NGAS Manual for Local Government Units

7/30/2019 NGAS Manual for Local Government Units

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NGAS Manual for Local Government UnitsVolume I - The Accounting Policies

CHAPTER 3. ACCOUNTING SYSTEM

A. GENERAL ACCOUNTING PLAN

Sec. 05. General Accounting Plan. The General Accounting Plan shows the overallaccounting cycle in the Local Government Unit. Transactions shall emanate from the differentoffices/departments of the local government units (LGUs). These offices/departments willprovide/produce the source documents and other accounting forms leading to the perfection ofthe transaction, whether it be budgetary, collections or disbursements. The source documentsand accounting forms shall be the basis for the preparation of reports by the Office of theTreasurer. The Office of the Accountant shall record the transactions to the registries or to thecorresponding books of original entry. Posting to the books of final entry and preparation of the

financial reports shall also be undertaken by the Office of the Accountant.

The General Accounting Plan (Table 1) is presented as to the following type oftransactions:

a. Appropriations, Allotments and Obligationsb. Collections and Depositsc. Disbursements

By cash

By checkd. Miscellaneous and Other transactions
http://www.coa.gov.ph/ngas/lgu/lgu_ngas-table1.xlshttp://www.coa.gov.ph/ngas/lgu/lgu_ngas-table1.xlshttp://www.coa.gov.ph/ngas/lgu/lgu_ngas-table1.xlshttp://www.coa.gov.ph/ngas/lgu/lgu_ngas-table1.xls


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B. BUDGETARY ACCOUNTS

Sec. 06. Budgetary Accounts. Budgetary accounts are composed of appropriations,allotments and obligations.

Sec. 07. Accounting for Appropriations. Appropriation refers to an authorizationmade by ordinance, directing the payment of goods and services from local government fundsunder specified conditions or for specific purposes.

The local sanggunian approves the annual budget thru the issuance of appropriationordinance. On the first business day of the fiscal year, the entire annual budget of the localgovernment unit shall be recorded in the Registry of Appropriations, Allotments andObligations (RAAO). The appropriations, in the amounts approved by the legislative body andconfirmed by the reviewing authorities, are recorded in the registries maintained by theaccountant where they may be compared with the actual developments of the period.

Budgetary reserves which are stand by appropriations ready for release in case ofcalamities, as well as supplemental budget are similarly recorded in the RAAO. In case theLGU is operating on a re-enacted budget, said re-enacted budget shall likewise be recorded inthe registry. Once current budget is approved, the necessary adjustments shall be made in theregistry.

Separate registries shall be maintained for the four classes of expenditures perresponsibility center, to wit:


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1. Registry of Appropriations, Allotments and Obligations - Capital Outlays (RAAOCO)2. Registry of Appropriations, Allotments and Obligations - Maintenance and Other

Operating Expenses (RAAOMO)3. Registry of Appropriations, Allotments and Obligations - Personal Services (RAAOPS)4. Registry of Appropriations, Allotments and Obligations - Financial Expenses

(RAAOFE)

Sec. 08. Accounting for Allotments. Allotment is the authorization issued by the LocalChief Executive (LCE) to a department/office of the LGU, which allows it to incur obligations,for specified amounts, within the appropriation ordinance. Allotments are released quarterlybased on the Work and Financial Plan and Request for Release of Allotment. The Accountant,upon receipt of the Advice of Allotment, shall enter the allotment in the RAAOs.

Sec. 09. Accounting for Obligations. Obligations refer to the amounts committed tobe paid by the LGU for any lawful act made by an accountable officer for and in behalf of the

local government unit concerned.

Obligations shall be taken up in the registries as they are incurred. For each obligation,the requesting department/office shall prepare the Allotment and Obligation Slip (ALOBS)signed by the department or office head as requesting official and forward this, together withthe supporting documents, to the Budget Officer.

The Budget Officer shall certify to the existence of appropriation that has been legallymade for the purpose by signing the appropriate box in the ALOBS and assign the ALOBSnumber thereto. The Accountant shall review the ALOBS and certify as to obligation of theallotment by signing the appropriate box in the ALOBS. He shall also fill up the Status ofObligation. The Accountant shall record the amount of obligation in the RAAOs.

Sec. 10. Adjustment of Obligations. The Chief Accountant shall record paiddisbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Anybalance appearing in the ALOBS after full payment of obligations shall form part of unobligatedallotment. The Chief Accountant shall adjust accordingly the amount of recorded obligations inthe RAAO using the same ALOBS number as reference. At the end of each month, the ChiefAccountant and the Budget Officer shall reconcile their records on allotments available forobligation.

Sec. 11. Accounting Procedures for Budgetary Accounts. Summarized hereunderis the process in accounting for budgetary accounts:

P R O C E S SPERSON / UNITRESPONSIBLE

a. Records in the appropriate RAAOs theapproved appropriation per Appropriation

Office of theAccountant


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Ordinance.

b. Forwards the advice of allotments to theOffice of the Accountant and returns thework plan to the concerned departments/offices.

Office of the BudgetOfficer

c. Enters the allotments in the RAAOs. Office of theAccountant

d. Prepares ALOBS based on disbursementvouchers/purchase requests and/orsupporting documents. Signs theappropriate box for requesting office.Forwards the same to the Office of theBudget Officer.

Heads ofdepartments/offices

e. Certifies the ALOBS as to the existenceof appropriations based on theappropriation ordinance. Assigns ALOBS

number and forwards the same to theOffice of the Accountant.

Budget Officer

f. Certifies the ALOBS as to the obligationsof allotments. Records the obligation inthe appropriate column of the RAAOs andin the Status of Obligation portion(Obligation) of the ALOBS.

Chief Accountant

g. Records paid disbursement vouchers inthe Status of Obligation portion(Payments) of the ALOBS. Any balanceappearing in the ALOBS after full

payment of obligations shall form part ofunobligated allotment. Adjust accordinglythe amount of recorded obligations in theRAAOs.

Office of theAccountant

h. At the end of each month, reconcilerecords on allotments available forobligation.

Budget Officer andChief Accountant

Sec. 12. Terminology and Classification. A common terminology and classificationshall be used consistently throughout the budget, the accounts and the financial reports.

For this purpose, the following specific expenditures shall be recorded in the appropriateRAAOs:

a. RAAOCO

Investments outlay (e.g. stocks, bonds)

Land, Land Improvements and Leasehold Improvements outlay

Buildings and Other Structures outlay (e.g. school buildings, marketsand slaughterhouses, hospital and health centers, etc.)


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Public Infrastructures outlay (e.g. parks, plaza, monuments, bridgesetc.)

