the GL accounts.

Lists all GL accounts with debit and credit balances. Totals the

debits and credits of the unadjusted Tb and check the equality of

the debit and credit totals.

Note 1. In case the TB does not balance, the following shall be

done:

Check individual footings and balances for any error

Check the balances per GL

Check the footings and extraction of balance in the GL

City/Municipal Accountant

Barangay Bookkeeper

B

3

4

5

6

7

8

9

Pre-Closing TB

Prepares JEV for the yearend adjusting/correcting journal entries.

Signs the “Prepared by” portion of the JEV.

Forwards the JEV to the City/Municipal Accountant for review

and approval.

Review and approves the JEV.

Returns JEV to the Barangay Bookkeeper for recording in the

books.

Receives the approved JEV and records adjusting/correcting

entries in the GJ. Files JEV.

Posts the entries in the GJ to the GL and SL. Foots and extracts

the balances of the GL and SL.

Based on the GL balances, prepares the Pre-Closing TB. Initials

below the name of the City/Municipal Accountant.

Note 2. The Pre-Closing TB shall be prepared in four copies to

be distributed as follows:

Original – COA Auditor

2nd Copy - Sangguniang Barangay

3rd Copy – PB/BRK

4th Copy - City/Municipal Accountant


Seq Activity


10

11

Forwards the Pre-Closing TB to the City/Municipal Accountant

for review and certification.

Reviews and certifies the Pre-Closing TB.

Barangay Bookkeeper

12

13

14

Returns the Pre-Closing TB to the Barangay Bookkeeper for

release.

Receives the certified Pre-Closing TB.

Releases the Pre-Closing TB to the concerned offices thru the

releasing officer of the City/Municipality and retains the 3 rd copy

for file.

PREPARATION OF PRE-CLOSING TRIAL BALANCEProcedural Flow Chart

Barangay Bookkeeper City/Municipal Accountant

A. Unadjusted Trial Balance

totals, rules and extracts

2

1

receives and records

posts, foots, and extracts

Prepares Note 2

forwards

releases

receives

B. Pre-Closing Trial Balance

Notes:1. In case the TB does not balance, the following shall be done:

- Checks individual footings and balances for any error- Checks the balances per GL- Checks the footings and extraction of balance in the GL

2. The PreCTB shall be prepared in four copies to be distributed as follows:Original – COA Auditor2nd Copy – Sangguniang Barangay3rd Copy – PB/BRK

4th Copy – City/Municipal Accountant

Legend:GJ – General JournalGL – General LedgerSL – Subsidiary LedgerTB – Trial Balance

Adj/Cor – Adjusting/Correcting EntriesJEV – Journal Entry Voucher

PreCTB – Preclosing Trial Balance

Preparation of Post-Closing Trial Balance



Seq Activity

lists and totals Note 1

GLUnadjusted

TB

3

Adj/Cor JEV

prepares

Adj/Cor JEV

4forwards

Adj/Cor JEV

reviews and approves

5

6returns

GL

7

GLSL

8

9

PreCTB 1-4

10PreCTB 1-4

reviews and certifies

11

returns12

PreCTB 3

PreCTB 1-2,4 14

13

-Process

-File

-Document

-Books

-Records/Prepares/Foots/

- - Flow of Documents

Symbols:

Barangay Bookkeeper


Barangay Bookkeeper


1

2

3

4

5

6

7

8

9

10

11

Retrieves the Pre-Closing TB.

Prepares the JEV for the closing journal entries and signs the

“Prepared by” portion of the JEV.

Forwards the JEV to the City/Municipal Accountant

Reviews and approves the JEV.

Returns the approved JEV to the Barangay Bookkeeper for

recording in the books.

Records the approved JEV in the GJ and files.

Post entries from the GJ to the GL and SL. Foots and extracts the

balances of the GL and SL.

Based on the GL balances, prepares the Post-Closing TB. Initials

below the name of the City/Municipal Accountant.

Forwards the Post-Closing TB to the City/Municipal Accountant.

Reviews and certifies the Post-Closing TB.

Returns the certified Post-Closing TB to the Barangay

Bookkeeper.

