Chapter 3

The Government Accounting Process

Learning Objectives:
 Record the basic transactions of a government entity.
 Prepare a worksheet.
Government Accounting
 The government accounting process comprises the activities of analyzing,
recording, classifying, summarizing and communicating transactions involving
the receipt and disposition of government funds and property, and
interpreting the results thereof.
 This process is similar to that of a business entity, except that it incorporates
budgetary controls, such as recording in the budget registries and preparing
periodic budget accountability reports.
Books of Accounts & Registries
 Journals
 General Journal
 Cash Receipts Journal
 Cash Disbursements Journal
 Check Disbursements Journal

 Ledgers
 General Ledgers
 Subsidiary Ledgers

 Registries
 Registries of Revenue and Other Receipts (RROR) -
 Registry of Appropriations and Allotments (RAPAL)
 Registries of Allotments, Obligations and Disbursements (RAOD)
 Registries of Budget, Utilization and Disbursements (RBUD)
Budget Registries
 Registries of Revenue and Other Receipts (RROR) - maintained by the Budget
Division/Unit of NGAs to monitor the revenue and other receipts
estimated/budgeted, collected and remitted/deposited.
 Registry of Appropriations and Allotments (RAPAL) - maintained by NGAs to
monitor appropriations and allotments charged thereto.
 Registries of Allotments, Obligations and Disbursements (RAOD) - maintained
by the Budget Division/Unit of agencies to record allotments, obligations and
disbursements.
 Registries of Budget, Utilization and Disbursements (RBUD) - used to record the
approved special budget and the corresponding utilizations and disbursements
charged to retained income authorized under R.A. 8292 for SUCs and other
retained income collection of a national government agency with similar
authority, Revolving Funds and Trust Receipts/Custodial Funds.

 Take note that separate RAOD and RBUD are maintained for each object of
expenditure.
Object of Expenditures
a. Personnel Services (PS) – pertain to all types of employee benefits.
b. Maintenance and Other Operating Expenses (MOOE) – pertain to various
operating expenses other than employee benefits and financial expenses.
c. Financial Expenses (FE) – pertain to finance costs.
d. Capital Outlays (CO) – pertain to capitalizable expenditures.
The Revised Chart of Accounts

Example:
The Government Accounting Cycle
1. Appropriation
2. Allotment
3. Incurrence of Obligation
4. Disbursement Authority – NCA
5. Disbursement
6. Billings, Collections & Remittances
7. Unadjusted trial balance
8. Adjusting entries
9. Pre-closing Trial Balance
10. Closing entries
11. Post-closing Trial Balance
12. Preparation of financial statements
Basic Recordings
Illustration - Appropriation
Entity A (a government agency) receives its GAA consisting of the following:
Personnel Services (PS) 100,000
Maintenance and Other Operating Expenses (MOOE) 60,000
Financial Expenses (FE) -
Capital Outlays (CO) 200,000
Total appropriation for the current year 20x1 360,000

Registries and Other

Journal Entry
Records
RAPAL None
Registry Record
The receipt of the appropriation is posted (recorded) in the Registry of
Appropriations and Allotments (RAPAL) as follows:
Illustration - Allotment
Entity A receives its allotment from the DBM consisting of the following:

Personnel Services (PS) 90,000

Maintenance and Other Operating Expenses (MOOE) 40,000
Financial Expenses (FE) -
Capital Outlays (CO) 170,000
Total appropriation for the current year 20x1 300,000

Registries and Other

Journal Entry
Records
RAPAL
RAOD – PS
None
RAOD – MOOE
RAOD - CO
Registry Record
The receipt of the allotment is posted (recorded) in the Registry of
Appropriations and Allotments (RAPAL) and Registries of Allotments, Obligations
and Disbursements (RAOD) as follows:

