GOVERNMENT

ACCOUNTING

Chapter 24
Introduction

Government entities are not reporting to shareholders like profit oriented entities, but it is very important that
they can account for funds received and show how they have been spent. In some cases, resources may be
contributed for specific purposes and management is required to show that they have been utilized for that
purpose. Perhaps most importantly, taxpayers are entitled to see how the government is spending their money.

Regulation of local and national governments and governmental agencies in the European countries wherein
our local accounting standards are based, is by the International Public Sector Accounting Standards Board
(IPSAB), which comes under the International Federation of Accountants (IFAC). Likewise, in the Philippines
as mandated by 1987 Constitution, a New Government Accounting System (NGAS) shall be adopted.

The Government Accounting Manual (GAM) introduced the basic policies and procedures, the new coding
system, the accounting systems, books, registries, records, forms, reports and financial statements to be adopted
by all national government agencies effective January 1, 2002; and includes the Revised Chart of Accounts
(RCA).
Public sector has similar key characteristics to those in the private sector. They are typically
established by legislation and:

• Their objective is to provide goods and services to various recipients or to develop or

implement policy on behalf of governments and not to make a profit;
• They are characterized by the absence of defined ownership interests that can be sold,
transferred or redeemed;
• They typically have a wide group of stakeholders to consider (including the public at large;
• Their revenues are generally derived from taxes or other similar contributions obtained
through exercise of coercive powers; and
• Their capital assets are typically acquired and held to deliver services without the intention
earning a return on them
Government Accounting

As defined and pursuant to Section 109 of PD 1445, government accounting, “encompasses the process of
analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and
disposition of government fund and property and interpreting the result thereof.”

Section 110, Presidential Decree 1445 sets down the following objectives of government accounting:
1. To produce information concerning past operations and present conditions;
2. To provide a basis for guidance for future operations;
3. To provide for control of the acts of public bodies and offices in the receipt, disposition and utilization
of funds and property; and
4. To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.
Subjects of Government Accounting

The subjects of government accounting include:

1. National Government - consisting of departments, bureaus, commissions, boards, state
colleges and universities.
2. Local Government – provinces, chartered cities, municipalities, and barangays.
3. Government-owned or government controlled corporations – which were created by law
to manage specific type of business.
Objective of Government Accounting Manual

The New Government Accounting System (NGAS) Manual presents the basic policies and procedures; the new
coding system; the accounting systems, books, registries, records, forms, reports, and financial statements; and
illustrative accounting entries to be adopted by all national government agencies effective January 1, 2002. The
objectives of the Manual are to prescribe the following:
1. Standards, policies, guidelines and procedures in accounting for government funds and property;
2. Coding structure and accounts; and
3. Accounting books, registries, records, forms, reports and financial statements.
The NGAS presents the basic accounting policies and principles in accordance with the Philippine
Public Sector Accounting Standards (PPSAS) adopted thru COA Resolution No. 2014-003 dated
January 24, 2014 and other pertinent laws, rules and regulations.

It shall be used by all National Government Agencies (NGAs) in the:

• 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
• reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.
Definition of Terms. For the purpose of this Manual, the terms used as stated below shall be construed to mean as follows:
• General Provisions, Basic Standards and Policies
1. 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).
2. 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.
3. 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:
• 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
• can be sold, exchanged, transferred, or redeemed.
4. 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.
5. Entity – refers to a government agency, department or operating/field unit. It may be referred to in this GAM as an agency.
6. 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.
7. Government Budget – is the financial plan of a government for a given period, usually for a fiscal year. 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.
8. 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.
9. Net assets/equity – is the residual interest in the assets of the entity after deducting all its liabilities.
10. 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.
11. 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
• Budget Execution, Monitoring and Reporting
12. Allotment – is an authorization issued by the DBM to NGAs to incur obligations for specified amounts contained in a
legislative appropriation in the form of budget release documents. It is also referred to as Obligational Authority.
13. Appropriation – is the authorization made by a legislative body to allocate funds for purposes specified by the legislative
or similar authority.
14. Approved Budget – is the expenditure authority derived from appropriation laws, government ordinances, and other
decisions related to the anticipated revenue or receipts for the budgetary period. The approved budget consists of the
following:

UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08
15. Automatic Appropriations – are the authorizations programmed annually or for some other period prescribed by law, by
virtue of outstanding legislation which does not require periodic action by Congress.
16. Budget Information – the budgetary information consists of, among others, data on appropriations or the approved budget,
allotments, obligations, revenues and other receipts, and disbursements.
17. Continuing Appropriations – are the authorizations to support obligations for a specific purpose or project, such as multi-
year construction projects which require the incurrence of obligations even beyond the budget year.
18. Disbursements – are the actual amounts spent or paid out of the budgeted amounts.
19. Final Budget – is the original budget adjusted for all reserves, carry-over amounts, transfers, allocations and other
authorized legislative or similar authority changes applicable to the budget period.
20. New General Appropriations – are annual authorizations for incurring obligations during a specified budget year,
as listed in the GAA.
21. Obligation – is an act of a duly authorized official which binds the government to the immediate or eventual
payment of a sum of money. Obligation maybe referred to as a commitment that encompasses possible future
liabilities based on current contractual agreement.
22. Original Budget – is the initial approved budget for the budget period usually the General Appropriations Act
(GAA). The original budget may include residual appropriated amounts automatically carried over from prior years
by law such as prior year commitments or possible future liabilities based on a current contractual agreement.
23. Revenues – are increases in economic benefits or service potential during the accounting period in the form of
inflows or increases of assets or decreases of liabilities that result in increases in net assets/equity, other than those
relating to contributions from owners.
24. Supplemental Appropriations – are additional appropriations authorized by law to augment the original
appropriations which proved to be insufficient for their intended purpose due to economic, political or social
conditions supported by a Certification of Availability of Funds (CAF) from the BTr.
• Revenue and Other Receipts
25. Bequest – is a transfer made according to the provisions of a deceased person’s will. The past event giving rise to the control of
resources embodying future economic benefits or service potential for a bequest occurs when the entity has an enforceable claim,
for example on the death of the testator, or the granting of probate, depending on the laws of the jurisdiction.
26. Concessionary loans – are loans received by an entity at below market terms.
27. Exchange transactions – are transactions in which one entity receives assets or services, or has liabilities extinguished, and
directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in
exchange.
28. Fair value – is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in
an arm’s length transaction
29. Fines – are economic benefits or service potential received or receivable by NGAs, from an individual or other entity, as
determined by a court or other law enforcement body, as a consequence of the individual or other entity breaching the
requirements of laws or regulations.
30. Gifts, Donations and Goods In-kind – are voluntary transfers of assets, including cash or other monetary assets, goods in-kind
and services in-kind that one entity makes to another, normally free from stipulations. The transferor may be an entity or an
individual. For gifts and donations of cash or other monetary assets and goods in-kind, the past event giving rise to the control of
resources embodying future economic benefits or service potential is normally the receipt of the gift or donation.
31. Non-exchange transactions are a transaction in which an entity either receives value from another entity without directly giving
approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in
exchange. (Par. 11, PPSAS 9)
32. Pledges are unenforceable undertakings to transfer assets to the recipient entity.
33. Revenue – same in No. 10.
34. Services in-kind are services provided by individuals to public sector agencies in a non-exchange transaction.
• Disbursements
35. Accounts Payable – refers to valid and legal obligations of NGAs, for which, goods/services/projects have been
delivered/rendered/completed and accepted, regardless of the year when these obligations were incurred.
36. Advice to Debit Account (ADA) – refers to an authorization issued by the NGA appearing in the lower portion of
the List of Due and Demandable Accounts Payable- Advice to Debit Account (LDDAP-ADA). It serves as
instruction to the Modified Disbursement System, Government Servicing Banks (MDS-GSBs) to debit a specified
amount from its available NCA balance under regular MDS sub-account for payment of creditors/payees through
the Expanded Modified Disbursement Payment Scheme (ExMDPS).
37. 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 GOCCs, including its subsidiaries, or other self-
governing board or commission of the government.
38. Disbursements – constitute all cash paid out during a given period in currency (cash) or by check.
39. Implementing Agency – refers to the agency to which the funds are transferred for the purpose of
prosecuting/implementing the project.
40. Modified Disbursement System (MDS) Check – refers to a check issued by government agencies chargeable
against the account of the Treasurer of the Philippines
41. Petty Cash Fund – refers to the amount granted to duly designated Petty Cash Fund Custodian for payment of
authorized petty or miscellaneous expenses which cannot be conveniently paid through checks.
42. Tax Remittance Advice – refers to a serially-numbered document prescribed by the DBM that should be used by the
NGAs in the remittance of withheld taxes on funds coming from DBM.
• Responsibility Accounting
1. Responsibility Accounting – provides access to cost and revenue information under the supervision of a
manager having a direct responsibility for its performance. It is a system that measures the plans (by
budgets) and actions (by actual results) of each responsibility center.

2. Responsibility Center – is a part, segment, unit or function of a government agency, headed by a

manager, who is accountable for a specified set of activities. Except for some, which derive most of
their income from collection of taxes and fees, NGAs are basically cost centers which primary purpose
is to render service to the public at the lowest possible cost. Cost centers are established to provide each
government agency’s accessibility to cost information and to facilitate cost monitoring at any given
period.
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. Specifically, the objectives of general purpose financial reporting in the public sector are to provide
information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it.

Fair Presentation. The FSs shall present fairly the financial position, financial performance and cash flows of an entity. Fair
presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the
definition recognition criteria for assets, liabilities, revenue, and expenses set out in PPSAS. The application of PPSAS, with
appropriate disclosures, if necessary, would result in fair presentation of the FS.

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.

Consistency of Presentation. The presentation and classification of items in the FSs shall be retained from one period to the next
unless laws, rules and regulations, and PPSAS require a change in presentation.

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.
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.

Comparative Information. Comparative information shall be disclosed with respect to the previous period for all amounts
reported in the FSs. Comparative information shall be included for narrative and descriptive information when it is relevant
to an understanding of the current period’s FSs.

Compliance with PPSASs. An entity whose financial statements comply with PPSASs shall make an explicit and
unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with
PPSASs unless they comply with all the requirements of PPSASs. Inappropriate accounting policies that do not comply with
PPSAS are not rectified either by disclosure of the accounting policies used, or by notes or explanatory material.

Departure from PPSAS. In the event that Management strongly believes that compliance with the requirement of PPSAS
would result in misleading presentation that it would contradict the objective of the FSs set forth in PPSAS, the entity may
depart from that requirement if the relevant regulatory framework allows, or otherwise does not prohibit, such a departure.

Comparative Information. Comparative information shall be disclosed with respect to the previous period for all amounts
reported in the FSs. Comparative information shall be included for narrative and descriptive information when it is relevant
to an understanding of the current period’s FSs.
Components of General Purpose Financial Statements. The complete set of GPFSs consists of:
1. Statement of Financial Position
2. Statement of Financial Performance
3. Statement of Changes in Net Assets/Equity
4. Statement of Cash Flows
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements, comprising a summary of significant accounting policies and other
explanatory notes.

