THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL 5. Books of Accounts.

The Books of Accounts are as follows:

For Local Government Units 6. Journals

• Cash Receipts Journal (CRJ)
Chapter 1. INTRODUCTION • Cash Disbursements Journal (CDJ)
• Check Disbursements Journal (CKDJ)
Sec. 01. Objectives of the Manual. – The New Government Accounting System Manual presents the basic • General Journal (GJ)
policies and procedures; the new coding system and chart of accounts; the accounting books,
reports/forms and financial statements, and illustrative accounting entries to be adopted by all local 7. Ledgers
government units effective January 1, 2002. The objectives of the Manual are to prescribe the following: • General Ledger (GL)
• Subsidiary Ledgers, where applicable for:
a) Uniform guidelines and procedures in accounting for government funds and property; • Cash
b) New coding structure and new chart of accounts; and • Receivables
c) New accounting books, reports/forms, financial statements and accounting entries. • Inventories
• Investments
Sec. 02. Coverage. – This Manual shall be used by all local government units (LGUs). • Property, Plant and Equipment
• Liabilities
Sec. 03. Legal Basis. – This Manual is prescribed by the Commission on Audit pursuant to Article IX-D, • Income
Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which provides that: • Expenses

"The Commission on Audit shall have exclusive authority, subject to the limitations in this Article, to 8. All the above records shall be maintained by the accounting unit of the LGUs. However,
define the scope of its audit and examination, establish the techniques and methods required therefor, treasurers and disbursing officers shall also maintain their respective cash records such as:
and promulgate accounting and auditing rules and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of • Cashbook – Cash in Treasury
government funds and properties". (underscoring supplied) • Cashbook – Cash in Bank
• Cashbook – Cash Advances

Chapter 2. BASIC FEATURES AND POLICIES 9. The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD) daily and
the Report of Accountability for Accountable Forms (RAAF) monthly.
Sec. 04. Basic Features and Policies. – The new government accounting system has the following basic
features and policies, to wit: 10. Financial Statements. The following statements shall be prepared:

1. Accrual Accounting. A modified accrual basis of accounting is used. Under this method, all
expenses shall be recognized when incurred. Income shall be on accrual basis (e.g. Share from
Internal Revenue Collections) except for transactions where accrual basis is impractical (e.g.
Market Fees) or when other methods may be required by law.
2. One Fund Concept. This system adopts the one fund concept. Separate fund accounting shall
be done only when specifically required by law or by a donor agency or when otherwise
necessitated by circumstances subject to prior approval of the Commission. As required
under Sections 308, 309 and 310 of the Local Government Code, separate books shall be
maintained for the General Fund, Special Education Fund and Trust Fund.
3. Special Accounts in the General Fund. Special accounts in the General Fund complete with
subsidiary ledgers, shall be maintained for the following:
• Public utilities and other economic enterprises;
• Loans, interests, bonds issued, and other contributions for specific purposes;
• Development projects funded from the Share in the Internal Revenue
Collections; and
• Such other special accounts which may be created by law or ordinance.
4. Chart of Accounts and Account Codes. A new coding structure and a new chart of accounts
with a three-digit account numbering system shall be adopted.
• Balance Sheet
• Statement of Income and Expenses
• Statement of Cash Flows
11. Notes to Financial Statements shall accompany the above statements.
12. Trial Balance. The two money-column trial balance shall be used.
13. Appropriations, Allotments and Obligations. Journal entry shall no longer be prepared to
record the appropriations, receipt of allotments and incurrence of obligations. In lieu of this,
separate registries shall be maintained by the Accounting Unit to control the appropriations,
allotments and obligations for each of the four classes of expenditures, namely:
• Registry of Appropriations, Allotments and Obligations – Capital Outlay
(RAAOCO)
• Registry of Appropriations, Allotments and Obligations – Maintenance and
Other Operating Expenses (RAAOMO)
• Registry of Appropriations, Allotments and Obligations – Personal Services
(RAAOPS)
• Registry of Appropriations, Allotments and Obligations – Financial Expenses
(RAAOFE).

