SELF-PACED LEARNING

MODULE
COLLEGE DEPARTMENT

MODULE 1
Subject:

PRE8-AGNO: ACCOUNTING FOR GOVERNMENT

AND NON-PROFIT ORGANIZATION

AISAT COLLEGE – DASMARIÑAS, INC.

This material has been developed in support to the Senior High School Program
implementation. Materials included in this module are owned by the respective copyright
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ownership over them.
This material will be reproduced for educational purposes and can be modified for the
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supplementary work are permitted provided all original works are acknowledged and the
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |2
PRE8-AGNO Units: 4
Profit Organization

copyright is attributed. No work may be derived from this material for commercial purposes and
profit.

INFORMATION SHEET PR-1.1.1

“Overview of Government Accounting”

Objectives:

After completing this module, the learner will be able to:

1. Differentiate government accounting from the accounting for business entities.

2. State the government entities charged with accounting responsibility.
3. Describe briefly the GAM for NGAs.
4. State the basic principles used in government accounting.
5. State the recognition criteria for assets.

Introduction

"Government accounting encompasses the processes of analyzing recording classifying,

summarizing communicating all transactions involving the receipt and disposition of government funds
and property, and interpreting the results thereof." (State Audit Code of the Philippines, P.D. 1445,
Sec,109)

The objectives of government accounting are: (P.D. 1445, Sec 110)

a. To produce information concerning past operations and present conditions;

b. To provide a basis for guidance for future operations;
c. To provide for control of the acts of public bodies and officers in the receipt, disposition and
utilization of funds and property;
d. To report on the financial position and the results of operations of government agencies for the
information of all persons concerned.

Like the accounting for business entities, government accounting is also a process of producing
information that is useful in making economic decisions.

Government accounting however, places greater emphasis on the following:

a. Sources and utilization of government funds;

The sources of government funds include receipts from taxes and other fees borrowings
and grants from other governments and international bodies.

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |3
PRE8-AGNO Units: 4
Profit Organization

b. Responsibility, accountability and liability of entities entrusted with government funds

and properties.
The utilization of government funds includes expenditures on programs, projects,
unanticipated losses from calamities and the like.
Responsibility, Accountability and Liability over Government Funds and Property

Responsibility over Government Funds and Property (State Audit Code of the Philippines, P.D. 1445)

1. Government resources shall be utilized efficiently and effectively in accordance with the law.
The head of a government agency is directly responsible in implementing this policy and is
primarily responsible for government resources entrusted to his agency. Those who are
entrusted with the possession of government resources are directly responsible to the head of
the agency
2. All those who are exercising authority over a government agency shall share fiscal responsibility.

Accountability over Government Funds and Property

1. A government officer entrusted with the possession of government resources is responsible for
the safekeeping therefor in accordance with the law. Every accountable officer shall be properly
bonded: (P.D. No 1445 and E.)
2. The transfer of government funds from one officer to another shall, except as allowed by law, be
made only after the authorization of the COA the transfer shall be properly documented in an
invoice and receipt. (P.D. No. 1445)

Liability over Government Funds and Property (P.D. No 1445)

1. The unlawful use of government resources shall be the personal liability of the employee found
to be directly responsible therefor.
2. Every accountable officer shall be liable for all losses resulting from the unlawful use or
negligence in the safekeeping of government resources.
3. No accountable officer shall be relieved from liability merely because he has acted under the
direction of a superior officer in unlawfully utilizing the government resources entrusted him ,
unless before that act , he has notified the superior officer, in writing , that the utilization is
illegal The superior officer shall be primarily liable while the accountable officer who fails to
serve the required notice shall be secondarily liable.
4. An accountable officer shall immediately notify the COA for any loss of government funds from
unforeseen events (force majeure) within 30 days. Failure to do so will not relieve the officer of
liability.

Main concept: Government resources must be utilized efficiently and effectively in accordance
with the law. Government officials are responsible in implementing this policy, are accountable for the
government resources in their custody, and are liable for any loss.