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.
Structure and Content. The FSs and each component shall be identified clearly and distinguished from other information in the same
published document.
1. Statement of Financial Position. An entity shall present current and non-current assets, as well as current and non-current
liabilities, as separate classifications on the face of the Statement of Financial Position (SFP).
2. Statement of Financial Performance. The Statement of Financial Performance (SFPer) shall include line items that present the
revenue, expenses and net surplus or deficit for the period.
3. Statement of Changes in Net Assets/Equity. An entity shall present in the Statement of Changes in Net Assets/Equity (SCNA/E)
the following:
a. Net Income or Deficit for the period;
b. Each item of revenue and expenses for the period that, as required by Standards, is recognized directly in net assets/equity,
and the total of these items;
c. Total revenue and expenses for the period; and
d. For each component of net assets/equity separately disclosed, the effects of changes in accounting policies and corrections
of errors recognized in accordance with Accounting Policies, Changes in Accounting Estimates and Errors.
4. Statement of Cash Flows. The Statement of Cash Flows (SCF) provides information to users of FSs a basis to assess the ability
of the entity to generate cash and cash equivalents and to determine the entity’s utilization of funds. This also provides
information on how the entity generates income authorized to be used in their operation and its utilization.
5. 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).
6. Notes to Financial Statements. The Notes to FSs contain information in addition to that presented in the SFP, SFPer, SCNA/E,
SCF and SCBAA. Notes provide narrative descriptions or disaggregation of items disclosed in those FSs and information about
items that do not qualify for recognition in those statements.
Books of Accounts and Registries. The books of accounts and registries of the NG entities consist of:
1. Journals
a. General Journal
b. Cash Receipts Journal
c. Cash Disbursements Journal
d. Check Disbursements Journal

2. Ledgers
a. General Ledgers
b. Subsidiary Ledger

3. Registries
a. Registries of Revenue and Other Receipts
b. Registry of Appropriations and Allotments
c. Registries of Allotments, Obligations and Disbursement
d. Registries of Budget, Utilization and Disbursements
Fund Accounting. The books of accounts shall be maintained by fund cluster as follows:
Code Description
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account-Locally Funded/Domestic Grants
Fund
04 Special Account-Foreign Assisted/Foreign Grants
Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts

Responsibility Center Code Structure. Each NGA shall be assigned a responsibility center code defined as organization code in the UACS
Manual. For monitoring revenue and expenses, additional three digit codes for the agency’s major offices/departments shall be appended to
the organization code. The organization code and the agency’s major offices/departments’ code shall consist of 15 digits as follows:

00 000 0000000
000

Organization
Department

Agency

Lower Level Operating Unit

Additional code for major office/department

Major Office/Department
Key Features of Assets. 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; 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:
• the ability of an entity to benefit from the asset and to deny or regulate the access of others to that
benefit.
• 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.
• 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.

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.
Accounting Standards for Revenue. The following accounting standards shall apply for revenue and receipts of
government entities:
a. Revenue includes only the gross inflows of economic benefits or service potential received and receivable by the
entity in its own account.
b. Receipts/Collections shall refer to all cash actually received from all sources during a given accounting period.
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. Fines
and penalties, either on tax revenue or other specific income account, shall be recognized as income of the year
these were collected.
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.
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.
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.
g. Transfers are inflows of future economic benefits or service potential from non- exchange transactions, other than
taxes.
Notice of Cash Allocation. The NCA shall be the authority of an agency to pay operating expenses, purchases of supplies and
materials, acquisition of PPE, accounts payable, and other authorized disbursements through the issue of MDS checks, ADA or
other modes of disbursements. No MDS check/ADA shall be issued without the covering NCA.

Fund Release Documents. With the adoption of the UACS and the Performance-Informed Budgeting (PIB), the following
are the fund release documents:
a. Obligational Authority or Allotment – the following are the documents which authorize the entity to incur obligations:
1. General Appropriations Act Release Document (GAARD) – serves as the obligational authority for the
comprehensive release of budgetary items appropriated in the GAA, categorized as For Comprehensive Release
(FCR).
2. Special Allotment Release Order (SARO) – covers budgetary items under For Later Release (FLR) (negative list) in
the entity submitted Budget Execution Documents (BEDs), subject to compliance of required documents/clearances.
Releases of allotments for Special Purpose Funds (SPFs) (e.g., Calamity Fund, Contingent Fund, E-Government
Fund, Feasibility Studies Fund, International Commitments Fund, Miscellaneous Personnel Benefits Fund and
Pension and Gratuity Fund) are also covered by SAROs.
3. General Allotment Release Order (GARO) – is a comprehensive authority issued to all national government
agencies, in general, to incur obligations not exceeding an authorized amount during a specified period for the
purpose indicated therein. It covers automatically appropriated expenditures common to most, if not all, agencies
without need of special clearance or approval from competent authority, i.e. Retirement and Life Insurance Premium.
b. Disbursement Authority – the following documents authorize the entity to pay obligations and payables:
1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central, regional and provincial offices and
operating units to cover the cash requirements of the agencies;

2. Non-Cash Availment Authority (NCAA) – authority issued by the DBM to agencies to cover the liquidation of their
actual obligations incurred against available allotments for availment of proceeds from loans/grants through
supplier’s credit/constructive cash;

3. Cash Disbursement Ceiling (CDC) – authority issued by DBM to the Department of Foreign Affairs (DFA) and
Department of Labor and Employment (DOLE) to utilize their income collected/retained by their Foreign Service
Posts (FSPs) to cover their operating requirements, but not to exceed the released allotment to the said post; and

4. Notice of Transfer of Allocation – authority issued by the Central Office to its regional and operating units to cover
the latter’s cash requirements.
Registry of Appropriations and Allotments. The Registry of Appropriations and Allotments (RAPAL) shall be maintained
by NGAs to monitor appropriations and allotments charged thereto. It shall show the original, supplemental and final budget
for the year and all allotments received charged against the corresponding appropriation. The balance is extracted every time
an entry is made to prevent incurrence of overdraft in appropriations.

Registries of Allotments, Obligations and Disbursements. The Registries of Allotments, Obligations and Disbursements
(RAOD) shall be maintained by the Budget Division/Unit of agencies to record allotments, obligations and disbursements. It
shall show the allotments received for the year, obligations incurred against the corresponding allotment and the actual
disbursements made. The balance is extracted every time an entry is made to prevent incurrence of obligations in excess of
allotment and overdraft in disbursements against obligations incurred.

The RAODs shall be maintained by appropriation act, fund cluster, MFO/PAP, and allotment class.
a. Registry of Allotments, Obligations and Disbursements-Personnel Services (RAOD-PS) shall be used to record the
allotments received, obligations incurred and disbursements classified under PS.
b. Registry of Allotments, Obligations and Disbursements-Maintenance and Other Operating Expenses (RAOD-
MOOE) shall be used to record the allotments received, obligations incurred and disbursements classified under
MOOE.
c. Registry of Allotments, Obligations and Disbursements-Financial Expenses (RAOD-FE) shall be used to record
the allotments received, obligations incurred and disbursements classified under FE.
d. Registry of Allotments, Obligations and Disbursements-Capital Outlays (RAOD-CO) shall be used to record the
allotments received, obligations incurred and disbursements classified under CO.
Obligation Request and Status. The incurrence of obligations shall be made through the issuance of Obligation Request and Status (ORS).

Notice of Obligation Request and Status Adjustment. The NORSA shall be prepared by the Accounting Division/Unit after the processing of the
claim which shall be used in adjusting the original amount obligated to the actual obligations incurred in the RAOD. It shall be forwarded by the
Accounting Division/Unit to the Budget Division/Unit to take up the adjustments of obligation in the RAOD.

Budget Utilization Request and Status. The incurrence of budget utilization shall be made through the issuance of Budget Utilization Request and
Status (BURS).

Registries of Budget, Utilization and Disbursements. The Registries of Budget, Utilization and Disbursements (RBUD) shall be used to record the
approved special budget and the corresponding utilizations and disbursements charged to retained income authorized and
other retained income collection of a national government agency with similar authority,
a. Registry of Budget, Utilization and Disbursements-Personnel Services (RBUD-PS) shall be used to record the budget utilizations and
disbursements classified under PS.
b. Registry of Budget, Utilization and Disbursements-Maintenance and Other Operating Expenses (RBUD-MOOE) shall be used to record
the budget utilizations and disbursements classified under MOOE.
c. Registry of Budget, Utilization and Disbursements-Financial Expenses (RBUD-FE) shall be used to record the budget utilizations and
disbursements classified under FE.
d. Registry of Budget, Utilization and Disbursements-Capital Outlays (RBUD-CO) shall be used to record the budget utilizations and
disbursements classified under CO.

Notice of Budget Utilization Request and Status Adjustment. The NBURSA shall be prepared by the Accounting Division/Unit after the
processing of the claim which shall be used in adjusting the original amount utilized to the actual utilizations in the RBUD.
Revenues

Revenue from Exchange Transactions. Revenues received by the NGAs from exchange transactions are derived from the
following:
• Sale of goods or provisions of services to third parties or to other NGAs. Examples are:
1. Service Income – Permit Fees, Registration Fees, Registration Plates, Tags and Stickers Fee, Clearance and
Certification Fees, Franchising Fees, Licensing Fees, Supervision and Regulation Enforcement Fees,
Spectrum Usage Fees, Legal Fees, Inspection Fees, Verification and Authentication Fees, Passport and Visa
Fees, Processing Fees and Other Service Income; and
2. Business Income – School Fees, Affiliation Fees, Examination Fees, Seminar/Training Fees, Rent/Lease
Income, Communication Network Fees, Transportation System Fees, Road Network Fees, Waterworks System
Fees, Power Supply System Fees, Seaport System Fees, Landing and Parking Fees, Income from
Hostels/Dormitories and Other Like Facilities, Slaughterhouse Operation, Income from Printing and
Publication, Sales Revenue, Hospital Fees, Share in the Profit of Joint Venture and Other Business Income.
• Use by other entity of assets yielding interest, royalties and dividends or similar distributions. Examples are:
1. Interest income – charges for the use of cash or cash equivalents, or amounts due to the entity;
2. Royalties – fees paid for the use of entity’s assets such as trademarks, patents, software, and copyrights; and
3. Dividends – share of the National Government from the earnings of its capital/equity investments in
Government-Owned or Controlled Corporations (GOCCs) and other entities.
Recognition and Measurement of Revenue from Exchange Transactions. Revenue from exchange transaction shall be measured at fair
value of the consideration received or receivable.
a. Revenue shall be recognized when it is probable that future economic benefits or service potential will flow to the entity and
these benefits can be measured reliably, such as:
1. Revenue from the sale of goods
2. Revenue from the supply of services shall be recognized on a straight line basis over the specified period of the services.
3. Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distributions.
b. Revenue shall be measured at the fair value of the consideration received or receivable. Any amount of trade discounts and
volume rebates allowed by the entity shall be taken into account.

Exchanges of Goods or Services for Similar/Dissimilar Good or Services. When goods or services are exchanged or swapped for goods
or services which are of a similar nature and value, the exchange is not regarded as a transaction which generates revenue. However, when
goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which
generates revenue.

The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents
transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of
the goods given up, adjusted by the amount of any cash or cash equivalents transferred.

Impairment Losses and Allowance for Impairment Losses. When an uncertainty arises about the collectability of an amount already
included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognized as an
expense (impairment losses), rather than as an adjustment of the amount of revenue originally recognized.
Revenue from Non-Exchange Transactions. Revenue of the NGAs from non- exchange transactions are derived mostly from
taxes, gifts and donations, goods in kind and fines and penalties. Most NGAs derive revenues from transactions where they receive
resources and provide no or nominal consideration directly in return. These are as follows:
• Tax Revenue
1. Tax Revenue-Individual and Corporation
2. Tax Revenue-Property
3. Tax Revenue-Goods and Services
4. Tax Revenue-Others
• Fines and Penalties
5. Tax Revenue
6. Service Income
7. Business Income
• Shares, Grants and Donations
8. Share from National Wealth
9. Share from Philippine Amusement and Gaming Corporation (PAGCOR)/ Philippine Charity Sweepstakes Office
(PCSO)
10. Share from Earnings of GOCCs
11. Income from Grants and Donations in Cash
12. Income from Grants and Donations in Kind
Revenue from non-exchange transactions may also arise when, in respect of an inflow of resources from a non-exchange
transaction, the entity satisfies a present obligation recognized as a liability which may be as follows:
13. Trust Liabilities – Customers’ Deposits Payable and Guaranty/Security Deposits Payable
14. Deferred Credits – Deferred Finance Lease Revenue and Other Deferred Credits
15. Unearned Revenue – Investment Property and Other Unearned Revenue
Recognition of Revenue from Non-Exchange Transactions. The cash basis of accounting shall be applied by all government
agencies in the recognition of revenue from non- exchange transaction until a reliable model of measurement of this revenue is
developed. Therefore, asset and the corresponding revenue or liability that arises from non-exchange transaction shall be recognized
when collected or when these are measurable and legally collectible.
a. Taxation revenue shall be determined at a gross amount. It shall not be reduced for expenses paid through the tax system.
b. Gifts and donations, other than services in kind shall be recognized as assets and revenue when it is probable that the future
economic benefits or service potential will flow to the entity and shall be measured at fair value.
c. Goods in-kind received without conditions shall be recognized as revenue immediately.
d. Donation in cash or in kind shall be recognized as revenue.