RAPAL:
Registry Record
RAOD - PS

RAOD - MOOE
Registry Record
RAOD - CO
Obligation Request and Status (ORS)
 The incurrence of obligations shall be made through the issuance of
Obligation Request and Status (ORS)
 The ORS shall be prepared by the Requesting/Originating Office supported by
valid claim documents like DVs, payrolls, purchase/job orders, itinerary of
travel, etc.
 The Head of the Requesting/Originating Office or his/her authorized
representative shall certify in the Section A of the ORS as to the necessity and
legality of charges to the budget under his/her supervision, and validity,
propriety and legality of SDs.
 The Head of the Budget Division/Unit shall certify to the availability of
allotment and such is duly obligated by signing in Section B of the ORS.
Obligation Request
and Status (ORS)
Illustration – Incurrence of Obligation
Entity A enters into the following contracts:

a. PS – Employment contracts (Job Order) 70,000

b. MOOE - Purchase contract for office supplies 25,000
c. CO – Purchase contract for office equipment 160,000

Registries and Other

Journal Entry
Records
RAOD – PS
RAOD – MOOE
None
RAOD – CO
3 ORS
Registry Record
RAOD - PS

RAOD - MOOE
Registry Record
RAOD - CO
 Obligation Request
and Status (ORS)

Take note:
To simplify the illustration, only one ORS
is presented for the three contracts.
Separate ORSs should be prepared for
each of them.
Notice of Obligation Request and
Status Adjustment
 Adjustment of obligation incurred after the processing of the claim by the
Accounting Division/Unit shall be made through the use of Notice of
Obligation Request and Status Adjustment (NORSA).
 The adjustment shall be effected through a positive entry (if additional
obligation is necessary) or a negative entry (if reduction is necessary) in the
‘Obligation’ column of the ORS and RAOD.
 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.
Notice of Obligation
Request and Status
Adjustment
Disbursement Authority – Notice of
Cash Allocation (NCA)
 Entity A receives Notice of Cash Allocation (NCA) from the DBM amounting to
P200,000, net of tax.
Registries and
Journal Entry
Other Records
Cash - Modified Disbursement System (MDS), 200,000
RANCA Regular
Subsidy from National Government 200,000

 Cash-Modified Disbursement System (MDS), Regular 10104040 - This

account is used to recognize in the agency books the NCA received for its
operating requirements.
 Subsidy from National Government 40301010 - This account is used to
recognize the NCA, constructive receipt of Non-Cash Availment Authority
(NCAA); constructive receipt of CDC by Foreign Service Posts; and
constructive receipt of NCA for TRAs.
RANCA & RANTA
The registries used to monitor the NCA & NTA are the following:
 Registry of Allotments and Notice of Cash Allocation - The RANCA shall be
maintained by the Accounting Division/Unit to determine the amount of
allotments not covered by NCA and to monitor available NCA
 Registry of Allotment and Notice of Transfer of Allocation - The RANTA shall
be maintained by the Accounting Division/Unit to determine the amount of
allotments not covered by NTA and to monitor available NTA.
Registry of Allotments and Notice of
Cash Allocation (RANCA)
Illustration - Disbursement
Employees have rendered services and are now entitled to compensation.

Salaries and Wages 35,000

Personal Economic Relief Allowance (PERA) 5,000
Gross Compensation 40,000
Withholding tax (10,000)
GSIS (2,000)
Pag-IBIG (2,000)
PhilHealth (1,000)
Total Deductions (15,000)
Net 25,000
Disbursement
A. Set up of payable to officers and employees upon approval of payroll

Journal Entry
Salaries and Wages, Regular 35,000
PERA 5,000
Due to BIR 10,000
Due to GSIS 2,000
Due to Pag-IBIG 2,000
Due to PhilHealth 1,000
Due to Officers and Employees 25,000
Disbursement
B. Posting of payable to the Section C of ORS