PREPARATION OF POST-CLOSING TRIAL BALANCEProcedural Flow Chart


4

Legend:GJ – General Journal

GL – General LedgerSL – Subsidiary Ledger

PCTB – Post-Closing Trial Balance PreCTB – Pre-Closing Trial Balance

JEV – Journal Entry Voucher

Financial Statements

Financial Statements and Supporting Schedules. The following barangay FSs and

supporting schedules shall be prepared annually:

PreCTB

1

JEV

2

retrieves

prepares forwards

3

JEV

reviews and approves

JEVreturns

5

6records

GJ

GJSL

7

posts, foots and extracts

8

PCTB

prepares

9

forwardsPCTB

10

reviews and certifies

PCTB returns

11

-Process

-File

-Document

-Books

-Records/Prepares/Foots/Extracts

-Flow of Documents

Symbols:

1. Balance Sheet (BS) is a formal statement showing the financial condition of the barangay as of a

particular date. It shows information on the three elements of financial position, namely: assets,

liabilities and government equity. It shall be prepared based on information taken from the

yearend Post-Closing TB.

2. Statement of Income and Expenses (SIE) is a statement showing the results of operations of the

barangay for a particular period ended. This statement shall be prepared based on the information

taken from Pre-Closing TB.

3. Statement of Cash Flows (SCF) is a statement summarizing all cash transactions of the barangay.

It shall be prepared using the Direct Method. It shows the amount of cash received and disbursed

for the operating, investing and financing activities and the net cash provided by/(used in) each

activity as of a given date. The ending balance of SCF should tally with the cash balance per BS.

4. Statement of Changes in Government Equity (SCGE) is a statement showing the result or

changes in Government Equity account as of a given period.

5. Supporting schedules shall be prepared as follows:

a. Schedule of Public Infrastructures

b. Schedule of Reforestation Projects

c. Schedule of Accounts Receivables

d. Schedule of Accounts Payable

e. Other schedule that may be required

6. Noyes to Financial Statements shall be made an integral part of the FSs. The disclosures pertain

to additional information to enhance the value of financial data in the FSs. These may explain

information that cannot be expressed in money terms and description of present accounting

policies.

The FSs shall be prepared in four copies to be distributed as follows:

Original – COA Auditor who has supervision over the City/Municipality where the

barangay is located

2nd Copy – Sangguniang Barangay

3rd Copy – PB/BRK


7. The FSs shall be supported with the statement of Management Responsibility for Financial

Statements.

Preparation of Post-Closing Trial Balance


Area of Responsibility/ Seq Activity

Person Responsible

Barangay Bookkeeper

A

1

2

B

3

4

C

5

6

7

D

8

9

10

E

11

12

13

Statement of Income and Expenses

Retrieves the Pre-Closing TB from file.

Prepares the SIE of a specific barangay in detailed and condensed

format.

Balance Sheet

Retrieves the Post-Closing TB from file.

Prepares the BS in detailed and condensed format.

Statement of Changes in Government Equity

Retrieves the GL from file.

Prepares the SCGE based on the postings made on the GL of the

Government Equity account.

Reconciles the ending balance of the SCGE with the BS.

Statement of Cash Flows

Retrieves the CRDReg, CDReg, CHBReg, CkDReg, and the

previous year’s SCF from file.

Prepares the SCF.

Note 1. The ending balance of Cash in the previous year’s SCF

shall be forwarded as beginning balance of Cash in current

year’s SCF.

Reconciles the ending balance of the SCF with the total of the

cash accounts in the BS.

Statement of Management Responsibility for the Financial

Statements

Compiles all the FSs prepared.

Prepares the “Statement of Management Responsibility for the

Financial Statements” (SMRFS). Initials below the name of the

City/Municipal Accountant.

Submits the SMRFS with the prepared BS, SIE, SCF and SGE to

the City/Municipal Accountant for signature on the SMRFS.


Seq Activity

Note 2. The detailed and condensed FSs and the SMRFS shall be


Punong Barangay

Barangay Bookkeeper

14

15

16

17

18

prepared in four (4) copies to be distributed as follows:

Original – COA Auditor

2nd Copy – Sangguniang Barangay

3rd Copy – PB/BRK


Reviews and signs the SMRFS.

Forwards the SMRFS to the Punong Barangay for

countersignature.

Signs the SMRFS and returns to the City/Municipal Accountant

for release.

Forwards the signed SMRFS with the FS to the Barangay

Bookkeeper for recording in the logbook and release to concerned

offices.

Receives and releases the FS, complete with all the supporting

schedules, to the concerned offices and retains a copy for file.

