Chapter 23

Problem
Assume the following transaction for a National Government Agency: (000,000’s omitted)

Transactions National Government Agency Books Dr. Cr.

1. Receipt of Allotment Memorandum entry in
for: RAOCO
Personal Services (PS).. P 2,460 RAOMO
Maintenance and RAOPS
Other Operating RAOFE
Expenses (MOOE)…. 2,400
Capital outlay (CO)….. 10,260
Financial Expenses (FE) 440

P15,600
2. Receipt of Notice of Cash – National Treasury – Modified
Cash Allocation Disbursement System………………………..... 15,600
(NCA) from DBM- P15,600 Subsidy Income from National
Government………………………………… 15,600

Personal Services

3. Obligation for Memorandum entry RAOPS

Personal Services,
P3,000

4. Established a payroll Payroll Fund……………………………………... 2,460

fund which is Cash – National Treasury –
composed of : Modified Disbursement System………… 2,460
Regular pay…………… P2,880
Personal Relief
Allowance (PERA)….. 720
P3,600
Less: Deductions:
Withholding tax....... 840
GSIS Life and
Retirement Premium 360
PhilHealth premiums. 180
Pag-ibig premiums… 120
Net………………………. P2,460
Accordingly, an
amount of P2,460 was
advanced by the
agency’s disbursing
officer.

5. To record liquidation of Salaries & Wages – Regular Payroll………… 2,880

cash advances or PERA………………………………………………. 720
payment of salaries. Due to BIR…………………………………… 840
Due to GSIS ……….………..………………. 360
Due to PhilHealth………….………………. 180
Due to Pag-ibig ……………………………. 120
Payroll Fund…………………………………. 2,460
6. Remittance of salary Due to BIR………………………………………... 840
 deductions (no tax Due to GSIS ……….………..…………………… 360
remittance advice) P12,600 Due to PhilHealth …………………………….... 180
Due to Pag-ibig ……………………………...... 120
Cash – NT – MDS…………………………… 1,500
7. Obligation for Memorandum entry RAOPS
government share
representing:
Life and retirement
Insurance…………… P 360
Philhealth……………... 180
Pag-ibig……………….. 120
P 660
8. Recording the Life and Retirement Insurance Contribution 360
incurrence of PhilHealth Contribution Expense……………. 180
government share for Pag-ibig Contribution Expense……………… 120
applicable salary Due to GSIS………………………………….. 360
deduction. Due to Pag-Ibig…………………………….. 180
Due to PhilHealth…………………………… 120
9. Remittance of Due to GSIS……………………………………… 360
government share for Due to Pag-Ibig………………………………… 180
applicable salary Due to PhilHealth………………………………. 120
deduction. Cash – NT – MDS……………………………. 660

Maintenance and Other Operating Expenses

10. Obligation of rent for Memorandum entry RAOMO

two years…………….. P180
11. Payment of two Prepaid rent……………………………………... 180
years rent…………….. P180 Cash – NT – MDS……………………………. 180
12. Obligation for: Memorandum entry RAOMO
Electricity bill………. P360
Telephone bill…….. 60
P420
13. Received the Electricity expense…………………………….. 360
following bill: Telephone expenses – landline…………….. 60
Electricity bill………… P360 Accounts payable…………………………. 420
Telephone bill……….. 60
P420
14. Payment of electricity Accounts payable……………..……………… 420
and telephone bills. Cash – NT - MDS…………………………….. 420

15. Obligation for Memorandum entry RAOMO

traveling (local)
expenses of Mr.
Miranda………………. P24
16. Grant of cash Advances to Officers & Employees………… 24
advance to Mr. Alex Cash – NT - MDS…………………………….. 24
Miranda for traveling
expense.
17. Liquidation of cash Travel expenses- local…….…………………... 22
advance for travel of Advances to Officers & Employees…….. P2-18 22
Mr. Alex Miranda... P22

