CHAPTER 1 - INTRODUCTION

TO GOVERNMENT
ACCOUNTING
 Learning Contents:

1. Introduction to Government Accounting

2. Responsibility, Accountability and Liability over
Government Funds
3. Agencies charged with accounting responsibility
4. GAM for NGAs
5. Government Accounting Principles and Concepts
6. Components of General Purpose Financial Statements

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 1
Introduction to
Government
Accounting

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 Government Accounting
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." (State Audit Code of the
Philippines, P.D. No. 1445, Sec. 109)

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 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 officers 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 of all
persons concerned.
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 Government Accounting vs. Accounting for
Business Entities
Like the accounting for business entities, government
accounting is also a process of producing information that is
useful in making economic decisions. Government accounting,
however, places greater emphasis on the following:
I. Sources and utilization of government funds; and
II. Responsibility, accountability and liability of entities
entrusted with government funds and properties.

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 2
Responsibility,
Accountability
and Liability

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 Responsibility over Government Funds
Government resources shall be "utilized efficiently and
effectively” in accordance with the law. The head of a
government agency is directly responsible in implementing this
policy and is primarily responsible for government resources
entrusted to his agency. Those who are entrusted with the
possession of government resources are directly responsible to
the head of the agency.

All those who are exercising authority over a government

agency shall share fiscal responsibility.
(State Audit Code of the Philippines, P.D. No. 1445)

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 Accountability over Government Funds
A government officer entrusted with the possession of
government resources is responsible for the safekeeping
therefor in accordance with the law. Every accountable officer
shall be properly bonded. (P.D. No. 1445 and E.O. No. 292)

The transfer of government funds from one officer to another

shall, except as allowed by law, be made only after the
authorization of the COA. The transfer shall be properly
documented in an invoice and receipt. (P.D. No. 1445)

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 Liability over Government Funds
The unlawful use of government resources shall be the personal
liability of the employee found to be directly
responsible therefor.

No accountable officer shall be relieved from liability merely

because he has acted under the direction of a superior officer in
unlawfully utilizing the government resources entrusted to him,
unless before that act, he has notified the superior officer, in
writing, that the utilization is illegal. The superior officer shall
be primarily liable while the accountable officer who fails to
serve the required notice shall be secondarily liable.
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 Liability over Government Funds
Every accountable officer shall be liable for all losses resulting
from the unlawful use or negligence in the safekeeping of
government resources.

An accountable officer shall immediately notify the COA for any

loss of government funds from unforeseen events (force
majeure) within 30 days. Failure to do so will not relieve the
officer of liability (P.D. No. 1445)

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 3 Agencies
charged with
Accounting
Responsibility
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 Accounting Responsibility
The following offices are charged
with government accounting
Responsibility:
1. Commission on Audit (COA)
2. Department of Budget and
Management (DBM)
3. Bureau of Treasury (BTr)
4. Government agencies

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 Commission on Audit (COA)
The Commission on Audit (COA):
1. Has the exclusive authority to
promulgate accounting and auditing
rules and regulations.
2. Keeps the general accounts of the
government, supporting vouchers, and
other documents.
3. Submits financial reports to the
President and Congress.

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

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 Bureau of Treasury (BTr)
The Bureau of Treasury (BTr) functions
under the Department of Finance and is the
cash custodian of the government. The BTr
is authorized to:
a. Receive and keep national funds and
manage and control the disbursements
thereof; and
b. Maintain accounts of financial
transactions of all national government
offices, agencies and instrumentalities.
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 Government Agencies
Government agency refers to any department, bureau or office of
the national government, any of its branches and
instrumentalities, or any political subdivision, as well as any
government owned or controlled corporation (GOCC), including
its subsidiaries, or other self-governing board or commission of
the government. (P.D. No. 1445)
The government agencies are responsible in directly
implementing the projects of, and performing the functions
delegated by, the government.

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 Government Agencies
Each agency (entity) shall maintain accounting books and
budget registries which are reconciled with the cash records of
the BTr and the budget records of the COA and DBM.

Government agencies are required by law to have accounting

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

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 Financial Reporting System of the National
Government
★ Entity - refers to a government agency, department or
operating/field unit.
★ Financial Reporting - is the process of preparation,
presentation and submission of general purpose financial
statements and other reports. The objective of financial
reporting is to provide information about the entity that is
useful to users for accountability purposes and
decision-making.

