Saray Ss ae le Nee en The Caeerremeret Aoracrtagy POs Chapter 3 The Government Accounting Process Learning Objectives 1 Recont the basic transactions: ota government entity, > Introduction The government accounting process comprises the activities of analyzing, recording, classitying, summarizing and communicating transactions involving the receipt and disposition of government funds and property, and interpreting the results thereof. This process is similar to that of a business entity, except that it incorporates budgetary controls, such as recording, in the budget registries and preparing periodic budget accountability reports. Books of Accounts and Registries The books of accounts and registries of government entities consist of: 1. Journals a. General Journal b. Cash Receipts Journal c. Cash Disbursements Journal d. Check Disbursements Journal ~ Ledgers _ a. General Ledgers b. Subsidiary Ledgersouting Praes 53 3. Registries a. Registries of Revenue b. Registry of Appropria c. Registries of Allotments, (RAOD) d. Registries of Budget, (RBUD) and Other Receipts (RROR) tions and Allotments (RAPAL) Obligations and Disbursements Utilization and Disbursements Technically, only the Journals and Ledgers are considered accounting records. These are similar to the accounting records of a business entity. The Registries are budget records. These are used to monitor the budget. You may think of the registries like “logbooks” or something, rather than accounting books with debit and credit columns. The accounting unit of the agency maintains the Journals and Ledgers while the budget division of the agency maintains the Registries. Recall that separate accounting records and budget registries are maintained for each fund cluster (i.e., Regular Agency Fund, Foreign Assisted Projects Fund, ete. - see Chapter 1). Budget Registries 1. Registries of Revenue and Other Receipts (RROR) - used to monitor the budgeted amounts, actual collections and remittances of revenue and other receipts. 2. Registry of Appropriations and Allotments (RAPAL) - used to monitor appropriations and allotments. This is to ensure that allotments will not exceed appropriations. 3. Registries of Allotments, Obligations and Disbursements (RAOD) - used to monitor the allotments received, obligations incurred against the corresponding allotment, and the actual disbursements made. This is to ensure that obligations incurred will not exceed allotments while _ actual disbursements will not exceed the obligations incurred.Chapter 3 Separate RAOD shall be maintained for each object of expenditure, Object of Expenditures _ | The classifications of expenditures by object are as follows: a Personnel Services (PS) — pertain to all types of employee benetits, e.g., salaries, bonuses, allowances, cash gifts, etc. Maintenance and Other Operating Expenses (MOOE) pertain to various operating expenses other than employee benefits and financial expenses, e.g,, travel, utilities, supplies, etc. Financial Expenses (FE) — pertain to finance costs, e.g., interest expense, bank charges, etc. Financial expenses also include losses on foreign exchange transactions, Capital Outlays (CO) — pertain to capitalizable expenditures, eg. expenditures on the construction of public infrastructures, acquisition costs of equipment, etc, Accordingly, the following separate RAODs shall be maintained: (a) RA@D-PS; (b) RAQD-MOOE; (¢) RAOD-FE: and (4) RAOD-CO. Registries of Budget, Utilization and Disbursements (RBUD) — used to record the approved special budget idee corresponding utilizations and disbursements charged - retained income. Separate RBUDSs are also maintaineg for g object of expenditure, ie., (a) RBUD-PS; (b) RBUD-Moog, ch RBUD-FE; and (a) RBUD-CO.The Government Accounting Process = Keeping of the General Accounts The COA shall keep the general accounts of the Government and preserve the vouchers and other supporting documents. Basic Recordings Appropriation Entity A (a government agency) receives its GAA consisting of the following: Personnel Services (PS) 100,000 Maintenance and Other Operating Expenses (MOOE) 60,000 Financial Expenses (FE) - Capital Outlays (CO) 200,000 Total appropriation for the current year 20x1 360,000 The receipt of the appropriation is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL) as follows: REGISTRY OF APPROPRIATIONS AND ALLOTMENTS Ey ame Ets A Fd Cs: Rah Aa Fad Due | Rel ‘Aetna need pris ms MOOE | we] 00 | Tol 5 | nooe | FE 60 | Ta B woe, [otal tikt| Gav] rong | encod | + anon | 364.000 | |. ] [. Allotment we Entity A receives its allotment from the DBM consisting of the following: 90,000 Personnel Services (PS) J Maintenance and Other Operating Expenses (MOOE) 40,000 Financial Expenses (FE) - 170,000 Capi ___ 170,000, ‘apital Outlays (CO) 70.008 Total allotmentmad The receipt of the allotment is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL) and Registrieg of Allotments, Obligations and Disbursements (RAOD) as follows: RAPAL REGISTRY OF APPROPRIATIONS AND ALLOTMENTS Eat Yoe Baty Fund Chaser: Regular Agency Fund Date | Ret Aotmeats Vareleased [me [wove] we) 00 [tu] 1s [one] re] co | tot | #8 [oor | Fe | 00 | ta tc [rt aca | [aa ew] Per (el itouao| ||| [sin | sg 240 a am Lid evlaoshvendlaniel aaellmnalon nani nce | | RAODs REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS PERSONNEL SERVICES For the year 20x1 Entity Name: Entity