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14. Financial Expenses. Financial expenses such as bank charges, interest expenses, commitment
fees and other related expenses shall be separately classified from Maintenance and Other
Operating Expenses (MOOE).
15. Perpetual Inventory of Supplies and Materials. Supplies and materials purchased for inventory
purpose shall be recorded using the perpetual inventory system. Regular purchases shall be
coursed thru the inventory account and issuances thereof shall be recorded as they take place
except those purchased out of petty cash fund which shall be for immediate use and not for
stock. Such case shall be charged immediately to the appropriate expense accounts.
16. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be computed
using the moving average method.
17. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. The Accounting
Unit shall maintain Supplies Ledger Cards by stock number and Property, Plant and Equipment
Ledger Cards by category of assets.
18. Construction of Assets. For assets under construction, the Construction Period Theory shall be
applied for costing purposes. Bonus paid to the contractor for completing the work ahead of
time shall be added to the total cost of the project. Liquidated damages charged and paid for
by the contractor shall be deducted from the total cost of the asset. Any related expenses
incurred during the construction of the project, such as, license fees, permit fees, clearance
fees, etc. shall be capitalized.
19. Public Infrastructures. Public infrastructures are assets for use of the general public, such as
roads, bridges, waterways, railways, plazas, monuments, etc. A Registry of Public
Infrastructures (RPI) shall be maintained according to classification to record all infrastructures
for use of the general public. The following are the Registries to be maintained, classified by
category of property, plant and equipment:
• Registry of Public Infrastructure – Bridges (RPIB)
• Registry of Public Infrastructure – Roads (RPIR)
• Registry of Public Infrastructure – Plazas, Monuments, etc. (RPIP)
20. During construction these infrastructures shall be recorded in the books under the account
“Construction in Progress”. Upon completion, the completed asset shall be transferred to the
account “Public Infrastructure”. At the end of the year, completed assets under “Public
Infrastructure” shall be transferred to the respective registry.
21. Completed public infrastructures funded out of a loan shall, however, be retained in the books
of accounts until the loan is fully paid.
22. A Summary of all Public Infrastructures (based on the different registries) shall be prepared
annually and included in the Notes to Financial Statements.
23. Depreciation. The straight-line method of depreciation shall be used. A residual value
equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start on the
second month after purchase/completion of the property, plant and equipment. Public
infrastructures shall not be charged any depreciation.
24. Reclassification of Obsolete and Unserviceable Assets, as well as Assets No Longer Used by the
Agency to “Other Assets” Account. Assets declared by proper authorities as obsolete and
unserviceable, including assets of the agency no longer used, shall be reclassified to “Other
Assets” account from the corresponding inventory and property, plant and equipment
accounts.
25. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set up for
estimated uncollectible receivables. This will allow for a fair valuation of receivables.
Allowance for Doubtful Accounts shall be provided only for trade receivables.
26. Elimination of Contingent Accounts. Contingent accounts shall no longer be used. All financial
transactions shall be recorded using the appropriate accounts. Cash shortages and disallowed
payments shall be recorded under receivable accounts “Due From Officers and Employees”
and “Receivables– Disallowances/Charges”, as the case may be.
27. Recognition of Liability. Liability shall be recognized at the time goods and services are
accepted or rendered and supplier/creditor bills are received.
28. Interest Accrual. Whenever applicable and appropriate, interest income and/or expense shall
be accrued and recognized in the books of accounts.
29. Accounting for Borrowings and Loans. All borrowings and loans incurred shall be recorded
direct to the appropriate liability accounts.
30. Elimination of corollary and negative entries. The use of corollary and negative entries shall
be stopped. Acquisition/Disposition of assets shall be debited/credited direct to the
appropriate asset accounts. If an error is committed, a correcting entry shall be prepared to
adjust the original entry.
Chapter 3. ACCOUNTING SYSTEM
A. GENERAL ACCOUNTING PLAN
Sec. 05. General Accounting Plan. – The General Accounting Plan shows the overall accounting cycle in
the Local Government Unit. Transactions shall emanate from the different offices/departments of the
local government units (LGUs). These offices/departments will provide/produce the source documents
and other accounting forms leading to the perfection of the transaction, whether it be budgetary,
collections or disbursements. The source documents and accounting forms shall be the basis for the
preparation of reports by the Office of the Treasurer. The Office of the Accountant shall record the
transactions to the registries or to the corresponding books of original entry. Posting to the books of final
entry and preparation of the financial reports shall also be undertaken by the Office of the Accountant.
The General Accounting Plan (Table 1) is presented as to the following type of transactions:
1) Appropriations, Allotments and Obligations
2) Collections and Deposits
3) Disbursements –
a) By cash
b) By check
4) Miscellaneous and Other transactions
B. BUDGETARY ACCOUNTS
Sec. 06. Budgetary Accounts. – Budgetary accounts are composed of appropriations, allotments and
obligations.
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Sec. 07. Accounting for Appropriations. – Appropriation refers to an authorization made by ordinance,
directing the payment of goods and services from local government funds under specified conditions or
for specific purposes.