Furniture and Fixtures outlay

Work Animals outlay

Breeding stocks

Machineries and Equipment outlay (e.g. dump trucks, construction

equipment, industrial machineries, technical and scientific equipment,etc.)

Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars,vans, etc.)

Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay

Books outlay

Ordnance outlay

IT Equipment and Software outlay

Other Property, Plant and Equipment outlay

Reforestation Projects

Arts, Archeological Specimen and Other Exhibits

b. RAAOPS

Salaries and Wages (e.g. regular pay, part-time pay, overtime andnight pay, holiday pay, etc.)

Allowances (e.g. PERA, hazard pay, RATA, etc.)

Benefits (e.g. bonus, cash gifts, productivity, pension, etc.)

Government Shares on Employees Contributions

c. RAAOMO

Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.)

Livestock (e.g. swine, hogs, chicken, goats, etc.) Crops

Supplies (e.g. office, medical, dental and laboratories, spare parts,gasoline and oil, etc.)

Repairs and Maintenance

Printing and Binding

Travel

Consultancy

Light, Water and Gas

Communication (e.g. telephone, telegraph, internet, postage, etc.)

Auditing Services

Other Services (e.g. janitorial, security, hauling, etc.)

Extraordinary and Miscellaneous Expenses

All other expenditures in the Chart of Accounts forMOOE, exceptdepreciation, obsolescence, bad debts, loss on sale ofassets, loss of assets, discount on Real Property Tax and SpecialEducation Tax.

d. RAAOFE

Bank Charges


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Interest Expenses

Commitment Charges

Other Financial Charges (e.g. underwriting fees, guarantee fees)

Loan Amortization

C. INCOME/COLLECTIONS AND DEPOSITS

Sec. 13. Separation of Books and Depository Accounts. Local accountants andtreasurers shall maintain separate books and depository accounts, respectively, for each fundin their custody or administration.

Sec. 14. Depository Accounts. Local treasurer shall maintain depository accounts inthe name of their respective local government units with banks, preferably government-owned,located in or nearest to their respective areas of jurisdiction. Earnings of its depositoryaccounts shall accrue exclusively thereto.

Sec. 15. Remittance of Government Monies to the Local Treasury. Officers of thelocal government authorized to receive and collect monies arising from taxes, revenue, orreceipts of any kind shall remit the full amount received and collected to the treasury of suchlocal government unit which shall be credited to the particular account or accounts to which themonies in question properly belong.

Sec. 16. Sources of Income of LGUs. The main sources of income of LGUs are as

follows:

a. Tax revenues, fees and chargesb. Share from Internal Revenue Collectionsc. Share from National Wealth

The sources of income are further classified into general income accounts and specificincome accounts.

Sec. 17. General Income Accounts. The following shall comprise the General Income

Accounts applicable to LGUs:

a. Subsidy from Other LGUsb. Subsidy from Other Fundsc. Subsidy from Special Accountsd. Sales Revenuee. Dividend Incomef. Interest Incomeg. Gain on Sale of Securitiesh. Gain on Sale of Assets


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i. Sale of Confiscated Goods and Propertiesj. Foreign Exchange (FOREX) Gainsk. Miscellaneous Operating and Service Incomel. Fines and Penalties Government Services and Business Operationsm. Income from Grants and Donations

Sec. 18. Specific Income Accounts. The following major classification comprise thespecific income accounts for LGUs:

1. Property Taxes2. Taxes on Goods and Services3. Other Taxes4. Other Specific Income

Sec. 19. Methods of Accounting for Income. The following accounting methods shall

be adopted in recording income:

a. Accrual Method Accrual method of accounting shall be used to record Sharefrom Internal Revenue Collections in the books of accounts. Upon receipt ofthe Notice of Funding Check Issued from Department of Budget andManagement (DBM), Share from Internal Revenue Collections shall be takenup as Due from NGAs and credited to Share from Internal RevenueCollections. However, Cash in Bank shall be debited upon receipt of BankCredit Advice as to receipt of the Share from Internal Revenue Collectionsregardless of whether or not the Notice of Funding Check Issued has beenreceived from DBM.

b. Modified Accrual Modified accrual method of accounting shall be used forreal property taxes. At the beginning of the year, Real Property Tax

Receivable and Special Education Tax Receivable shall be established. Thisis in view of the need to record in the books not mere income estimates fromreal property taxes but actual receivables from said taxes. However, to avoidappropriating uncollected revenues which might result to huge cash overdraft,the same shall be credited to Deferred Real Property Taxes Income/DeferredSpecial Education Tax Income. Real Property Tax Income/Special EducationTax Income shall be recognized upon receipt of collection.

c. Cash Basis Cash basis of accounting shall be used for all other taxes, fees,charges and other revenues.

Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. RealProperty Tax Receivables/Special Education Tax Receivables shall be established at thebeginning of the year based on Real Property Tax Account Register/Taxpayers index card. Atthe beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certifiedlist showing the name of taxpayers and the amount due and collectible for the year. Based onthe list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the debit toReal Property Tax Receivable/Special Education Tax Receivable and crediting to DeferredReal Property Tax Income/Deferred Special Education Tax Income.

Upon collection of Real Property Taxes from taxpayers, the account Deferred Real


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Property Tax Income/Deferred Special Education Tax Income shall be debited while the RealProperty Tax Income due to the municipality is recognized/credited. The share of the Provinceand Barangay shall also be credited to Due to LGUs.

Every end of the week, thereafter the Municipal Accountant shall furnish the ProvincialAccountant with a summary of the JEVs showing the breakdown of the amounts Due to LGUs.

The summary, which shall be supported with copies of the JEVs, shall be the basis of theProvincial Accountant to draw the JEV taking up the RPT Income. The account Due from LGUshall be debited and Real Property Tax Income credited.

At the end of the month, the Municipal Accountant shall likewise prepare the Abstract ofReal Property Tax to facilitate the distribution of real property tax collection. A copy of theabstract shall be furnished the Provincial Accountant, for purposes of reconciliation with theweekly summary of JEVs.

Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior to CY2002. Payment of delinquencies for real property taxes/special education taxes prior to CY

2002 shall be recognized as a direct credit to Real Property Tax Income/Special Education TaxIncome account.

Sec. 22. Discount on Real Property Tax/Special Education Tax. Discounts foradvance and prompt payment of Real Property Tax and the additional one percent (1%) taxaccruing to the Special Education Fun shall be recognized in the year the taxes are due. Saiddiscounts shall be apportioned to the concerned LGUs in accordance with the sharingprescribed for real property tax and additional one percent (1%) tax under the LocalGovernment Code.