A ‘ Fand Cluster : Regular Agency Fund ‘Allotments zd 90,000 REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS MAINTENANCE AND OTHER OPERATING EXPENSES For the year 20x1 Entity Name: Entity A ‘Fund Cluster : Regular Agency Fund | |, [2 Wapeld Chiigetisor—_ Date | et | anoomens | obtigations | UMMM! Dieremeats | Due and negThe Government Accounting Process 57 Incurrence of Obligation [Obligation Request and Status (ORS) ar | |Obligations shall be incurred through the issuance of Obligation | |Request and Status (ORS). The Requesting Office shall prepare this) |document, supported by valid claim documents like disbursement vouchers, payrolls, purchase/job orders, itinerary of travel, etc. | | The Head of the Requesting Office shall certify the |necessity and legality of the obligation and the validity of the ‘supporting documents. The Head of the Budget Division shall certify the availability of the allotment. Entity A enters into the following contracts: a. Personnel Services - Employment contracts (Job Order) amounting to ®70,000. / b. Maintenance and Other Operating Services — Purchase contract for office supplies worth 25,000. ‘ ' ¢. Capital Outlays — Purchase contract for office equipment worth ®160,000. The ORS is prepared as follows:‘OBLIGATION REQUEST AND STATUS ___ Entity A Daye Office ‘less ‘Human Resources ‘Administration Office Adminstration Office |B le | cm curgrenpriinacoce | Can: Aimer mai tome necessary, lawful and under my direct supervision, aot | Mon the parpose acyEsEment BCE 2 documents valid, proper amd. = legal we LY Z Signature: Speen | Siguamee lA Printed Name: Boy G. Astos Printed Name | Gal T. Pit Z Position ‘Head, Requesting Office Pomoc ‘Head, Bodget Devine: Date’ Wits Dae Was eT ‘STATUS OF OBLIGATION Relerence Amoust ae] ORSTEVICteck’ | Obligation! Payable | Payment! NaYe Duemé Da asia) ‘ADATTRA No. | Dee @ @ To Te» eo Vat Job Order 70,000 o ° 7.08 ° Bat Office supplies 15,000 o ° 25,000 ° Vix) | Office equipment 160,000 ° ° 160,000 ° hil J To simplify the illustration, only one ORS is presented for the three contracts. Separate ORSs should be prepared for each of them. The “obligations” are recorded in the Registries of Allotments, Obligations and Disbursements (RAOD) as follows: REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS PERSONNEL SERVICES ‘Unobligased ‘Allotments +4 20,000 |The Government Accounting Process 38 pace OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS TAINTENANCE AND OTHER OPERATING EXPENSES For the year 20x1 REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS CAPITAL OUTLAYS For the year 20x1 Notice of Obligation Request and Status Adjustment (NORSA) » If the obligations recorded in the RAOD and ORS above need 4 be adjusted, the subsequent adjustment shall be made through ; use of the Notice of Obligation Request and Status Adjustinen (NORSA). The adjustment shall be effected through a Posi e entry (addition) or a negative entry (reduction), as appropriate. | oe ied yet in the accounting books. Up to this point, nothing is recorded YBN istries. Journal The recordings above are made on the B , entries shall be made only after: oe 4 the employees have rendered SIV a and b. the office supplies are delivered and received. © the office equipment is deliveredQV apie, * Only after these events occur that the entity's finang statement elements are affected, and rhs ah pccountable a, iS ds to be recognized. - Ce ee the rtllgatai recorded jn 3 Tegistries (but not yet in the accounting books) are referreq toa “Not Yet Due and Demandable.”” ; . Notice that government entities and business entities Use the term “obligation” or the phrase “incurrence of obligation: differently, > Government enti Obligation — is an act of a duly authorized official which binds the government to the immediate or eventual Payment of a sum of money. Obligation maybe referred to asa commitment that encompasses possible future liabilities based on current contractual agreement, Business enti > Obligation is another term for liability. books because now affected, i.e., increase in entry is as follows: This time a journal en Date Cash-Modified Disburse, ~Subsidy from National To recognize receipt of Ni try shall be made j i the Anaricial in the accounting ‘Ment Syste; (MDS), Regular yen Government CA from DBMThe registries used to monitor the a. Registry of Allotments ang used to determine the NCA and to monitor th NCA are the following: Notice of Cash Allocation (RANCA) - amount of allotments not covered by '€ available balance of NCA. b. Registry of Allotment and Notice of Transfer of Allocation (RANTA) ~ used to determine the amount of allotments not covered by Notice of Transfer of Allocation (NTA) and to monitor the available balance of NTA. The NCA is posted (recorded) in the RANCA as follows: REGISTRY OF ALLOTMENTS AND NOTICE OF CASH ALLOCATION 1 JOURNALS a. General Journal — used to record transactions not recorded in the Special Journals. Special Journals: b. Cash Receipts Journal - used r and Deposit and Cash Receipts Regi: i = d by a id Deposit (RCD) : prepares 2 - a t of eee report his/her collections and deposits = ee Government Depository Bank (AGDB). to an Au lection to record the Report of Co 7 ster of collecting officers.AP ter 3 a spRog) — used by field offic sao Reveipts Register (C RReg) % ; wt noe et of books es collections and dep n the books ©} ung