Measurement of Revenue from Non-Exchange Transactions. Revenue from non-exchange transactions shall be measured at the
amount of the increase in net assets recognized by the entity, unless it is also required to recognize a liability. Where a liability is
recognized and subsequently reduced, because the taxable event occurs, or a condition is satisfied, the amount of the reduction in the
liability will be recognized as revenue.

Measurement of Assets on Initial Recognition from Non-Exchange Transactions. An asset acquired through a non-exchange
transaction shall initially be measured at its fair value as at the date of acquisition.

Measurement of Liabilities on Initial Recognition. Where the time value of money is material, the liability will be measured at the
present value of the amount expected to be required to settle the obligation.
Tax Revenue. Taxes are economic benefits or service potential 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.

Recognition of Asset through Transfers. An entity shall recognize an asset in respect of transfers when the
transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset.

Measurement of Transferred Assets. Transferred assets are measured at their fair value as at the date of acquisition.

Recognition and Measurement of Fines

a. Fines are recognized as revenue when the receivable meets the definition of an asset and satisfies the criteria
for recognition as an asset.
b. Where an entity collects fines in the capacity of an agent, the fine will not be recognized as revenue of the
collecting entity.
c. Assets arising from fines are measured at the best estimate of the inflow of resources to the entity.
Recognition and Measurement of Bequests
a. Bequests which satisfy the definition of an asset are recognized as assets and revenue when it is probable that the
future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured
reliably.
b. The fair value of bequeathed assets is determined in the same manner as for gifts and donations

Recognition and Measurement of Gifts, Donations and Goods In-kind

c. Gifts and donations (other than services in-kind) are recognized as assets and revenue when it is probable that the
future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured
reliably.
d. Goods in-kind are tangible assets transferred to an entity in a non-exchange transaction, without charge, but may
be subject to stipulations
e. Goods in-kind are recognized as assets when the goods are received, or there is a binding arrangement to receive
the goods. If goods in-kind are received without conditions attached, revenue is recognized immediately. If
conditions are attached, a liability is recognized, which is reduced and revenue recognized as the conditions are
satisfied.
f. On initial recognition, gifts and donations including goods in-kind are measured at their fair value as at the date of
acquisition, which may be ascertained by reference to an active market, or by appraisal.
Grant with Condition. If conditions are attached to a grant, a liability is recognized, which is reduced and revenue recognized as the
conditions are satisfied. (Illustration – refer to Appendix Section)

Recognition and Measurement of Services In-kind. These services meet the definition of an asset because the entity controls a resource
from which future economic benefits or service potential is expected to flow to the entity

Recognition and Disclosure of Pledges. Pledges do not meet the definition of an asset because the recipient entity is unable to control the
access of the transferor to the future economic benefits or service potential embodied in the item pledged. Agencies do not recognize pledged
items as assets or revenue. If the pledged item is subsequently transferred to the recipient entity, it is recognized as a gift or donation. Pledges
may warrant disclosure as contingent assets.

Advance Receipts of Revenue. When an entity receives resources before a transfer arrangement becomes binding, the resources are
recognized as an asset when they meet the definition and satisfy the criteria for recognition as an asset and recognized as a liability until the
event that makes the transfer arrangement binding occurs, and all other conditions under the agreement are fulfilled. When that event occurs
and all other conditions under the agreement are fulfilled, the liability is discharged and revenue is recognized.

Recognition and Measurement of Concessionary Loans

a. The portion of the loan that is repayable, along with any interest payments, is an exchange transaction.
b. An entity considers whether any difference between the transaction price (loan proceeds) and the fair value of the
loan on initial recognition is non-exchange transaction.