PREPARATION OF FINANCIAL STATEMENTS

Procedural Flow Chart

CRDRegCRDReg

CRDRegCRDReg

SMRFS1-4

Barangay Bookkeeper City/Municipal Accountant Punong Baranngay

Consolidation of Trial Balance and Financial Statements

signs

prepares

SIE – C/D1-4

2

PreCTB

retrieves 1

prepares

BS – C/D1-4

4

PCTB

retrieves 3

5retrieves

GL

6

SCGE1-4

prepares7reconciles

10

prepares submits

forwards

forwards

8retrieves

9

SCF1-4

PreparesNote 1

reconciles

SCF11

compiles 12

SMRFS1-4

13

SCF1-4

SCGE1-4

SIE - C/D1-4

BS - C/D1-4

SMRFS1-4

SCF1-4

SCGE1-4

SIE - C/D1-4

BS - C/D1-4

14

reviews and signs

15

SCF1-4

SCGE1-4

SIE - C/D1-4

BS - C/D1-4

16

SMRFS1-4

SCF1-4

SCGE1-4

SIE - C/D1-4

BS - C/D1-4

18

receives and releasesNote 2

17

Legend:BS-C/D - Balance Sheet-Condensed/DetailedSIE-C/D - Statement of Income and Expenses

Condensed/DetailedSCGE - Statement of Changes in Government

EquitySCF - Statement of Cash FlowsCRDReg - Cash Receipts and Deposits RegisterCDReg - Cash Disbursement RegisterCHBReg - Cash on Hand and in Bank RegisterCkDReg - Check Disbursement RegisterSMRFS - Statement of Management

Responsibility for the Financial Statements

PreCTB - Pre-Closing Trial BalancePCTB - Post-Closing Trial Balance

-Process

-Document

-Books


-Flow of Documents

Symbols: Notes:

1. The ending balance of cash in previous year’s SCF shall be forwarded as beginning balance of Cash in current year’s SCF.

2. The detailed and condensed FSs and the SMFRS shall be prepared in 4 copies to be distributed as follows:

Original – COA Auditor2nd copy – Sangguniang Barangay3rd copy – PB/BRK4th copy – City/Municipal Accountant

Consolidation of Trial Balance. The City/Municipal Accountant shall prepare the Consolidated

Pre-Closing and Post-Closing TBs of all barangays under the city/municipality at yearend.

Consolidation of Financial Statements. The City/Municipal Accountant shall consolidate the

following FSs and schedules of all barangays under the city/municipality at yearend:

a. Detailed and Condensed Balance Sheet

b. Detailed and Condensed Statement of Income and Expenses

c. Statement of Cash Flows (Direct Method)

d. Statement of Changes in Government Equity

e. Schedule of Infrastructure Projects and Reforestation Projects (if applicable)

f. Schedule of Accounts Receivable

g. Schedule of Accounts Payable

Submission of Consolidated TBs and FSs. The City/Municipal Accountant shall

submit the Consolidated TBs and FSs for Barangays together with those of the City/Municipality

to the GAFMIS Sector, Commission on Audit, Central Office, and COA Auditor/ATL in printed

and digital copies within 60 days after the 31st of December.

Consolidation of Pre-Closing and Post-Closing Trial Balances



Seq Activity

Barangay Bookkeeper

City/Municipal

Accountant

Barangay Bookkeeper

1

2

3

4

5

Prepares the Consolidated Pre-Closing and Post-Closing TBs of

all the barangays of the City/Municipality based on the individual

Pre-Closing and Post-Closing TB of each barangay.

Note 1. The Consolidated Pre-Closing and Post-Closing TB shall

be prepared in three copies to be distributed as follows:

Original – GAFMIS, COA, CO

2nd Copy – COA Auditor/ATL

3rd Copy – City/Municipal Accountant

Submits the Consolidated Pre-Closing and Post-Closing TBs to

the City/Municipality Accountant.

Receives, reviews and certifies the Consolidated Pre-Closing and

Post-Closing TBs.

Returns the certified Consolidated Pre-Closing and Post-Closing

TBs to the Barangay Bookkeeper.

Releases the certified Consolidated Pre-Closing and Post-Closing

TBs to concerned offices and retains a copy for file.