colle sa he (central/regional/di on office): record the © Cash Disbursements Journal — used to cash disbursements of the Disbursing Officer. rd the a ad Check Disbursements Journal — used to reco! heck disbursements of the Disbursing Officer. Il. =LEDGERS General Ledger — summarizes all transactions recorded in the journals. Accounts in the general ledger are arranged according to their sequence in the Revised Chart of Accounts. Subsidiary Ledgers — show details of each control account in the general ledger. “The NCA specifies the maximum amount of withdrawal that an entity can make from a government bank for the period indicated. The Collecting Officer shall not issue an official receipt (OR) for the receipt of NCA.” (GAM for NGAs, Chapter 5, Sec. 38) Since the receipt of the NCA does not constitute a collection that is recordable in the Cash Receipts it i ‘ General Journal as follows: ate . eer rhe Government Accounting Process 63 Le The journal entry for the NCA is posted to the general jedget 25 follows: Disbursements Employees have rendered services and are now entitled to compensation. Journal entries shall be made because the financial statement elements of the entity are affected, ie. increase in expenses and increase in liability/decrease in cash. The recordings are as follows: a. Set up of payable to officers and employees upon approval of payroll. Salaries and Wages , 35,000 Personal Economic Relief Allowance (PERA) 5,000 Gross Compensation 40,000 Withholding Tax (10,000) Gsis (2,000) Pag-IBIG (2,000) PhilHealth _____(4,000) Total Deductions a. 25,000 NetDu | Salaries and Wages, Regular cal sees Relief Allowance (PERA) Due to BIR 100, Due to GSIS oof Due to Pag-IBIG 2 Due to PhilHealth im Due to Officers and Employees a To recognize payable to officers and 7 employees upon approval of payroll b. Posting of payable to the Section C of ORSre Goverment Accounting Proess —_— Grant of Cash Advance for payroll. pate | Advances for Payroll | 25,000 Cash-Modified Disbursement 25,000 System (MDS), Regular To recognize grant of cash advance for payroll The entries above are posted to the appropriate ledgers. d. Posting of disbursement to the payment column of Section of C of the ORS and disbursements column of the RAOD > The Section C of the ORS will show the following information: ‘OBLIGATION REQUEST AND STATUS Entity A. > The recording in the RAOD-PS is as follows: REGISTRY OF ALLOTMENTS, OBLIGATIONS AND DISBURSEMENTS PERSONNEL SERVICES For the year 20x1 Eatty Name: Eatity A Fund Cluster : ‘Unpaid ted we | nee | auormeats | Ontgnions | Ut0blett! | pubarvements'| Doc nd | wa 7000 ee amamnclaChapter 5 At this point, the payment and disbursement columns & the ORS and RAOD-PS, respectiviey, show only 25,099 Payment. This amount will be updated after the entity remits the other 15,000 amount withheld to the other government agencig, (ie, BIR, GSIS, Pag-IBIG, and PhilHealth). In the aypantine, t! 15,000 withheld are treated as “Due and Demandable.” We will discuss the remittances momentarily. €._ Liquidation of Payroll Fund Due to Officers and Employees Advances for Payroll To recognize liquidation of Payroll Fund| Remittance of Amounts Withheld Entity A remits the 15,000 withheld to the other government agencies. The breakdown is te-provided below: Withholding Tax 10,000 sis 2,000 Pag-IBIG 2,000 PhilHealth 1,000 Total Deductions 15,000 Remittance of Withholding Tax Tax Remittance Advice (TRA) The Tax Remittance Advice (TRA) is used to recognize: |a. In the books of government agencies, the Constructive remittance of taxes withheld to the Bureau of Internal Revenue (BIR) or customs duties withheld to the Bureau of Customs (BOC), and the constructive receipt of NCA for those taxes and customs duties; b. In the books of the BIR and BOC, the constructive receipt of tax revenue and customs duties; and ¢. In the books of the BTr, the constructive receipt of the taxes and customs duties remitted. at Li~Chapters ON eee record the taxes as its income and for the BTr to record the i bsidy. withholding agency's disbursement au thority as subsidy. Remittance to GSIS, Pag-IBIG & PhilHealth Pag-IBIG and PhilHealth To recognize remittance to GSIS, Date] Due to GSIS a Due to Pag-IBIG a Due to PhilHealth ! Cash-Modified Disbursement System (MDS), Regular 5,000 The Obligation Request and Status (ORS) and the RAOD-Ps are updated for the payments above. Billings, Collections & Remittances a. Entity A bills revenue of 100,000 for rent income.: Date | Accounts receivable Rent/Lease income To recognize billing of income 100,000 100,000 b. Entity A collects 100,000 from the the collection to the BTr, billed revenue and remits Date | Cash- Collecting Officers Accounts Receivable ay.000 To recognize collection of bled income 700,00) Date Cash-Treasury/Agency Deposit, Re, ? » Negull Cash — Collecting Officers Sea To recognize remittance of income tp Br, 100,000 P.D. No. 1445 requires that all Collect to the National Treasury, unless ahonns ioe ™ust be remitted otherwise. bed Specifically allowshe Government Accounting Process 7 — The remittance of the tax withheld is recorded as follows: pooks of Entity A [Dee | Cash-Tax Remittance Advice 10,000 Subsidy from National Government 10,000 To recognize the constructive receipt of NCA for TRA ‘Due to BIR 10,000 Cash-Tax Remittance Advice 10,000 | To recognize the constructive remittance of