PHILIPPINE
GOVERNMENT
ACCOUNTING
CHAPTER 2: GENERAL
PROVISIONS, BASIC
STANDARDS AND
POLICIES
• This chapter covers the general
provisions from existing laws, rules and
regulations; and the basic
standards/fundamental accounting
principles for financial reporting by
national government agencies 2
DEFINITION OF
TERMS
a. Accrual basis – means a basis of accounting under
which transactions and other events are recognized
when they occur (and not only when cash or its
equivalent is received or paid). Therefore, the
transactions and events are recognized in the accounting
records and recognized in the financial statements of the
periods to which they relate. The elements recognized
under accrual accounting are assets, liabilities, net
assets/equity, revenue, and expenses.
b. 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.
c. 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:
d. 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.
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e. Entity – refers to a government agency, department
or operating/field unit. It may be referred to in this
GAM as an agency.
f. 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.
g. Government Accounting – encompasses the
processes of analyzing, recording, classifying,
summarizing and communicating all transactions
involving the receipt and disposition of government
funds and property, and interpreting the results
thereof.
h. Government Budget – is the financial plan of a
government for a given period, usually for a fiscal year,
which shows what its resources are, and how they will
be generated and used over the fiscal period. The
budget is the government's key instrument for
promoting its socio- economic objectives.
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i. 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.
j. Net assets/equity – is the residual interest in the
assets of the entity after deducting all its liabilities.
k. 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.
l. 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.
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RESPONSIBILITY,
ACCOUNTABILITY
AND LIABILITY OVER
GOVERNMENT
FUNDS AND
PROPERTY
A. RESPONSIBILITY OVER GOVERNMENT
FUNDS AND PROPERTY
1. It is the declared policy of the 2. Fiscal responsibility shall, to the
State that all resources of the greatest extent, be shared by all
government shall be managed, those exercising authority over the
expended or utilized in financial affairs, transactions, and
accordance with laws and operations of the government
regulations, and safeguarded agency.
against loss or wastage through 3. The head of any agency of the
illegal or improper disposition, government is immediately and
with a view to ensuring efficiency, primarily responsible for all
economy and effectiveness in the government funds and property
operations of government. The pertaining to his agency. Persons
responsibility to take care that entrusted with the possession or
such policy is faithfully adhered to custody of the funds or property
rests directly with the chief or under the agency head shall be
head of the government agency immediately responsible to him,
concerned. without prejudice to the liability of
either party to the government.
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B. ACCOUNTABILITY OVER GOVERNMENT
FUNDS AND PROPERTY
1. Every officer of any government 3. When government funds or
agency whose duties permit or property are transferred from one
require the possession or custody AO to another, or from an
of government funds or property outgoing officer to his successor,
shall be accountable therefor and it shall be done upon properly
for the safekeeping thereof in itemized invoice and receipt which
conformity with law. Every AO shall invariably support the
shall be properly bonded in clearance to be issued to the
accordance with law. relieved or outgoing officer,
subject to regulations of the
2. Transfer of government funds Commission.
from one officer to another shall,
except as allowed by law or
regulation, be made only upon
prior direction or authorization of
the Commission or its
representative.
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C. LIABILITY OVER GOVERNMENT FUNDS AND
PROPERTY
1. Expenditures of government funds 3. No AO shall be relieved from liability by
or uses of government property in reason of his having acted under the
violation of law or regulations direction of a superior officer in paying
shall be a personal liability of the out, applying, or disposing of the funds or
official or employee found to be property with which he is chargeable,
directly responsible therefor. unless prior to that act, he notified the
superior officer in writing of the illegality
2. Every officer accountable for of the payment, application, or disposition.
government funds shall be liable
for all losses resulting from the 4. When a loss of government funds or
unlawful deposit, use, or property occurs while they are in transit or
application thereof and for all the loss is caused by fire, theft, or other
losses attributable to negligence casualty or force majeure, the officer
in the keeping of the funds. accountable therefor or having custody
thereof shall immediately notify the
Commission or the auditor concerned and,
within 30 days or such longer period as
the Commission or auditor may in the
particular case allow, shall present his
application for relief, with the available 10
supporting evidence.