C. Grant of Cash Advance for Payroll

Journal Entry
Advances for Payroll 25,000
Cash - Modified Disbursement System 25,000
(MDS), Regular
Disbursement
D. Posting of disbursement to the payment column of Section C of the ORS and
disbursements column of the RAOD
Disbursement
E. Liquidation of Payroll Fund
Journal Entry
Due to Officers and Employees 25,000
Advances for Payroll 25,000
Illustration - Remittances
 Entity A remits the P15,000 withheld to the other government agencies. The
breakdown is re-provided below:

Withholding tax 10,000

GSIS 2,000
Pag-IBIG 2,000
PhilHealth 1,000
Total Deductions 15,000
Remittance to GSIS, Pag-IBIG &
PhilHealth
 Entity A remits the P5,000 withheld to GSIS, Pag-IBIG & PhilHealth.

Registries and
Journal Entry
Other Records
Due to GSIS 2,000
Due to Pag-IBIG 2,000
ORS
RAOD - PS Due to PhilHealth 1,000
Cash - Modified Disbursement System (MDS), 5,000
Regular
Remittance of Withholding Tax
 Entity A remits the P10,000 tax withheld.

Books of Entity A

Registries and
Journal Entry
Other Records
Cash – Tax Remittance Advice 10,000
ORS Subsidy from National Government 10,000
RAOD - PS To recognize the constructive receipt of
NCA for TRA

Due to BIR 10,000

Cash – Tax Remittance Advice 10,000
To recognize the constructive remittance
of taxes withheld to the BIR through TRA
Tax Remittance Advice
Cash-Tax Remittance Advice 10104070
 In the remitting agency books, this account is debited for constructive
receipts of NCA for TRA and credited for constructive remittances of taxes to
BIR through TRA.
 In the BIR books, this account is debited for the constructive receipt of tax
revenue through TRA and credited for the yearend closing to Accumulated
Surplus/(Deficit).
 In the BTr books, this account is credited for the constructive utilization of
NCA for TRA by the remitting agencies and debited upon closing to
Accumulated Surplus/ (Deficit).
Remittance of Withholding Tax
Books of BIR
Journal Entry
Cash – Tax Remittance Advice 10,000
Income Tax 10,000
To recognize the constructive receipt of
taxes withheld by NGAs through TRA

Books of BTr
Journal Entry
Subsidy to NGAs 10,000
Cash – Tax Remittance Advice 10,000
To recognize the constructive receipt of
remittance of taxes by NGAs through TRA
Collection & Remittance
 PD No. 1445 requires that all collections must be remitted to the National
Treasury, unless another law specifically allows otherwise.
 The billing of revenue is recorded in the General Journal.
 Collection and remittance are recorded in the Cash Receipts Journal.
Collection & Remittance
A. Entity A bills revenue of P100,000 for rent income.
Journal Entry
Accounts receivable 100,000
Rent/Lease income 100,000
To recognize billing of income

B. Entity A collects P100,000 from the billed revenue and remits the collection
to the BTr.
Journal Entry
Cash – Collecting Officers 100,000
Accounts receivable 100,000
To recognize collection of billed of income

Cash – Treasury/Agency Deposit, Regular 100,000

Cash – Collecting Officers 100,000
To recognize remittance of income to BTr
Collection & Remittance
 Cash-Collecting Officers 10101010 - This account is used to recognize the
amount of collections with the Collecting Officers for remittance to the
Treasurer of the Philippines (TOP)/ deposit to AGDBs. Credit this account for
remittance to the TOP/deposit to AGDBs.
 Cash-Treasury/Agency Deposit, Regular 10104010 - This account is used to
recognize in the agency books the amount of collections remitted to the BTr
under the General Fund, either directly or thru the AABs and AGDBs. At year
end, credit this account to close to the Accumulated Surplus/(Deficit).
Reversion of Unused NCA
 Government entities are required to revert any unused NCA at the end of the
accounting period.