18. Adjustment of Memorandum entry RAOMO

obligation for refund
of excess advance
for traveling expense P2.4
19. Collection of refund Cash – collecting officers…………………….. 2.4
 for excess advance Advances to Officers & Employees…….. 2.4
from the foregoing
cash advance for
travel.
20. Deposit of collection Subsidy Income from National
from excess Government…………………………………… 2.4
advance to Bureau Cash – collecting officers…………………. 2.4
of Treasury
21. Issuance of Memorandum entry RAOMO
purchase order
(obligation) for office P240
supplies……….
22. Paid the purchase Office Supplies Inventory……………………... 240
order less withholding Due to BIR…………………………………… 24
tax of P 24 Cash – NT – MDS…………………………… 216
23. Issuance of the P168 Office Supplies Expense………………………. 168
following office Office Supplies Inventory…………………. 168
supplies………………..
24. Remittance of Due to BIR……………………………………….. 24
withholding tax thru Subsidy Income from National
TRA (tax remittance Government……………………………….. 24
advice)
25. To record obligation Memorandum entry RAOMO
for the establishment
of Petty Cash Fund
(PCF) for office
supplies (pens and
pencils – not
available in the
stockroom)

26. Establishment of Petty Cash Fund………………………………... 42

Petty Cash Fund Cash – NT – MDS……………………………. 42
(PCF) for MOOE…….. P42
27. Purchase of sign No entry
pens, ball pens,
white board pens,
pencils thru PCF…….. P36
28. To record obligation Memorandum entry RAOMO
for request of
replenishment of the
PCF for P36.
29. To record Office Supplies Expense………………………. 36
replenishment of Cash – NT - MDS……………………………. 36
PCF, before the end
of the year.

Capital Outlay

30. Issuance of purchase Memorandum entry RAOCO

order (obligation) for
office equipment…… P120
31. Receipt of office Office Equipment……………..……………….. 120
equipment based on Accounts payable…………………………. 120
invoice/delivery
receipt.
32. Payment of office Accounts payable…………….………………. 120
 equipment, with a tax Due to BIR……………………………………. 12
of……………………...... P12 Cash-NT-MDS………………………………... 108
33. To record obligation Memorandum entry RAOCO
for construction of a
new building upon
signing of contract… P840
34. Payment of 15% of Advances to Contractors……………………. 126
contract for Cash – NT - MDS…………………………… 126
mobilization fee
(advances to
contractors)
amounting to
(P840 x 15%)…………. P126
35. Receipt of first Construction In Progress – Buildings………… 420
progress billing for Advances to Contractors………………… 126
construction of new Accounts payable………………………….. 294
building:
50% of P840…………. P420
Less: Recoupment… 126
Net Amount………… P294
36. Payment of first Accounts payable…………………………….. 294
progress billings, Due to BIR………………..………………….. 30
withholding tax……... P30 Cash – NT - MDS……………………………. 264
37. Presentation of final Construction In Progress – Buildings………… 420
billing: 50% of P840…. P420 Accounts payable…………………………. 420
38. Final payment for Accounts payable…………………………….. 420
building, withholding Due to BIR…………………..………………... 42
tax of………………….. P42 Cash – NT - MDS………………………........ 378

39. To close the Buildings………………………………………….. 840

Construction In Construction In progress – Buildings…… 840
Progress Account to
Buildings upon turn-
over and acceptance
40. To record obligation Memorandum entry RAOCO
for construction of
roads upon signing of
contract amounting - P2,400
41. To record the receipt Cash – Collecting Officer…………………….. 12
of performance Performance Bonds Payable…………….. 12
bond from (cash or
certified check)
contractor……………. P 12

If the performance bond is in the form of surety bond, the following entry is required:
To record the receipt Guarantee Deposits……………..... 12
of performance Performance Bonds Payable…............ 12
bond from (cash or
certified check)
contractor P 12