Dishonored Checks. A check is dishonored either by non-payment or non- acceptance. Dishonor by non-payment occurs
when (a) the check is duly presented for payment and payment is refused or cannot be obtained; or (b) presentment is
excused and the check is overdue and unpaid.
At a glance, the following accounts and their respective accounting treatment is similar to IFRS unless otherwise it is
indicated:
Financial Instruments:
a. Equity instrument – is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities.
b. Derivative – is a financial instrument that derives its value from the movement in commodity price, foreign
exchange rate and interest rate of an underlying asset or financial instrument.
c. Financial instrument – is any contract that gives rise to both a financial asset of one entity and a financial liability
or equity instrument of another entity.
d. Financial asset – is any asset that is:
1. Cash;
2. An equity instrument of another entity;
3. A contractual right to receive cash or another financial asset from another entity;
4. A contractual right to exchange financial instruments with another entity under conditions that are potentially
favorable; or
5. A contract that will or may be settled in the entity’s own equity instruments.
e. Financial liability – is any liability that is:
1. A contractual obligation:
- To deliver cash or another financial asset to another entity; or
- To exchange financial assets or financial liabilities with another entity under conditions that is potentially
unfavorable to the entity.
2. A contract that will or may be settled in the entity’s own equity instruments.
• Initial Measurement of Financial Assets. When a financial asset at fair value through surplus or deficit is
recognized initially, an entity shall measure it at its fair value. In the case of a financial asset not at fair value
through surplus or deficit, the financial asset is recognized at fair value plus transaction costs that are directly
attributable to the acquisition, issue or disposal of the financial asset.
• Subsequent Measurement of Financial Assets. After initial recognition, an entity shall measure financial assets,
including derivatives that are assets, at their fair values,
• Measurement at Amortized Cost
• Impairment of Financial Assets
• Derecognition of Financial Assets
• Transfer of Financial Assets
• Financial Liability. Examples of financial liabilities which are transacted by many national government agencies
are Accounts Payable, Bail Bonds Payable, Notes Payable, Interest Payable, Bonds Payable-Domestic, Bonds
Payable-Foreign, and Loans Payable-Domestic and Loans Payable-Foreign representing domestic and foreign debt
accounted at the BTr
• Recognition of a Financial Liability
• Initial Measurement of Financial Liabilities.
• Subsequent Measurement of Financial Liabilities
• Derecognition of Financial Liability
• Equity Instrument - The term “equity instrument” may be used to denote the following:
1. A form of unitized capital such as ordinary or preference shares;
2. Transfers of resources (either designated or agreed as such between the parties to the transaction) that evidence
a residual interest in the net assets of another entity;
• Financial liabilities in the legal form of debt that, in substance, represent an interest in an entity’s net assets.
• Equity security encompasses any instrument representing ownership shares and right, warrants or options to
acquire or dispose of ownership shares at a fixed or determinable price. It represents an ownership interest in an
entity. This includes ordinary share, preference share and other share capital.
• The government securities issued by the BTr are debt securities in the form of treasury bills and treasury notes.
They have maturity date and maturity value. Other examples include Bangko Sentral ng Pilipinas commercial
papers and preference shares with mandatory redemption date or are redeemable at the option of the holder.
• Derivatives. Derivative is a financial instrument that derives its value from the movement in commodity price,
foreign exchange rate and interest rate of an underlying asset or financial instrument.
• Hedging
Inventories
• Current Replacement Cost – is the cost the entity would incur to acquire the asset on the reporting date.
• Fair Value – is the amount for which the same inventory could be exchanged between knowledgeable and willing buyers and
sellers in the marketplace. Inventories are assets:
1. In the form of materials or supplies to be consumed in the production process (examples: materials and supplies awaiting use
in the production process);
2. In the form of materials or supplies to be consumed or distributed in the rendering of services (examples: office supplies,
ammunitions, maintenance materials);
3. Held for sale or distribution in the ordinary course of operations (examples: merchandise purchased by an entity and held for
resale, or land and other property held for sale, agricultural produce); or
4. In the process of production for sale or distribution (examples: goods purchased or produced for distribution to other parties
for no charge or for a nominal charge like educational books produced by a health authority for donation to schools).
• Net Realizable Value – is the estimated selling price in the ordinary course of operations, less the estimated costs of completion
and the estimated costs necessary to make the sale, exchange, or distribution. It is the net amount that an entity expects to realize
from the sale of inventory in the ordinary course of operations.
• Perpetual Inventory System – is a system that continually tracks all additions to and deletions from inventory
• Cost Formulas - Weighted Average Method. The weighted average method shall be used for costing inventories. This method calls
for the re-calculation of the average cost of all items in stock after every purchase.
• Impairment; Perpetual Inventory Method
• Semi-expendable Property. Tangible items below the capitalization threshold of P15,000 (refer to PPE capitalization threshold)
shall be accounted as semi-expendable property. The following policies apply as follows: (a) Semi-expendable property which was
recognized as PPE shall be reclassified to the affected accounts. (b) These tangible items shall be recognized as expenses upon
issue to the end-user.
Investment Property
• Carrying amount – is the amount at which an asset is presented in the statement of financial position.
• Cash Generating Unit – the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates
cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.
• Cost – is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or
construction.
• Depreciation – is the systematic allocation of the depreciable amount of an asset over its useful life.
• Impairment – a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the
asset’s future economic benefits or service potential through depreciation.
• Investment Property – is a property (land or buildings-or part of a building-or both) held to earn rentals, or for capital appreciation or both. It is not
held for use in the production or supply of goods or services, for administrative purposes, or sale in the ordinary course of business.
• Owner-occupied property – is property held (by the owner or by the lessee under a finance lease) for use in the production or supply of goods or
services or for administrative purposes.
• Recoverable amount – is the higher of a cash-generating asset’s fair value less costs to sell and its value in use.
• Items considered as Investment Property
• Items not considered as Investment Property
• Criteria for Recognition
• Measurement at Initial Recognition
• Mode of Acquisition of Investment Property
• Measurement after Recognition
• Transfers To or From Investment Property
• Transfer from Investment Property to Owner-occupied Property
• Transfer from Investment Property to Inventories
• Transfer from Owner-occupied Property to Investment Property
• Transfer from inventories to investment property
• Derecognition of Investment Property
• Gains/Losses; Impairment of Investment Property
• Reversal of Impairment Loss
Property, Plant and Equipment
• Carrying Amount – is the amount at which an asset is recognized after deducting any accumulated depreciation and
accumulated impairment losses.
• Cost – is the amount of cash or cash equivalents paid and the fair value (FV) of the other consideration given to acquire an
asset at the time of its acquisition or construction.
• Depreciation – is the systematic allocation of the depreciable amount of an asset over its useful life.
• Depreciable Amount – is the cost of an asset, or other amount substituted for cost, less its residual value.
• Entity-specific Value – is the present value (PV) of the cash flows an entity expects to arise from the continuing use of an
asset and from its disposal at the end of its useful life or expects to incur when settling a liability.
• Exchange Transactions – are transactions in which one entity receives assets or services, or has liabilities extinguished,
and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another
entity in exchange
• Fair Value – is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction.
• Impairment Loss of a Cash-generating Asset – is the amount by which the carrying amount of an asset exceeds its
recoverable amount.
• Impairment Loss of a Non Cash-generating Asset – is the amount by which the carrying amount of an asset exceeds its
recoverable service amount.
• Non-exchange Transactions – are transaction where an entity either receives value from another entity without directly
giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately
equal value in exchange.
• Residual Value – is the equivalent to at least five percent (5%) of the cost of an asset that the entity would currently
obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and
in the condition expected at the end of its useful life, unless a more appropriate percentage is determined by an entity
based on their operation.
• Recoverable Service Amount – is the higher of a non cash-generating asset’s fair value less costs to sell and its value in
use.
• Useful Life – is the period over which an asset is expected to be available for use by an entity; or the number of
production or similar units expected to be obtained from the asset by an entity.
• Value in use of a cash generating asset – the present value of the estimated future cash flows expected to be derived
from the continuing use of an asset and from its disposal at the end of its useful life.
• Value in use of a non-cash generating asset – the present value of the asset’s remaining service potential.
• Criteria for Recognition (include the threshold criteria of P15,000)
• Applying the Capitalization Threshold of P15,000. The capitalization threshold of P15,000 represents the minimum cost
of an individual asset recognized as a PPE on the Statement of Financial Position. This threshold shall be applied on an
individual asset or per item basis. Each item within the bulk acquisition with aggregate or total value of PPE, such as
library books, computer peripherals and small items of equipment, will need to meet the capitalization threshold to be
recognized as PPE.
• Measurement and Recognition
• Costs not qualified for recognition as PPE
• Modes of Acquisition of PPE
• Exchange Transactions. One or more items of PPE may be acquired in exchange for non-monetary assets, or a
combination of monetary and non-monetary assets. The cost of such an item of PPE is measured at its fair value unless
(a) the exchange transaction lacks commercial substance, or (b) the fair value of neither the asset received nor the asset
given up is reliably measurable.
• Types of Exchange Transactions. (a) Exchange with Commercial Substance. An exchange transaction has commercial
substance by considering the extent to which its future cash flows or service potentials is expected to change as a result of
the transaction. (b) Exchange without Commercial Substance. If the PPE acquired in an exchange transaction lacks
commercial substance, the cost is measured at the carrying amount of the asset given up. Consequently, no gain or loss
shall be recognized.
• Non-exchange Transaction. Grants. Grants are assistance in the form of transfer of resources, in cash or in kind, to an
agency/entity from other levels of government, private sectors or international institutions with or without conditions
relating to the operating activities of the agency/entity. These grants shall be recognized as income over the periods
necessary to match them with the related costs which they are intended to compensate on a systematic basis. Grants,
including non- monetary its cost shall be measured at its fair value as at the date of acquisition, and shall be recognized
when there is reasonable assurance that: (a) the entity will comply with the conditions attached, and (b) the grants will be
received.
• Donation without Condition. Cost of PPE acquired through donation without condition shall be taken up at its fair value
at the date it is acquired. All expenses incurred in connection with the donated asset, such as delivery and installation
costs, shall be included in the amount recognized as asset. The fair value of the PPE shall be recognized as “Income from
Grants and Donations in Kind.”
• Donation with Condition. Where a PPE is acquired through donation with conditions or restrictions, a liability account
shall be recognized until the conditions or restrictions have been fulfilled.
• Measurement after Recognition. For consistency and uniformity, the cost model shall be applied to an entire class of
PPE. Cost model means that PPE are carried at cost, less any accumulated depreciation and any accumulated impairment
losses.
• Subsequent Costs of PPE other than Reforestation Projects. Subsequent costs are costs of the day-to-day servicing of an
item of PPE which are recognized as an expense when incurred. Costs of day-to-day servicing are primarily the costs of
labor and consumables, and may include the cost of small parts. The purpose of these expenditures is often described as
“repairs and maintenance” of an item of PPE.
• Repairs and Maintenance. Repairs and maintenance primarily maintain or improve the functionality and capacity of the
PPE; increase its service life; improve the quality of its output; or reduce the operating cost. These may be categorized
into major and minor repairs. Minor repairs shall be directly charged to expense account “Repairs and Maintenance” of
the specific PPE while major repairs shall be added to the carrying amount of the PPE and shall be depreciated over the
remaining life of the PPE. Where cost cannot easily be differentiated between a minor or major repair, it shall be treated
as expense.
• Betterments
• Additions and Rearrangements
• Depreciation (except for land and not recognized heritage assets, all PPE shall be depreciated.)
• Impairment of PPE other than Reforestation Projects
• Heritage Assets. Heritage assets are those assets which have historical, cultural and environmental significance, and
are intended to be preserved in trust for future generations. Examples of heritage assets include historical buildings
and monuments, statues, museum and gallery collections, archeological sites, national archives, ruins, conservation
areas, nature reserves, and works of art.
• Infrastructure Assets. Besides the five criteria for recognizing PPE, infrastructure assets have the
following additional characteristics:
a. Part of a system or network;
b. Specialized in nature and do not have alternative uses;
c. Immovable; and
d. May be subject to constraints on disposal.
• Public infrastructures shall be recognized as PPE in the entity’s financial statements. These shall be recorded in
the books of accounts as Infrastructure Assets such as road networks, sewer system, water and power supply
systems, communication networks, etc.
• Reforestation Projects. Reforestation projects are recognized as Land Improvements, Reforestation Projects in the books
of accounts of the DENR or other entity concerned.
• Initial Costs for Reforestation Projects. The following constitutes the initial costs of Land Improvements-Reforestation
Projects: (a) Survey, Mapping and Planning (SMP); (b) Nursery Operation and Seedling Production or Procurement (c)
Plantation Establishment (Site preparation, hauling of seedlings and planting)
• Subsequent Costs for Reforestation Projects. Subsequent expenditures incurred for the reforestation project shall be
accounted for as follows: (a) Costs for the maintenance and protection incurred within the duration of the reforestation
project such as construction of firelines, strip brushing, replanting, providing pest control, patrolling shall be capitalized.
(b) Costs for the maintenance and protection incurred after the duration or turn-over of the reforestation project shall be
charged to Repairs and Maintenance-Land Improvements. (c)The cost of replacing trees shall be expensed where small
numbers of trees are being replaced in any one particular area
• Impairment of Reforestation Projects. When reforestation projects are destroyed/impaired by force majeure (fortuitous
event beyond the control of man e.g., typhoon, flood, landslides, earthquakes, and the like), an impairment loss shall be
taken up for the trees as soon as it is discovered that the trees in the area have been destroyed. This being the case, it will
be up to each agency/entity to liaise with their valuers at the point in time a reforestation area has been destroyed to arrive
at an impairment value.
• Derecognition
Agriculture
• Agricultural Activity – is the management by an entity of the biological transformation and harvest of biological assets for sale, including
exchange or non- exchange transactions, or for conversion into agricultural produce, or into additional biological assets.
• Agricultural Produce – is the harvested product of the entity’s biological assets.
• Bearer Biological Assets – are those biological assets that are used repeatedly or continuously for more than one year in an agricultural activity.
Bearer biological assets are not agricultural produce but, rather, are self-regenerating. Example, livestock from which milk is produced, grape
vines, fruit trees, and trees from which firewood is harvested while the tree remains.
• Biological Asset – is a living animal or plant.
• Biological Transformation – comprises the processes of growth, degeneration, production and procreation that cause qualitative or quantitative
changes in a biological asset.
• Consumable Biological Assets – are those that are held for harvest as agricultural produce or for sale or distribution at no charge or for a
nominal charge as biological assets. Examples of consumable biological assets are animals and plants for one-time use such as livestock
intended for the production of meat, livestock held for sale, fish in farms, crops such as maize and wheat, and trees being grown for lumber.
• Costs to Sell – are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.
• Degeneration – is a decrease in the quantity or deterioration in quality of an animal or plant.
• Group of Biological Assets – is an aggregation of similar living animals or plants.
• Growth – is an increase in quantity or improvement in quality of an animal or plant.
• Harvest – is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.
• Mature Biological Assets – are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain
regular harvests (for bearer biological assets).
• Procreation – is the creation of additional living animals or plants.
• Examples of Biological Assets, Agricultural Produce and Products
• Agricultural Activity; Biological Transformation
• Recognition and Measurement
• Determination of Fair Value
• Gain or Loss
Intangible Assets
• Active Market – is a market in which all the following conditions exist: (a) the items traded in the market are
homogeneous, (b) willing buyers and sellers can normally be found at any time; and (c) prices are available to the public.
• Amortization – is the systematic allocation of the depreciable amount of an intangible asset over its useful life.
• Development – is the application of research findings or other knowledge to a plan or design for the production of new or
substantially improved materials, devices, products, processes, systems, or services before the start of commercial
production or use.
• Intangible Assets – are identifiable non-monetary asset without physical substance.
• Intangible Heritage Assets – are intangible assets which displayed the following characteristics: (a) Their value in cultural,
environmental and historical terms is unlikely to be fully reflected in a financial value based purely on a market price; (b)
Legal and/or statutory obligations may impose prohibitions or severe restrictions on disposal by sale; (c) Their value may
increase over time; and (d) It may be difficult to estimate their useful lives, which in some cases could be several hundred
years.
• Research – is original and planned investigation undertaken with the prospect of gaining new scientific and technical
knowledge and understanding.
• Nature of Intangible Asset
• Recognition of Intangible Asset
• Measurement of an Intangible Asset
• Acquisition of Intangible Assets
• Recognition of an Expense and Measurement after Initial Recognition
• Useful Life; Residual Value and Amortization of Intangible Assets
• Subsequent Expenditure and Impairment
• Derecognition and Gain or Loss arising from Derecognition
Leases
• Commencement of the lease term – is the date from which the lessee is entitled to exercise its right to use the
leased asset. It is the date of initial recognition of the lease (i.e., the recognition of the assets, liabilities,
revenue, or expenses resulting from the lease, as appropriate).
• Contingent rent – is that portion of the lease payments that is not fixed in amount, but is based on the future
amount of a factor that changes other than with the passage of time (e.g., percentage of future sales, amount of
future use, future price indices, future market rates of interest).
• Finance lease – is a lease that transfers substantially all the risks and rewards incidental to ownership of an
asset. Title may or may not eventually be transferred.
• Inception of the lease – is the earlier of the date of the lease agreement and the date of commitment by the
parties to the principal provisions of the lease.
• Initial direct costs – are incremental costs that are directly attributable to negotiating and arranging a lease,
except for such costs incurred by manufacturer or trader lessors.
• Lease – is an agreement whereby the lessor conveys to the lessee, in return for a payment or series of
payments, the right to use an asset for an agreed period of time.
• Lease term – is the non-cancelable period for which the lessee has contracted to lease the asset, together with
any further terms for which the lessee has the option to continue to lease the asset, with or without further
payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.
• Net investment in the lease
• Operating lease – is a lease other than a finance lease.
• Unguaranteed residual
• Useful life
• Commencement of the lease term
• Gross investment in the lease
• Guaranteed residual value
• Changes in Lease Payments between the Inception of the Lease and the Commencement of the Lease
Term.
• Hire Purchase Contracts. The definition of a lease includes contracts for the hire of an asset which contain
a provision giving the hirer an option to acquire title to the asset upon the fulfillment of agreed conditions.
These contracts are sometimes known as hire purchase contracts
• Classification of Leases
• Accounting for Leases
Service Concession Arrangements: Grantor
• Binding Arrangements – are contracts and other arrangements that confer similar rights and obligations on the
parties to it as if they were in the form of a contract.
• Grantor – is the public sector entity that grants the right to use the service concession asset to the operator.
• Operator – is the entity that uses the service concession asset to provide public services subject to the grantor’s
control of the asset
• Service Concession Arrangement – is a binding arrangement between a grantor and an operator in which:
1. The operator uses the service concession asset to provide a public service on behalf of the grantor for a
specified period of time; and
2. The operator is compensated for its services over the period of the service concession arrangement.
• Service Concession Asset – is an asset used to provide public services in a service concession arrangement that:
1. Is provided by the operator which:
- the operator constructs, develops, or acquires from a third party;
- or is an existing asset of the operator; or
2. Is provided by the grantor which:
- is an existing asset of the grantor; or
- is an upgrade to an existing asset of the grantor. (Par. 8, PPSAS 32)
• Recognition and Measurement of a Service Concession Asset
• Concession Arrangements Provided under R.A. No. 7718. The following are examples of service concession
arrangements provided under R.A. No. 7718, An Act Amending Certain Sections Of Republic Act No. 6957, Entitled "An
Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The Private
Sector, And For Other Purposes",:
a. Build-operate-and-transfer (BOT) – A contractual arrangement whereby the project proponent undertakes the
construction, including financing, of a given infrastructure facility, and the operation and maintenance thereof. The
project proponent operates the facility over a fixed term during which it is allowed to charge facility users
appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated
in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in
the project. The project proponent transfers the facility to the government agency or local government unit
concerned at the end of the fixed term that shall not exceed fifty (50) years. This shall include a supply-and-operate
situation which is a contractual arrangement whereby the supplier of equipment and machinery for a given
infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals.
b. Build-transfer-and-operate (BTO) – A contractual arrangement whereby the public sector contracts out the building
of an infrastructure facility to a private entity such that the contractor builds the facility on a turn-key basis,
assuming cost overruns, delays, and specified performance risks. Once the facility is commissioned satisfactorily,
title is transferred to the implementing agency. The private entity however operates the facility on behalf of the
implementing agency under an agreement.
c. Contract-add-and-operate (CAO) – A contractual arrangement whereby the project proponent adds to an existing
infrastructure facility which it is renting from the Government and operates the expanded project over an agreed
franchise period. There may or may not be a transfer arrangement with regard to the added facility provided by the
project proponent. If there will be transfer of the added facility to the public sector at the end of the arrangement, this
shall be treated as service concession arrangement.
d. Develop-operate-and-transfer (DOT) – A contractual arrangement whereby favorable conditions external to a new
infrastructure project which is to be built by a private project proponent are integrated into the arrangement by giving
that entity the right to develop adjoining property, and thus, enjoy some of the benefits the investment creates such as
higher property or rent values.
e. Rehabilitate-operate-and-transfer (ROT) – A contractual arrangement whereby an existing facility is turned over to the
private sector to refurbish, operate and maintain for a franchise period, at the expiry of which the legal title to the facility
is turned over to the Government. The term is also used to describe the purchase of an existing facility from abroad,
importing, refurbishing, erecting and consuming it within the host country.