taxes withheld to the BIR through TRA | Notice that there is actually no physical transfer of cash to the BIR (ie., debit and credit to ‘Cash-TRA’), thus the term “constructive.” The TRA is another form of disbursement authority, thus it is recorded similarly to the receipt of the regular NCA (ie, credit to ‘Subsidy from National Government’). This means that Entity A has the authority to use the amount withheld in its operations. Amounts used from the TRA will be reported in Entity A’s Monthly Report of Disbursements. The TRA is recorded by the other government agencies as follows: Books of BIR i Books of BTr To uctive | To recognize constructive | eipt of taxes remitted by National | receipt of remittance of taxes by NGAs | Government Agencies (NGAs) through | through TRA TR4 7 | The use of the account “Cash-Tax Remittance Advice” is as if Entity A remits the cash to the BIR and BTr, which the latter then "mits back to Entity A, without the cash being physically "ansferred. The use of TRA is necessary in order for the BIR toie ‘The billing, of revenue is recorded in the General Journal while the collection and remittance are recorded in the Cash Receipts Journal as follows; CASH RECEIPTS JOURNAL Month January 20%) Areownte SYN Mcsivable | UACS Chosoraiey | eet | ee Reversion of Unused Notice of Cash Allocation (NCA) Government entities are required to revert any unused NCA at the end of the accounting period. The unused NCA is computed as follows: Cash-Modified Disbursement System (MDS), Regular Receipt of NCA — 200,000 25,000 Advances for payroll Remittances to GSIS, Pag-IBIG, & PhilHealth end 5,000 170,000. Date | Subsidy from National Government 170,000 Cash-Modified Disbursement 170,000 System (MDS), Regular To recognize reversion of unused NCA Notice that the entry above is the exact opposite of the entry to record the receipt of the NCA.Journal & Ledger Transaction ae . ther Records_}| ________ = ° PAL - None —# a._ Appropriation _| - RA ad |- None b. Allotment - RAPAL an appropriate RAODs = ¢c. Incurrenceof |- ORSand SiwNone Obligations appropriate I RAODs Real P 7 A Cash-MDS, Regular xx a, "NCA RANG Subsidy fromNG x e. Disbursements |- updating of | Expense/Asset ca) ORS and Payable x appropriate | payable xx RAODs Cash-MDS, Regular xx f. Tax Remittance |- updating of | Cash-TRA xx Advice ORS and Subsidy fromNG xx (TRA is used for appropri remittance of taxes AOL ats Due to BIR xx withheld) Cash-TRA a & Billings, - RROR, Accounts receivable xx Collections, & RCD/CRReg Cash -CO xx Remittances (not illustrated) Cash-CO xx Accounts receivable xx Cash-Treasu: ry/Agen Deposit, Regular, Cash-co, xx h. Reversion of - RANCA Stk bsid: Unused NCA Casha NG x a | IDS, Regular xx hc ee a a_— a ee. The Government Accounting Process Zs The Revised Chart of Accounts A chart of accounts is a list of all the accounts used by an entity. Government entities shall use the account titles and account codes inthe Revised Chart of Accounts (RCA) issued by the COA. The RCA includes numerous accounts. Only a few of these accounts are shown below as presenting the complete list would more than double the number of pages in this book. Each account in the RCA is assigned an 8-digit code as follows: . 0 00 00 00 9 Account Group a Bee | Major Account Group Sub-Major Account Group General Ledger Accounts General Ledger Contra-Accounts Code Account Groups Assets Liabilities Equity Income Expenses ab wONne Example: Account Group: Asset ‘Major Account Group: Cash and Cash Equivalents ‘Sub-Major Account Group: Cash on Hand ‘General Ledger Account: Cash-Collecting Officers 1 General Ledger Contra-Acaounts: Not a contra acount Otticers 1 01 01 01 0 Account ttle) (RCA Code)ACCOUNTS LIST O Vag Account Title Code Odieg Code ASSETS - Cash and Cash Equivalents Cash on Hand ; 30101010 | 101010; Cash-Collecting Officers 70101020 | 10101GaRy Petty Cash — it in Bank-Local Currency = a = re Currency, Current | 10102020 1ovozmaN§ Account-Banco de Oro (BDO) Treasury/Agency Cash Accounts i Cash-Treasury/Agency Deposit, 10104010 | 10104010H Regular | Cash-Modified Disbursement System | 10104040 | 101040400 (MDS), Regular mal Cash-Tax Remittance Advice 10104070 | 101040700 Cash Equivalents Treasury Bills 10105010 | 1010501000 Investments [ Financial Assets at Fair Value + Through Surplus or Deficit 10201010 | 102010100 -————-| Receivables Loans and Receivable Accounts Accounts Receivable et oni | Allowafce for Impairin HEA 10301010 | 1030101! Receivable poouiits 10301021 | 10301011the Government Accounting Process —o—— oe Propet Networks Accumulated Impairment Losses-Road Networks Olfice Supplies Inventory To1a10 | 1040401000 , Plant and Equipment alter Infrastructure Assets — — a Road Networks 10603010 | 1060801000 ‘Accumulated Depreciation-Road 10603011 | 1060301100 10603012 | 1060301200 Other Assets Advances Advances for Payroll 19901020 1990102000 Prepayments Prepaid Rent LIABILITIES Financial Liabilities Payables Accounts Payable L 19902020 _| 20101010 1990202000 2010101000 Inter-Agency Payables 20201010 2020101000 Due to BIR NET ASSETS/EQUITY Government Equity ‘Accumulated Surplus/(Deficit) _ 30101010 3010101000 REVENUE Tax Revenue 40101010 4010101000 Income Tax Income Tax-Individual Immigration Tax ta 40101010 40101040 4010101001 4010104000 Service and Business Income Service Income40202010 40202100 402019995) | ao202 51a! 4020210095 Gains Gain on