Sec. 23. Fines and Penalties. Fines and Penalties, either from tax revenue or otherspecific income, shall be recognized as income of the year it was collected.

Fines and Penalties arising from real property taxes shall be distributed to concernedLGUs in accordance with the sharing prescribed under the Local Government Code for RealProperty Tax and the additional one percent (1%) tax for the Special Education Fund.

Sec. 24. Other Receipts. Other receipts of the local government units shall becomprised of, but not limited to, the following:

a. Borrowingsb. Sale of Property, Plant and Equipmentc. Refund of Cash Advancesd. Receipt of Performance/Bidders Bonds

Sec. 25. Borrowings. Borrowings are proceeds of repayable obligations, generally with


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interest from the bank, national agency, another local government unit, and private sector. Allborrowings incurred shall be recorded direct to the appropriate liability accounts. Upon receiptof the advice from the bank or lending agency informing the release of the proceeds, theAccountant shall draw a Journal of Entry Voucher taking up the transaction.

Sec. 26. Sale of Property, Plant and Equipment. Sale of property, plant andequipment refers to the proceeds from the sale of land, buildings, equipment, furniture andother similar property which are recorded in the books as Property, Plant and Equipment. Theappropriate Property, Plant and Equipment account shall be credited upon transfer ofownership.

Sec. 27. Refund of Cash Advances. Cash advances for official travel shall be takenup as a receivable from the concerned official or employee. Refunds made shall be credited tothe receivable account previously set up. Cash advances for salaries and wages shall berecorded as debits to the account Cash Disbursing Officer. Any refund made shall be

credited to this account.

Sec. 28. Receipt of Performance Bonds. Performance bond posted by contractor orsupplier to guaranty full and faithful performance of the their work may be in the form of cash,certified check or surety. Performance bond in cash or certified check shall be acknowledgedby the issuance of official receipt and recorded in the books by the Accountant drawing a JEVfor the purpose. In case of surety bond, an acknowledgment receipt shall be issued by theauthorized official.

Sec. 29. Reporting for Collections and Deposits. Collectors/tellers shall issue areceipt to acknowledge collections made. The receipt maybe in the form of pre-numberedOfficial Receipts, or cash tickets and the like. At the close of each business day, thesecollectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four copies.The original and two copies, together with the duplicates of the official receipts issued, shall besubmitted to the treasurer/cashier to whom the cash collected shall be turned over. The fourthcopy of the RCD shall be retained by the collector/teller concerned. Barangay Treasurersdeputized to collect taxes imposed by provinces, cities and municipalities shall follow the sameprocedures in turning over their collections to the treasurer/cashier concerned.

In the case of collectors assigned to the field, where travel time from their places ofassignment to the Treasurers Office is more than one day, turnover of collections shall be

made at least once a week or as soon as the collections reach P5,000.00.

Sec. 30. Verification of Collections and Accountable Forms. The Treasurer/Cashiershall verify the Report of Collections and Deposits; check the statement of accountable formsas to initial balances on hand, receipts, issues and the ending balances on hand; make aphysical count of the accountable forms remaining in the custody of the collector/teller andcheck the same against the new balances on hand column. He shall indicate his verification by


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affixing his signature at the back of the triplicate copy of the last official receipt issued. He shallcount the money turned over to him and sign the certification and receipt portion of all copiesof RCD.

Sec. 31. Designation of Liquidating Officers. The Treasurer may designateliquidating officers from among the collectors/tellers whenever necessary.

a. Collectors/tellers shall turn over their collections to their designated liquidatingofficer. The RCD shall however be prepared in five copies, four copies to besubmitted to the liquidating officer, the fifth copy to be retained by thecollector/teller.

b. The liquidating officer shall perform the procedures for the receipt andverification of collections turned over to him. He shall also accomplish theRCD in four copies to summarize the collections turned over to him by thecollectors/tellers as well as his own collections.

c. The liquidating officer shall turn over intact the cash collections to theTreasurer/Cashier together with the originals and two copies of the RCDs of

collectors/tellers and the duplicates of the official receipts issued. TheTreasurer/Cashier shall acknowledge receipt of the cash and allaccompanying documents by signing all copies of the RCD of liquidatingofficer on the certification and receipt portion of the form. The fourth copy ofthe RCD of the liquidating officer and RCDs of collectors/tellers shall beretained by the liquidating officer.

Sec. 32. Deposit of Collections. The Treasurer/Cashier shall deposit intact all hiscollections as well as all collections turned over to him by the collectors/tellers with theauthorized depository bank daily or not later than the next banking day. He shall record alldeposits made in the cashbook and prepare the RCD.

The barangay treasurer shall deposit all collections intact with the city/municipal treasurer,or in a depository bank account maintained in the name of the barangay, within five (5) daysfrom receipt thereof.

Sec. 33. Deposit of Field Collections. Collections by field collectors shall be remittedto the Cashier or designated liquidating officer of the field office of the LGU. When traveldistance of the field office to the local treasury may expose government funds to the risk ofloss while in transit, the Cashier or designated liquidating officer, upon authorization by theTreasurer, may deposit the collections in the authorized depository bank near the field office ofthe LGU. The procedures in reporting collections and deposits prescribed in this Chapter shallbe observed.

Sec. 34. Accounting for Collections and Deposits. The Accountant shall determinethe account classification of the collections covered by the RCD and the supporting paperssubmitted by the Treasurer/Cashier and shall accomplish the Journal Entry Voucher. Theaccountant shall also maintain the Abstract of Real Property Tax Collections to facilitate thedistribution and remittance of the shares of the different government units concerned in the


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real property tax collections.

Sec. 35. Receipts and Collection Process. The following is a summary of the receiptand collection process in the LGU:


a. Receive payment from taxpayers/creditors and issue Official Receipt (OR).Prepare Report of Collections andDeposits. Remit to the Liquidating Officer(if one is designated) or Treasurer.

Collector/Teller

b. Check remittances and verifiesaccountable forms of collectors/tellers.

Consolidates collections and remits to theTreasurer/Cashier. Prepares RCD.

Liquidating Officer

c. Receive remitted collections, consolidatesthe same and prepares RCD. Records inthe Cashbook Cash in Treasury.

Treasurer

d. Deposit collections in the appropriatebank account per authorized depositorybank. Records deposit in the CashbookCash in Bank.

Treasurer

e. Forward RCD to Accounting Unit with

copies of ORs and validated deposit slips.

Treasurer

f. Prepare Journal of Entry Voucher andrecord in the Cash Receipt Journal.

