Professional Documents
Culture Documents
National Government Agency (NGA) are agencies that includes all departments,
bureaus, offices, boards, commissions, councils state colleges and universities.
3. The managers/administrators who are in-charge of carrying out the policy and daily
conduct of government affairs.
4. The students of public finance
5. The resource providers of the government such as:
Donors or grantors
Lenders, suppliers and employees whose main concern is to know whether the
government can pay its obligations to them.
DISTINCTIONS BETWEEN GOVERNMENT AND COMMERCIAL ENTERPRISES
1. Ownership - Private enterprises are owned by a relatively few stockholders, partners, or
owners. The government represents the entire people in a given community.
2. Purpose - Private enterprises are organized primarily to make profits. The government
is set up mainly to render service at lowest possible cost to its constituents.
3. Organization - The organization of a private enterprise is a succession of authority and
responsibility starting from its stockholders who delegate them to a duly elected board of
directors which in turn organize its own staff of officers in whom the responsibility of managing
the affair of business is reposed. The responsibility and authority of a government entity in our
system lies in Congress.
4. Financing - Private enterprise is supported for its finance primarily by the voluntary
contribution from its members or stockholders which constitute as their share of capital or
investment in the business. The government is vested the exclusive right to demand involuntary
contributions from its constituent in the form of taxes.
5. Income - In private enterprise, the capital investment of stockholders are made to
generate return in the form of profits for services rendered or good sold. The government which
is organized primarily to render service, cannot make profits on the services it renders. To
support the estimated annual cost of government, taxes are levied.
DISTINCTION BETWEEN GOVERNMENT AND COMMERCIAL ACCOUNTING
1. Objective
CA is geared towards income measurements aside from control of company
resources,
GA - is control of government funds to see to it that they are properly utilized and
provide data to management for decision.
2. Basis of Accounting CA either cash or accrual method is used but not a combination of both.
GA - the modified accruals basis of accounting is used.
3. Preparation of periodic reports
CA Statement of Financial Position, Statement of Comprehensive Income, Statement
of Cash Flows, Statement of Shareholders Equity and Notes to the FS
GA - Statement of Financial Position, Statement of Financial Performance, Statement of
Changes in Net Assets/ Equity, Statement of Cash Flows and Notes to the FS
4. Control Mechanism
CA none
GA Fund accounting, obligation accounting and CDC accounting
5. Books of Accounts
CA - only one set is kept
GA - National Government (NG) Books.
6. As to accounts and transactions
CA - Nominal and Real Accounts are used.
GA - includes budgetary accounts such as Appropriation, Allotments and
Obligations are maintained.
7. Source of Accounting practice and procedures
CA - dictated by nature of business and policies of management
GA - laws, rules and regulations
AC 518 2nd Sem, A.Y. 2015-2016
Fund Accounting
Obligation Accounting
Cash Disbursement Ceiling (CDC) Accounting
Fund Accounting. A fund is a sum of money or other resources set aside for the
purpose of carrying out specific activities or attaining certain objectives in accordance with
specific regulations, restriction, and limitations.
The two major classification of funds as to purpose for which they may be used:
1. General Fund one which is generally available for all functions of the
government.
2. Special Fund - one which, by legislative action, segregates specified revenues
for limited purposes.
Obligation Accounting. As a control mechanism of government accounting system,
obligation accounting provides the ceiling of the maximum extent by which an agency can incur
obligations or commit the resources of the government in the performance of its functions.
Obligation accounting refers to the accounting practice, procedures and techniques for
recording obligations in the government.
Cash Disbursement Ceiling Accounting. The cash disbursement ceiling accounting is
another control mechanism of government accounting system. The cash operations of the
government under the cash disbursement ceiling accounting are limited within the boundaries of
the appropriations release to government agencies in the form of allotments, and any additional
amount granted by the DBM to liquidate or pay existing valid obligation.
Accounting Responsibility - Under PD 1445, accounting responsibility for all
government funds and property is entrusted, immediately and primarily, to the head of the
government agency or office. It is the duty of the head of the agency to take reasonable steps
to minimize, if not to avoid the risk of losses, defalcations and other types of irregularities in the
utilization of all government resources (to safeguard the resources of the government under his
custody) and periodic reporting to concern authorities. His responsibility, however, is supervised
by higher authorities and government bodies.