CONSILIDATION OF PRE-CLOSING AND POST-CLOSING TRIAL BALANCE

Procedural Flow Chart


Consolidation of Financial Statements

PreCTB

PostCTB

1

preparesNote 1

CPostCTB1-3

CPreCTB1-3

2

submits

CPostCTB1-3

CPreCTB1-3

3receives, reviews and certifies

CPreCTB1 CPostCTB

1

CPreCTB2 CPostCTB

2

CPreCTB3 CPostCTB

3

4

returns

5

releases

COA-GAFMIS COA Auditor City/Municipal Accountant

Legend:

PreCTB - Pre-Closing Trial BalancePCTB - Post-Closing Trial BalanceCPreCTB - Consolidated Pre-Closing Trial BalanceCPostCTB - Consolidated Post-Closing Trial Balance

-Process

-Document

-File


-Flow of DocumentsSymbols:

Notes

1. The Consolidated Pre-Closing Trial Balance and Post-Closing Trial Balance shall be prepared in three copies to be distributed as follows:

Original – GAFMIS, COA, CO2nd copy – COA Auditor/ATL3rd copy – City/Municipal Accountant



Seq Activity

Barangay Bookkeeper 1

2

3

Retrieves the Individual FS and prepares the Consolidated

Detailed FSs (CDFS) of all the barangays of the

City/Municipality.

Prepares the Consolidated Detailed FSs (CCFS) based on the

Consolidated Detailed FSs of all the barangays within the

City/Municipality.

Prepares the transmittal letter for signature of the

City/Municipality Accountant transmitting the following:

Consolidated Condensed FSs (BS, SIE)

Consolidated Detailed FSs (BS, SIE, SCF and SCGE)

Other Schedules

Note 1. The Consolidated FSs shall be prepared and distributed

as follows:

Original – GAFMIS, COA (Central Office in printed and

digital copies (diskette or compact disk))

2nd Copy – COA Auditor

3rd Copy – City/Municipal Accountant


Barangay Bookkeeper

4

5

6

7

8

Forwards the transmittal letter together with the CDFS and CCFS

to the City/Municipal Accountant.

Receives the transmittal letter and consolidated FSs. Checks the

completeness and correctness of the Consolidated FSs, and signs

the transmittal letter.

Forwards the signed transmittal letter and Consolidated FSs to the

Barangay Bookkeeper for release.

Receives the signed transmittal letter and Consolidated FSs.

Releases the signed transmittal letter and Consolidated FSs to

concerned Offices and retains a copy for file.

Note 2. The Consolidated FSs shall be submitted within 60 days

after the 31st day of December.

CONSILIDATION OF FINANCIAL STATEMENTSProcedural Flow Chart


Duties and Responsibilities of the City/Municipal Accountant and Budget Officer

Legend:IFS -Individual Financial SystemsCDFS - Consolidated Detailed Financial StatementsCCFS - Consolidated Condensed Financial Statements

-Process

-Document

-File


-Flow of DocumentsSymbols:

Notes:

1. The Consolidated FS shall be prepared and to be distributed as follows:Original – GAFMIS, COA, Central Office in printed and digital copies (diskette or compact disc)2nd copy – COA Auditor3rd copy – City/Municipal Accountant

2. The Consolidated FS shall be submitted within 60 days after the 31st day of December.

IFS

1 retrieves and prepares

CDFS1-3

2

CCFS1-3

3preparesNote 1

Transmittal Letter

4

forwards

CCFS1-3

Transmittal Letter

5 receives, checks and signs

CCFS1-3

CDFS1-3

Transmittal Letter

CCFS1-2

CDFS1-2

Transmittal Letter

CCFS3

CDFS3

Transmittal Letter

6 forwards

7 receives

8 releases Note 2

The City/Municipal Accountant and Budget Officer shall perform the following duties and

responsibilities for the barangay financial transactions:


1. Maintain the General Journal, General Ledger, Subsidiary Ledgers and Registries of PI/RP for

each of the barangays under city/municipality;

2. Prepare JEV to record the financial transactions of barangays based on the certified registers and

supporting documents submitted by the BRK;

3. Record the JEVs in the General Journal and post journal entries to the General Ledgers and

Subsidiary Ledgers;

4. Prepare the required monthly and yearend TBs, FSs and reports/schedules for each of the

barangays;

5. Prepare and submit the Bank Reconciliation Statement to COA Auditor/ATL concerned;

6. Consolidate the yearend TBs and FSs and reports/schedules of the barangays; and

7. Submit monthly and yearend barangay individual financial reports to the Sangguniang Barangay,

and the printed and digital copies of the consolidated yearend TBs, FSs, and reports/schedules of

the barangays together with those of the City/Municipality to GAFMIS-COA and to the

Auditor/ATL concerned.

Budget Officer

1. Consolidate the SACB of each barangay for the five funds.

2. Submit the CSACB of all barangays under the city/municipality to GAFMIS, COA thru the

Auditor/ATL and to DBM.