Accountant

Sec. 36. Proforma Accounting Entries. The following are pro-forma accountingentries for income, collection and deposit:

Particulars Account TitleAcct.Code Debit Credit

I N C O M E

1. Real Property Tax Basic

A. Books of the Municipality

a. Setting-up of RPTReceivable

Real Property TaxReceivable

124 1,000

RPT = P1,000 Deferred Real


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RPT Sharing:Municipal - 40%Province - 35%Barangay - 25%

Property Tax Income 448 1,000

b. Receipt of Payment Cash in Treasury 101 100


124 100

c. Distribution of Collection Deferred Real PropertyTax Income

448 100

RPT Sharing:Municipal - 40%Province - 35%Barangay - 25%

Real Property TaxDue to LGUs

711431

4060

d. Deposit of Collections Cash in Bank LCCA 110 100

Cash in Treasury 101 100

e. Remittance of Share Due to LGUs 431 35

(Province) Cash in Bank LCCA 110 35

f. Remittance of Share(Barangay)

Due to LGUsCash in Bank LCCA

431110

2525

B. Books of the Province

a. Upon receipt of theSummary of the JEVfrom the Municipal

Accountant

Due from LGUsReal Property Tax

131711

3535

b. Upon receipt of share Cash in Bank LCCADue from LGUs

110131

3535

2. Operating and Service Income

a. Receipt of Income Cash in TreasuryReceipts from MarketsGarbage Fees

101783772

1009010

b. Deposit of Collections Cash in Bank LCCACash in Treasury

110101

100100

3. Share from Intern al Revenue Collections

a. Receipt of Notice ofFunding Check Issuedfrom the DBM and creditmemo from the bank forShare from InternalRevenue Collections

Cash in Bank LCCAShare from Internal

Revenue Collections

110746

1,0001,000

b. Receipt of Notice ofFunding Check Issuedfrom the DBM for Sharefrom Internal RevenueCollections

Due from NGAsShare from Internal

Revenue Collections

130746

1,0001,000

4. Grants and Donat ions

a. Receipt of grants anddonations in cash(Donations in kind shall

Cash in TreasuryIncome from Grants

and Donations

101651

100100


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be booked-up using theappropriate assetaccount)

b. Receipt of grants anddonations in kind - MotorVehicle:

Motor VehiclesInvested Equity

218537

800800

Original Cost P1,000Less: Acc. Depn. 200

(At the end of Year)Invested Equity 537 800

Book Value P 800 Government Equity 501 800

5. Borrow ings

a. Receipt of borrowedfunds from bank -Principal P1,000

Cash in Bank LCCALoans Payable

Current, Domestic

110403

1,0001,000

Bank Charges - 10 Bank Charges 951 10

Interest Expense - 12 Interest Expenses 952 12

Cash in Bank LCCA 110 22

b. Receipt of borrowedfunds from other agency-

Cash in TreasuryLoans Payable

Current, domestic

101403

1,0001,000

Principal - P1,000 Interest Expenses 952 6

Interest Expense - 6 Cash in Bank LCCA 110 6

c. Payment of loanamortization

Loans PayableCurrent, Domestic

403 200

Cash in Bank - LCCA 110 200

6. Subsidies

a. Subsidy from Other Funds (General Fund to Sp ecial Educat ion Fund)

GENERAL FUND BOOKS

Transfer of subsidy toSpecial Education Fund(Aid to SEF to finance its

projects)

Subsidy to Other FundsCash in Bank LCCA

897110

500500

SPECIAL EDUCATION FUND BOOKS

Receipt of subsidy fundsfrom Other funds

Cash in TreasurySubsidy from OtherFunds

101605

500500

b. Special Accounts (subsidy from General Fund proper to Operat ion of

Publ ic Market

BOOKS OF GENERAL FUND PROPER

Transfer of subsidy toSpecial Account

Subsidy to SpecialAccounts

898 500


BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)

Receipt of subsidy fromGeneral Fund Proper

Cash in Bank LCCASubsidy from SpecialAccounts

110606

500500

7. Refund o f Cash Adv ances

a. Cash A dvance by an Off icer for Local Travel

a. To take up the cashadvance

Due from Officers &Employees

128 10


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b. To take up refund ofcash advance

Cash in TreasuryDue from Officers &

Employees

101128

1010

b. Cash Advance by a Disbursing Off icer for Salar ies and Wages

a. To take up the cashadvance

Cash DisbursingOfficers

107 10


b. To take up refund ofcash advance

Cash in TreasuryCash Disbursing

Officers

101107

1010

8. Receipt pf Cash Bo nds

a. To take up receipt ofperformance bond incash

Cash in TreasuryPerformance/ Bidders/

Bail Bonds Payable

101414

5050

b. To take up deposit ofperformance bond

Cash in Bank LCCACash in Treasury

110101

5050

c. To take up refund ofperformance bond

Performance/ Bidders/Bail Bonds Payable

414 50


D. DISBURSEMENTS

Sec. 37. Disbursements. Disbursements refer to the settlement of governmentpayables/obligations by cash or by check.

Typical transactions for which disbursements are made are as follows:

1. Personal Services2. Maintenance and Other Operating Expenses3. Capital Outlay4. Financial Expenses

Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and paideither by check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an integral partof the DV.

Sec. 38. Certification on Disbursements. Disbursements from the general fund shall

require the following certifications on the DV:

1. Certification and approval of vouchers and payrolls as to validity, propriety andlegality of the claim (Box A of DV) by the head of the department or office whohas administrative control of the fund concerned. In case of temporaryabsence or incapacity of the department head or chief of office, the officernext-in-rank shall automatically perform his function and shall be fullyresponsible therefor.

2. Necessary documents supporting the disbursement vouchers and payrolls as


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certified to and reviewed by the Accountant. (Box B of DV)3. Certification that funds are available for the purpose by the Local Treasurer.

(Box C of DV)

Sec. 39. Approval of Disbursements. Approval of disbursements by the Local ChiefExecutive (LCE) himself shall be required whenever local funds are disbursed, except forregularly recurring administrative expenses such as: payrolls for regular or permanentemployees, expenses for light, water, telephone and telegraph services, remittances togovernment creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of theDBM and others, where the authority to approve may be delegated. Disbursement vouchersfor expenditures appropriated for the operation of the Sanggunian shall be approved by theprovincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as the case maybe.