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |4
PRE8-AGNO Units: 4
Profit Organization

The ' Unsung Heroes

The number of Filipinos going abroad to seek employment is increasing every year. In 2012, it
was estimated that about 10.4 million Filipinos worked abroad. Almost all Filipinos know at least one
other Filipino - a family member a relative, or a friend who is working abroad We refer to our overseas
workers as unsung heroes. How so?

This is mainly because overseas workers remittances greatly increase the spending in our
country, and the more money is spent the more taxes the government collects. A portion of the money
we spend on almost everything (food clothing bills, entertainment, medicine, rentals, etc.) represents
payment for tax. Taxes are the main source of government funds used in developing our country.

Working abroad entails great sacrifices, not only for the overseas worker but also for family
members left at home. We need efficient and effective utilization of our government resources so that
someday our countrymen can have better options of finding a livelihood in our country.

Accounting, as a tool for planning and control contributes to the achievement of this goal by
providing information that is useful in planning the sources and uses of government funds and
comparing actual results with expected results to promote the efficient and effective utilization of
government funds.

Accounting responsibility

The following offices are charged with government accounting responsibility:

1. Commission on Audit (COA)

a. Has the exclusive authority to promulgate accounting and auditing rules and regulations.
b. Keeps the general accounts of the government, supporting vouchers, and other documents.
c. Submits financial reports to the President and Congress.

2. Department of Budget and Management (DBM)

The Department of Budget and Management (DBM) is responsible for the formulation
and implementation of the national budget with the goal of attaining the nation's socio -
economic objectives.

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |5
PRE8-AGNO Units: 4
Profit Organization

3. Bureau of Treasury (BTr)

The Bureau of Treasury (BTr) functions under the Department of Finance and is the cash
custodian of the government. The BTr is authorized to:

a. Receive and keep national funds and manage and control the disbursements thereof
b. Maintain accounts of financial transactions of all national government offices, agencies
and instrumentalities.

4. Government agencies

Government agency refers to any department, bureau or office of the national government, or
any of its branches and instrumentalities, or any political subdivision, as well as any government owned
or controlled corporation (GOCC), including its subsidiaries, or other self- governing board or
commission of the government. (P.D. 1445 )

The government agencies are responsible in directly implementing the projects of, and
performing the functions delegated by, the government .
Each agency (entity) shall maintain accounting books and budget registries which are reconciled
with the cash records of the BTr and the budget records of the COA and DBM.

Government agencies are required by law to have accounting units/divisions/departments.

Even a barangay (the smallest administrative division in the Philippines) is required to have an
accounting unit, e, g, the barangay's "bookkeeper."

Financial Reporting System of the National Government

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |6
PRE8-AGNO Units: 4
Profit Organization

Entity refers to a government agency, department or operating /field unit.

Financial Reporting is the process of preparation, presentation and submission of general-

purpose financial statements and other reports.

The objective of financial reporting is to provide information about the entity that is useful to
users for accountability purposes and decision- making.

The GAM for NGAs

An " old " government accounting system had been used for about five decades before it was
replaced by the New Government Accounting System (NGAS) in 2002. However, on January 1, 2016, the
NGAS was replaced by the Government Accounting Manual for National Government Agencies (GAM
for NGAs).

The GAM for NGAs was promulgated primarily to harmonize the government accounting
standards with international accounting standards, particularly the International Public Sector
Accounting Standards (IPSAS). The IPSASs are based on the International Financial Reporting
Standards (IFRS).

The Philippine Government has adopted the IPSAS through the Philippine Public Sector
Accounting Standards (PPSAS). The provisions of the PPSAS are incorporated in the GAM for NGAs.

Since the PPSAS are based on the IPSAS, which are in turn based on the IFRSs /PFRSs, most of
the concepts that we will be learning in this module would be very familiar to you.

Legal basis

The GAM for NGAs is promulgated by the Commission on Audit (COA) based on the authority
conferred to it by the Philippine Constitution:

Relevant provision of law : The Commission (on Audit) shall have exclusive authority , subject to
the limitations in this Article , define the scope of its audit and examination , establish the techniques
and methods required therefor , and promulgate accounting and auditing rules and regulations ,
including those for the prevention and disallowance of irregular , unnecessary , excessive , extravagant ,
or unconscionable expenditures , or uses of government funds and properties ." (Art. IX-D Sec2 (2)
Philippine Constitution)

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |7
PRE8-AGNO Units: 4
Profit Organization

Coverage

The GAM for NGAs provides the basic concepts to be used in:

c. Preparing general purpose financial statements in accordance with the Philippine Public Sector
Accounting Standards (PPSAS) and other financial reports as may be required by laws, rules and
regulations;
d. Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.

