GOVERNMENT ACCOUNTING

MANUAL
 Introduction

CHAPTER 1
 Government Accounting Manual

Supersedes the New Government Accounting System

(NGAS) Manual being used since 2002, based on
Sec 2(2), Art. IX-D, 1987 Constitution

Prompted by the implementation of the Philippine

Public Financial Management Reform Roadmap
(includes the development of the PPSAS)

PPSAS) – Philippine Public Sector Accounting

Standards
 CONTENTS OF THE GAM

Volume 1 - Accounting Policies, Guidelines and

Procedures, and Illustrative
Accounting Entries

Volume 2 - Accounting Books, Registries,

Records, Forms and Reports

Volume 3 - The Revised Chart of Accounts

 VISION OF GAM

Ensures uniformity, accuracy, reliability and

timeliness in the preparation of financial statements
and other reports in conformity with the
requirements of the PPSAS and relevant accounting
policies.
 LEGAL BASIS OF GAM

Prescribed by COA pursuant to Article IX-D, Section 2 par (2)

of the 1987 Constitution , which provides;

“The Commission on Audit shall have exclusive authority,

subject to the limitations in this Article, to define the scope
of its audit and examination, establish the techniques and
methods required therefore 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". (Underscoring
supplied)
 USES OF THE MANUAL

a. preparation of the general purpose financial

statements in accordance with the PPSAS and
other financial reports as may be required by laws,
rules and regulations; and

b. reporting of budget, revenue and expenditure in

accordance with laws, rules and regulations.
 OBJECTIVES OF THE MANUAL

a. standards, policies, guidelines and procedures in

accounting for government funds and property;

b. coding structure and accounts; and

c. accounting books, registries, records, forms,

reports and financial statements.
 General Provisions,
Basic Standards and
Policies
CHAPTER 2
 Sec. 2 Definition of Terms

Accrual basis
– means a basis of accounting under which
transactions and other events are recognized when
they occur (and not only when cash or its equivalent
is received or paid). Therefore, the transactions and
events are recognized in the accounting records and
recognized in the financial statements of the periods
to which they relate. The elements recognized under
accrual accounting are assets, liabilities, net
assets/equity, revenue, and expenses.
 Sec. 2 Definition of Terms

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.
 Sec. 2 Definition of Terms

Contributions from owners –

means future economic benefits or service potential that have been

contributed to the entity by parties external to the entity, other
than those that result in liabilities of the entity, that establish a
financial interest in the net assets/equity of the entity, which:
1. conveys entitlement both to (i) distributions of future economic
benefits or service potential by the entity during its life, such
distributions being at the discretion of the owners or their
representatives; and to (ii) distributions of any excess of assets
over liabilities in the event of the entity being wound up; and/or
2. can be sold, exchanged, transferred, or redeemed.
 Sec. 2 Definition of Terms

Distributions to owners
–means future economic benefits or service potential
distributed by the entity to all or some of its owners,
either as a return on investment or as a return of
investment.

Entity
– refers to a government agency, department or
operating/field unit. It may be referred to in this
GAM as an agency.
 Sec. 2 Definition of Terms

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.

Government Accounting
– encompasses the processes of analyzing, recording, classifying,
summarizing and communicating all transactions involving the
receipt and disposition of government funds and property, and
interpreting the results thereof. (Sec. 109, Presidential Decree
(P.D.) No. 1445)
 Sec. 2 Definition of Terms
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 (NG) that are used to achieve
national objectives, strategies and programs.

Liabilities

– are firm 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 or service potential.
 Sec. 2 Definition of Terms
Net assets/equity

– is the residual interest in the assets of the entity after deducting all its
liabilities.

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.

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)
Section 3. a. Responsibility over Government Funds and Property

It is the declared policy of the State that all resources

of the government shall be managed, expended or
utilized in accordance with laws and regulations, and
safeguarded against loss or wastage through illegal
or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the
operations of government.
Section 3. a. Responsibility over Government Funds and Property

Fiscal responsibility shall, to the greatest extent, be

shared by all those exercising authority over the
financial affairs, transactions, and operations of the
government agency. (Sec. 4(4), P.D. No. 1445)

The head of any agency of the government is

immediately and primarily responsible for all
government funds and property pertaining to his
agency.
Section 3.b. Accountability over Government Funds and Property

Every officer of any government agency whose duties permit

or require the possession or custody of government funds
or property shall be accountable therefor and for the
safekeeping thereof in conformity with law.