Sec. 40. Payments by Check. Checks shall be drawn only on duly approved

disbursement vouchers. It shall be drawn by the local Treasurer and countersigned by the localAdministrator. In case of temporary absence or incapacity of the aforesaid officials, theseduties shall devolve upon their immediate assistants. In the case of municipalities where noAdministrator has been appointed, checks shall be countersigned by the municipal Mayor. Incase, however, of expenditures appropriated for the operation of the Sanggunian, checksdrawn shall be countersigned by the provincial Vice Governor, the city Vice Mayor, or themunicipal Vice Mayor, as the case may be.

Sec. 41. Recording Check Disbursements in the Cashbooks. All checks issuedincluding cancelled checks shall be recorded chronologically in the Cashbook Cash in Bank.

Sec. 42. Release of Checks. The Treasurer shall release the check only to the payeeor his duly authorized representative. For purposes of releasing checks, the Treasurer shallmaintain a Check Register where all checks issued shall be recorded chronologically andwhere the claimants shall be required to acknowledge receipt thereof.

Sec. 43. Reporting of Checks Issued. The checks released to claimants shall bereported in the Report of Checks Issued (RCI) which shall be prepared daily by the Treasurerfor each fund. It shall be submitted to the Accountant for preparation of Journal of Entry

Voucher based on individual checks issued and recording in the Check DisbursementsJournal.

Sec. 44. Check Disbursement Process. The steps in disbursements through issuanceof check is shown below:

P R O C E S S PERSON / UNIT


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RESPONSIBLE

a. Gather supporting documents, andapproved ALOBS, prepare DV andforward to Head of Department.

Concerned Office

b. Sign Box A of DV and submit to theAccounting Unit.

Supervisor/Head ofDepartment

c. Check completeness of documents,assign number to DV, sign Box B andforward to Treasurer.

Accounting Unit

d. Verify claim, certify cash vailability (BoxC) and forward to approving officer.

Treasurer

Note: If funds are not available, return toAccountant for recording in the books as

Accounts Payable (AP). For AP, JEV shall beprepared by Accounting Unit and JEV numberreflected in the DV. JEV for AP is recorded inGeneral Journal. Accountant retains copy ofDV and forwards to Treasurer.

e. Approve transaction (Box D) and forwardDV to Cashier.

Local ChiefExecutive orauthorized approvingofficer

f. Prepare, sign check and forward checkwith DV to countersigning officer.

Treasurer

g. Countersign check and forward toAccountant for preparation of theAccountants Advice of Local CheckDisbursements.

Administrator/ Vice-Mayor for the LocalSanggunianDisbursements

h. Prepare Accountants Advice of LocalCheck Disbursements and submit tobank. Return DV, check and supportingdocuments to Cashier/Treasurer.

Accountant

i. Record check in the Check Register andrelease check to claimant. Record

disbursement in Cashbook Cash inBank. Prepare Report of Checks Issued.Forward RCI with DV and supportingdocuments to Accounting Unit.

Treasurer

. Prepare the JEV based on individualchecks/voucher; sign "Prepared By"portion (approved by Chief Accountant),and record JEV in the CheckDisbursements Journal. Post monthly to

Accounting Unit


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the General Ledger/Subsidiary Ledgers.

k. Forward RCI, DV, supporting documentsand JEV to the Office of the Auditor.

Accountant

Sec. 45. Payments in Cash. Disbursements by cash shall be made from a cashadvance drawn and maintained in accordance with COA rules and regulations. Cash paymentsshall be made only on duly approved payrolls/disbursement vouchers. Cash advances, byregular and special disbursing officers shall be recorded through a debit to Cash DisbursingOfficers and a credit to Cash in Bank Local Currency, Current Account (LCCA).

Sec. 46. Reporting of Cash Disbursements. To account for cash disbursements, fromregular and special cash advances, the Accountable/Disbursing Officer shall prepare theReport of Disbursements and submit the original and duplicate copy withvouchers/payrolls/petty cash vouchers to the Accountant. He shall ensure that receipt of thereport and supporting documents, are properly acknowledged by the Accountant. The

Accountant shall verify the report including the completeness of the supporting documents,prepare the Journal of Entry Voucher (JEV) and record the transaction in the CashDisbursements Journal.

Sec. 47. Cash Advances for Travel. Cash advances for travel shall be recorded asdebit to the account Due from Officers and Employees and a credit to Cash in Bank LocalCurrency, Current Account.

For liquidation of travel where the amount of cash advance is equal to or more than thetravel expenses incurred, the Liquidation Report form shall be prepared by theofficers/employees concerned and submitted to the accounting unit as basis for preparation ofthe JEV to record liquidation. In case the amount of cash advance is less than the travelexpenses incurred, a Disbursement Voucher shall be prepared to liquidate the previous cashadvance and serve as a claim for reimbursement of the deficiency in amount.

Sec. 48. Payments out of the Petty Cash Fund. Petty cash fund shall be maintainedunder the imprest system. The fund shall be sufficient for the non-recurring, emergency andpetty expenses of the LGU for one month. Disbursements from the fund shall be through thePetty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amountreceived. The official receipt shall be attached to the PCV.

Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be preparedfor the fund, recorded in the RAAO and obligated as Other Expenses.

Payments out of the fund shall be made through the use of PCVs duly supported byofficial receipts and other required documents. Each PCV shall not exceed Php1,000.00.

A Disbursement Voucher shall be prepared for replenishments of the petty cash fundduring the year duly supported by a list/summary of PCVs, the PCVs and its supportingdocuments. ALOBS shall be prepared for each replenishment and recorded in the RAAO


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based on actual expenses incurred.

At the end of the year, the petty cash fund shall be fully liquidated by preparing a Reportof Disbursement supported by the list/summary of PCVs, the PCVs and its supportingdocuments. The ALOBS setting up the fund at the beginning of the year shall be cancelled.Another ALOBS shall be prepared taking up the liquidation and recorded in the RAAO based

on the actual expenses incurred. Unused cash shall be returned to the Treasurer who shallissue an Official Receipt to acknowledge the amount returned. A new Cash Advance for PettyCash Fund shall be set up in the ensuing year.

Sec. 49. Cash Disbursement Process. Disbursement process for payment of salariesand wages out of cash advances is as follows:


a. Processing of Payrolls to be paid by cashis the same as that of steps (a) to (e) forcheck disbursements.

Concerned offices

b. Gather duly certified and approvedpayrolls to be paid out of cash advance.Prepare DV for cash advancecorresponding to the net amount ofpayroll/s. Sign Box A of DV and submit tothe Accounting Unit.

Office of theTreasurer

c. Check completeness of documents/previous cash advance liquidated, assign

number to DV, sign Box B and forward toApproving Officer.

Accounting Unit

d. Approves DV and forward to Treasurerfor preparation of checks.

