GOVERNMENT CHAP. 1

• Government accounting


  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
• Objectives of government accounting

  • To produce information concerning past operations and present conditions
  • To provide a basis for guidance for future operations
  • To provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of funds and property
  • To report on the financial position and the results of operations of government agencies for the information of all persons concerned
• Government accounting vs. business accounting

  • Greater emphasis on sources and utilization of government funds
  • Greater emphasis on responsibility, accountability and liability of entities entrusted with government funds and properties
• Sources of government funds

  • Receipts from taxes and other fees
  • Borrowings
  • Grants from other governments and international bodies
• Utilization of government funds

  • Expenditures on programs, projects
  • Unanticipated losses from calamities
• Responsibility over government funds and property

  • 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
• Accountability over government funds and property

  • A government officer entrusted with the possession of government resources is responsible for the safekeeping thereof in accordance with the law
  • Every accountable officer shall be properly bonded
  • 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
• Liability over government funds and property

  • The unlawful use of government resources shall be the personal liability of the employee found to be directly responsible therefor
  • Every accountable officer shall be liable for all losses resulting from the unlawful use or negligence in the safekeeping of government resources
  • 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
  • An accountable officer shall immediately notify the COA for any loss of government funds from unforeseen events (force majeure) within 30 days
• Government resources must be utilized efficiently and effectively in accordance with the law. Government officials are responsible in implementing this policy, are accountable for the government resources in their custody, and are liable for any loss.
• Offices charged with government accounting responsibility

  • Commission on Audit (COA)
  • Department of Budget and Management (DBM)
  • Bureau of Treasury (BTr)
  • Government agencies
• Commission on Audit (COA)


  • Has the exclusive authority to promulgate accounting and auditing rules and regulations
  • Keeps the general accounts of the government, supporting vouchers, and other documents
  • Submits financial reports to the President and Congress
• Department of Budget and Management (DBM)


  Responsible for the formulation and implementation of the national budget with the goal of attaining the nation's socio-economic objectives
• Bureau of Treasury (BTr)


  • Functions under the Department of Finance and is the cash custodian of the government
  • Authorized to receive and keep national funds and manage and control the disbursements thereof
  • Maintains accounts of financial transactions of all national government offices, agencies and instrumentalities
• Government agencies


  • Responsible in directly implementing the projects of, and performing the functions delegated by, the government
  • 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
  • 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".
• Financial Reporting System of the National Government

  1. Each entity maintains accounting books and budget registries

  2. Each entity reconciles accounting books with cash records of BTr

  3. Each entity reconciles budget registries with budget records of COA

  4. Each entity reconciles budget registries with budget records of DBM

  5. Each entity submits financial reports to COA for consolidation

  6. COA consolidates financial reports of government agencies and submits it to the President and Congress
• Entity


  A government agency, department or operating/field unit
• Financial Reporting


  • 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
• GAM for NGAs


  • Promulgated primarily to harmonize the government accounting standards with international accounting standards, particularly the International Public Sector Accounting Standards (IPSAS)
  • 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
• Legal basis of GAM for NGAs

  Promulgated by the Commission on Audit (COA) based on the authority conferred to it by the Philippine Constitution
• Coverage of GAM for NGAs

  • 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
  • Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations
• Objectives of GAM for NGAs

  • Update standards, policies, guidelines and procedures in accounting for government funds and property
  • Update coding structure and accounts
  • Update accounting books, registries, records, forms, reports and financial statements
• Basic Accounting and Budget Reporting Principles

  • Comply with Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules and regulations
  • Accrual basis of accounting
  • Budget basis for presentation of budget information in the financial statements
  • Revised Chart of Accounts prescribed by COA
• Accrual basis of accounting

  • Transactions are recognized when they occur (and not only when cash is received or paid)
  • Transactions are recognized in the periods to which they relate
• Objective of the GAM for NGAs

  • Update standards, policies, guidelines and procedures in accounting for government funds and property
  • Update coding structure and accounts
  • Update accounting books, registries, records, forms, reports and financial statements
• Basic Accounting and Budget reporting Principles

  • Comply with Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules and regulations
  • Use accrual basis of accounting
  • Use budget basis for presentation of budget information in the financial statements
  • Use Revised Chart of Accounts prescribed by COA
  • Use double entry bookkeeping
  • Prepare financial statements based on accounting and budgetary records
  • Use fund cluster accounting
• Fund clusters

  • Regular Agency Fund
  • Foreign Assisted Projects Fund
  • Special Account-Locally Funded/Domestic Grants Fund
  • Special Account-Foreign Assisted/Foreign Grants Fund
  • Internally Generated Funds
  • Business Related Funds
  • Trust Receipts
• Qualitative Characteristics of Financial Reporting

  • Understandability
  • Relevance
  • Materiality
  • Timeliness
  • Reliability
  • Faithful representation
  • Substance over form
  • Neutrality
  • Prudence
  • Completeness
  • Comparability
• Trade-offs 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
  • To achieve a balance between relevance and reliability, the overriding consideration is how users' needs are best satisfied
• Components of General Purpose Financial Statements

  • Statement of Financial Position
  • Statement of Financial Performance
  • Statement of Changes in Net Assets/Equity
  • Statement of Cash Flows
  • Statement of Comparison of Budget and Actual Amounts
  • Notes to the Financial Statements
• Assets


  • 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
  • Key features: benefits must be controlled by the entity, benefits must have arisen from a past event, future economic benefits or service potential must be expected to flow to the entity
• Recognition of an Asset

  • It is probable that the future economic benefits will flow to the entity
  • The asset has a cost or value (e.g., fair value) that can be measured reliably
• Liabilities


  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
• Equity


  Net assets/equity - is the residual interest in the assets of the entity after deducting all its liabilities
• Revenue


  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
• 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
• Expenses


  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
• 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
• There are no retained earnings accounts for equity in government accounting, but accumulated surplus/deficits, equity-enjoyed venture, and revaluation surplus accounts exist.