Chapter 7.

SUPPLIES OR PROPERTY

ACCOUNTING FOR SUPPLIES OR PROPERTY

Sec. 112. Definition of Supplies or Property. – Supplies or

property include everything, except real property, which may be
needed in the transaction of public business or in the pursuit of any
undertaking, project or activity, whether in the nature of equipment,
furniture, stationery, materials for construction or personal property
of any sort, including non-personal or contractual services such as the
repair and maintenance of equipment and furniture, as well as
trucking, hauling, janitorial, security, and related services. ( Sec.
356c of the LGC)

Sec. 113. Classification of Supplies or Property. – Supplies

or property shall have the following classification:

a. Expendable supplies or property – referring to articles

which are normally consumed in use within one year or
converted in the process of manufacture or construction,
or those having a life expectancy of more than one year
but which shall have decreased substantially in value
after being put to use for only one year. Examples are
stationery, fuel, spare parts. Expendable supplies forms
part of the maintenance and operating expenses of the
LGU.

b. Non-expendable supplies or property – referring to

articles which are not consumed in use and ordinarily
retain their original identity during the period of use,
whose serviceable life is more than one year and which
add to the assets of the government. Examples are
furniture, fixtures, transport equipment and other
equipment. Non-expendable supplies or property are
proper charges to capital outlay of the LGU.

c. Non-personal services – includes, but is not limited to

repairing, cleaning, redecorating, and furnishing of
necessary repair parts or other supplies as part of the
services performed. Examples are contractual services

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 like trucking, hauling, janitorial, security and related
services. Non-personal services are proper charges to
maintenance and operating expenses of the LGU.

Sec. 114. Perpetual Inventory Method. – Purchase of

supplies and materials for stock, regardless of whether or not they are
consumed within the accounting period, shall be recorded as
inventory following the perpetual inventory method. Under the
perpetual inventory method, an inventory control account is
maintained in the General Ledger on a current basis. In addition,
detailed inventory records are maintained for each inventory item.

Regular purchases shall be coursed thru the inventory

account and issuances thereof shall be recorded as they take place,
except those purchased out of the petty cash fund which shall be for
immediate use and for stock in which case shall be charged
immediately to the appropriate expense accounts.

The Chief Accountant shall maintain the perpetual inventory

records comprising of Supplies Ledger Cards (SLC) for each
commodity/stock, Property, Plant and Equipment Ledger Card
(PPELC) for each category of plant, property and equipment and
Work, Other Animals and Breeding Stocks Ledger Card
(WOABSLC) for each type of livestock. Such ledger cards shall
contain the details of the property, plant and equipment and livestock
account in the inventory control account in the general ledger.

The General Services Officer or the Municipal Treasurer, as

the case maybe shall likewise maintain stock cards and property
cards for supplies; property, plant and equipment; and work animals
in their custody to account for the receipt and disposition of the same.
The balance per stock card/property cards should always reconcile
with the ledger cards of the accounting unit. They should also
reconcile with other property records like Acknowledgement Receipt
for Equipment (ARE).

Sec. 115. Moving Average Method. – The moving average

method of costing shall be used for costing inventories. This is a
method of calculating cost of inventory on the basis of weighted
average on the date of issue. The Chief Accountant shall compute the
inventory cost monthly using the method. Illustrative calculation of
inventory using this method is as follows:

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 Ball pen

Reference Date Received Issued Balance

Beg. Balance
per actual Jan. 1 200 @
inventory P10 P2,000
Delivery Jan 12 400 @
Receipt/ 12 4,800 600 @
Invoice No. 11.33 6,800
RIS No. Jan. 16 500 @ 100 @
11.33 5,665 11.35 1,135
Delivery Jan. 26 300 @ 400 @
Receipt/ 11 3,300 11.09 4,435
Invoice No.
RIS No. Jan. 29 200 @
11.09 2,218 200 2,217
@11.09
Delivery 100 @ 1,200 300 @
Receipt/ Jan. 30 12 11.39 3,417
Invoice No.