42. To record Due from National Government Agency -

remittance/deposit of (BTr)………………………………………………. 12
performance bond Cash –Collecting Officer…………………. 12
cash to Bureau of
Treasury (BTr) thru
AGDB (Authorized
 Government
Depository Bank)
43. Payment of 15% of Advances to Contractors…………………….. 360
contract for Cash-NT-MDS……………………………….. 360
mobilization fee
(advances to
contractors)
amounting to (P2,400
x 15%)………………….. P360
44. Receipt of progress Construction in Progress – Roads…………… 1,200
billing for Advances to Contractors………………… 360
construction of roads, Accounts payable…………………………. 840
50% of P2,400………. P1,200
Less: Recoupment… 360
Net amount………… P 840
45. Payment of bill for Accounts payable…………………………….. 840
the construction of Due to BIR…………………..………………. 84
roads: Guarantee deposits payable………….. 120
Accts. Payable…….. P 840 Cash-NT-MDS………………………………. 636
Less: Withholding
tax………....... 84
10% Retention
(1,200x10%)... 120
Net Amount………… P 636
46. Presentation of final Construction in Progress – Roads…………… 1,140
billing for roads Accounts payable…………………………. 1,140
50% of P2,400………. P1,200
Less: Liquidated
Damages…….. 60
Net Amount ……….. P 1,140
47. Final payment for the Accounts payable…………………………….. 1,140
construction of Due to BIR…………………..………………. 114
roads: Cash-NT-MDS………………………………. 1,026
Accts. Payable…….. P 1,140
Less: Withholding
tax(P1,140X10%) 114
Net Amount P 1,026

48.Adjustment of Memorandum entry RAOCO

RAOCO to reduce
original amount of
obligation P60
49. To close the Public Infrastructures………………………… 2,340
Construction In Construction In Progress – Roads, etc 2,340
Progress Account to
Public Infrastructures
upon turn-over and
acceptance of the
road project:
Contract amount…... P2,400
Less: Liquidated
damages……… 60
Net Cost……………… P2,340
50. To record refund Guarantee Deposits Payable……………….. 120
of retention fee for Cash – NT – MDS……………………………. 120
the construction of P 120
 roads.
51. To record receipt Cash – NT – MDS………………………………... 12
of NCA for release of Due from National Government (BTr)….. 12
performance bond….. P 12
52. To record refund Performance bond payable………………… 12
of performance bond. P 12 Cash – NT – MDS……………………………. 12
If the performance bond is in the form of surety bond, the following entry is required (instead of
No. 51 and 52)
To record the Performance Bonds 12
release of Payable…… 12
performance Guaranty
bond P 12 Deposits……………...

53. To record Memorandum entry RAOCO

obligation for
purchase of land and
building upon signing P1,800
of contract…..
54. The assessed Land………………………………………………. 1,200
value of the land P1,200 Building…………………………………………… 600
amounted to Accounts payable…………………………. 1,800
55. To record the Accounts payable…………………………….. 1,800
payment of land and Due to BIR…………………..……………….. 180
building, with tax of…. P 180 Cash – NT - MDS……………………………. 1,620
56. To record Due to BIR………………………………………... 84
remittance of Cash – NT - MDS……………………………. 84
withholding tax
without TRA: P 12
No. 32………………. 30
No. 36………………. 42
No. 38………………. P 84
Total…………………

57. To record Due to BIR……………………………………….. 378

remittance of Subsidy Income from National
withholding tax thru Government……………………………….. 378
TRA: P 84
No. 45………………. 114
No. 47………………. 180
No. 55………………. P 378
Total…………………
58. To record for Memorandum entry RAOCO
obligation for the
general repair of the
building acquired……. P 840
59. To record the Construction Materials Inventory…………… 480
receipt of Accounts payable…………………………. 480
construction materials
with the charge P 480
invoice……….
60. To record Accounts payable…………………………….. 480
payment of materials, Due to BIR……………………………………. 48
with a tax P 48 Cash – NT – MDS………………………....... 432
of………………………...
61. To record Construction in Progress – Building………… 480
issuance of materials Construction Materials Inventory……….. 480
for the construction P 480
62. To record Memorandum entry RAOCO
obligation of payroll in
relation to the general P 360
repair……

63. To record cash Cash – Disbursing Officer..……………………. 324

advance granted to Cash – NT- MDS……………………………... 324
disbursing officer (net
of P30 withholding P 324
tax).
64. To record Construction in Progress (CIP) – Building…. 360
liquidation of cash Due to BIR……………………………………. 36
advance by Cash – Disbursing Officer…………………. 324
Disbursing Officer
65. To record the Building………………………………………….. 840
transfer of CIP Construction In Progress – Building…….. 840
account to Buildings
account upon
completion of the
general repair.
66. To record Due to BIR………………………………………... 84
remittance of Subsidy Income from National
withholding tax for Government……………………………….. 84
materials and labor,
assuming that the
Notice of Cash
Allocation received
was already reduced
by TRA: P 48
No. 60………………. 36
No. 64………………. P 84
Total…………………