When government funds or property are transferred from

one AO to another, or from an outgoing officer to his
successor, it shall be done upon properly itemized invoice
and receipt which shall invariably support the clearance to
be issued to the relieved or outgoing officer, subject to
regulations of the Commission.
 Section 3.c. Liability over Government Funds and Property

Expenditures of government funds or uses of government

property in violation of law or regulations shall be a
personal liability of the official or employee found to be
directly responsible therefor. (Sec. 103, P.D. No. 1445)

Every officer accountable for government funds shall be

liable for all losses resulting from the unlawful deposit,
use, or application thereof and for all losses attributable
to negligence in the keeping of the funds. (Sec.
105(2),P.D. No. 1445)
 Section 3.c. Liability over Government Funds and Property

No AO shall be relieved from liability by reason of his

having acted under the direction of a superior officer
in paying out, applying, or disposing of the funds or
property with which he is chargeable, unless prior to
that act, he notified the superior officer in writing of
the illegality of the payment, application, or
disposition.
 Section 3.c. Liability over Government Funds and Property

When a loss of government funds or property occurs

while they are in transit or the loss is caused by fire,
theft, or other casualty or force majeure, the officer
accountable therefor or having custody thereof shall
immediately notify the Commission or the auditor
concerned and, within 30 days or such longer period
as the Commission or auditor may in the particular
case allow, shall present his application for relief,
with the available supporting evidence.
 Section 4.Fundamental Principles for Revenue

a. Unless otherwise specifically provided by law, all

revenues accruing to an entity by
virtue of the provisions of existing law, orders and
regulations shall be
deposited/remitted in the National Treasury (NT) or
in any duly authorized
government depository, and shall accrue to the
General Fund (GF) of the NG.
(Sec. 65(1), P.D. No. 1445)
 Section 4.Fundamental Principles for Revenue

b. Except as may otherwise be specifically provided by

law or competent authority, all moneys and property
officially received by a public officer in any capacity
or upon any occasion must be accounted for as
government funds and government property.

(Sec. 42, Chapter 7, Title I(B), Book V, E.O. No. 292)

 Section 4.Fundamental Principles for Revenue

c. Amounts received in trust and from business-type

activities of government may be separately recorded
and disbursed in accordance with such rules and
regulations as may be determined by a Permanent
Committee composed of the Secretary of Finance as
Chairman, and the Secretary of Budget and
Management and the Chairman, COA, as members.
(Sec. 65(2), P.D. No. 1445)
 Section 4.Fundamental Principles for Revenue

d. Receipts shall be recorded as revenue of Special, Fiduciary or

Trust Funds or Funds other than the GF, only when authorized
by law as implemented by rules and regulations issued by the
Permanent Committee. (Sec. 66, P.D. No. 1445)

e. No payment of any nature shall be received by a collecting

officer without immediately issuing an official receipt in
acknowledgement thereof. The receipt may be in the form of
postage, internal revenue or documentary stamps and the like,
officially numbered receipts, subject to proper custody,
accountability, and audit.
(Sec. 68(1), P.D. No. 1445)
 Section 4.Fundamental Principles for Revenue

f. Where mechanical devices (e.g. electronic official receipt) are used to

acknowledge cash receipts, the COA may approve, upon request,
exemption from the use of accountable forms.
(Sec. 68 (2), P.D. No. 1445)

g. At no instance shall temporary receipts be issued to acknowledge the

receipt of public funds.
(Sec. 72, GAAM Volume I)

h. Pre-numbered ORs shall be issued in strict numerical sequence. All

copies of each receipt shall be exact copies or carbon reproduction in
all respects of the original.
(Sec. 73, GAAM Volume I)
 Section 4.Fundamental Principles for Revenue

i. An officer charged with the collection of revenue or the

receiving of moneys payable to the government shall
accept payment for taxes, dues or other indebtedness to
the government in the form of checks issued in payment
of government obligations, upon proper endorsement
and identification of the payee or endorsee. Checks
drawn in favor of the government in payment of any such
indebtedness shall likewise be accepted by the officer
concerned. At no instance should money in the hands of
the CO be utilized for the purpose of cashing private
checks. (Sec. 67(1) and (3), P.D. No. 1445)
 Section 4.Fundamental Principles for Revenue

j. Under such rules and regulations as the COA and the

Department of Finance (DOF) may prescribe, the
Treasurer of the Philippines and all AGDB shall
acknowledge receipt of all funds received by them,
the acknowledgement bearing the date of actual
remittance or deposit and indicating from whom and
on what account it was received.
(Sec. 70, P.D. No. 1445)
 Section 5. Fundamental Principles for Disbursement of Public
Funds

a. No money shall be paid out of any public treasury or

depository except in pursuance of an appropriation
law or other specific statutory authority.

b. Government funds or property shall be spent or

used solely for public purposes.