(On Jan. 12, the new unit cost of P11.33 was found by
dividing P6,800, the total cost, by 600, the number of units at hand.
Then on Jan. 16, the peso balance, P1,135 represented the previous
balance P6,800 less P5,665, the cost assigned to the 500 units issued
on this date. New unit costs were calculated on Jan. 26 and 30 when
additional units were acquired. )

Sec. 116. Requisition Procedures. – (a) Requirement of

Requisition - Any order for supplies shall be filled by the provincial
general services officer, the city general services officer, or the
municipal treasurer, as the case maybe, for any office or department
of the LGU concerned only upon written requisition.

(b) Forms to be used - Requisitions shall be accomplished

using the following forms:

(1) Requisition Issue Slip (RIS) - for supplies carried in

stock; and
(2) Purchase Request (PR) - for supplies not carried in
stock.

(c) Preparation of Requisition - At the beginning of the year,

the Office of the General Services Officer (GSO) or the Municipal
Treasurer, as the case maybe, shall prepare a PR for supplies and
materials needed for the quarter based on the approved Annual
Procurement Program. Subsequent requisition from stock shall be
made by the head of office or department needing the supplies. A

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Supplies Availability Inquiry (SAI) shall be used to inquire as to
availability of supplies needed from the Office of the Chief
Accountant. If supplies are available, the RIS shall be prepared and
submitted to the GSO/Local Treasurer for the issuance of supplies. If
the supplies needed are not available from stock, a PR shall be
prepared.

The head of office or department needing the supplies shall

certify as to their necessity for official use and shall specify the
project or activity where the supplies or property are to be used.

(d) Certification on Allotment and Obligation Slip (ALOBS) -

Every PR must be accompanied by an ALOBS showing the
certification of the local budget officer and the local accountant, that
an appropriation therefore exists; and that the estimated amount of
such expenditure has been obligated. The Local Treasurer shall
certify as to cash availability in the purchase request.

(e) Approval of Requisitions - Approval of requisitions by

the head of office or department concerned who has administrative
control of the appropriation against which the proposed expenditure
is chargeable is deemed sufficient, except in case of requisition for
supplies to be carried in stock which shall be approved by the local
chief concerned.

Sec. 117. Issuance of Purchase Orders or Contract. –

Immediately after the LGU has performed all the required procedures
adopting a particular mode of procurement, a purchase/letter order or
contract shall be issued.

The date when the purchase/letter order was received by the

supplier or contractor shall be indicated clearly.

The purchase order or contract shall be released only to, and

signed for by, the awardee or his duly authorized representative.

Sec. 118. Acceptance and Inspection of Purchases. –

Deliveries of items purchased by the local government units shall be
accepted first by the general services officer or municipal treasurer as
the case maybe before inspection. Inspection of purchases shall be
made by the authorized inspector/s for conformity with specification
in the order. Acceptance and inspection shall be made using the
Acceptance and Inspection Report (AIR).

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 Sec. 119. Property Records to be Maintained. – The
General Services Officer or the Local Treasurer, as the case maybe,
shall number each type of supplies and maintain Stock Cards per
stock number. He shall likewise maintain Property Cards per
category of property, plant and equipment.

Deliveries of supplies or property shall be immediately

recorded in the property records on the basis of the AIR and other
supporting documents. The AIR and other supporting documents
shall be forwarded to the Chief Accountant for the preparation of the
DV and recording of deliveries in the appropriate ledger cards.

Sec. 120. Recording of Deliveries of Supplies or Property

in the Books of Accounts. – The Chief Accountant shall maintain
Supplies Ledger Cards per stock number; Property, Plant and
Equipment Ledger Cards for each category of assets; and Real
Property Ledger Cards for land.