Adjusting Entries
66. Depreciation of the Depreciation expense – equipment……….. 6
following Depreciation expense – buildings………….. 18
Equipment…………. P 6 Accumulated depreciation- equipment 6
Buildings……………. 18 Accumulated depreciation- buildings… 18
Total…………………. P 24
67. Rent expense for the Rent Expense………………………………. 90
year, P150/2 years…. P 90 Prepaid rent…………………………... 90
Closing Entries
68. Reversion of the Subsidy Income from National
Unused Subsidy Government…………………………………… 4,386
Income from Cash – NT – MDS……………………………. 4,386
National
Government
representing NCA

69. Close SING to Income Subsidy Income from National

and Expense Government…………………………………… 8,698
Summary Income and Expense Summary……..... 8,698
70. Close expenses to Income and Expense Summary…………….. 7,360
 Income and Expense Salaries and Wages (#5)………………… 2,880
Summary PERA (#5)…………………………………… 720
Life and Retirement (#8)………………… 360
PhilHEALTH Contr. Exp. (#8)…………….. 180
Pag-ibig Contr. Exp. (#8)………………… 120
Electricity expense (#13)………………… 360
Telephone (#13)…………………………... 60
Travel expense (#17)…………………….. 22
Office supplies expense (#23 & #29)…. 204
Public Infrastructures……………………... 2,340
Depr Exp – Equipment (#66)…………… 6
Depr Exp – Bldgs (#66).………………….. 18
Rent expense (#67)………………………. 90
71. Close Income and Income and Expense Summary…………….. 2,036
Expense Summary to Retained operating surplus………………. 2,036
Retained Operating
Surplus
72. Close Retained Retained Operating Surplus…………………. 2,036
Operating Surplus to Government Equity………………………… 2,036
Government Equity

Multiple Choice Problems

1. b 6. d 11. a 16. d 21. d 26. a 31 b 36. d 41. b
2. d 7. a 12. b 17. a 22. c 27. a 32. b 37. b 42. a
3. b 8. d 13. c 18. d 23. b 28. b 33. c 38. a 43. c
4. c 9. d 14. b 19. a 24. c 29. b 34. b 39. b 44. b
5. c 10, b 15, c 20. c 25. b 30. d 35. d 40. b 45. d

46. d – P58,800,000 = P7,000,000 + P14,000,000 + P25,200,000 + P9,800,000 + P2,800,000

47. No answer available – P121,800,000
Assets:
Current assets P 14,000,000
Investments and fixed assets 126,000,000
Other assets ___7,000,000
Total assets P147,000,000
Less: Liabilities __25,200,000
Government Equity P121,800,000

48. a
Income P20,000,000
Less: Expenses
Personal services 7,000,000
MOOE 3,000,000
Financial expenses 5,000,000
Depreciation ___800,000
Excess of income over expenses P 4,200,000

49. b
I ncome:
Subsidy income from National Government P 4,000,000
Less: Reversion of unused cash allocation ___500,000 P 3,500,000
Sales P15,000,000
 Less: Cost of goods sold __4,000,000 11,000,000
Rent income 1,000,000
Interest income 500,000
Gain on sale of assets 2,000,000
Income from government services 8,000,000
Total Income P26,000,000
Less: Expenses
Interest expense P 100,000
Depreciation expenses 800,000
Salaries and wages 10,000,000
PERA 200,000
Representation allowances 300,000
Transportation allowances 100,000
Grants and donations 400,000
Rent expense 500,000
Electricity 2,000,000
Telephone charges 800,000
Bank charges ___400,000 _15,600,000
Excess of income over expenses P 10,400,000

50. c
Government equity, beginning P10,000,000
Retained Operating Surplus:
Current operations P16,000,000
Adjustment of prior years __2,000,000 18,000,000
Property, plant and equipment – public infrastructures ( 3,000,000)
Government equity, ending P 25,000,000