• Recognition and Measurement of Liability

• Financial Liability Model
• Grant of a Right to the Operator Model
• Dividing the Arrangement
• Other Liabilities, Commitments, Contingent Liabilities and Contingent Assets
• Other Revenues
• Impairment of Service Concession Assets
Investment in Joint Ventures – similar to PFRS 11 (refer to Chapter 9 for overview discussion)

The Effects of Changes in Foreign Exchange Rates – refer to Chapters 6 for detailed discussions and illustrations

Borrowing Costs
• Borrowing costs – are interest and other expenses incurred by an entity in connection with the borrowing of funds.
• Qualifying asset – is an asset that necessarily takes a substantial period of time to get ready for its intended use or
sale.
• Composition of Borrowing Costs
• Recognition: Benchmark Treatment
• Recognition: Allowed Alternative Treatment
• Borrowing Costs Eligible for Capitalization
• Commencement of Capitalization
• Suspension of Capitalization
• Cessation of Capitalization
Provisions, Contingent Liabilities and Contingent Assets

• Constructive Obligation – is an obligation that derives from an entity’s actions where:

1. By an established pattern of past practice, published policies, or a sufficiently specific current statement, the entity
has indicated to other parties that it will accept certain responsibilities; and
2. As a result, the entity has created a valid expectation on the part of those other parties that it will discharge those
responsibilities.
• Contingent Asset
• Contingent Liability
• Executory Contracts
• Legal Obligation
• Obligating Event
• Onerous Contract
• Provision – is a liability of uncertain timing or amount.
• Restructuring – is a program that is planned and controlled by management, and materially changes
• Criteria for Recognition
• Measurement
• Reimbursements
• Changes in Provisions
• Use of Provisions
• Application of the Recognition and Measurement Rules
Financial Reporting
• Accounting Policies
• Cash
• Cash Equivalents
• Cash Flows
• Change in accounting estimate
• Financial Reporting
• General Purpose Financial
• Material omissions or misstatements of items
• Notes – contain information in addition to that presented in the Statement of Financial Position, Statement of
Financial Performance, Statement of Changes in Net Assets/Equity, and Statement of Cash Flows. Notes provide
narrative descriptions or disaggregation of items disclosed in those statements and information about items that do
not qualify for recognition in those statements.
• Prospective application of a change in accounting policy – means applying the new accounting policy to
transactions, other events and conditions occurring after the date as at which the policy is changed.
• Prospective application of recognizing the effect of a change in an accounting estimate – means recognizing the
effect of the change in the accounting estimate in the current and future periods affected by the change.
• Retrospective application – is applying a new accounting policy to transactions, other events, and conditions as if
that policy had always been applied.
• Retrospective restatement – is correcting the recognition, measurement, and disclosure of amounts of elements of
financial statements as if a prior period error had never occurred.
• Purpose of Financial Statements
• Responsibility for Financial Statements
• Components of Financial Statements
• Qualitative Characteristics of Financial Reporting
• Fair Presentation and Compliance with PPSAS
• Reporting Period
• Statement of Financial Position
• Current/Non-current Distinction
• Information to be presented on the Face of Statement of Financial Position
• Statement of Financial Performance
• Information to be presented in the Statement of Financial Performance
• Statement of Changes in Net Assets/Equity
• Statement of Comparison of Budget and Actual Amount. A separate additional financial statement for comparison of
budget and actual amounts shall be prepared since the financial statements and budget of NGAs are not on the same
accounting basis.
• Statement of Cash Flows
• Presentation of Statement of Cash Flows
• Direct Method of Reporting Cash Flows from Operating Activities
• Reporting Cash Flows from Investing and Financing Activities
• Reporting Cash Flows on a Net Basis
• Foreign Currency Cash Flows
• Unrealized Gains and Losses
• Components of Cash and Cash Equivalents
• Notes to Financial Statements
• Structure of the Notes to Financial Statements
• Contents of Notes to FS
• Events After the Reporting Date
• Adjusting Events After the Reporting Date
• Disclosures of Events after the Reporting Date
• Selection and Consistency in the Application of Accounting Policies
• Changes in Accounting Policies
• Accounting for Changes in Accounting Policies
• Disclosures for Changes in Accounting Policy
• Changes in Accounting Estimates
• Disclosures for Changes in Accounting Estimates
• Errors
• Limitations of Retrospective Restatement of Prior Period Errors
• Disclosure of Prior Period Errors
• Interim Financial Statements. Financial statements that are required to be prepared at any given period or at a financial
reporting period without closing the books of accounts
• Preparation and Submission of Other Reports. In addition to the set of financial statements enumerated in Section 5 of this Chapter, the
following reports/ schedules/statements shall be submitted to GAS, COA:
1. Pre-Closing Trial Balances
2. Post-Closing
3. Other schedule
- Regional Breakdown of Income
- Regional Breakdown of Expenses
• Trial Balance
• Pre-Closing Trial Balance
• Adjusting Journal Entries
• Other Adjustments. The following adjustments shall also be made (if applicable) for fair presentation of the results of operation
of the entity in the financial statements:
1. Unused NCA (National)
2. Petty Cash Fund
3. Unreleased Commercial Checks
4. Allowance for/Accumulated Impairment Losses of asset accounts
5. Write-down of Inventories
6. Correction/Reclassification Entries
7. Adjustment for reversal of Impairment Losses
8. Depreciation Expense
9. Exchange differences on foreign currency
10. Other adjustments
• Adjustment for Accrued Items
• Adjustment for Deferred Items
• Petty Cash Fund Adjustments
• Reversion of Unused Notice of Cash Allocation. For NGAs receiving subsidies from the national government in the form
of NCA, adjusting journal entry shall be made for the reversion of the unused or unutilized NCA at the end of the
accounting period. The entry for lapsed regular NCA and those issued for the payment of accounts payable/retirement
gratuity/terminal leave, shall be:
Account Title
Subsidy from National Government xxx
Cash-Modified Disbursement System (MDS),Regular xxx

• Adjustments for Unreleased Commercial Checks

• Closing Journal Entries. Closing journal entries are entries which close out the balances of all nominal/temporary and
intermediate accounts at the end of the year. The closure will reduce the balance of those accounts to zero. The nominal
and intermediate accounts that shall be closed at the end of the year are as follows:
a. Balance of all revenue accounts to the “Revenue and Expense Summary” account;
b. Balance of all expense accounts to the “Revenue and Expense Summary” account;
c. Balance of the “Revenue and Expense Summary” to the “Accumulated Surplus/ (Deficit)” account;
d. Balance of all “Cash-Treasury/Agency Deposit, Regular” to the “Accumulated Surplus/(Deficit)” account; and
e. Other Closing Entries.
• Post-Closing Trial Balance
Consolidated and Separate Financial Statements. This provides the standards, policies, guidelines and procedures in the
Consolidation of Financial Statements. It is an accounting process that allows an entity to combine its financial data with
information from its controlled entities and present financial reports as a single entity which is the whole National
Government.
• Scope of Consolidated Financial Statements. Consolidated financial statements shall include all controlled
entities of the controlling entity, except where there is evidence that:
a. control is intended to be temporary because the controlled entity is acquired and held exclusively with a view
to its disposal within twelve months from acquisition; and
b. management is actively seeking a buyer
• A controlled entity is not excluded from consolidation simply because the investor is a venture capital organization,
mutual fund, unit trust, or similar entity.
• A controlled entity is not excluded from consolidation because its activities are dissimilar to those of the other
entities within the economic entity, for example, the consolidation of GBEs with entities in the budget sector.
Relevant information is provided by consolidating such controlled entities and disclosing additional information in
the consolidated financial statements about the different activities of controlled entities.
Bank Reconciliation. This covers the preparation of the bank reconciliation statements for “Cash in Bank” and
“Cash-Modified Disbursement System (MDS)” accounts including the proposed adjusting entries.

Cash Advance for Petty Operating Expenses. The Petty Cash Fund (PCF) to be set up shall be sufficient for
the recurring petty operating expenses of the agency for one month. It shall be maintained using the Imprest
System. All replenishments shall be directly charged to the expense account and at all times, the PCF shall be
equal to the total cash on hand and the unreplenished expenses. The PCF shall be replenished as soon as
disbursements reach at least 75% or as needed.
Accounting Systems
The General Accounting Plan (GAP) shows the overall accounting system of a government agency/unit. It includes the source documents,
the flow of transactions and its accumulation in the books of accounts and finally the conversion into financial information/data presented in
the financial reports. The following accounting systems are:
1. Budgetary Accounts System
2. Receipt/Income and Deposit System
3. Disbursement System
4. Financial Reporting System

The National Budget

The national budget is a plan for financing the government activities for a fiscal year prepared and submitted by responsible executive to a
representative body whose approval and authorization are necessary before the plan can be executed.

Balance Budget
It is a budget where the proposed expenditures are equal to or less than the estimated revenues. Currently, the government is operating with a
budget deficiency. As such, it is serving government priorities to achieve a balance budget by increasing revenues and cutting on
expenditures.