Upon receipt of the AIR and other supporting documents, the

Chief Accountant shall record the deliveries in the appropriate ledger
cards. Upon completion of the disbursement process pertaining
thereto the Chief Accountant shall prepare the JEV taking up the in
the books the procurement made. Thereafter, the Chief Accountant
shall reconcile the JEV with the appropriate ledger cards.

Sec. 121. Reporting on Issuance of Supplies/materials. –

The General Services Officer or the Local Treasurer, as the case
maybe, shall consolidate weekly the RIS for which supplies and
materials were issued using the Summary of Supplies and Materials
Issued (SSMI). The SSMI together with the original copy of the RIS
shall be submitted to the Chief Accountant, who shall compute cost
of supplies issued and ending inventory using the moving average
method. Based on the SSMI, a JEV shall be prepared to record the
expenditures using appropriate expenditure accounts.

Sec. 122. Inventory Process. – The following is the general

process to be followed in the control of inventory:

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 PROCESS PERSON / UNIT
RESPONSIBLE

a. Prepare Purchase Request (PR) for Office of the General

supplies and materials needed for Services Officer
the quarter based on the approved (GSO) or the
annual procurement program, at Municipal Treasurer
the beginning of the year and of as the case maybe.
each subsequent quarters.

b. Prepare ALOBS covering the Office of the GSO or

requisition under the PR. the Municipal
Treasurer or the office
authorized to prepare
the same.

c. Approve ALOBS and the PR. The Budget Officer

and the Chief
Accountant, for the
ALOBS; and the
Local Chief Executive
and the Local
Treasurer, for the PR.

d. Prepare Purchase Order. GSO/Local Treasurer

e. Approve Purchase Order. Local Chief Executive

f. Receive delivered items, prepare GSO/Local Treasurer

Acceptance and Inspection Report
(AIR) and signs acceptance
portion.

g. Inspect items, and signs Property Unit/LGU

inspection portion of the AIR. Inspector

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 PROCESS PERSON / UNIT
RESPONSIBLE

h. Record delivered items in the GSO/Local Treasurer

stock/property cards. Prepare
Disbursement Voucher (DV), sign
box A and forward the same with
the delivery receipt/invoice/
appropriate documents to
Accounting Unit.

i. Record delivered items in Supply Accounting Unit

Ledger Card/Property, Plant and
Equipment Ledger Card/Work,
Other Animals and Breeding
Stocks Ledger Card, on the basis
of the AIR. Process DV and
follow disbursement process.
Prepare JEV. Reconcile JEV with
the entries in the ledger cards
recorded on the basis of the AIR.

j. Prepare Stock Availability Inquiry Requisitioning Unit

(SAI) and forward to Accounting
Unit.

k. Verify records, advise Accounting Unit

requisitioning unit.

l. Prepare Requisition and Issue Slip Requisitioning Unit

(RIS) and forward to Property
/Supply Unit.

m. Release supplies/equipment and GSO/Local Treasurer

record issuance in the stock
cards/property cards.

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 PROCESS PERSON / UNIT
RESPONSIBLE

n. Consolidate RIS for which GSO/Local Treasurer

supplies and materials were
issued and prepare the Summary
of Supplies and Materials Issued
(SSMI) and forward to
Accounting Unit.

o. Prepare JEV on the basis of Accounting Unit

SSMI, and record withdrawals in
Supply Ledger Cards (SLC).

Sec. 123. Receipts of Issuance. – All issuances of supplies

or property shall be properly receipted using the forms prescribed
under applicable rules and regulations on supply and property
management in local government units. For transfer of equipment,
the Acknowledgement Receipt for Equipment (ARE) shall however
be used.

Sec. 124. Inventory of Supplies or Property. – The local

chief executive shall require periodic physical inventory of supplies
or property. Physical count of inventory items by type shall be
conducted semestrally and reported in the Report of the Physical
Count of Inventories (RPCI). This shall be submitted to the Auditor
concerned not later than July 31 and January 31 of each year for the
first and second semesters, respectively.