c. Trust funds shall be available and may be spent only

for the specific purpose for which the trust was
created or the funds received.
 Section 5. Fundamental Principles for Disbursement of Public
Funds

d. Fiscal responsibility shall, to the greatest extent, be

shared by all those exercising authority over the
financial affairs, transactions, and operations of the
government agency.

e. Disbursement or disposition of government funds or

property shall invariably bear the approval of the
proper officials.
 Section 5. Fundamental Principles for Disbursement of Public
Funds

f. Claims against government funds shall be supported

with complete documentation.

g. All laws and regulations applicable to financial

transactions shall be faithfully adhered to.

h. Generally accepted principles and practices of

accounting as well as of sound management and
fiscal administration shall be observed, provided that
they do not contravene existing laws and regulations.
 Section 6. Basic Government Accounting and Budget
Reporting Principles

Each entity shall recognize and present its financial

transactions and operations conformably to the
following:
a. generally accepted government accounting principles in
accordance with the PPSAS and pertinent laws, rules
and regulations;
b. accrual basis of accounting in accordance with the
PPSAS;
c. budget basis for presentation of budget information in
the financial statements (FSs) in accordance with PPSAS
24;
 Section 6. Basic Government Accounting and Budget
Reporting Principles

d. RCA prescribed by COA;

e. double entry bookkeeping;

f. financial statements based on accounting and

budgetary records; and

g. fund cluster accounting.

 Section 8. Financial Reporting System for the National
Government.

The financial reporting system of the Philippine

government consists of accounting system on accrual
basis and budget reporting system on budget basis
under the statutory responsibility of the NGAs,
Bureau of the Treasury (BTr), Department of Budget
and Management (DBM), and the COA.
Section 9. Objectives of General Purpose Financial Statements.

The objectives of general purpose financial statements

(GPFSs) are to provide information about the
financial position, financial performance, and cash
flows of an entity that is useful to a wide range of
users in making and evaluating decisions about the
allocation of resources.
 Sec. 10 Responsibility for Financial Statements

a. for individual entity/department FSs – the head of

the entity/department central office (COf) or
regional office (RO) or operating unit (OU) or
his/her authorized representative jointly with the
head of the finance/accounting division/unit; and

b. for department/entity FSs as a single entity – the

head of the entity/department Cof jointly with the
head of the finance unit.
Sec. 14 Components of General Purpose Financial Statements

a. Statement of Financial Position (Annex A);

b. Statement of Financial Performance (Annex B);
c. Statement of Changes in Net Assets/Equity (Annex
C);
d. Statement of Cash Flows (Annex D);
e. Statement of Comparison of Budget and Actual
Amounts (Annex E); and
f. Notes to the Financial Statements, comprising a
summary of significant accounting policies and other
explanatory notes. (Annex F)
 Sec 18. Going Concern.

The FSs shall be prepared on a going concern basis

unless there is an intention to discontinue the entity
operation, or if there is no realistic alternative but to
do so.
 Sec. 20. Materiality and Aggregation

Each material class of similar items shall be presented

separately in the financial statements. Items of a
dissimilar nature or function shall be presented
separately unless they are immaterial. If a line item
is not material, it is aggregated with other items
either on the face of FSs or in the Notes to the FSs. A
specific disclosure requirement in a PPSAS need not
be satisfied if the information is not material.
 Sec. 21. Offsetting.

Assets and liabilities, and revenue and expenses shall

not be allowed to offset unless required or permitted
by a PPSAS except when offsetting reflects the
substance of the transaction or other event.
 Sec. 28. Statement of Comparison of Budget and Actual
Amounts.

A comparison of budget and actual amounts will

enhance the transparency of financial reporting in
government. This shall be presented by government
agencies as a separate additional financial statement
referred in this Manual as the Statement of
Comparison of Budget and Actual Amounts
(SCBAA).
Sec. 30. Qualitative Characteristics of Financial Reporting

An entity shall present information including

accounting policies in a manner that meets a number
of qualitative characteristics such as
understandability, relevance, materiality, reliability
and comparability.