Performance-Informed Budgeting
It is a budgeting approach that uses performance information to assist in deciding where funds will go. Performance information, both
financial and non-financial information, is presented in the appropriations document, which provides for the context for the programs,
activities and projects pursued by the different agencies of government.
Kinds of Budget
1. As to Nature
a. Annual Budget – a budget which covers a period of one year. It is the basis of an annual appropriation.
b. Supplemental Budget – a budget which supplements or adjusts a previous budget which is deemed inadequate for
the purpose it is intended. It is the basis for a supplemental appropriation.
c. Special Budget – a budget of special nature and generally submitted to special forms on account that itemizations are
not adequately provided in the Appropriation Act or that amounts are not at all included in the Appropriations Act.
2. As to Basis
a. Performance budget – a budget emphasizing the program or services conducted and based on functions, activities
and project, which focus attention upon the general character and nature of work to be done, or upon the services to
be rendered.
b. Line-item Budget – a budget the basis of which is the objects of expenditures such as salaries and wages, travelling
expenses, freight, supplies and materials, machinery and equipment, etc.
3. As to Approach and Technique
a. Zero-based Budgeting – a process which requires systematic consideration of all programs, projects and activities
with the use of define ranking procedures. In this approach, activities are analyzed and presented in “decision
packages” or key budgetary inclusions.
b. Incremental Approach – a budget where only additional requirements need justifications. It focuses analysis of
incremental changes in the budget and maybe done within the context of performance and program budgeting.
The Budget Process (Budgetary Procedures)/Budget Cycle
One of the distinguishing characteristics of government accounting is the requirement of a budget which shall be the basis for all
expenditures. Budgeting is performed on a basis consistent with the revenue and appropriation systems. The appropriation system provides
for the control and ultimate disbursement of funds. The budgetary procedures are as follows:
1. Budget Preparation and Presentation. It covers estimation of government revenues, the determination of budgetary priorities and
activities within the constraints imposed by available revenues and borrowing limits, and the translation of approved priorities and
activities into expenditure levels for a budget year.
The budget preparation begins with the issuance of a budget call issued by the Department of Budget and Management (DBM).
This document outlines the specific guidelines on the preparation of the agency budget estimates to be submitted to the DBM. The DBM
then consolidates all budgets to form a government-wide budget to be submitted to the President for final approval before it will be
forwarded to the Congress.
2. Budget Legislation and Authorization. This procedure is a prerogative of the Congress, which refers to the enactment of the General
Appropriations Bill based on the budget of “receipts and expenditures” into Appropriations Act. Series of budget hearings/debate is
conducted whereby the various heads of agencies would explain to Congress the details of their respective budgets. Appropriations are
approved by the legislative body in the form of General Appropriations Act which covers most of the expenditures of the government.
This Act will be forwarded to the President to sign it into law.
3. Budget Execution or Operation. This covers the various operational aspects of budgeting, thus making budgeting to serve as one of the
principal tools of management control to insure that public funds are spent only for the specific purpose for which they are appropriated.
This aspect involves also the regulation of funds release, the scheduling of preferred activities, etc. The responsibility for monitoring the
budget execution rests primarily with the DBM.
4. Budget Accountability. This aspect focuses on tracking, monitoring, and evaluation of expenditures and performance. This is simply
achieved by comparing performance with predetermined plans.
Budgetary Accounts
Budgetary accounts comprise of the following items:
1. Appropriation – it refers to an authorization made by law or other legislative enactment, directing the
payment of goods and services out of government funds under specified conditions or for special
purposes.
2. Allotment – it refers to the authorization issued by the DBM to the Agency, which allows it to incur
obligations, for specified amounts, within the legislative appropriation.
3. Obligation – it refers to the commitment by a government agency arising from an act of a duly
authorized official, which binds the government to the immediate or eventual payments of a sum of
money.
Obligation accounting is modified to simplify the procedures in the incurrence in liquidation of
obligations and the recording of the budgetary accounts (allotments and obligations incurred and
liquidated).
The Expense Accounts
1. Personal Services (PS) – items under this account includes basic pay, all authorized allowances, bonus, cash, gifts,
incentives and other personal benefits of officials and employees of the government.
2. Maintenance and Other Operating Expenses (MOOE) – items under this account includes expenses necessary
for the regular operations of an agency like, among others, travelling expenses, training and seminar expenses,
water, electricity, supplies expense, maintenance of property, plant and equipment, and other maintenance and
operating expenses.
3. Financial Expenses (FE) – items under this account includes bank charges, interest expense, commitment charges,
documentary stamp expense and other financial charges. It also includes those losses incurred relative to foreign
exchange transactions and debt service subsidy to Government Owned Controlled Corporations (GOCCs).
Accounting Procedures – Books of National Government Agency
Only the basic accounting procedure for a national government agency will be presented and illustrated in the succeeding
discussions.

Accounting for Disbursements and Related Transactions

The disbursement activities of the National Government Agencies shall start from the receipt of Notice of Cash Allocation
(NCA) from the Department of Budget and Management. Government agency cannot pay its payables/obligations without
the NCA, since it is the sole purpose of the agency in receiving their NCA for incurrence and eventual payment of its
obligations.
The Notice of Cash Allocation
The NCA received by the agency may be net of the amount of the taxes to be withheld by the agency, because of the Tax
Remittance Advice (TRA) System. The NCA may be used for payment of personal services, maintenance and other
operating expenses, financial expenses, capital outlay, and other miscellaneous transactions.

Notice of Cash Allocation (NCA) is an authorization issued by the Department of Budget and Management to government
agencies to withdraw cash from the National Treasury through the issuance of Modified Disbursement System (MDS)
checks or other authorized mode of disbursements.

The receipt of Notice of Cash Allocation by the agency shall be recorded in the Regular Agency (RA) books as debit to
account “Cash-Modified Disbursement System (MDS), and credit to account “Subsidy from National Government.”

Pursuant to the Tax Remittance Advice (TRA) system, the NCA released by the Department of Budget and Management to
the agency is reduced by the estimated taxes expected to be remitted by the Agency to the Bureau of Internal Revenue (BIR)
through the TRA.
Accounting for Obligation
Obligation refers to a commitment by a government agency arising from an act of a duly authorized official which binds the
government to the immediate or eventual payment of a sum of money. The agency is authorized to incur obligations only in
the performance of activities which are in pursuits of its functions and programs authorized in appropriation acts/laws within
the limit of the Allotment Release Order (ARO).

Disbursements
Disbursements constitute all cash paid out during a given period either in currency (cash) or by check. It may also mean the
settlement of government payables/obligations by cash or by check. Disbursements refer to the settlement of governments
payables/obligations by cash or by check. Typical transactions for which disbursements are made are as follows:
1. Personal Services
2. Maintenance and Other Operating System
3. Capital Outlay
4. Financial Expenses

Disbursements shall be covered by Disbursement Voucher (DV) or payroll and paid either by check or in cash.
Payment Out of the Petty Cash Fund
Petty Cash Fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency
and petty expenses of the local government unit for one month.

Disbursements by Check

The following are the two types of checks being issued by government agencies:
1. Modified Disbursement System (MDS) Checks – issued by government agencies chargeable against the account
of the Bureau of Treasury, which are maintained with different MDS – Government Servicing Banks. These are
covered by Notice of Cash Allocation (NCA), an authorization issued by the Department of Budget and
Management to government agencies to withdraw cash from the National Treasury through the issuance of the MDS
checks or other authorized mode of disbursements.
2. Commercial Checks – issued by the government agencies chargeable against the Agency Checking Account with
government servicing banks. These are covered by income/receipts authorized to be deposited with authorized
government depository banks.
Disbursements by Cash
Disbursements by cash shall be made from cash advances drawn and maintained in accordance with Commission on Audit
rules and regulations. Cash payments shall be made based on duly approved payroll/disbursements vouchers.
Components of General Purpose Financial Statements. The complete set of GPFSs consists of:
Statement of Financial Position
(NAME OF THE ENTITY)
STATEMENT OF FINANCIAL POSITION
(ALL FUNDS OR NAME OF FUND)
AS AT DECEMBER 31, 20x5
Note 20x5 20x4
ASSETS
Current Assets
Cash and Cash Equivalents xxx xxx
Investments xxx xxx
Receivables xxx xxx
Inventories xxx xxx
Other Current Assets xxx xxx
Total Current Assets xxx xxx
Non-Current Assets
Investments xxx xxx
Investment Property xxx xxx
Property, Plant and Equipment xxx xxx
Biological Assets xxx xxx
Intangible Assets xxx xxx
Other Non-Current Assets xxx xxx
Total Non-Current Assets xxx xxx
Total Assets xxx xxx
LIABILITIES
Current Liabilities
Financial Liabilities xxx xxx
Inter-Agency Payables xxx xxx
Trust Liabilities xxx xxx
Deferred Credits/Unearned Income xxx xxx
Provisions xxx xxx
Other Payables xxx xxx
Total Current Liabilities xxx xxx
Non-Current Liabilities
Financial Liabilities xxx xxx
Trust Liabilities xxx xxx
Deferred Credits/Unearned

Income xxx xxx

Provisions xxx xxx
Other Payables xxx xxx
Total Non-Current Liabilities xxx xxx
Total Liabilities xxx xxx
Total Assets less Total Liabilities xxx xxx
NET ASSETS/EQUITY
Accumulated Surplus/(Deficit) xxx Xxx
Total Net Assets/Equity xxx xxx
This statement should be read in conjunction with the accompanying notes.
 Statement of Financial Performance
(NAME OF THE ENTITY)
STATEMENT OF FINANCIAL PERFORMANCE
(ALL FUNDS OR NAME OF FUND)
FOR THE YEAR ENDED DECEMBER 31, 20x5
Note 20x5 20x4
Revenue
Tax Revenue xxx xxx
Service and Business Income xxx xxx
Shares, Grants and Donations xxx xxx
Gains xxx xxx
Total Revenue xxx xxx
Less: Current Operating Expenses
Personnel Services xxx xxx
Maintenance and Other Operating Expenses xxx xxx
Financial Expenses xxx xxx
Direct Costs xxx xxx
Non-Cash Expenses xxx xxx
Total Current Operating Expenses xxx xxx
Surplus/(Deficit) from Current Operations xxx xxx
Net Financial Assistance/Subsidy xxx xxx
Sale of Assets xxx xxx
Gains xxx xxx
Losses (xxx) (xxx)
Surplus/(Deficit) for the period xxx xxx
 Statement of Changes in Net Assets/Equity

(NAME OF THE ENTITY)

STATEMENT OF CHANGES IN NET ASSETS/EQUITY
(ALL FUNDS OR NAME OF FUND)
FOR THE YEAR ENDED DECEMBER 31, 20x5
Accumulated
Surplus/ (Deficit)
20x5 20x4
Balance at January 1 xxx xxx
Add/(Deduct):
Changes in accounting policy xxx xxx
Prior period errors xxx xxx
Other adjustments xxx xxx
Restated balance xxx xxx
Add/(Deduct):
Changes in Net Assets/Equity for the Calendar Year
Surplus/(Deficit) for the period xxx xxx
Adjustment of net revenue recognized directly in net assets/equity 1 xxx xxx
Others 2 xxx xxx
Balance at December 31 xxx xxx
*1 – Net revenue deposited with the National Treasury (revenue including constructive receipt of income by Foreign Based Agencies and
income remitted by agencies thru TRA)

*2 – Direct adjustments to Net Assets/Equity which are not revenues or expenses (e.g. transfer of PPE from one unit of the agency to
another directly charged to Accumulated Surplus/(Deficit))
 Statement of Cash Flows
(NAME OF THE ENTITY)
STATEMENT OF CASH FLOWS
(ALL FUNDS OR NAME OF FUND)
FOR THE YEAR ENDED DECEMBER 31, 20x5
Cash Flows From Operating Activities 20x5 20x4
Cash Inflows
Receipt of Notice of Cash Allocation xxx xxx
Proceeds from sale of goods and service xxx xxx
Collection of Income/Revenues xxx xxx
Receipt of Assistance&Subsidy from Other NGAs, LGUs and GOCCs xxx xxx
Collection of Receivables xxx xxx
Receipt of Inter-Agency Fund Transfers xxx xxx
Receipt of Intra-Agency Fund Transfers xxx xxx
Trust Receipts xxx xxx
Other Receipts xxx xxx
Adjustments xxx xxx
Total Cash Inflows xxx xxx
Cash Outflows xxx xxx
Replenishment of Negotiated MDS Checks (for BTr) xxx xxx
Remittance to National Treasury xxx xxx
Payment of Expenses xxx xxx
Purchase of Inventories xxx xxx
Purchase of Consumable Biological Assets xxx xxx
Grant of Cash Advances xxx xxx
Prepayments xxx xxx
Refund of Deposits xxx xxx
Payment of Accounts Payable xxx xxx
Remittance of Personnel Benefit Cont. & Mandatory Deductions xxx xxx
Grant of Financial Assistance/Subsidy xxx xxx
Release of Inter-Agency Fund Transfers xxx xxx
Release of Intra-Agency Fund Transfers xxx xxx
Other Disbursements xxx xxx
Reversal of Unutilized NCA xxx xxx
Cash Flows from Investing Activities xxx xxx
Cash Inflows xxx xxx
Proceeds from Sale of Investment Property xxx xxx