Local ChiefExecutive

e. Prepare and sign check, and forwardcheck with DV to countersigning officer.

Treasurer

f. Countersign check and forward toAccountant for preparation of Advice.

Administrator

g. Prepare Accountants Advice of Local

Check Disbursements and return DV,check and supporting documents toCashier/Treasurer.

Accountant

h. Encash check and pay claimants. Recorddisbursement in Cashbook CashAdvances.

Treasurer/Disbursing Officer

i. Return unused cash to the Treasurer/ Disbursing Officer


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Cashier. An official receipt (OR) shall beissued by the Treasurer/Cashier toacknowledge the return of unused cashand indicate check no. of cash advancegranted on the face of OR. Record therefund as credit to cash advance andattach OR to the Cashbook CashAdvances.

. Prepare Report of Disbursement, attachpaid payrolls/ supporting documents andcopy of OR for unused cash advancereturned to Treasurer/Cashier. Sign"Certified Correct" portion of Report ofDisbursement and submit to AccountingUnit.

Disbursing Officer

k. Prepare JEV to record the liquidation ofcash advance. Record JEV in the CashDisbursements Journal (CDJ). Postmonthly to the General Ledger/Subsidiary Ledger.

Accountant

l. Forward Report of Disbursement andsupporting documents including JEV tothe Office of the Auditor.

Accountant

Sec. 50. Purchase or Construction of Property, Plant and Equipment. Property,plant and equipment include land and land improvements, buildings, equipment, motorvehicles, books, machineries, ordnance, etc. and public infrastructure. These are chargedagainst appropriations/allotments for capital outlay when obligated.

Property, plant and equipment acquired through purchase shall include all costs incurredto bring it to the location necessary for its intended use, like transportation, freight, installationcosts, etc. In the books of accounts, the purchase is immediately recorded as asset.

Property, plant and equipment to be constructed may be classified as agency assets andpublic infrastructures. Agency assets are those to be used by the LGU concerned, likebuildings, while public infrastructures are those to be used by the general public. Theconstruction period theory shall be used in recording both types of assets. This means thatexpenses such as license fees and bonus paid to contractor for completing the work ahead ofschedule, etc. during the construction period shall be added to the total cost of the project.However, liquidated damages charged to the contractor for delayed completion should bededucted from the total cost.

During the construction period, agency assets and public infrastructures shall be taken upin the books as "Construction in Progress" with the appropriate asset classification. As soon asthe project is completed, the Construction in Progress for agency asset is closed to theappropriate asset account.

For public infrastructures funded out of regular income, the Construction in Progressaccount is transferred to the Public Infrastructures account upon completion. At the end of theyear, the latter account is closed to the Government Equity and the asset is recorded in the


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Registry of Public Infrastructures (RPI). However, completed public infrastructures funded outof a loan shall be closed to the Government Equity account only upon full payment of the loan.A disclosure of public infrastructures completed funded from loans shall be made in the Notesto Financial Statements.

Sec. 51. Purchase of Supplies. Purchase of supplies and materials for stockregardless of whether or not they are consumed within the accounting period shall be recordedas assets using the Inventory account following the Perpetual Inventory Method (refer toChapter 7 Supplies or Property). However, supplies and materials purchased out of the PettyCash Fund for immediate use or for emergency shall be taken up as expenses.

Sec. 52. Pro-forma Accounting Entries. Pro-forma accounting entries fordisbursement transactions are shown below:

Particulars Account Title

Acct.

Code Debit Credit

1. Payment through Cash Advances

a. Cash advance for p ersonal services

Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000Additional Compensation, and P3,000 Personnel Economic Relief Allowance(PERA).

1. Grant of cash advancefor payroll


107 21,000

Cash in Bank LCCA 110 21,000

2. Liquidation of cashadvance for payroll

Salaries and WagesRegular Pay

801 18,000

P E R A 804 3,000Additional Compensation 805 5,000

Withholding TaxesPayable

410 2,000

GSIS Payable 411 1,500

PAG-IBIG Payable 412 1,500


107 21,000

Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance Contributionsand P1,500 PAG-IBIG Contributions.

3. Government share for lifeand retirement insuranceand PAG-IBIG

Contributions

Life and RetirementInsurance Contributions

PAG-IBIG Contributions

GSIS Payable

817

818

411

1,500

1,500

1,500PAG-IBIG Payable 412 1,500

c. Cash advance for travel

Enter obligation in RAAOMO for Travel of P1,000

1. Grant of cash advance Due from Officers andEmployees

128 1,000



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2. Liquidation of cashadvance during thecurrent year (assumingonly P900 was utilizedand P100 was refunded)

Traveling ExpensesLocal

Due from Officers andEmployees

831

128

900

900

Adjust RAAOMO for refund of cash advance of P100

3. For amount refundedwhere official receipt wasissued

Cash in Bank LCCADue from Officers and

Employees

110128

100100

2. Payment by Check

a. Maintenance and Other Operat ing Expenses

Enter obligation in RAAOMO for rent P3,000

1. Payment of rent Rent Expense 841 3,000


Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet of P2,000

2. Payment of utilities

(MERALCO and PLDT)

Electricity

Telephone/Telegraph andInternet

835

837

1,500

2,000


Enter obligation in RAAOMO for training and seminar expenses of P1,000

3. Payment of seminar fee Training and SeminarExpenses

833 1,000


E. MISCELLANEOUS TRANSACTIONS

Sec. 53. Miscellaneous Transactions. Miscellaneous transactions refer totransactions that are unique and not recurring in the ordinary course of operations of thegovernment. These transaction types seldom take place or ideally should not happen at all.The following maybe considered miscellaneous transactions:

1. Loss of Cash and Property Accountability2. Cash Overage3. Dishonored Check4. Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check5. Settlement of Suspensions/Disallowances/Charges6. Refund of Overpayments

Sec. 54. Loss of Cash and Property. Loss of cash and property may be due tomalversation, theft, robbery or other causes.

Cash shortage discovered during cash examination conducted by auditors is reportedthrough the Report of Cash Examination within ten (10) working days from the completion ofexamination pursuant to COA Memorandum No. 84-373A. The auditor issues an audit report incase of shortage in property accountability. As soon as a shortage is definitely established, theAuditor shall issue a memorandum pertaining thereto and the Accountant shall draw a Journal


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of Entry Voucher to take up the shortage as a receivable from the accountable officerconcerned.