Physical count of property, plant, and equipment by type

shall be made annually and reported on the Report on the Physical
Count of Property, Plant and Equipment (RPCPPE). This shall be
submitted to the Auditor concerned not later than January 31 of each
year.

Sec. 125. Disposal of Supplies or Property. - Disposal

procedures shall be in accordance with applicable rules and
regulations on supply and property management in local government
units. The Waste Materials Report (WMR) and the Inventory and
Inspection Report of Unserviceable Property (IIRUP) shall be used .

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 Sec. 126. Pro–Forma Accounting Entries. – The following
are the pro-forma accounting entries for supplies or property:

Acct.
Particulars Account Title Code Debit Credit

1. Supplies and Materials

1.1 Spare parts -

Issuance of PR for (enter Obligation in

spare parts the RAAOMO- P100)

1
Record delivery of Spare Parts Inventory 155 00
items and charge Accounts Payable 401 100
invoice, if
procurement is on
credit

Payment of Invoice Accounts Payable 401 100

Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80

If Procurement is on Spare Parts Inventory 155 100

Cash Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80

Spare parts worth Motor Vehicles

P50 used for repairs Maintenance 878 50
of motor vehicles. Spare Parts Inventory 155 50

1.2 Office Supplies -

Issuance of PR for (Enter obligation in

office supplies P100. the RAAOMO-P100)

Record delivery of
items and charge Office Supplies 149 100
invoice, if Inventory
procurement is on Accounts Payable 401 100
credit.

Payment of Charge
Invoice Accounts Payable 401 100
Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80

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 Acct.
Particulars Account Title Code Debit Credit
If procurement is on
cash basis Office Supplies
Inventory 149 100
Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80
Withdrawal of
Office Supplies for Office Supplies
office use. Expenses 849 100
Office Supplies
Inventory 149 100

1.3 Accountable
Forms -
(Enter obligation in
Issuance of PR for the RAAOMO –
accountable forms P100.00)

Accountable Forms
Procurement on a Inventory 148 100
cash basis Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80

Accountable Forms
Withdrawal of office Expenses 848 100
supplies Accountable Forms
Inventory 148 100

2. Equipment

2.1 Office Equipment -

Issuance of PR for (Enter obligation in

Office Equipment RAAOCO-P20,000)
-P20,000

Record charge Office Equipment 222 20,000

invoice and Delivery Accounts Payable 401 20,000
of item. 20,00
Accounts Payable 401 0
Payment of delivered Withholding Taxes
Equipment Payable 410 2,000
Cash in Bank – LCCA 110 18,000

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 Acct.
Particulars Account Title Code Debit Credit

2.2 Issuance of PR for (Enter Obligation in

Furniture and RAAOCO-P20,000)
Fixture - P20,000

Record Charge Furniture and Fixtures 224 20,000

Invoice and delivery Accounts Payable 401 20,000
of item

Payment of Accounts Payable 401 20,000

delivered furniture Withholding Taxes
and fixture Payable 410 2,000
Cash in Bank – LCCA 110 18,000

3. Non-Personal Services

3.1 Security Services -

Issuance of contract (Enter obligation in

for security services the RAAOMO-
- P120,000 P120,000)

Receipt of monthly Security and Janitorial

Billing- P10,000 Services 858 10,000
Accounts Payable 401 10,000

Payment of monthly Accounts Payable 401 10,000

billing Withholding Taxes
Payable 410 1,000
Cash in Bank – LCCA 110 9,000

3.2 Plumbing Services -

Signing of contract (Enter obligation in

for Plumbing the RAAOMO-
Services – P120,000 P120,000)

Receipt of monthly General Services 857 10,000

billing – P10,000 Accounts Payable 401 10,000

Payment of Monthly Accounts Payable 401 10,000

Billing Withholding Taxes
Payable 410 1,000
Cash in Bank – LCCA 110 9,000

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