FUNDAMENTAL
PRINCIPLES FOR
REVENUE
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a. Unless otherwise specifically provided by law, all revenues
accruing to an entity by virtue of the provisions of existing
law, orders and regulations shall be deposited/remitted in the
National Treasury (NT) or in any duly authorized government
depository, and shall accrue to the General Fund (GF) of the
NG. Effectively communicating involves not only delivering a
message but also resonating with the experiences, values,
and emotions of those listening
b. Except as may otherwise be specifically provided by law or
competent authority, all moneys and property officially
received by a public officer in any capacity or upon any
occasion must be accounted for as government funds and
government property.
c. Amounts received in trust and from business-type activities of
government may be separately recorded and disbursed in
accordance with such rules and regulations as may be
determined by a Permanent Committee composed of the
Secretary of Finance as Chairman, and the Secretary of
Budget and Management and the Chairman, COA, as
members.
d. Receipts shall be recorded as revenue of Special, Fiduciary or
Trust Funds or Funds other than the GF, only when authorized
by law as implemented by rules and regulations issued by the
Permanent Committee. 12
e. No payment of any nature shall be received by a collecting
officer without immediately issuing an official receipt in
acknowledgement thereof. The receipt may be in the form of
postage, internal revenue or documentary stamps and the
like, officially numbered receipts, subject to proper custody,
accountability, and audit. Except as may otherwise be
specifically provided by law or competent authority, all
moneys and property officially received by a public officer in
any capacity or upon any occasion must be accounted for as
government funds and government property.
f. Where mechanical devices (e.g. electronic official receipt) are
used to acknowledge cash receipts, the COA may approve,
upon request, exemption from the use of accountable forms.
Receipts shall be recorded as revenue of Special, Fiduciary or
Trust Funds or Funds other than the GF, only when authorized
by law as implemented by rules and regulations issued by
the Permanent Committee.
g. At no instance shall temporary receipts be issued to
acknowledge the receipt of public funds.
h. Pre-numbered ORs shall be issued in strict numerical
sequence. All copies of each receipt shall be exact copies or
carbon reproduction in all respects of the original.
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i. An officer charged with the collection of revenue or the
receiving of moneys payable to the government shall accept
payment for taxes, dues or other indebtedness to the
government in the form of checks issued in payment of
government obligations, upon proper endorsement and
identification of the payee or endorsee. Checks drawn in
favor of the government in payment of any such
indebtedness shall likewise be accepted by the officer
concerned.
j. At no instance should money in the hands of the CO be
utilized for the purpose of cashing private checks.
k. Under such rules and regulations as the COA and the
Department of Finance (DOF) may prescribe, the Treasurer of
the Philippines and all AGDB shall acknowledge receipt of all
funds received by them, the acknowledgement bearing the
date of actual remittance or deposit and indicating from
whom and on what account it was received.
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FUNDAMENTAL
PRINCIPLES FOR
DISBURSEMENT
OF PUBLIC FUNDS
a. No money shall be paid out of any public treasury or
depository except in pursuance of an appropriation law or
other specific statutory authority. Except as may otherwise
be specifically provided by law or competent authority, all
moneys and property officially received by a public officer in
any capacity or upon any occasion must be accounted for as
government funds and government property.
b. Government funds or property shall be spent or used solely
for public purposes.
c. Trust funds shall be available and may be spent only for the
specific purpose for which the trust was created or the funds
received.
d. Fiscal responsibility shall, to the greatest extent, be shared
by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.
e. Disbursement or disposition of government funds or property
shall invariably bear the approval of the proper officials.
f. Claims against government funds shall be supported with
complete documentation.
g. All laws and regulations applicable to financial transactions
shall be faithfully adhered to.
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BASIC GOVERNMENT
ACCOUNTING AND
BUDGET REPORTING
PRINCIPLES
a. generally accepted government accounting principles
in accordance with the PPSAS and pertinent laws, rules
and regulations;
b. accrual basis of accounting in accordance with the
PPSAS;
c. budget basis for presentation of budget information in
the financial statements (FSs) in accordance with
PPSAS 24;
d. RCA prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and
budgetary records; and
g. fund cluster accounting.