Proceeds from Sale/Disposal of Property, Plant and Equipment xxx xxx

Sale of Investments xxx xxx
Receipt of Cash Dividends xxx xxx
Proceeds from Matured/Return of Investments xxx xxx
Collection of Long-Term Loans xxx xxx
Proceeds from Sale of Other Assets xxx xxx
Adjustments xxx xxx
Total Cash Inflows xxx xxx
Cash Outflows
Purchase/Construction of Investment Property xxx xxx

Purchase/Construction of Property, Plant and Equipment xxx xxx

Investments xxx xxx
Purchase of Bearer Biological Assets xxx xxx
Purchase of Intangible Assets xxx xxx
Grant of Loans xxx xxx
Adjustments xxx xxx
Total Cash Outflows xxx xxx
Net Cash Provided by (Used in) Investing Activities xxx xxx
Cash Flows From Financing Activities
Cash Inflows
Proceeds from issuance of bills and bonds xxx xxx
Proceeds from Domestic and Foreign Loans xxx xxx
Adjustments xxx xxx
Total Cash Inflows xxx xxx
Cash Outflows
Payment of Long-Term Liabilities xxx xxx
Redemption of Bills/Bonds Issued xxx xxx
Payment of Interest Expense (BTR/NG Debt) xxx xxx
Adjustments xxx xxx
Total Cash Outflows xxx xxx
Net Cash Provided by (Used in) Financing Activities xxx xxx
Increase (Decrease) in Cash and Cash Equivalents xxx xxx
Effects of Exchange Rate Changes on Cash and Cash Equivalents xxx xxx
Cash and Cash Equivalents, January 1 xxx xxx
Cash and Cash Equivalents, December 31 xxx xxx
 Statement of Comparison of Budget and Actual Amount

(NAME OF THE ENTITY)

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT
(ALL FUNDS OR NAME OF FUND)
FOR THE YEAR ENDED DECEMBER 31, 20x5
Budgeted Amounts Actual Amounts Difference
Particulars on Comparable Final Budget
Original Final Basis and Actual
Notes
RECEIPTS
Tax Revenue xxx xxx xxx xxx
Services and Business Income xxx xxx xxx xxx
Assistance and Subsidy xxx xxx xxx xxx
Shares, Grants and Donations xxx xxx xxx xxx
Gains xxx xxx xxx xxx
Others xxx xxx xxx xxx
Total Receipts xxx xxx xxx xxx
PAYMENTS
Personnel Services xxx xxx xxx xxx
Maintenance and Other Operating
Expenses xxx xxx xxx xxx
Capital Outlay xxx xxx xxx xxx
Financial Expenses xxx xxx xxx xxx
Others xxx xxx xxx xxx
Total Payments xxx xxx xxx xxx

NET RECEIPTS/PAYMENTS
This statement should be read in conjunctionxxx xxx
with the accompanying notes. xxx xxx
 Notes to Financial Statements
Pro-forma Notes to Financial Statements Reference
A. Header
Name of Entity
Notes to [Consolidated] Financial Statements PPSAS 1
For the year ended December 31, 20x5

1. Statement of Compliance and Basis of Preparation of Financial Statements

The [consolidated] financial statements have been prepared in accordance with and
comply with the Philippine Public Sector Accounting Standards (PPSAS) issued by PPSAS 1.129
the Commission on Audit per COA Resolution No. 2014-003 dated January 24, 20x4. PPSAS 2
The [consolidated] financial statements have been prepared on the basis of historical PPSAS 6
cost, unless stated otherwise. The Statement of Cash Flows is prepared using the
direct method.

2. Statement of Compliance and Basis of Preparation of Financial Statements

The [consolidated] financial statements have been prepared in accordance with and
comply with the Philippine Public Sector Accounting Standards (PPSAS) issued by
the Commission on Audit per COA Resolution No. 2014-003 dated January 24, 20x4.
PPSAS 1.129
The [consolidated] financial statements have been prepared on the basis of historical
PPSAS 2
cost, unless stated otherwise. The Statement of Cash Flows is prepared using the
PPSAS 6
direct method.

3. Summary of Significant Accounting Policies

PPSAS 1, 6
3.1 Basis of accounting
The [consolidated] financial statements are prepared on an accrual basis in
accordance with the Philippine Public Sector Accounting Standards (PPSAS).
ILLUSTRATIVE ENTRIES
REGULAR AGENCY FUND [Note: Recording of Obligation for PS, MOOE, CO and FE be posted (memorandum entry) to Obligation & Request Status (ORS);
RAODPS; RAODMOOE; RAODCO; RAODFE]

Transactions National Government Agency Books Dr. Cr.

Appropriations, Allotments, and Obligations
1. Receipt of GAA Posting to the appropriate RAPAL
Personal Services (PS) P 2,560
Maintenance & Other Oper. Expenses (MOOE) 2,500
Capital outlay (CO) 10,360
Financial Expenses (FE) ___ 540
P15,960

2. Receipt of Allotment from the DBM for: Posting to the appropriate RAPAL &
Personal Services (PS) P 2,460 RAODPS
Maintenance & Other Oper. Expenses (MOOE) 2,400 RAODMOOE
Capital outlay (CO) 10,260 RAODCO
Financial Expenses (FE) ___ 480 RAODFE
P15,600

3. Incurrence of Obligation for: Posting to ORS to the appropriate:

Personal Services (PS) P 2,460 RAODPS
Maintenance & Other Oper. Expenses (MOOE) 2,400 RAODMOOE
Capital outlay (CO) 10,260 RAODCO
Financial Expenses (FE) ___ 480 RAODFE
P15,600

4. Receipt of Notice of Cash Allocation (NCA) from DBM P15,600 Cash – MDS, Regular 15,600
Subsidy from National Gov’t. 15,600
Personal Services

5. Set-up payable to Officers & Employees Salaries & Wages – Regular 2,880
Regular pay: Personal Relief P 2,880 PERA 720
Allowance (PERA) ___720 Due to BIR 840
Total Gross P 3,600 Due to GSIS 360
Less: Salary deductions: Due to PhilHealth 180
Withholding tax 840 Due to Pag-IBIG 120
GSIS Life and Retirement Premium 360 Due to Off. & Employees 2,100
PhilHealth premiums 180
Pag-ibig premiums ___120
Net P 2,100

6. Granting of cash advances for payroll P 2,100 Advances for Payroll 2,100
Cash – MDS, Regular 2,100
7. Liquidation of payroll fund Due to Officers and Employees 2,100
Advances for Payroll 2,100

Remittance of salary deductions Due to GSIS 360

(employees share) Due to PhilHealth 180
Due to Pag-IBIG 120
Cash – MDS, Regular 660

8. Remittance of Government’s share:

Retirement and life insurance premium P 360 Retirement & Life Insurance Premium 360
Pag-ibig contributions 120 Pag-ibig contributions 180
PhilHealth contributions __180 Philhealth contributions 120
P 660 Cash-MDS, Regular 660
 Maintenance and Other Operating Expenses

9. Payment of two years rent P 180 Prepaid Rent 180

Cash – MDS, Regular 180

10. Payment of electricity and telephone bills

Electricity bill P 360 Electricity expenses 360
Telephone bill 60 Telephone expenses 60
P420 Cash – MDS, Regular 420

11. Grant of cash advance to Ms. Kennetha for traveling expense P 24 Advances to Officers & Employees 24
Cash – MDS, Regular 24

12. Liquidation of cash advance for travel of Ms. Kennetha P 20 Travel expenses 20
Advances to Officers & Employ. 20

13. Receipt and deposit of refund of cash advance For travelling expenses of Ms. P 4 Cash-collecting officers 4
Kennetha Advanced to Off. & Employees 4
Cash – Treasury Agency Deposit Regular 4
Cash-collecting officers 4

14. Purchase of office supplies P 240 Office supplies inventory 240

Accounts payable 240

15. Paid the purchase order less withholding tax of P 24 Accounts payable 240
Due to BIR 24
Cash – MDS, Regular 216

16. Issuance of the following office supplies P 100 Office supplies expense 100
Office supplies inventory 100

17. Establishment of Petty Cash Fund for MOOE P 42 Petty Cash Fund 42
Cash – MDS, Regular 42

18. Purchase of sign pens, ball pens, white board rd and pencils thru PCF P 42 No entry required

19. To record obligation for request of replenishment the PCF for P42 Memorandum entry/posting of ORS to the appropriate
RAODMOOE

20. To replenish PCF, before the end of the year. P 36 Office Supplies Expenses 36
Cash – MDS, Regular 36

21. Closing of PCF within the year due to retirement of the PCF Custodian (P42 – P6) P 6 Cash – collecting officer 6
Petty Cash 6

22. Deposit of collection from refund of PCF P 6 Subsidy from National Government 6
Cash – collecting officer 6

23. Establishment of PCF for MOOE P 42 Petty Cash Fund 42

Cash – MDS, Regular 42
 Capital Outlay

Purchase of Office Equipment – Cash Basis

24. Cash purchase of office equipment: Office Equipment 500
Invoice price P 450 Cash – MDS, Regular 460
Installation cost 30 Due to BIR 40
Test run cost _____20
Total P 500
Less: Withholding tax ____40
Net amount paid P 460

Purchase of Agricultural Equipment – On Account

25. An entity purchased a threshing machine on account at Agricultural & Forestry Equipment 196
P200, credit terms of 2/10, n/30 Accounts payable (P200 x .98) 196

lf: Payment of machinery within the discount Period Accounts payable 196
Due to BIR 12
Cash – MDS, Regular 184
lf: Payment of machinery beyond the discount Period Accounts payable 196
Other losses 4
Due to BIR 12
Cash – MDS, Regular 184
 Construction of Buildings
26. Receipt of cash from the contractor paid as Cash – collecting officer 75
performance bond Guaranty/Security Deposits
Payable 75
27. Deposit of cash performance bond to BTr - AGDB Cash–Treasury/Agency Dep., Trust 75
Cash – collecting officer 75
28. Payment of 15% of contract for mobilization fee Advances to Contractors 120
(adv. to contractors) amounting to (P800 x 15%) P 120 Cash – MDS, Regular 120
29. Payable on the first progress billing for Construction In Progress – Buildings
construction of building: & Other Structures 400
50% of P800 P 400 Accounts payable 340
Less: Recoupment of advances to contractors ____60 Advances to Contractors 60
Net Amount P 340
30. Payment of first progress billings, withholding tax Accounts payable 340
Accounts payable P 340 Due to BIR 23.8
Less: 10% Retention 34 Guaranty/Security Deposits
Withholding tax __23.8 Payable 34
Net P282.2 Cash – MDS, Regular 282.2
31. Payable on the final billing for construction of Construction In Progress – Buildings
building: & Other Structures 400
50% of P800 P 400 Accounts payable 340
Less: Recoupment of advances 60 Advances to Contractors 60
Liquidated damages for delayed in
completion ____8
Net Amount P 332
32. Collection of liquidated damages P 8 Cash – collecting officer 8
Miscellaneous income 8
33. Payment of final progress billings, withholding tax Accounts payable 340
Accounts payable P 340.0 Due to BIR 23.8
Less: 10% Retention 34.0 Guaranty/Security Deposits
Withholding tax __23.8 Payable 34
Net P282.2 Cash – MDS, Regular 282.2
34. Turn-over and acceptance of building Buildings 800
contract amount Construction In Progress –
Buildings & Other Structures 800
35. Return of performance bond Guaranty/Security Deposits Payable 75
Cash – MDS, Trust 75
36. Release of Retention Fee (P75 + P34 + P34– P75) = Guaranty/Security Deposits Payable 68
P68 Cash – MDS, Regular 68
Purchase of Construction Equipment – On Installment
37. An entity purchased a bulldozer at an installment price of Construction & Heavy Equipment 270
P300; terms, P50 down payment and the balance is payable if 4 Accounts payable 220
annual installment. The cash price of the heavy equipment is Cash-MDS, Regular
P270.
38. First installment payment P 30 Accounts payable 27
Interest expense 3
Cash – MDS, Regular 30
39. Remittance of taxes thru Tax Remittance Advice
a. Constructive receipt of NCA
No. 5 P 840.0 Cash- Tax Remittance Advice 963.6
No. 15 24.0 Subsidy from National Gov’t. 963.6
No. 24 40.0
No. 25 12.0
No. 30 23.8
No. 33 ____23.8
Total. P 963.6
b. Remittance of taxes thru TRA Due to BIR 963.6
Cash-Tax Remittance Advice 963.6
 Revenue
41. Billing of revenue/income
Rent/Lease Income P 300 Accounts Receivable 3,000
Waterworks System Fees 500 Rent/Lease Income 300
Power Supply System Fees 1,000 Waterworks System Fees 500
Seaport System Fees 450 Power Supply System Fees 1,000
Landing and Parking Fees 750 Seaport System Fees 450
Total P3,000 Landing and Parking Fees 750
42. Billed Revenue/Income – current year
a. Collection
Rent/Lease Income P 250 Cash-Collecting Officers 2,000
Waterworks System Fees 500 Accounts Receivable 2,000
Power Supply System Fees 750
Seaport System Fees 400
Landing and Parking Fees _100
Total P2,000
b. remittance Cash-Treasury/Agency Deposit, Regular 2,000
Cash-Collecting Officers 2,000
43. Unbilled Tax Revenue
a. Collection thru Agency Collecting Officer Cash-Collecting Officers 2,700
Travel Tax P 200 Travel Tax 200
Immigration Tax 2,500 Immigration Tax 2,500
Total P2,700
b. Remittance
Cash-Treasury/Agency Deposit, Regular 2,700

