LM 2: GOVERNMENT ACCOUNTING

GOVERNMENT BUDGET PROCESS

Government Budget
Government Budget is the financial plan of a government for a given period, usually for a fiscal year,
which shows what its resources are, and how they will be generated and used over the fiscal period.
The budget is the government’s key instrument for promoting its socio-economic objectives. The
government budget also refers to the income, expenditures and sources of borrowings of the National
Government that are used to achieve national objectives, strategies and programs.

BUDGET CYCLE
1. Budget Preparation
Steps:
1) Budget calls include:
i. Define budget framework
ii. Sets economic and fiscal budgets
iii. Prescribe the priority thrust and budget levels
iv. Spells out the guidelines and procedures, technical instructions and the timetable
for budget preparation
2) Budget hearings
3) Presentation to the office of the President

2. Budget Legislation/Authorization
Steps:
1) House deliberations
2) Senate deliberations
3) Bicameral deliberations
4) Ratification and enrolment
5) President’s enactment

General Appropriations Act (GAA)

� The legislative authorization that contains the new appropriations in terms of specific
amounts for salaries, wages, and other personnel benefits; maintenance and other
operating expenses; and capital outlays authorized to be spent for the implementation
of various programs/projects and activities of all departments, bureaus and offices of the
government for a given year.

3. Budget Execution and Operation

Steps:
1) Release and guidelines and Budget Execution Documents
2) Allotment
3) Incurrence of obligations
4) Disbursement authority

4. Budget Accountability
Steps:
1) Budget accountability reports
2) Performance reviews
3) Audit
 LM 2: GOVERNMENT ACCOUNTING

The cycle can be further subdivided as follows:

1. Budget call
2. Budget hearings
3. Presentation to the Office of the President
4. House deliberations
5. Senate deliberations
6. Bicameral deliberations
7. President’s enactment
8. Release guidelines and BEDs
9. Allotment
10. Incurrence of obligation
11. Disbursement authority
12. Budget accountability reports
13. Performance reviews
14. Audit

Budgetary Accounts
1. Appropriation – is the authorization made by a legislative body to allocate funds for purposes
specified by the legislative or similar authority
2. Allotments - is an authorization issued by the DBM to NGAs to incur obligations for specified
amounts contained in a legislative appropriation in the form of budget release documents. It is
also referred to as Obligational Authority.
3. Obligations - 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 as a
commitment that encompasses possible future liabilities based on current contractual
agreement.
4. Disbursement – actual amounts spent of the budgeted amounts.

Source of Revenue and Other Receipts

1. Revenue from exchange transactions
� Sale of goods or provisions of services to third parties or to other NGAs
� Use by other entity of assets yielding interest, royalties and dividends or similar
distributions
2. Revenue from Non-exchange transactions
� Tax revenue
� Fines and penalties
� Shares, grants and donations

Modes of disbursements
1. Disbursement by check
� Modified disbursement system checks (MDS)
� Commercial checks
2. Cash
3. Advice to debit the account (ADA)
4. Tax remittance advice (TRA)
5. Working fund
6. Direct payment method

Books of Accounts and Registries

 LM 2: GOVERNMENT ACCOUNTING

1. Journals
✔ General Journal
✔ Cash Receipts Journal
✔ Cash Disbursements Journal
✔ Check Disbursements Journal
2. Ledgers
✔ General Ledgers
✔ Subsidiary Ledgers

3. Budget Registries
1) Registries of Revenue and Other Receipts (RROR) – used to monitor the revenue
and other receipts estimated/budgeted, collected and remitted/deposited.
2) Registry of Appropriations and Allotments (RAPAL) – to monitor appropriations and
allotments charged thereto. It shall show the original, supplemental and final budget for
the year and all allotments received charged against the corresponding appropriation.
The balance is extracted every time an entry is made to prevent incurrence of overdraft
in appropriations.
3) Registries of Allotments, Obligations and Disbursements (RAOD) – to record
allotments, obligations and disbursements. It shall show the allotments received for the
year, obligations incurred against the corresponding allotment and the actual
disbursements made. The balance is extracted every time an entry is made to prevent
incurrence of obligations in excess of allotment and overdraft in disbursements against
obligations incurred. The RAOD shall be maintained by appropriation act, fund cluster,
MFO/PAP, and allotment class.

Classification of expense by Description Books

object
1. Personal Services Pertains to all types of employee RAOD-PS
benefits.
2. Maintenance and Other Pertains to various operating expenses RAOD-MOOE
Operating Expenses other than employee benefits and
financial expenses
3. Financial Expenses Pertains to finance cost RAOD-FE
4. Capital Outlays Pertains to capitalization expenditures RAOD-CO

4. Registries of Budget, Utilization and Disbursements (RBUD) – to record the approved

special budget and the corresponding utilizations and disbursements charged to retained
income. Separate RBUDs are also maintained for each object of expenditure.