Sale of Property, Plant and Equipment Other Non-Operating Income Reversal of Impairment Loss Reversal of Impairment Loss 40202120 ah 40301010 4020212009 — 4060201000 EXPENSES Personnel Services Salaries and Wages Salaries and Wages-Regular Other Compensation Personal Economic Relief Allowance sar0a0I0 5010201000 (PERA, Cost of Sales 50101010 5010101000 Non-Cash Exp Depreciation-Buildings and Other Structures- eGovernment Accounting 75 Th The Government Accounting Cycle In this section, we will have an overview of the accounting cycle ofagovernment entity, Here is a list of the things that we will be jearning: 1. Appropriation 2, Allotment 3. _Incurrence of Obligation Disbursement Authority - NCA Disbursements Billings, Collections & Remittances Unadjusted trial balance Adjusting entries Closing entries 10. Preparation of financial statements i The trial balance of Entity A (a government entity) at the beginning of the period is shown below: Accounts Debit Credit Cash - Collecting Officers © 5,000 Accounts Receivable 45,000 Buildings 500,000 Accumulated Depreciation - Buildings 150,000 Office Equipment 150,000 Accumulated Depreciation - Equipment Accounts Payable Accumulated Surplus (Deficit) Totals 700,000 Notes: * The ®20,000 accounts payable pertains to office supplies purchased in the prior year that were already delivered but not yet paid. An additional purchase of office supplies worth 5,000 is not yet recorded in the accounting books because they are not yet delivered. This prior year “obligation” is described in the registries as “Not yet ‘due and demandable obligation.”¥O ; . 000,000. 7 arn said its GAA amounting to Pl Entity A receives its | = is posted (recorded) in the Registry o is pos > The appropriation A Lsoropratie and Allotments (RAE : 0,000 from * ps pedals its allotment amounting to PI6U the DBM. : i Regis > The allotment is posted (recorded) in Pane of Appropriations and Allotments (RAPAL) an gis of Allotments, Obligations and Disbursements ( RAOD). 3. Incurrence of Obligation Entity A incurs obligations amounting to ®700,000. » The obligations are recorded in the Obligation Request and Status (ORS) documents and Registries of Allotments, Obligations and Disbursements (RAOD). 4. Disbursement Authority - NCA Entity A receives the following Notice of Cash Allocations (NCA), net of tax: a. For current year's appropriation b. For prior year's accounts payable and Not yet d; we and demandable obligations ves 25,000 > The journal entries are as follows: Cash-Modified Disburs, (MDS), Regular Subsidy from Nationa] Gove: To recognize receips of NCA ce ement System DBMSS Cash-Modified Disburse (MDS), Regular Subsidy from National Government To recognize receipt of NCA from the ‘ment System 25,000 25,000 DBM » The NCA is posted (recorded) in the Registry of Allotments and Notice of Cash Allocation (RANCA). 5, Disbursements I. Personnel Services (PS) Set up of payable to officers and employees upon approval of payroll. Salaries and Wages 200,000 Personal Economic Relief Allowance (PERA) 50,000. Gross Compensation 250,000 Withholding Tax (20,000) GSIS (9,000) Pag-IBIG (2,000) PhilHealth (1,000) Total Deductions — (32,000) Net 218,000 Pate | Salaries and Wages, Regular Personal Economic Relief Allowance (PERA) Due to BIR Due to GSIS ‘Due to Pag-IBIG Due to PhilHealth ; e to Officers and Employees sis To recognize payable to officers and employees upon approval o tl— in the ORS. b. The payable is recorded in Ll. c. Grant of Cash Advance for payr 218,000 Date | Advances for Payroll aro | “Cash Modified Disbursement 218 pq, lar System (MDS), Regu! 7 To recognize grant of cash advance for payroll ~| d. The disbursement is recorded in the ORS and RAOD, €. Liquidation of Payroll Fund Date | Due to Officers and Employees 218,000 ) Bld Advances for Payroll 218,00 To recognize liquidation of Payroll Fund| II. Maintenance and Other Operating Expenses (MOOE) Purchase of office supplies: a. Receipt of delivery of purchased offi year’s obligation (see note abo demandable obligation’) ce supplies from prior ve on ‘Not yet due and Office Supplies Inventory Accounts Payable To recognize delivery of Office supplies > The payable is Tecorded in the ORS. b. Receipt of delivery of Purcha 70,000 from current Year's leis = oefit hi i ‘i 79 Government Accounting Process Office Supplies Inventory 70,000 Accounts Payable To recognize delivery of office supplies 70,000 y The payable is recorded in the ORS. Payment of accounts payable: Entity A pays the following accounts payable: ' . From prior year’s accounts payable (see trial balance above): | Accounts payable 20,000 Less: Withholding taxes* (2,000) Net 18,000 ——S— * For simplification, the withholding taxes in this illustration do not necessarily reflect the provisions of relevant tax laws. Dite | Accounts Payable 20,000 ane Due to BIR 2,000 Cash - Modified Disbursement | System (MDS), Regular 18,000 | To recognize payment of accounts | payable d. From prior year's obligation (see note above on ‘Not yet due and demandable obligation’ and previous entry to record the related accounts payable): Accounts payable 5,000 Less: Withholding taxes (1,000) Net 4,000Date | Accounts Payable 5,000 ele Due to BIR ity Cash — Modified Disbursement System (MDS), Regular 4.0, To recognize payment of accounts . payable , | Common Fund System , the Common Fund Syst, To maximize the available