These qualitative characteristics are the attributes that

make the information provided in the FSs useful to
users.
 Sec. 31. Key Features of Assets.

a. the benefits must be controlled by the entity;

b. the benefits must have arisen from a past event;

and

c. future economic benefits or service potential must

be expected to flow to the entity.
The following are indicators of control of the benefits by the
entity:

a. the ability of an entity to benefit from the asset and to

deny or regulate the access of others to that benefit.

b. an entity can, depending on the nature of the asset,

exchange it, use it to provide goods or services, exact a
price for others’ use of it, use it to settle liabilities, hold it,
or perhaps even distribute it to owners.

c. possession or ownership of an object or right would

normally be synonymous with control over the future
economic benefits embodied in the right or object.
The following are indicators of past event:

a. the specification of a past event differentiates

assets from intentions to acquire assets, which are
not to be recognized.

b. a transaction or event giving rise to control of the

future economic benefits must have occurred.
The following are 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;

e. and the fact that an asset cannot be sold does not

preclude it from providing future economic benefits.
 Sec. 32. Recognition of an Asset

An asset shall be recognized in the financial position

when and only when
(a) it is probable that the future economic benefits will
flow to the entity ; and

(b) the asset has a cost or value that can be measured

reliably.
The following are indicators of 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.
The following are indicators of 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.
 Sec. 33. Accounting Standards for Revenue.

a. Revenue includes only the gross inflows of

economic benefits or service potential received and
receivable by the entity in its own account. (PPSAS
9)

b. Receipts/Collections shall refer to all cash actually

received from all sources during a given accounting
period.
 Sec. 33. Accounting Standards for Revenue.

c. Fines shall include economic benefits or service

potential received or receivable by a public sector
agency, as determined by a court or other law
enforcement body, as a consequence of the breach of
laws or regulations.

d. Gifts and donations shall consist of voluntary

transfers of assets including cash or other monetary
assets, goods in-kind and services in-kind that one
agency makes to another, normally free from
stipulations. (PPSAS 23)
 Sec. 33. Accounting Standards for Revenue.

e. Goods in-kind are tangible assets transferred to an agency in a non-

exchange transaction, without charge, but may be subject to
stipulations. External assistance provided by multilateral or bilateral
development organizations often includes a component of goods in-
kind. (PPSAS 23)

f. Taxes are economic benefits or service potentials compulsory paid or

payable to public sector agencies, in accordance with laws and or
regulations, established to provide revenue to the government. Taxes
do not include fines or other penalties imposed for breaches of the law.
(PPSAS 23)

g. Transfers are inflows of future economic benefits or service potential

from nonexchange transactions, other than taxes. (PPSAS 23)
 Sec. 34. Use of Appropriated Funds

All moneys appropriated for functions, activities,

projects and programs shall be available solely for
the specific purposes for which these are
appropriated.
Sec. 36. Basic Requirements for
Disbursements and the Required Certifications

a. Availability of allotment/budget for obligation/utilization

certified by the Budget Officer/Head of Budget Unit;

b. Obligations/Utilizations properly charged against available

allotment/budget by the Chief Accountant/Head of
Accounting Unit;

c. Availability of funds certified by the Chief Accountant. The Head

of the Accounting Unit shall certify the availability of funds
before an Agency Head or his duly authorized representative enter
into any contract that involves the expenditure of public funds
based on the copy of budget release documents;
 Sec. 36. Basic Requirements for
Disbursements and the Required Certifications

d. Availability of cash certified by the Chief Accountant.

e. Legality of the transactions and conformity with

existing rules and regulations.

f. Submission of proper evidence to establish validity

of the claim.

g. Approval of the disbursement by the Head of Agency

or by his duly authorized representative.
 Sec. 37. Certification of Availability of Funds

No funds shall be disbursed, and no expenditures or

obligations chargeable against any authorized
allotment shall be incurred or authorized in any
department, office or agency without first securing
the certification of its Chief Accountant or head of
accounting unit as to the availability of funds and the
allotment to which the expenditure or obligation
may be properly charged.
 Sec. 38. Prohibition against the Incurrence of Overdraft.

Heads of departments, bureaus, offices and agencies

shall not incur nor authorize the incurrence of
expenditures or obligations in excess of allotments
released by the DBM Secretary for their respective
departments, offices and agencies. Parties
responsible for the incurrence of overdrafts shall be
held personally liable therefor. (Book VI, Chapter 5,
Section 41 of EO No. 292)
 Sec. 39. Mode of Disbursements.

Payments/Disbursements by NGAs may be effected

through the Treasury Single Account (TSA), by
issuing Modified Disbursements System (MDS)
check or commercial check, cash through cash
advance, Advice to Debit Account (ADA), or Non-
Cash Availment Authority (NCAA).
 Sec. 40. Authority to Disburse/Pay

NGAs are authorized to disburse/pay based on the

Notice of Cash Allocation (NCA), Notice of Transfer
of Allocation (NTA), Cash Disbursement Ceiling
(CDC) or other authority that may be provided by
law.
Sec. 41. Disbursement Voucher/Payroll.

Checks/ADA shall be drawn based on duly approved

disbursement voucher or payroll.