Objective

The GAM for NGAs aims to update the following:

a. Standards, policies, guidelines and procedures in accounting for government funds and property
b. Coding structure and accounts;
c. Accounting books, registries, records, forms, reports and financial statements. (GAM for NGAs
Chapter 1, Sec 3)

Basic Accounting and Budget reporting Principles

The financial records and reports of government entities shall comply with the following:

1. Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules and regulations;
2. Accrual basis of accounting:
Under the accrual basis of accounting, transactions are recognized when they occur and
not only when cash is received or paid). Therefore, transactions are recognized in the periods to
which they relate.

3. Budget basis for presentation of budget information in the financial statements;

4. Revised Chart of Accounts prescribed by COA;
5. Double entry bookkeeping;
6. Financial statements based on accounting and budgetary records;
7. Fund cluster accounting.

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |8
PRE8-AGNO Units: 4
Profit Organization

The books of accounts are maintained by fund cluster (i.e., according to the types of
funds being accounted for) as follows:

Code Fund clusters

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 Funds
07 Trust Receipts

For example, separate accounting books (Journals and Ledgers) and budget registries shall be
maintained for Regular Agency Fund. Another separate accounting books and budget registries shall be
maintained for Foreign Assisted Projects Funds, and so on

Qualitative Characteristics of Financial Reporting

Information reported shall meet the qualitative characteristics. Qualitative characteristics are
the attributes that make information useful to users.

1. Understandability: Information is understandable when users can reasonably be expected to

comprehend its meaning. Accordingly, users are assumed to have:
a. reasonable knowledge of the entity's activities;
b. willingness to study the information.

Information about complex matters is not excluded simply because it may be too difficult for
certain users to understand.

2. Relevance: Information is relevant if it can assist users in evaluating past, present or future
events or in confirming or correcting past evaluations. In order to be relevant, information must
also be timely.

3. Materiality: Materiality affects the relevance of information is material if its omission or

misstatement could influence the decisions of users. Materiality depends on the nature or size
of the item or error, judged in the particular circumstances of its omission or misstatement.

4. Timeliness: Information loses its relevance if there is undue delay in its reporting the complexity
of an entity's operations is not a sufficient reason for failing to report on a timely basis.
PREPARED BY: APPROVED FOR IMPLEMENTATION:
st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- Page |9
PRE8-AGNO Units: 4
Profit Organization

5. Reliability: Reliable information is free from material error and bias, and can be depended on by
users to represent faithfully that which it purports to represent or could reasonably be expected
to represent.
Trade - offs between Relevance and Reliability

To provide timely information, it may be necessary to report before all aspects of a

transaction are known, thus impairing reliability. Conversely, if reporting is delayed until all
aspects are known, the information may be highly reliable but of little use to users who need to
make decision in the interim. To achieve a balance between relevance and reliability, the
overriding consideration is how users ' needs are best satisfied.

6. Faithful representation: For information to represent faithfully transactions and other events, it
should be presented in accordance with the substance of the transactions and other events, and
not merely their legal form.

7. Substance over form: The substance of transactions or other events is not always consistent
with their legal form. If information is to represent faithfully the transactions and other events
that it purports to represent, it is necessary that they be accounted for and presented in
accordance with their substance and economic reality, and not merely their legal form.

8. Neutrality: Information is neutral if it is free from bias. Information shall not be selected or
presented in a manner that is designed to influence the user's decision in order to achieve a
predetermined outcome.

9. Prudence: It is the exercise of a degree of caution when making estimates under conditions of
uncertainty, such that assets or revenue are not overstated and liabilities or expenses are not
understated. However, prudence does not allow creation of hidden reserves or excessive
provisions, the deliberate understatement of assets or revenue, or the deliberate overstatement
of liabilities or expenses, because the financial statements would not be neutral and, therefore,
not reliable.