AC 518 2nd Sem, A.Y. 2015-2016
In government, authority is often used interchangeably with the term "power". However,
their meanings differ: while "power" is defined as 'the ability to influence somebody to do
something that (s)he could not have done', "authority" refers to a claim of legitimacy, the
justification and right to exercise that power.
Accountability Requirements From Public Officer/Employees
Section 1 of PD 1445 provides:It is the declared policy of the State that all government
resources shall be managed, expended and utilized in accordance with law and regulations and
safeguard against loss or wastage through illegal or improper disposition, with a view to
ensuring efficiency, economy and effectiveness in the operations of government. The
responsibility to see to it that such policy is faithfully adhered to rests directly with the chief or
head of the government agency concerned.
This declaration articulates the concern of the state for the safekeeping of the publics
resources. It focuses on how the resources shall be handled by those given the public trust to
manage, spend or use such resources.
Pursuant to this policy the State requires from public officers and employees the following:
1. Compliance with laws and regulations
- Laws and rules
- Agency policies
- Agency manuals of operations; and
- Provisions of contracts, MOA
2. Safeguarding of government resources from loss and waste
3. Achieving goals and objectives
Assertions of Compliance with Accountability Requirements
When public officers and employees submit to the Commission their transactions,
accounts, financial reports and statements and other performance and operation reports, they
are asserting or claiming that they have complied with the foregoing accountability
requirements.
What is Assertions?
Assertion is the expressed or implied representation by management that is reflected in
their transactions, accounts, financial statements, records, reports and that they are claiming
that they have complied with the accountability requirements of the state policy.
Assertions on Compliance with Laws and Rules
When expenditures, disbursements, receipts and collections are reported to the
appropriate authorities, management is making claim that so much amount has been disbursed
or so much amount have been collected in payment of goods and services received or rendered
in accordance with laws, rules, applicable policies and practices.
Assertion on Resources Duly Safeguarded
When the agencies issue their financial reports and statements they are asserting the
following:
1. Existence or Occurrence - This deals with whether assets or liabilities of the audited
agency actually exist at a given date, and whether recorded transactions have occurred
during the given period.
2. Completeness This deals with whether all transactions and accounts that should be
presented in the financial statements are included.
3. Rights and Obligations - This deals with whether assets are actually owned by the
agency and liabilities are the obligation of the agency at a given date.
4. Valuation or Allocation - This deals with whether or not the asset, liability, revenue and
expenses components have been included in the financial statements at appropriate
amounts.
5. Presentation and Disclosure This deal on whether particular components of the
financial statements are properly classified, described and disclosed.
AC 518 2nd Sem, A.Y. 2015-2016
accounting principles and accordance with pertinent laws and regulations. The principles to be
followed by government entities includes the following:
1. The accounts of the agency shall be kept in such detail and at the same time be
adequate to furnish the information needed by fiscal or control agencies of the
government.
2. The highest standard of honesty, objectivity and consistency shall be observed in the
keeping of accounts to safeguard against inaccurate or misleading information.
3. The government accounting system shall be on double-entry basis with the general
ledger in which all financial transactions are recorded, Subsidiary record shall be kept
where necessary.
4. The Chart of Accounts has three-digit coding system and provides for responsibility
accounting.
5. The Chart of Accounts categorizes Personal Services, Maintenance and Other
Operating Expenses and Financial Expenses as Expenses, obligation charged to capital
outlay are recorded to appropriate asset accounts when the liability and the payment are
taken-up.
6. Matching Principles, The principle that requires the matching of revenues and expenses
is adopted.
- Modified accrual method is used
- Depreciation accounting for property, plant and equipment using the straight line
method is followed.
- Allowance for doubtful accounts is taken up. Dormant accounts are transferred o
a separate registry,
- Asset method is followed for prepaid expenses.
7. On financial statement:
1. Fairness of presentation this refer to the overall propriety of disclosing financial
information. Full disclosures in financial aspects requires observance of the
standards of reporting.
2. Compliance the report shall be in accordance with prescribed government
requirements and international accounting standard of reporting.
3. Timeliness all needed reports shall produced promptly to be of maximum
usefulness.
4. Usefulness financial reports shall be carefully designed to present information
that is needed and useful to reports users.
8. Obligation accounting is modified, allotments and obligations are no longer journalized.
Separate registries are maintained to control these accounts and the appropriation.
9. All lawful expenditures and obligation incurred during the year shall be taken up as
accounts of that year.
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