In case of loss of property due to other causes (theft, force majeure, fire, etc.), a reportthereon shall be prepared by the accountable officer concerned for purposes of requestingrelief 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. 55. Grant of Relief from Accountability. When a request for relief for shortagesor loss of funds is granted, a copy of the decision shall be forwarded to the Chief Accountantwho shall draw a JEV to record the transaction. The loss shall be debited to the Loss of Assetsaccount and credited to the appropriate receivable account. In case the request for relief isdenied, 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 ofAssets account and credited to the appropriate asset account. If request for relief fromaccountability is denied, the loss shall be taken up as a receivable from the accountableofficer/persons liable and shall be credited to the appropriate asset account.

Sec. 56. Cash Overage. In case the cash examination disclosed cash overage, asdetermined by the auditor, the amount shall be forfeited in favor of the government and anofficial receipt shall be issued by the collector/teller. The cash overage shall be taken up asOther Specific Income.

Sec. 57. Dishonored Checks. A check is said to be dishonored when upon its beingduly presented for payment, such payment is refused or cannot be obtained.

Upon receipt of the debit memo and the dishonored check(s) from the bank, constructivecancellation of the official receipt covering the dishonored check shall be immediately effectedby the Treasurer on the copy in his possession. The Treasurer shall immediately photocopythe dishonored checks and record as credit in the CashbookCash in Bank and cancelpayment in the taxpayers index card. He shall also notify the collector/teller of the dishonorand the cancellation of the official receipt. The collector/teller shall note the cancellation in thetriplicate copies of the receipt. The Treasurer shall then inform the Auditor who shall effect thecancellation in the duplicate copy of official receipt, in case the same has already been

submitted for audit.

The Treasurer shall forward the debit memo and the photocopy of the dishonored checksto the Accountant. The Accountant shall cancel the official receipt if still in his possession. Heshall prepare the Journal of Entry Voucher (JEV) taking up the dishonored check by creditingthe Cash in Bank account and debiting the appropriate income account. In case of dishonor ofcheck payments for Real Property Tax (RPT) or Special Education Tax (SET), the RPT/SETReceivables and corresponding Deferred RPT/SET Income shall be restored. The accountsDue to LGUs, RPT Income, Cash in Bank and RPT Discount shall be adjusted accordingly. Heshall furnish the Treasurer with a copy of the duly approved JEV. The Treasurer shall record


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the JEV number in the Cashbook-Cash in Bank as reference in the entry effecting thecancellation of the dishonored check.

Sec. 58. Cancellation of Lost Check Issued. A check is considered lost when it is

misplaced, waylaid or left behind inadvertently/negligently by the payee or holder in due courseor by the custodian/carrier thereof and after diligent search cannot be found or located; orwhen it is lost due to fortuitous event, theft or robbery.

Upon submission of sworn statement from the payee that a check issued by the LGU islost, the treasurer shall immediately notify the bank concerned for the stoppage of payment.He shall forward the sworn statement to the accountant who shall prepare the JEV to cancelthe payment made. Copy of the JEV shall be furnished the treasurer as basis for him to debitthe amount in the Cashbook Cash in Bank.

Sec. 59. Spoiled and Stale Checks. Checks may be cancelled when they become

spoiled or stale. A check is considered spoil when, it is torn, mutilated, defaced or witherasures/errors affecting the genuineness of any material information contained therein.

It is stale, if it has been outstanding for over six months from date of issue or asprescribed by the depository bank. At least one month before a check becomes stale, theTreasurer shall send a written notice to the payee of the existence of the check.

A spoiled or stale check shall be marked cancelled on its face and reported as follows:

1. For spoiled checks which are immediately cancelled and for which the Reportof Checks Issued (RCI) has not yet been prepared, the cancelled check shallbe attached to the RCI and reported chronologically with the other checks

issued and the word "Cancelled"shall be indicated on the report.2. For stale checks which have been unclaimed and thus, the original DV andsupporting documents are still with the Treasurer, the cancelled check shall bepresented in the RCI after the last check issued for the period indicated in thereport. The original DV and supporting documents shall be returned to theAccountant who shall prepare a JEV to record the transaction as AccountsPayable.

3. For checks which became spoiled or stale in the hands of the payee andwhich require replacement, a new check may be issued upon submission ofthe spoiled or stale check to the Treasurer. A certified copy of the DV shall berequested from the Auditor for presentation to the Administrator/Local ChiefExecutive who shall countersign the check. The cancelled check shall bereported and attached to the RCI prepared at the period of cancellation. Thereplacement check shall also be reported chronologically in the RCI.

Sec. 60. Suspensions, Disallowances and Charges. Disallowances and chargesshall be taken up in the books of accounts only when they become final and executory. TheAccountant shall prepare the Journal of Entry Voucher (JEV) to take up the Receivable Disallowances and Charges and credit the appropriate expense account for the current year or


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prior years adjustment if pertaining to expenses of previous years.

Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash inTreasury and crediting the Receivable Disallowances and Charges account.

Suspensions in audit and settlement thereof shall not be recorded in the books of

accounts.

Sec. 61. Pro-forma Accounting Entries. The following the are pro-forma accountingentries for miscellaneous transactions:


1. Cash Shortage

a. Cash sho rtage of the of the Disbursing Off icer

To take up cash shortage Due from Officers andEmployees

128 50


107 50

b. Cash Short age of the Treasurer

To take up cash shortage Due from Officers andEmployees

128 50

Cash in Treasury 101 50

2. Grant of Relief from Accountability for Loss of Government Funds

To record the loss of fund bya Disbursing Officer

(allegedly thru theft ) = P50



128

107

50

50

To take up relief fromaccountability

Loss of Assets (currentyear) or Prior Yearsadjustments (prioryears)

948 50


128 50

3. Cash Settlement in case of denial of Request for Relief fromAccountability

To take uppayment/settlement

Cash in TreasuryDue from Officers and

Employees

101128

5050

4. Cash Overage

To take up cash overagediscovered during cashexamination

Cash in TreasuryOther Specific Income

of LGU

101792

5050

5. Dishonored Checks

From payment of real property tax in the current year or prior year


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Upon receipt of advice ofdishonored check andcancellation of OfficialReceipt