Cash – Modified Disbursement System (MDS), Regular

Receipt of NCA 200,000
25,000 Advances for payroll
Remittances to GSIS, Pag-
5,000
IBIG & PhilHealth
170,000 end

Subsidy from National Government 170,000

Cash - Modified Disbursement System (MDS), 170,000
Regular
To recognize reversion of unused NCA
Notice that the entry above is the exact opposite of the entry to
record the receipt of the NCA
Basic Recordings
Basic Recordings (continuation)
Basic Recordings (continuation)

Income
Trial Balance
 Trial Balance (TB) is a list of all the GL accounts and their balances at a given
time. The accounts are listed in the order in which they appear in the RCA,
with the debit balances in the left column and the credit balances in the right
column.
 The TB shows the equality of debit and credit balances of all GL accounts as
at a given period. It is prepared and submitted monthly, quarterly and
annually. At the end of the fiscal year, the pre-closing and the post-closing
trial balances shall be prepared.
 The TB is prepared to:
1. Prove the mathematical equality of the debits and credits after posting;
2. Check the accuracy of the postings;
3. Uncover errors in journalizing and posting; and
4. Serve as basis for the preparation of the financial statements.
Adjusting Journal Entries
 Adjusting journal entries are made at the end of an accounting period to
allocate revenue and expenses to the period in which they actually occurred.
 AJEs are required every time a financial statement is prepared to make the
statement truly reflective of the financial condition of the entity at a given
period.
 Adjustments are of two main types:
a. Accrued items
b. Deferred items
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:
a. Unused NCA (National)
b. Petty Cash Fund
c. Unreleased Commercial Checks
d. Allowance for/Accumulated Impairment Losses of asset accounts
e. Write-down of Inventories
f. Correction/Reclassification Entries
g. Adjustment for reversal of Impairment Losses
h. Depreciation Expense
i. Exchange differences on foreign currency
j. Other adjustments
Pre-Closing Trial Balance
 The Pre-Closing Trial Balance shall be prepared after posting the AJE in the GJ
and the same to the GL.
 It shows the adjusted balances of all accounts as at a given period.
 This is also described/termed as the Adjusted Trial Balance.
 The TB shall be supported with the schedule of SL balances of the controlling
accounts.
Pre-Closing
Trial Balance
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.
Closing Journal Entries
Immigration Tax 100,000
Permit Fees 200,000
Registration Fees 160,000
Other Service Income 10,000
Power Supply System Fees 100,000
Landing and Parking Fees 80,000
Revenue and Expense Summary 650,000
To recognize closing of income accounts
Closing Journal Entries
Revenue and Expense Summary 426,800
Salaries and Wages Regular 200,000
Personnel Economic Relief Allowance (PERA) 50,000
Traveling Expenses -Foreign 1,800
Office Supplies Expenses 63,000
Water Expenses 1,000
Electricity Expenses 5,000
Telephone Expenses 2,000
Janitorial Services 10,000
Security Services 12,000
Depreciation-Buildings and Other Structures 50,000
Depreciation-Machinery and Equipment 30,000
Impairment Loss - Loans and Receivables 2,000
To recognize closing of expense accounts
Closing Journal Entries
Subsidy from National Government 667,000
Revenue and Expense Summary 667,000
To recognize closing of subsidy account

Revenue and Expense Summary 890,200

Accumulated Surplus/(Deficit) 890,200
To recognize closing of revenue and expense summary account

Accumulated Surplus/(Deficit) 575,200

Cash-Treasury/Agency Deposit, Regular 575,200
To recognize closing of cash deposit account
Post-Closing Trial Balance
 The Post-Closing Trial Balance shall be prepared at the end of the year after
preparing and posting the closing journal entries in the GJ and posting to the
GL.
 Since revenue and expense accounts have been closed out, the only accounts
with balances are balance sheet or real accounts.
Post-Closing Trial Balance
Financial Statements
Financial Statements
Notes to Financial Statements
Notes to Financial Statements