10. Completeness: Information should be complete within the bounds of materiality and cost.

11. Comparability: Information is comparable when users are able to identify similarities and
differences between that information and information in other reports. Comparability applies to
the comparison of financial statements of different entities and comparison of the financial
statements of the same entity over different periods. Comparability requires that users must be
informed of the entity's policies, changes to those policies, and the effects of those changes and
that financial statements show corresponding information for preceding periods. (PPSAS 1
/GAM for NGAs, Chapter 19, Sec 6)

Components of General-Purpose Financial Statements

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- P a g e | 10
PRE8-AGNO Units: 4
Profit Organization

General Purpose Financial Statements are those intended to meet the needs of users who are
not in a position to demand reports tailored to meet their particular information needs . (PPSAS 13 )

The complete set of general purpose financial statements consists of :

a. Statement of Financial Position ;
b. Statement of Financial Performance ;
c. Statement of Changes in Net Assets /Equity;
d. Statement of Cash Flows;
e. Statement of Comparison of Budget and Actual Amounts;
f. Notes to the Financial Statements, comprising a summary of significant accounting policies and
other explanatory notes.

Notice that the financial statements listed above are similar to those of a business entity.
However, the financial statement unique to a government entity is the " Statement of Comparison of
Budget and Actual Amounts " (letter '‘). We will elaborate on this later

Elements of the financial statements

ASSETS: Assets are resources controlled by an entity as a result of past events, and from which
future economic benefits or service potential are expected to flow to the entity.

The key features of an asset are:

a. The benefits must be controlled by the entity
b. The benefits must have arisen from a past event;
c. Future economic benefits or service potential must be expected to flow to the entity.

 Control means the ability to benefit from an asset or prevent others from benefitting from that
asset.
Possession or ownership normally evidences control. However, this is not always true.
For example, under a finance lease, the lessor retains legal ownership over the leased asset but
control is transferred to the lessee.

 Benefit means the ability to use, exchange, lease, sell, or use the asset to settle liabilities, or
distribute it to owners.

Indicators of future economic benefits:

a. distinguishable from the source of the benefit i.e. the particular physical resource or legal right;
b. does not imply that assets necessarily generate cash flows, the benefits can also be in the form
of service potential;
c. in determining whether a resource or right needs to be accounted for as an asset, the potential
to contribute to the objectives of the entity should be the prime consideration;
d. capacity to contribute to activities /objectives / programs;

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- P a g e | 11
PRE8-AGNO Units: 4
Profit Organization

e. the fact that an asset cannot be sold does not preclude it from providing future economic
benefits.

 Past event - A transaction or event giving rise to control of future economic benefits must have
occurred. A mere intention to acquire assets in the future does not result to the recognition of
assets in the present.

Recognition of an Asset

An asset is recognized when:

a. it is probable that the future economic benefits will flow to the entity
b. the asset has a cost or value (e.g., fair value) that can be measured reliably.

Probable inflow of future economic benefits:

a. The chance of benefits arising is more likely rather than less likely (e.g. greater than 50 %).
b. Benefits can be expected on the basis of available evidence or logic.

Reliable measurement:

a. Valuation method is free from material error or bias.

b. Faithful representation of the asset's benefits.
c. Reliable information will without bias or undue error, faithfully represent those transactions and
events.

LIABILITIES: Liabilities are present obligations of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of resources embodying
economic benefits service potential.

EQUITY: Net assets/equity is the residual interest in the assets of the entity after deducting all
its liabilities.

REVENUE: Revenue is the gross inflow of economic benefits or service potential during the
reporting period when those inflows result in an increase in net assets/equity, other than increases
relating to contributions from owners

 Contributions from owners are future economic benefits that have been contributed to the
entity by external parties which do not result to liabilities of the entity and for which the
contributor obtains interest in the net assets of the entity (i.e., right to dividends and right to
net assets in cases of liquidation).

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- P a g e | 12
PRE8-AGNO Units: 4
Profit Organization

Revenue funds comprise all funds derived from the income of any agency of the government
and available for appropriation or expenditure in accordance with law. (Section 3, P.D. No. 1445)

EXPENSES: Expenses are decreases in economic benefits or service potential during the
reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result
in decreases in net assets / equity, other than those relating to distributions to owners.