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 Financial Reporting System of the National
Government
1. Each entity reconciles accounting books with cash records
of BTr.

2. Each entity reconciles budget registries with budget records

of DBM.

3. Each entity's accounting books are subject to audit by COA

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 Financial Reporting System of the National
Government
4. Each entity reconciles budget registries with budget records
of COA.

5. Each entity submits financial reports to COA for

consolidation.

6. COA consolidates financial reports of government agencies

and submits it to he President and Congress

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 4 GAM for NGAs
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 GAM for NGAs
1. Old Government Accounting System (Five Decades)
2. New Government Accounting System (NGAS) (2002)
3. Government Accounting Manual for National Government
Agencies (GAM for NGAs) (January 2016)

The GAM for NGAs was promulgated primarily to harmonize

the government accounting standards with international
accounting standards, particularly the International Public
Sector Accounting Standards (IPSAS).

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 GAM for NGAs
The IPSAS are based on the International Financial Reporting
Standards (IFRS).
The Philippine Government has adopted the IPSAS through the
Philippine Public Sector Accounting Standards (PPSAS).

The provisions of the PPSAS are incorporated in the GAM for

NGAs.
Since the PPSAS are based on the IPSAS, which are in turn
based on the IFRSs/PFRSs, most of the concepts are already
discussed in the accounting for business entities.
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 Coverage of GAM for NGAs
The GAM for NGAs provides the basic concepts to be used in:

1. Preparing general purpose financial statements in

accordance with the Philippine Public Sector Accounting
Standards (PPSAS) and other financial reports as may be
required by laws, rules and regulations; and

2. Reporting of budget, revenue and expenditure in accordance

with laws, rules and regulations.

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 Objectives of GAM for NGAs
The GAM for NGAs aims to update 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.

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 5 Government
Accounting
Principles and
Concepts
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 Accounting and Budgeting Principles
The financial records and reports of government entities shall
comply with the following:
1. Philippine Public Sector Accounting Standards (PPSAS) and
relevant laws, rules and regulations;
2. Accrual basis of accounting;
3. Budget basis for presentation of budget information in the
financial statements;
4. Revised Chart of Accounts prescribed by COA;
5. Double entry bookkeeping;
6. Financial statements based on accounting and budgetary
records; and
7. Fund cluster accounting
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 Fund Cluster Accounting
Code Fund Clusters
01 Regular Agency Fund
02 Foreign Assisted Projects Fund
03 Special Account - Locally Funded/Domestic Grants Fund
04 Special Account - Foreign Assisted/Foreign Grants Fund
05 Internally Generated Funds
06 Business Related Funds
07 Trust Receipts

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 Qualitative Characteristics
Information reported shall meet the qualitative characteristics.
Qualitative characteristics are the attributes that make
information useful to users.
1. Understandability
2. Relevance
3. Materiality
4. Timeliness
5. Reliability
6. Faithful Representation

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 Trade-off between Relevance and Reliability
To provide timely information, it may be
necessary to report before all aspects of a
transaction are known, thus impairing
reliability. Conversely, if reporting is
delayed until all aspects are known, the
information may be highly reliable but of
little use to users who need to make
decision in the interim. To achieve a
balance between relevance and
reliability, the overriding consideration
31 is how users' needs are best satisfied.
 Qualitative Characteristics (continued)
Information reported shall meet the qualitative characteristics.
Qualitative characteristics are the attributes that make
information useful to users.
1. Substance over Form
2. Neutrality
3. Prudence
4. Completeness
5. Comparability

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 6 Components of
General Purpose
Financial
Statements
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 General Purpose Financial Statements
General Purpose Financial Statements
are those intended to meet the position
to demand reports tailored to meet their
particular information needs.
The complete set of general purpose
financial statements consists of:
a. Statement of Financial Position;
b. Statement of Financial Performance;
c.Statement of Changes in Net
Assets/Equity;
34 d. Statement of Cash Flows;
 General Purpose FS (continued)
The complete set of general purpose
financial statements consists of:
e. Statement of Comparison of Budget
and Actual Amounts; and
f. Notes to the Financial Statements,
comprising summary of significant
accounting policies and other
explanatory notes.