NCAs of the agency policy shall be adopted whereby cash allocation balances of agencies unde, the Regular MDS Account may be used to cover payment of current yeay, accounts payable, ie, goods and services which have been delivered ang | accepted during the year charged against appropriations of prior year/s, afte, | satisfying their regular operating requirements as reflected in their Monthly | _Cash Program. (GAM for NGAs, Chapter 6, | e. From current year’s accounts payable. Accounts payable 60,000 | Less: Withholding taxes (3,000) | Net 57,000 Date | Accounts Payable 60,000 | (6.lLe) Due to BIR 3,000| Cash - Modified Disbursement | System (MDS), Regular 57,000 To recognize payment of accounts | payable Operating expenses: f. Entity A pays for the following expenses: Water yy Electricity 5 ad Telephone 2,000pe 81 sre corernanent AccountINg Pracess Janitorial 10,000 | Security 12,000 Total 30,000 Less: Withholding taxes (2,000) Net 28,000 ple ee ae fez | Water Expenses GIP | Electricity Expenses Telephone Expenses Janitorial Expenses Security Expenses Due to BIR Cash - Modified Disbursement System (MDS), Regular To recognize issuance of MDS checks as payment for expenses Cash advances for travel: g. Entity A grants a cash advance of 2,000 for the traveling expenses of an officer: ‘Dae | Advances to Officers and Employees 2,000 | Sig) Cash— Modified Disbursement | System (MDS), Regular 2,000 To recognize grant of cash advance jor travel > All the disbursements above (payments of accounts payable, operating expenses, and cash advance) are recorded in the ORS and RAOD. h. Liquidation of cash advance: I | ny | Traveling Expenses - Foreign 7,800 | | Advances to Officers and Employees 1,800 | To recognize liquidation of cash advance | for travel— . —_— - “ mee ~~ ON Sere Cha; Per 4 Oa | ece! cash advance: i ipt and deposit of refund of excess cas! | i, Receii | 200 Date | Cash - Collecting Officers ! , ou Advances to Officers and Employee: 0) To recognize refund of excess cash | advance for travel 3 ! Date "| Cash ~ Treasury/Agency Deposit, - | GulLi2) ™ | Regular on Cash - Collecting Officers 00 To recognize remittance of the refund of excess cash advance for travel - > An adjustment for the excess cash advance is made on the ORS and RAOD, Tssuance of Office supplies to end users ji. Entity A issues office Supplies worth 63,000 to end users, pi, | Office Supplies Expense 63,000 FD | Office Supplies Inventory 63,000 To record the issuance of ofc supplies foend users IH. Capital Outlays (CO) Purchase of Office equipment a. Receipt of delivery of Purchased office equi) ui 300,000 from current year’s obligation, apment worth Office Equipment Accounts Payable To recognize delivery quipment Date G.lLa)b Payment of accounts payable. Accounts payable Less: W ithholding taxes Net Dee | Accounts Payable Det | Due to BIR 20,000 om | Cash — Modified Disbursement | System (MDS), Regular 280,000 To recognize payment of accounts | payable IV. Remittances of amounts withheld a. Entity A remits the taxes withheld through TRA. Dae | Cash-Tax Remittance Advice 48,000 SW4t | Subsidy from National Government 48,000 | To recognize the constructive receipt of | |_NCA for TRA Dee | Due to BIR” 48,000 2/22)) Cash-Tax Remittance Advice 48,000 | To recognize the constructive remittance | of taxes withheld to the BIR through TRA Due to BIR (La) Gl.) (5.I.d) Ge) (ILA) (IIb)| oss Pag 1BIG 1000 PhilHealth — 000 / 12, — Total (81) | Due to Pag-IBIG Due to PhilHealth | Cash-Modified Disbursement } System (MDS), Regular To. recognize remittance 10 GsIs, Pag-IBIG and PhilHealth rded in the ORS and Date] Due to GSIS The disbursements above are reco! RAOD. ie 6. Billings, Collections & Remittances a. Entity A bills the following revenue/income: Power supply system fees 100,000 Landing and parking fees _80,000_ Total 180,000 Accounts receivable 180,000 Power Supply System Fees 100,000 Landing and Parking Fees f To recognize billing of income a) b. Entity A collects 100,000 accounts recei: nd , cei billing above and remits ®90,000* of the a ataa “ Cash - Collecting Officers Accounts receivable To recognize collection of current year’. billed income ae‘The Government Accounting Process 85 pie | Cash-Treasury/Agency Deposit, Regular] 90,000 | | @b2) Cash - Collecting Officers 90,000 | To recognize remittance of income to the BIr + Asa general rule, all revenues of an entity must be remitted to the BTr (Sec. (1), PD. No. 145). However, there are cases where other laws permit an entity to retain some of its revenues for specific uses - thus, the unremitted collection of 10,000 above (100K collection less 90K remittance). c. Entity A collects 45,000 accounts receivable from prior year's billing and remits total collection. Dae | Cash — Collecting Officers 45,000 | (cl) Accounts receivable 45,000 To recognize collection of prior year's billed income Date | Cash-Treasury/Agency Deposit, Regular 45,000 2 Cash — Collecting Officers 45,000 To recognize remittance of income to the BIr d. Entity A collects unbilled service income of ®370,000 and remits ®340,000 of the total collection: Permit fees 200,000 Registration fees 160,000 Other service income — 000 Total collection 370,000 me) Cash — Collecting Officers , Permit fees Registration fees Other service income To recognize collection of unbilled service income340,000, i ular cy Deposit, Reg Date Cash-Treasury/Agency a at ss (oan Cash - Collecting a ‘9 recognize remittance of in __| the BTr ‘rom regulatory functions any fees fi eT ices or goods. i income” Untilled revenue/in' street exchange O Coeevt collections of revenue with no e. Entity A collects unbilled tax revenue through direg deposit in Authorized Agent Banks: Immigration Tax 100,000 Total 100,000 100,000 Date | Cash-Treasury/Agency Deposit, Regular (oe _ Immigration Tax To recognize collection and remittance of income to BTr through Authorized Government Depository Banks (AGDB)/ Government Servicing Banks (GSB). 