Deferred Real PropertyTax Income

124

448

50

50

Due to LGUs 431 30

Real Property TaxIncome

711 20


Receipt of refund/settlement Cash in TreasuryReal Property Tax

Receivable

101124

5050

6. Lost/Destroyed/Stale/Obsolete Checks

Check issued in the current/prior year for replacement

Check cancellation Cash in Bank LCCA 110 50

Accounts Payable 401 50

Replacement Accounts Payable 401 50Cash in Bank LCCA 110 50

7. Disallowances and Charges

a. Recording of disallowance for current years transaction

When the disallowancebecomes final andexecutory

ReceivablesDisallowances/Charges 138 10

Overpayment of OfficeSupplies

Office SuppliesExpense 849 10

Amount paid - P100Should be - 90Difference - 10

Settlement of Disallowance Cash in TreasuryReceivables

Disallowances/Charges

101138

1010

b. Recordingof disallowance for prior years transaction

When the disallowancebecomes final and executory

ReceivablesDisallowances/Charges

138 10

Prior Years Adjustments 533 10

Settlement of disallowance Cash in TreasuryReceivables

Disallowances/

Charges

101138

1010

c. Sett lement of Charges

c.1 Recording of charges which collection were made in the current year

When the charge becomesfinal and executoryUnderpayment ofFranchise Tax


Franchise Tax

138

724

10

10

Amount Paid - P 100


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Should be - 110

Charge - 10

Settlement Cash in Treasury 101 10


138 10

c.2 Recording of charges which collection were made in the prior year

When the charge becomesfinal and executory


138 10

Prior Years Adjustments 533 10

Settlement Cash in Treasury 101 10


138 10

8. Refund of Overpayment

a. Overpaym ent taken up as receivable

To record overpayment ofsalaries and wages (Whenoverpayment is ascertained)



128

801

10

10

To record refund ofoverpayment

Cash in TreasuryDue from Officers and

Employees

101128

10 10

b. Refund of overpaym ent not taken up as receivable

Refund of overpayment ofSalaries and WagesRegular Pay during the

current year

Cash in TreasurySalaries and Wages

Regular Pay

101801

10 10

To take up refund of overpayment in the ensuing year

Cash in TreasuryPrior Years Adjustments

101533

10 10

F. ADJUSTING AND CLOSING ENTRIES

Sec. 62. Adjusting Entries. Adjusting entries are accounting journal entries made inorder to ensure that revenues and expenses are recorded in the period when they are earnedor incurred following the revenue recognition and the matching principles.

Adjusting entries are required every time financial statements are prepared. The use of

the adjusting entries makes it possible to report on the Balance Sheet the appropriate assets,liabilities and equity accounts at the statement date and the Statement of Income andExpenses the net income/(loss) for the period.

Sec. 63. Types of Adjusting Entries. There are two types of adjusting entries:

a. Prepayments; and


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b. Accruals

Sec. 64. Prepayments. Prepayments are expenses paid or revenues received beforethey are incurred or earned. Adjusting entries for prepayments are required at the statement

date to record the portion of the prepayment that represents the expense incurred or therevenue earned in the current accounting period. Sub-categories of prepayments are prepaidexpenses and unearned revenues.

Prepaid expenses are expenses paid in cash and recorded as assets before they areused or consumed. Prepaid expenses expire either with the passage of time (e.g. rent) orthrough use and consumption (e.g. supplies). The adjusting entry for prepaid expenses is adebit to the expense account and a credit to the asset account. Examples are rent, supplies,etc. Acquisition of productive facilities is viewed essentially as long term prepayments, hence,periodic adjusting entries for depreciation are included in this category. For depreciation, theentry is a debit to depreciation expense and a credit to accumulated depreciation. Thedepreciable or estimated life for different types of agency assets are presented in Table2 (Annex 7).

Unearned revenues are recorded as a liability when received and considered earnedupon rendition of service (e.g. tuition fees) or the passage of time (e.g. advance payment ofreal property taxes). The adjusting entry for unearned revenues is a debit to a liability accountand a credit to revenue account.

Illustrative accounting entries:


1. Report of supplies utilizedfor P2,000.

Office SuppliesExpense

Office Supplies Inventory

849

149

2,000

2,000

2. Application of advance RPTfor P2,500.

Deferred Credits toIncome

Real Property Tax

440

711

2,500

2,500

Sec. 65. Accruals. Accruals are revenues earned and expenses incurred in the currentaccounting period that have not yet been recorded. Adjusting entries for accruals are requiredto record revenues earned and expenses incurred in the accounting period.

Adjusting entry for accrued revenues is a debit to a receivable account and a credit to anincome account. Examples are interest, share from internal revenue collections covered bynotice of funding checks issued, etc.

Adjusting entry for accrued expenses is a debit to the appropriate expense account and acredit to a payable account. Examples are accrued salaries, bad debts, etc. For bad debts, theentry is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.



1. Receipt of the Notice of Due from NGAs 130 20,000


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Funding Check Issued forthe December Share fromInternal RevenueCollections for P20,000.

Share from InternalRevenue Collections

746 20,000

2. Unpaid salaries and wagesof employees, at end ofaccounting period, P50,000.


Due to Officers &Employees

801

428

50,000

50,000

Sec. 66. Closing Journal Entries. Closing journal entries are the accounting entriesprepared to reduce all balances of the nominal accounts to zero at the end of the accountingperiod in order to prepare the accounts for the next accounting period. The procedure followedin the reduction of the balances is called the closing process. The closing process is asfollows:

1. Debit all revenue accounts balances and credit the total to the Income andExpense Summary account.

2. Credit all expense accounts balances and cost of goods sold and debit thetotal to the Income and Expense Summary account.

3. Debit the credit balance of the Income and Expense Summary account andcredit the amount in the Retained Operating Surplus account, in case of a netincome.

4. Credit the debit balance of the Income and Expense Summary account anddebit the amount in the Retained Operating Surplus account, in case of a netloss.

5. Debit all credit balances of the intermediate accounts and debit the total to theGovernment Equity account.

6. Credit all debit balances of the intermediate accounts and credit the total to theGovernment Equity account.


Particulars Account Title

Acct.

Code Debit Credit

1. To close the Revenueaccounts to the Income andExpense Summary account.

Real Property TaxShare from Internal

Revenue Collections

711746

10010,000

Business Taxes &Licenses

Registration FeesIncome and Expense

Summary

723

761532

50

2010,170

2. To close the Income andExpense Summary toRetained Operating Surplusaccount.

Income and ExpenseSummary

Retained OperatingSurplus

532

534

5,670

5,670

3. To close the RetainedOperating Surplus toGovernment Equity account.

Retained OperatingSurplus

Government Equity

534

501

5,670

5,670

http://www.coa.gov.ph/ngas/lgu/lgu_ngas-c3v1.asp
http://www.coa.gov.ph/ngas/lgu/lgu_ngas-c3v1.asphttp://www.coa.gov.ph/ngas/lgu/lgu_ngas-c3v1.asphttp://www.coa.gov.ph/ngas/lgu/lgu_ngas-c3v1.asp


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Documents

NGAS Manual for Local Government Units