Fund Accounting
The books of accounts shall be maintained by fund cluster as follows:

Code Description
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/Domestic Grants Fund
04 Special Account-Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related
 LM 2: GOVERNMENT ACCOUNTING

07 Trust Receipts

Responsibility accounting
� It is a system that measures the plans (by budgets) and actions (by actual results) of each
responsibility center.
� Provides access to cost and revenue information under the supervision of a manager having a
direct responsibility for its performance.

Summary entries:
Transaction Registries and Other Records Journal and Ledgers
a. Appropriations RAPAL None
b. Allotment from DBM RAPAL and appropriate RAODs None
c. Incurrence of obligations Obligation Request Status (ORS) and None
appropriate RAODs
d. Notice of Cash Allocation RANCA Dr. Cash MDS, Regular xx
Cr. Subsidy Income from NG xx
e. Disbursements Updating ORS and appropriate RAODs Dr. Expense/Asset xx
Cr. Payable xx

Dr. Payable xx
Cr. Cash-MDS, Regular xx
f. Tax Remittance Advice Updating ORS and appropriate RAODs Dr. Cash – TRA xx
(TRA is used for remittance Cr. Subsidy Income from NG xx
of taxes withheld)
Dr. Due to BIR xx
Cr. Cash – TRA xx
g. Billings, Collections and RROR, RCD/CRReg Dr. Accounts Receivable xx
Remittances Cr. Revenue xx

Dr. Cash – Collecting Officer xx

Cr. Accounts Receivable xx

Dr. Cash – Treasury/Agency Deposit,

Regular xx
Cr. Cash – Collecting Officer xx
h. Reversion of Unused NCA RANCA Dr. Subsidy Income from NG xx
Cr. Cash MDS, Regular xx

Key differences Full PFRS and PPSAS

1. PETTY CASH FUND
● Imprest fund system only
● Petty cash custodian – bonded if PCF > 5,000
● Maximum amount per transaction – P15,000
● Replenishment – at least 75% or when needed

2. BANK RECONCILIATION
● Adjusted balance method only
 LM 2: GOVERNMENT ACCOUNTING

● 4 copies

3. FINANCIAL ASSETS
● Loans and Receivables
● Held-to-Maturity (PAS 39)
● Available for sale (PAS 39)
● Financial asset at Fair Value through Surplus (Deficit)

4. INVENTORIES
● Subsequent measurement: LOWER OF COST OR REPLACEMENT COST
● Perpetual Method only
● Cost formula: Weighted average method only

5. INVESTMENT PROPERTY
● Subsequent measurement: COST MODEL only

6. PROPERTY, PLANT AND EQUIPMENT

● Initial recognition:
⮚ ≥ 15,000 = capitalized
⮚ <15,000 = semi-expendable PPE
● Subsequent measurement: NO REVALUATION MODEL. COST MODEL only.
● Treatment of depreciation:
⮚ Monthly recording
⮚ Straight-line method
⮚ Commencement – available for use:
✔ On or before 15th day of the month – depreciation will start at the
beginning of the month.
✔ After 15th day of the month - depreciation will start at the beginning
of the next month.
⮚ Residual value – minimum of 5%.
⮚ Useful life – 2 to 50 years except for land and unrecognized heritage
asset.
⮚ Cessation: Residual value > Carrying value

7. BORROWING COST
● Benchmark – expensed
● Alternative:
⮚ Qualifying asset – capitalized
⮚ Non-qualifying asset – expensed

8. AGRICULTURE
PAS 41 PPSAS
Bearer animals Bio asset Bio asset

Bearer plants PPE Bio asset

Zoo animals PPE PPE

 LM 2: GOVERNMENT ACCOUNTING

9. INTANGIBLES
● Subsequent measurement: COST MODEL only
● Straight-line method
● Residual value – zero
● Useful life – 2 years to 10 years

10. LEASES
● PAS 17

11. STATEMENT OF CASH FLOWS

● DIRECT METHOD ONLY

12. SERVICE CONCESSION ARRANGEMENT

● Financial Liability Model
● Grant of Right to Operate Model

13. CONSOLIDATION
● Control – power to govern

14. INTERIM FINANCIAL STATEMENT

● Preparation – quarterly

15. JOINT VENTURE

● Jointly controlled operations
● Jointly controlled assets
● Jointly controlled entities