Cash-Collecting Officers 2,700

c. Direct deposit thru Authorized Agent Banks, Travel tax P 750 Cash-Treasury/Agency Deposit, Regular 2,750
Immigration tax 2,000 Travel Tax 750
P2,750 Immigration Tax 2,000
44. Unbilled Service Income
a. Collection
Permit Fees P 2,000 Cash-Collecting Officers 3,250
Registration Fees 750 Permit Fees 2,000
Licensing Fees 500 Registration Fees 750
P 3,250 Licensing Fees 500
b. Remittance Cash-Treasury/Agency Deposit, Regular 3,250
Cash-Collecting Officers 3,250
45. Unbilled Business Income without authority to use
a. Collection:
Cash-Collecting Officers
Affiliation Fees P 400 3,000
Affiliation Fees 400
Examination Fees 500
Examination Fees 500
Seminar/Training Fees 1,000
Seminar/Training Fees 1,000
Guarantee Income 400
Guarantee Income 400
Fines & Penalties – Business Income 200
Fines & Penalties- Business Income 200
Other Business Income __500
Other Business Income 500
Total P3,000
Cash-Treasury/Agency Deposit, Regular
b. Remittance: 3,000
Cash-collecting officer 3,000
Adjusting Entries
46. Depreciation of the following:
Equipment P 6Depreciation expense - eqpt 6
Buildings 14Depreciation expense – bldgs. 18
Construction equipment 10Depreciation expense – const. eqpt. 10
Agricultural & Forestry Equipment ____5Depreciation expense – agr. & for. 5
P 35 Acc depreciation – eqpt. 6
Acc depreciation - bldgs. 14
Acc depreciation – eqpt. 10
Acc depreciation - agr. & forestry 5
47. Rent expense for the year, P180/2 years P 90 Rent expense 90
Prepaid rent 90
Impairment loss – Loans & receivable P120 Impairment loss–Loans & receivable 120
Allowance for Impairment –A/R 120
48. Reversion of the Unused Subsidy from National Government Subsidy from National Govt’ 16,557.6
representing NCA/Adjustment of Unused NCA Cash – MDS, regular 16,557.6
Closing Entries:
a. Income Account Rent/Lease Income 300
Waterworks System Fees 500
Power Supply System Fees 1,000
Seaport System Fees 450
Landing and Parking Fees 750
Travel Tax 950
Immigration Tax 4,500
Permit Fees 2,000
Registration Fees 750
Licensing Fees 500
Affiliation Fees 400
Examination Fees 500
Seminar/Training Fees 1,000
Guarantee Income 400
Fines & Penalties- Business Income 200
Other Business Income 500
Revenue & Expense Summary 14,700
b. Expense Accounts Revenue & Expense Summary 5,092
Salaries & Wages Regular 2,880
PERA 720
Retirement and Life Insurance 360
PhilHealth Contributions 180
Pag-ibig Contributions 120
Electricity Expenses 360
Telephone Expenses 60
Travel Expenses 20
Office supplies expense 136
Depreciation expense – eqpt 6
Depreciation expense – bldgs. 18
Depreciation exp. – const. eqpt. 10
Depreciation exp. – agr. & for. 5
Rent/Lease Expenses 90
Impairment Loss - Loans Receivables 120
Other losses 4
Interest expense 3
c. Close SNG to Revenue and Expense Summary Subsidy from National Govt 16,557.6
Revenue & Expense Summary 16,557.6
d. Close Revenue and Expense Summary Revenue & Expense Summary 26,165.6
Accumulated Surplus/(Deficit) 26,165.6
e. Cash Deposit Account Accumulated Surplus/(Deficit) 13,704
Cash-Treasury/Agency Deposit Regular 13,704
Appendix: Grants with Condition
Example: The NG received a foreign grant amounting to P10 million for the construction of a railroad system. Under the terms of the grant,
the construction project shall be completed within a period of two years from the receipt of the grant, otherwise, the money shall be returned
to the grantor. The money can only be used as stipulated and the NG is required to include a note in the financial statement detailing how the
money was spent. The Department of Public Works and Highways (DPWH) will be the implementing entity. The transactions shall be
recognized as follows:

a. Receipt of the Grant

Books of the Implementing NGA – DPWH
Cash-Modified Disbursement System (MDS), Special Account 10,000,000
Subsidy from National Government 10,000,000
b. Purchase of construction materials and payment for labor for the construction of a railroad system amounting to P10,000,000
Books of the Implementing NGA – DPWH
Construction in Progress- Infrastructure Assets 10,000,000
Cash-Modified Disbursement System (MDS), Special Account 10,000,000
c. Receipt of the report from DPWH for the completion of the construction of a railroad system amounting to P10,000,000
Books of the Implementing NGA – DPWH : No entry required
d. Turnover and Acceptance of Completed Infrastructure Asset
Books of the Implementing NGA – DPWH
Railway Systems 10,000,000
Construction in Progress- Infrastructure Assets 10,000,000
Granting and Liquidation of Advances to Officers and Employees covering Official Travel (assumed amounts)

Advances to Officers and Employees 2,000

Cash-Modified Disbursement System (MDS), Regular 2,000
To recognize granting of cash advance for local travel to officers and employees based on duly approved
and paid DV, Authority to Travel and IT
Traveling Expenses-Local 2,000
Advances to Officers and Employees 2,000
To recognize liquidation of cash advance for local travel upon receipt of LR supporting docs
Advances to Officers and Employees 200,000
Training Expenses 80,000
Cash-Modified Disbursement System MDS), Regular 280,000
To recognize granting of cash advance for training abroad
Traveling Expenses-Foreign 200,000
Advances to Officers and Employees 200,000
To recognize liquidation of cash advance for training abroad upon receipt of LR and
supporting documents
Financial Asset at Fair Value through surplus or deficit (assumed amounts):
Financial Assets Held for Trading 500,000
Cash in Bank-Local Currency, Bangko Sentral ng Pilipinas 500,000
To recognize the acquired financial asset held for trading
Other Financial Charges 10,000
Cash in Bank-Local Currency, Bangko Sentral ng Pilipinas 10,000
To recognize the transaction cost incurred

Financial Asset not at Fair Value through surplus or deficit (assumed amounts):
Investments in Treasury Bonds-Foreign 510,000
Cash in Bank-Local Currency, Bangko Sentral ng Pilipinas 510,000
To recognize investment in foreign treasury bonds
Self-constructed Property. If a property is self-constructed, whether by contract or by administration, all costs related to the construction shall be
recognized as “Construction-In Progress” while it is not completed. Upon completion, these costs shall be transferred to an “Investment Property”
account when the criteria for recognition of such are met.

Example: Entity A constructed a building intended to earn rent income. Contract price is P11,200,000, inclusive of VAT, payable in two progress
billings. Advance payment to contractor is 15% of the contract price while retention fee is 10% of the progress billing. The following are the
illustrative accounting entries:

Advances to Contractors 1,680,000

Cash-Modified Disbursement System (MDS), Regular 1,680,000
To recognize payment of mobilization fee to contractor
Construction in Progress- Buildings and Other Structures 5,600,000
Advances to Contractors 1,680,000
Accounts Payable 3,920,000
To recognize first progress billing – 50% completed
(P11,200,000 x 50% = P5,600,000 – P1,680,000 = P3,920,000)
Accounts Payable 3,920,000
Guaranty/Security Deposits Payable 560,000
Due to BIR 350,000
Cash-Modified Disbursement System (MDS), Regular 3,010,000
To recognize payment for first progress billing
Cash-Tax Remittance Advice 350,000
Subsidy from Nat’l Government 350,000
To recognize constructive receipt of NCA for TRA
Due to BIR 350,000
Cash-Tax Remittance Advice 350,000
To recognize constructive remittance of withholding tax through TRA
Construction in Progress- Buildings and Other Structures 5,600,000
Accounts Payable 5,600,000
To recognize receipt of final progress billing
Accounts Payable 5,600,000
Guaranty/Security Deposit Payable 560,000
Due to BIR 350,000
Cash-Modified Disbursement System (MDS), Regular 4,690,000
To recognize payment of final progress billing
Cash-Tax Remittance Advice 350,000
Subsidy from National Govt. 350,000
To recognize constructive receipt of NCA for TRA
Due to BIR 350,000
Cash-Tax Remittance Advice 350,000
To recognize constructive remittance of withholding tax through TRA
Investment Property, Buildings 11,200,000
Construction in Progress- Buildings and Other Structures 11,200,000
To recognize IP based on the certificate of acceptance
Guaranty/Security Deposits Payable 1,120,000
Cash-Modified Disbursement System (MDS), Regular 1,120,000
To recognize refund of retention fee
Example: Entity A constructed a building by administration with total costs of P1,048,000, consisting of construction materials (inclusive of VAT),
labor costs and various overhead expenses amounting to P448,000, P350,000, and P250,000, respectively. The illustrative accounting entries shall be
as follows:
Construction Materials Inventory 448,000
Due to BIR 24,000
Cash-Modified Disbursement System (MDS), Regular 424,000
To recognize payment of construction materials amounting to P448,000
Construction in Progress- Investment Property, Buildings 448,000
Construction Materials Inventory 448,000
To recognize issue of construction materials amounting to P448,000
Construction in Progress- Investment Property, Buildings 350,000
Due to BIR 35,000
Cash-Modified Disbursement System (MDS), Regular 315,000
To recognize payment of labor costs amounting to P350,000
Construction in Progress- Investment Property, Buildings 250,000
Water Expenses 10,000
Electricity Expenses 150,000
Salaries and Wages-Regular 90,000
To recognize payment of overhead expenses amounting to P250,000
Cash-Tax Remittance Advice 59,000
Subsidy from National Govt 59,000
To recognize constructive receipt of NCA for TRA
Due to BIR 59,000
Cash-Tax Remittance Advice 59,000
To recognize constructive remittance of taxes withheld through TRA
Investment Property, Buildings 1,048,000
Construction in Progress- Investment Property, Buildings 1,048,000
To recognize investment property upon completion