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KEEPING OF THE
GENERAL
ACCOUNTS
a. The COA shall keep the general accounts of the
Government and, for such period as may be provided
by law, preserve the vouchers and other supporting
papers pertaining thereto, pursuant to Section 2, par.
(1), Article IX-D of the 1987 Philippine Constitution.
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FINANCIAL
REPORTING
SYSTEM FOR THE
NATIONAL
GOVERNMENT
The financial reporting system of the Philippine government
consists of accounting system on accrual basis and budget
reporting system on budget basis under the statutory
responsibility of the NGAs, Bureau of the Treasury (BTr),
Department of Budget and Management (DBM), and the COA
a. Each entity of the National Government (NG) maintains
complete set of accounting books by fund cluster which
is reconciled with the records of cash transactions
maintained by the BTr.
b. The BTr accounts for the cash, public debt and related
transactions of the NG.
c. Each entity maintains budget registries which are
reconciled with the budget records maintained by the
DBM and the Government Accountancy Sector (GAS),
COA.
d. The COA, through the GAS:
a. maintains budget records showing the overall
approved budget of the NG and its
execution/implementation;
b. consolidates the FSs and budget accountability
reports of all NGAs and the BTr with COA’s records to
come up with an Annual Financial Report (AFR) for
the NG as required in Section 4, Article IX-D of the
1987 Philippine Constitution; and
c. prepares other financial reports required by law for
submission to oversight agencies. 22
OBJECTIVES OF
GENERAL
PURPOSE
FINANCIAL
STATEMENTS
a. 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.
b. 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.
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RESPONSIBILITY
FOR FINANCIAL
STATEMENTS
a. for individual entity/department FSs – the
head of the entity/department central office
(COf) or regional office (RO) or operating unit
(OU) or his/her authorized representative
jointly with the head of the
finance/accounting division/unit; and
b. for department/entity FSs as a single entity –
the head of the entity/department COf jointly
with the head of the finance unit.
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COMPONENTS OF
GENERAL
PURPOSE
FINANCIAL
STATEMENTS
a. Statement of Financial Position;
b. Statement of Financial Performance;
c. Statement of Changes in Net Assets/Equity;
d. Statement of Cash Flows;
e. Statement of Comparison of Budget and
Actual Amounts; and
f. Notes to the Financial Statements, comprising
a summary of significant accounting policies
and other explanatory notes.
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BOOKS OF
ACCOUNTS AND
REGISTRIES.
a. Journals
1. General Journal (Appendix 1)
2. Cash Receipts Journal (Appendix 2)
3. Cash Disbursements Journal (Appendix 3)
4. Check Disbursements Journal (Appendix 4)
b. b. Ledgers
1. General Ledgers (Appendix 5)
2. Subsidiary Ledgers (Appendix 6)
c. c. Registries
1. Registries of Revenue and Other Receipts (Appendices 7, 7A, 7B,
7C and 7D)
2. Registry of Appropriations and Allotments (Appendix 8)
3. Registries of Allotments, Obligations and Disbursements
(Appendices 9A, 9B, 9C and 9D)
4. Registries of Budget, Utilization and Disbursements (Appendices
10A, 10B, 10C and 10D) 30
FUND
ACCOUNTING.
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FAIR
PRESENTATION
a. The FSs shall present fairly the financial
position, financial performance and cash
flows of an entity.
b. Fair presentation requires the faithful
representation of the effects of transactions,
other events, and conditions in accordance
with the definitions and 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.
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COMPLIANCE
WITH PPSASS
a. An entity whose financial statements comply
with PPSASs shall make an explicit and
unreserved statement of such compliance in
the notes.
b. Financial statements shall not be described as
complying with PPSASs unless they comply
with all the requirements of PPSASs.
c. 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.
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DEPARTURE FROM
PPSAS
a. 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.
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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. 39
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.
Structure and Content
• The FSs and each component shall be
identified clearly and distinguished from
other information in the same published
document.
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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).
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.
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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 PPSAS 3-Accounting
Policies, Changes in Accounting
Estimates and Errors.
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