Government Accounting

• Notice of Cash Allocation (NCA)


  Disbursement authority issued by the DBM to agencies with foreign operations allowing them to use the income collected by their Foreign Service Posts to cover their operating requirements
• Accounts Payable


  Valid and legal obligations of NGAs/OUs, for which, goods/services/projects have been delivered/rendered/completed and accepted, regardless of the year when these obligations were incurred
• Statement of Comparison of Budget and Actual Amounts


  Main purpose is to provide information regarding the government's financial performance
• Classifications of inventory held by a government entity

  • Inventory Held for Distribution
  • Inventory Held for Long-term Use
  • Inventory Held for Manufacturing
  • Inventory Held for Consumption
  • Semi-Expendable Property
• Cultural assets


  Assets which have historical, cultural and environmental significance, and are intended to be preserved for future generations
• Statement of Management Responsibility for Financial Statements

  Attached to the annual general purpose financial statements of a government entity as a cover letter
• Statement of comparison of budget and actual amounts

  Main purpose is to enhance the transparency of financial reporting of the government
• not to government entities?
• Finance lease accounting by lessors


  Applies to business entities but not to government entities
• Noncurrent asset held for sale classification

  Applies to business entities but not to government entities
• Direct method of presenting cash flows from operating activities

  Applies to business entities but not to government entities
• Cash equivalents classification for debt instruments acquired three months before their maturity date


  Applies to business entities but not to government entities
• Which of the following applies to business entities but not to government entities?

  • Accounting for biological assets at fair value less costs to sell
  • Preparation of interim financial statements
  • Presenting information on earnings per share
  • Continued depreciation of idle equipment
• The accounting for government entities differs from the accounting for business entities in which of the following respects?

  • Accounting for exchanges of property, plant and equipment
  • Accounting for exchanges of intangible assets
  • Accounting policy choice for the subsequent measurement of investment property
  • Classification of intangible assets as either with finite or with indefinite useful life for purposes of subsequent measurement
• All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are approved by the Head of the Requisitioning Unit
• The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to government agencies with foreign service posts
• According to the GAM for NGAs, the Advice to Debit Account (ADA) mode of disbursement can be used only if the payee maintains an account in the same bank where the government entity maintains its account
• Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition of a loan payable in the books of accounts of the BTr
• Under the Advice to Debit Account (ADA) mode of disbursement, payments from a government entity are directly credited to the bank accounts of the payees through bank transfers
• The accounting for government entities differs from the accounting for business entities in which of the following respects?

  • Classification of joint ventures
  • Consolidation procedures when preparing consolidated financial statements
  • Disclosure of events after the reporting date
  • Impairment requirements, and reversals thereof, for noncurrent assets
• Statement of cash flows of government entities

  Shows the historical changes in cash and cash equivalents
• The statement of cash flows of government entities is prepared using the accrual basis of accounting
• Classification of leases under the GAM for NGAs

  Based on the extent of transfer of risks and rewards incidental to ownership of the leased asset from the lessor to the lessee
• Lease contract between Lessee and Lessor

  • The lease term is 10 years for an annual lease payment of ₱5,000,000
  • Lessee has the option to extend the lease for the remaining half of the leased asset's useful life for the same amount of annual lease payment which is expected to be lower than the market rate during the extended period
  • The lease transfers ownership of the leased asset to the Lessee if the Lessee pays the Lessor the leased asset's fair value, to be determined on payment date
  • The Lessee has the unilateral right to cancel the lease after the first 5 years of the lease term without any significant costs
• Net assets released from restrictions


  (on the statement of activities for a private not-for-profit institution) Decrease in temporarily restricted and increase in unrestricted net assets
• Private not-for-profit institutions required to have a statement of functional expenses

  • Hospital
  • Voluntary Health and Welfare Organization
  • College
• A government entity derecognizes unserviceable PPE
• Notice of Cash Allocation


  Event where a government entity receives notice of the maximum amount it can spend on maintenance and other operating expenses
• The accounting procedures for unreleased checks prescribed under the GAM for NGAs apply only to commercial checks
• Unreleased checks are reverted back to cash
• At the start of the year, a reversing entry is made for the unreleased checks in the previous year
• Unreleased checks are perforated
• Biological assets of Entity A on January 1, 20x1

  Two 1-year old animals with fair value less costs to sell of ₱1,000 each
• Transactions related to biological assets during the period

  1. On July 1, 20x1, two 1-year old animals are acquired for ₱1,100 each, equal to the FVLCS on this date

  2. On October 1, 20x1, two animals are born with FVLCS of ₱500 each
• FVLCS of biological assets on December 31, 20x1


  • new born - ₱600
  • 3 mos. old - ₱800
  • 1 yr. old - ₱1,200
  • 1.5 yr. old - ₱1,500
  • 2 yrs. old - ₱2,000
• Total gain from the change in FVLCS during the period is ₱4,400
• Lease transaction


  • If you buy the machine, the cost is ₱7,596
  • If you lease the machine, you will have to sign a non-cancelable lease and make 5 payments of ₱2,000 each, with the first payment made one period after the first day of the lease
  • At the time of the last payment you will receive title to the machine
  • The interest rate implicit in this lease is approximately between 11% and 12%
• Periodic interest expenses recognized on bonds issued at a premium


  Plotted on a graph, the line will show a curvilinear line sloping here and there
• Information not reported in the statement of changes in net assets/equity

  • Effects of current period errors
  • Surplus or deficit for the period
  • Items of revenue and expense that are recognized directly in equity
• The 8-digit Revised Chart of Accounts (RCA) Code for revenues starts with number 2