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 Elements of the Financial Statements
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.

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 Elements of the Financial Statements
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

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 Recognition of an Asset
An asset is recognized when:
a. it is probable that the future economic
benefits will flow to the entity; and
b. the asset has a cost or value (e.g., fair
value) that can be measured reliably

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 Elements of the Financial Statements
Liabilities - are present obligations of
the entity arising from past events, the
settlement of which is expected to result
in an outflow from the entity of
resources embodying economic benefits
or service potential

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 Elements of the Financial Statements

Net assets/equity – is the residual

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

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 Elements of the Financial Statements
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.

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

Revenue funds - comprise all funds derived from the income of

any agency of the government and available for appropriation or
expenditure in accordance with law. (Section 3, P.D. No. 1445)

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 Elements of the Financial Statements
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.

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 Elements of the Financial Statements
Distributions to owners - future
economic benefits distributed by the
entity to its owners, either as a return
on investment or as a return of
investment.

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 Additional Classroom Discussions:

1. Download and Review GAM for NGAs

2. Search and Review Fund Cluster Accounting
3. Thoroughly review Qualitative Characteristics
4. Review and Differentiate Elements of General Purpose Financial
Statements

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 Classroom Activity:

Instructions:
1. Encode your answers in a Doc file.
2. Answers only. Don’t copy the questions.
3. Submit the Doc file on or before the set deadline.
4. Late submission of activities will be allowed until the
key answers have not been provided by the instructor.
5. Late submission of activities are with deductions.
 Classroom Activity:
TRUE OR FALSE
1. Compared to the accounting for business entities, government
accounting places greater emphasis on the sources and utilization of
government funds and the management’s stewardship over
government resources.
2. Taxes are the main sources of funds of the government.
3. Other sources of funds of the government includes fees, borrowings, and
grants from other governments and international bodies
4. Currently, the financial reporting of Government entities is based on
NGAS
5. The principles used in the financial reporting of government entities are
very unique that only a very few of these principles are similar to those
that are applied to business entities.
 Classroom Activity:
MULTIPLE CHOICE
1. It 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.
a. Government accounting
b. Government reporting
c. Government auditing
d. Tax accounting

2. The GAM for NGAs is promulgated by the

a. Commission on Accounting (COA)
b. Commission on Audit (COA)
c. Board of Accountancy (BOA)
d. Bureau of Internal Revenue (BIR)
Classroom Activity:
3. The Commission on Audit (COA) is responsible for
a. the formulation and implementation of the national budget with the
goal of attaining the nation’s socio-economic objectives.
b. receiving and keeping national funds and managing and controlling
the disbursements thereof.
c. directly implementing the projects of the government.
d. promulgating accounting and auditing rules and regulations.

4. Which of the following is not charged with government accounting

responsibility?
a. Commission on Audit
b. Bureau of Internal Revenue
c. Non-stock, non-profit private hospital
d. Department of Budget and Management
Classroom Activity:
5. Which of the following qualitative characteristics may be sacrificed when
reporting information on a timely basis?
a. Relevance
b. Reliability
c. Substance over form
d. Faithful representation

6. According to the GAM for NGAs, information has this qualitative

characteristic if it can be used to assist in evaluating past, present or future
events or in confirming or correcting past evaluations.
a. Feedback value
b. Predictive value
c. Materiality
d. Relevance
Classroom Activity:
7. This refers to the comparability between the financial statements of
different entities?
a. Inter-comparability
b. Intra-comparability
c. Horizontal comparability
d. Vertical comparability

8. When the substance of a transaction or event differs from its legal form, the
entity should report the transaction’s or event’s
a. substance
b. legal form
c. a trade-off between a and b
d. either a or b, based on their significance
Classroom Activity:
9. The implication that users must be informed of the entity’s policies, changes
to those policies, and the effects of those changes refers to
a. Comparability
b. Completeness
c. Understandability
d. Reliability

10. In the financial reporting system of the national government, to which of

the following shall an entity reconciles its cash records?
a. Commission on Audit
b. Bureau of Treasury
c. Department of Budget and Management
d. Office of the President
 Comments, Questions,
Concerns or Clarifications
Education is a lifelong process. It can’t be achieved
at one moment. It requires effort. God Bless.
End. Thank You!