 Distributions to owners are future economic benefits distributed by the entity to its owners,
either as a return on investment or as a return of investment.

Summary:

 Aside from providing information that is useful in making economic decisions, government
accounting also aims to demonstrate the accountability of the entity for the resources entrusted
to it.
 The following are charged with government accounting responsibility: COA, DBM, BTr and other
government agencies.
 The GAM for NGAs provides the principles and procedures to be applied in the financial
reporting of government entities. It was promulgated by the COA primarily to harmonize the
government accounting standards with international standards.
 Basic principles: Compliance with PPSAS and other relevant laws, Accrual basis, Budget basis,
Revised chart of accounts, Double entry, Financial statements based on accounting and
budgetary records, and Fund cluster accounting
 Qualitative characteristics: Understandability, Relevance, Materiality, Timeliness, Reliability,
Faithful representation, Substance over form, Neutrality, Prudence, Completeness, and
Comparability.
 An item is recognized as asset if all of the following criteria are met:

1. the item meets the definition of an asset;

2. probable inflow of future economic benefits;
3. reliable measurement of cost or other value (e.g., fair value)

Reference:

 Government Accounting and Accounting for Non-Profit Organization by: Zeus Vernon B. Millan

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- P a g e | 13
PRE8-AGNO Units: 4
Profit Organization

STUDENT NAME: __________________________________ SECTION: __________________

WRITTEN WORK PR-1.1.1

“Overview of Government Accounting”

WRITTEN WORK TITLE: Overview of Government Accounting

WRITTEN TASK OBJECTIVE: The student on his own and in the long run will be able to
demonstrate understanding and show their knowledge on the
topic and to express their opinion about the topic.

MATERIALS: Pen and paper

TOOLS & EQUIPMENT: None
ESTIMATED COST: None

Let’s Analyze on your own 500 words:

1. Compare to the accounting to business entities, government

accounting places greater emphasis on the sources and
utilization of government funds and the management’s
stewardship over government resources.
Questions: 2. Is Taxes are the main source of government funds? Explain
why.
3. Which is a unique requirement of government accounting that
is not required in the accounting for business. Explain your
answer.
4. Discuss the Bureau of Treasury (BTr) responsibilities.
5. Mr. A, a government employee entrusted with custody of the
government funds, was instructed by Mr. B (a politician) to
release funds for the acquisition of a car as a birthday gift for Mr.
B’s daughter who will be having her 18 th birthday next week. To
relieve Mr. A from any liability, what would Mr. A do?

PRECAUTIONS: None
ASSESSMENT METHOD: Written work criteria checklist

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher
 Unit Overview of Government Accounting
Module Overview of Government Accounting
Accounting Government and Non- P a g e | 14
PRE8-AGNO Units: 4
Profit Organization

STUDENT NAME: __________________________________ SECTION: __________________

WRITTEN OUTPUT CRITERIA CHECK LIST PR-1.1.1

“Overview of Government Accounting”

CRITERIA SCORING
Did I . . . 1 2 3 4 5
1. Focus – The single controlling point made with an awareness of task
about a specific topic.
2. Content – The presentation of ideas developed through facts,
examples, anecdotes, details, opinions, statistics, reasons and/or
opinions
3. Organization – The order developed and sustained within and across
paragraphs using transitional devices and including introduction and
conclusion.
4. Style – The choice, use and arrangement of words and sentence
structures that create tone and voice.
5. Conventions – Grammar, mechanics, spelling, usage and sentence
formation.
TEACHER’S REMARKS:  QUIZ  RECITATION  PROJECT

GRADE:

5 - Excellently Performed
4 - Very Satisfactorily Performed
3 - Satisfactorily Performed
2 - Fairly Performed
1 - Poorly Performed

Ms. CHITA S. CABANZA

TEACHER

Date: __________________

PREPARED BY: APPROVED FOR IMPLEMENTATION:

st nd
MODULE 1 –2
PRELIM MR. WILBERT A. MAÑUSCA
1 Meeting CHITA S. CABANZA School Director
Subject Teacher