100,00) The collection is automatically remitted to the Nationdl Treasury because it is made through the latter’s bank account. 7. Unadjusted trial balance = at balance is a list of the accounts in tH test Bo on ek their balances, Its purpose is © accounts, ebits and total credits in Before we need to post aoe the unadjusted trial balan Ledger. Journals entries above in the GeneGENERAL LEDGER oan i, Regular Cash Modified Disbursement System (MDS), Regular (4a) 0000 ony 4 25000} 218000 xe (eb) 90000 18000 Ge) (62) 45000 4000 61d) (642) 340000 57,000 (le) (Ge) _100000 78000 6m) 575.200 ea. 2000 6p 280000 mL») 12000 G1) 6000 end, Cash-Tax Remittance Advice Accounts Receivable vat 48,000 beg. 45,000 48,000_.1V..2) (6) 180,000 | 100,000 (6.1) (6.1) 70,000 | 63,000 (5.m) - ae. 45,000 <1) : 80,000 end. i Accum, Depreciation - Bidgs. Equipment ‘beg. 500,000 150,000 beg. beg. 150,000 500,000 end. end. _ 150,000 (ma) _ 300,000 . 450,000 end. ‘Accum. Deprectation - Equipment Advances for Payroll Advances to Officers and Employees 60,000, beg. (Gc) 218,000 . Mg 2,000 “ aon} 218,000.10), 1,800 Gath) = end 200...) ~mein minent Accounting Process UNADJUSTED TRIAL BALANCE counts ____RCA Code qa Collecting Officers ~~ y0101010 cant Tre Agency Dep, Reg, 10104010 Cash MDS, 10104040 aah Tax Remittance Advice 10104070 accounts Reevivable i0soto10 Olfice Supplies Inventory 10404010 tuild 10604010 Accum, Depreciation - Buildings 19804011 Citice Equipment 10605020 Accum, Depreciation ~ Equipt, 10605021 Advances for Payroll 49801020 Advances to Officers & Employees 19901040 Accounts Payable 20101010 Due to Officers and Employees: 20101010 Due to BIR 20201010 Due to GSIS 20201020 Due to Pag-IBIG 20201030 Due to PhilHealth 20201040 Accumulated Surplus (Deficit) 30101010 Immigration Tax 40101040 Permit Fees 40201010 Registration Fees 40201020 Other Service Income 40201990 Power Supply System Fees 40202100 Landing and Parking Fees 40202120 Subsidy from NG 40301010 Salaries and Wages, Regular 50101010 PERA 50102010 Traveling Expenses - Foreign 50201020 Office Supplies Expense Spann Water Expenses 50204010 Electricity Expenses 50204020 Telephone Expenses 50205020 Janitorial Expenses con izcn Security Expenses ca teee Totals Debi 45,000 575,200 6,000 80,000 12,000 500,000 450,000 200,000 50,000 1,800 63,000 1,000 5,000 2,000 10,000 12,000 2,013,000 150,000 60,000 10,000 013,00090 8. i. | Chapter 3 The accounts are arranged according to their sequence in the Revised Chart of Accounts (RCA). (GAM for NGAs, Chapter 19, Sec. 48) Adjusting entries 1. Reversion of unused Notice of Cash Allocation (NCA). 2. Depreciation expenses: i, Buildings — #50,000 ii. | Equipment - 830,000 3. Allowance for impairment on accounts receivable of 2,000. The adjusting entries are as follows: Date | Subsidy from National Government 6,000 ie) Cash-Modified Disbursement System (MDS), Regular 6,000 To recognize reversion of unused NCA Date | Depreciation-Buildings & Other Structures 50,000 Bb4) Accumulated Depreciation - Bldgs. 50,000 To recognize depreciation of | buildings | Date. Depreciation-Machinery and Equipment 30,000 | (8b.2) Accumulated Depreciation - O.E. 30,000 | To recognize depreciation of office | | equipment : | a5 Impairment Loss — Loans and Receivables 2,000 | : Allowance for Impairment — AIR To recognize loss allowance on accoun ts receivable The adjusted trial balance is shown below:The Government Accounting Process 91 ‘Accounts TIGA Code Unadjusted Trial Balance Adjustments ajasesd Tsat Raiaass ‘Debie ‘Credit Debit Credit Data ‘Create ‘Cash - Collecting Otficers “45,000 45,000 (Cash-Treasury/Agency Deposit, Regular 575200 a75208 ‘Cash Moditied Disbursement System (MDS), Regular 6,000 Accounts Receivable 80,000 80,000 (Office Supplies Inventory 12,000 aon Buildings 500,000 500,000, ‘Accunalated Depreciation - Buildings 150,000 50,000 "200,900 Ottice Equipment 450,000 450,000 Accumulated Depreciation - Equipment 0,000 30,000 90,000 ‘Accounts Payable 10,000 10,000 : 470,000 470,000 Immigration Tax - 100,000 100,000 Permit Fees sno pease iia 160,000 160,000 So odeeamenine 10,000 10.9000 Power Supply System Fees 100,000 100,000 Landing and Parking Fees 80,000 80,000 Subsidy trom National Government 673,000 6000 657,000 Salaries and Wages, Regular 200,000 200,000 Personnel Economic Relief Allowance (PERA) 50,000 50,000 Traveling Expenses - Foreign 1.800 1.800 (Otice Supplies Expense sane om Water Expenses a, Peon Eiecericity Expenses 5,000 5,900 Telephone Expenses eae Payee Janitorial Expenses 10,000 10,000 ‘Security Expenses 22000) sanee Adfustments: Deprectation-Butldings é« Other Structures 5000. ea Deprectation-Machinery and Equipment 30,000 30,000 Impairment Loas— Loans and Receivables 2,000 2,000 Allowance for lapairment - Accounts Receivable a aeThe Government Accounting Process 9. Closing entries The following are the necessary closing entries: i. | 2 a. Closing of the “Cash-Treasury/Agency Deposit, Regular account to the “Accumulated Surplus/(Deficit)” account, b. Closing of the “Subsidy from National Government” accouny to the “Revenue and Expense Summary” account. ¢. Closing of income and expense accounts to the “Reveny, and Expense Summary” account and closing of the ng balance of “Revenue and Expense Summary” account to the “Accumulated Surplus/(Deficit)” account. Only closing entries (a) and (b) are unique to government entity. Date | Accumulated Surplus/(Deficit) 575,200 Gx Cash-Treasury/Agency Deposit, 575,200 Regular To recognize closing of cash deposit |__| account Date | Subsidy from National Government 667,000 (om) Revenue and Expense Summary 667,000 To recognize closing of subsidy account Date | Immigration Tax 100,000 (9) | Permit Fees 200,000 Registration Fees 160,000 Other Service Income 10,000 Power Supply System Fees 100,000 | Landing and Parking Fees 80,000 | Salaries and Wages, Regular 200,000 PERA 50,000 ‘Traveling Expenses - Foreign 1,800] Office Supplies Expense 63,000 | Water Expenses 1,000 Electricity Expenses 5,000 Telephone Expenses 2,000 Janitorial Expenses 10,000 Security Expenses 12,000 Depreciation-Bldgs. 50,000,Depreciation-Mac. & Equipt. Impairment Loss — L/R Revenue and Expense Summary To recognize closing of income and expense accounts ; Revenue and Expense Summary Accumulated Surplus/(Deficit) To recognize closing of revenue and expense summa 30,000 2,000 223,200 890,200 890,200 The completed worksheet is shown below:‘Debt Crud Deb Cre Du Cont Daa wero mmo 600 EGE G8 HEE E sop 000 10.000 eq00 REEEEEEGEE § 700 ggucedudl ee Atmioments _ apt Tt Banc apace woo 1000 7000 Hl she geueededl | 1317000 testa RE eke Giseededl Eee bevengeed aeraat tear see 4 Tz iThe Government Accounting Process 2 40. Preparation of financial statements me Statement of Financial Position and Statement of Financial ee are shown below. We will prepare the other components of a complete set of financial statements later in Chapter 14. ENTITY A STATEMENT OF FINANCIAL POSITION (REGULAR AGENCY FUND) AS AT DECEMBER 31, 20X1 ASSETS Notes Current Assets Cash and Cash Equivalents Receivables Inventories Total Current Assets Noncurrent Assets Property, Plant and Equipment Total Noncurrent Assets 660,000 660,000 TOTAL ASSETS 795,000 Current Liabilities ____10,000 Financial Liabilities Total Current Liabilities 10,000 TOTAL LIABILITIES 10,000 TOTAL ASS ETS less TOTAL LIABILITIES 785,000 NET ASSETS/EQUITY - Accumulated Surplus/(Deficit) __785,000_ TOTAL NET ASSETS/EQUITY 785,000ENTITY A STATEMENT OF FINANCIAL PERFORMANCE (REGULAR AGENCY FUND) FOR THE YEAR ENDED DECEMBER 31, 20X1 REVENUE Notes Tax revenue 2 100,009 Service and Business Income : 3: 550,000 TOTAL REVENUE — 850,000 Less: CURRENT OPERATING EXPENSES Personnel Services 4 250,000 Maintenance and Other Operating Expenses 5 94,800 Non-cash Expenses 6 82,000 TOTAL CURRENT OPERATING EXPENSES 426,800 SURPLUS/ (DEFICIT) FROM CURRENT OPERATIONS 223,200 Net Financial Assistance/Subsidy 667,000 SURPLUS/ (DEFICIT) FOR THE PERIOD 890,200ENTITY A NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 20X1 note 1: Property, Plant and Equipment This account consists of the following: Buildings 500,000 Office Equipment 450,000 Total Cost 950,000 Accumulated Depreciation - Buildings 200,000 Accumulated Depreciation - Equipment 90,000 Total Accumulated Depreciation 290,000 Property, Plant and Equipment, net 660,000 Note 2: Tax Revenue This account consists of the following: Immigration Tax : 100,000 Tax Revenue 100,000 Note 3: Service and Business Income This account consists of the following: Permit Fees 200,000 Registration Fees 160,000 Other Service Income 10,000 Power Supply System Fees 100,000 ding and Parking Fees 80,000 Service and Business Income 550,000yvel Serulees . vent ain eo Collowliyy YY ec nnn EN UAE al th saatavion antel Wages Rogular PERN Heine Sarees Note & Maintenance and Other Operating Expenses This account consiats of the following: Traveling Expenses Foreign Offi Supplies Expense Water Bypenaes Hlevtrieity Expenses Volephone Expenses Janitorial Expenses Security Expenses Maintenance and Other Operating Expenses Note 6: Non-cash Expenses This account consists of the following: Depreciation Buildings & Other Structures Depreciation: Machinery and Equipment Impairment Loss = Loans and Receivables Norvaish Expenses 200,000 50,009 250,000. 50,000 30,000 2,000 82,000chapter 3 Summary: 7 government entity's books of accounts and registries consist | of a, Journals, b. Ledgers, and c. Registries. « The classifications of expenditures by object are: a, Personnel Services (PS), b. Maintenance and Other Operating Expenses (MOOE), c. Financial Expenses (FE), and d. Capital Outlays (CO). |e Appropriations, allotments, and incurrence of obligations are recorded only in the registries. Recording in the books of accounts starts from the receipt of disbursement authority. + Appropriations are recorded in the Registry of Appropriations and Allotments (RAPAL). * Allotments are recorded in the RAPAL and Registries of Allotments, Obligations and Disbursements (RAOD). * Obligations incurred are recorded in the RAOD and Obligation Request and Status (ORS). * Disbursement authority (e.g-, Notice of Cash Allocation) is tecorded in the books of accounts.