GENERAL ACCOUNTING PLAN (MS Excel file)

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The local sanggunian approves the annual budget thru the issuance of appropriation ordinance. On the PROCESS PERSON / UNIT
first business day of the fiscal year, the entire annual budget of the local government unit shall be RESPONSIBLE
recorded in the Registry of Appropriations, Allotments and Obligations (RAAO). The appropriations, in the
amounts approved by the legislative body and confirmed by the reviewing authorities, are recorded in a) Records in the appropriate RAAOs the approved Office of the Accountant
the registries maintained by the accountant where they may be compared with the actual developments appropriation per Appropriation Ordinance.
of the period.
b) Forwards the advice of allotments to the Office of the Budget Officer
Budgetary reserves which are stand by appropriations ready for release in case of calamities, as well as Office of the Accountant and returns the work plan
supplemental budget are similarly recorded in the RAAO. In case the LGU is operating on a re-enacted to the concerned departments/ offices.
budget, said re-enacted budget shall likewise be recorded in the registry. Once current budget is
approved, the necessary adjustments shall be made in the registry.

Separate registries shall be maintained for the four classes of expenditures per responsibility center, to
c) Enters the allotments in the RAAOs. Office of the Accountant
wit:
d) Prepares ALOBS based on disbursement Heads of
1. Registry of Appropriations, Allotments and Obligations - Capital Outlays (RAAOCO)
vouchers/purchase requests and/or supporting departments/offices
2. Registry of Appropriations, Allotments and Obligations - Maintenance and Other Operating
documents. Signs the appropriate box for
Expenses (RAAOMO)
requesting office. Forwards the same to the Office
3. Registry of Appropriations, Allotments and Obligations - Personal Services (RAAOPS)
of the Budget Officer.
4. Registry of Appropriations, Allotments and Obligations - Financial Expenses (RAAOFE)
e) Certifies the ALOBS as to the existence of Budget Officer
appropriations based on the appropriation
Sec. 08. Accounting for Allotments. – Allotment is the authorization issued by the Local Chief Executive
ordinance. Assigns ALOBS number and forwards the
(LCE) to a department/office of the LGU, which allows it to incur obligations, for specified amounts,
same to the Office of the Accountant.
within the appropriation ordinance. Allotments are released quarterly based on the Work and Financial
Plan and Request for Release of Allotment. The Accountant, upon receipt of the Advice of Allotment,
f) Certifies the ALOBS as to the obligations of Chief Accountant
shall enter the allotment in the RAAOs.
allotments. Records the obligation in the
appropriate column of the RAAOs and in the Status
Sec. 09. Accounting for Obligations. – Obligations refer to the amounts committed to be paid by the LGU
of Obligation portion (Obligation) of the ALOBS.
for any lawful act made by an accountable officer for and in behalf of the local government unit
concerned.
g) Records paid disbursement vouchers in the Office of the Accountant
Status of Obligation portion (Payments) of the
Obligations shall be taken up in the registries as they are incurred. For each obligation, the requesting
ALOBS. Any balance appearing in the ALOBS after
department/office shall prepare the Allotment and Obligation Slip (ALOBS) signed by the department or
full payment of obligations shall form part of
office head as requesting official and forward this, together with the supporting documents, to the
unobligated allotment. Adjust accordingly the
Budget Officer.
amount of recorded obligations in the RAAOs.
The Budget Officer shall certify to the existence of appropriation that has been legally made for the
purpose by signing the appropriate box in the ALOBS and assign the ALOBS number thereto. The
h) At the end of each month, reconcile records Budget Officer and
Accountant shall review the ALOBS and certify as to obligation of the allotment by signing the
on allotments available for obligation. Chief Accountant
appropriate box in the ALOBS. He shall also fill up the Status of Obligation. The Accountant shall record
the amount of obligation in the RAAOs.
Sec. 12. Terminology and Classification. – A common terminology and classification shall be used
consistently throughout the budget, the accounts and the financial reports.
Sec. 10. Adjustment of Obligations. – The Chief Accountant shall record paid disbursement vouchers in
the Status of Obligation portion (Payments) of the ALOBS. Any balance appearing in the ALOBS after full
For this purpose, the following specific expenditures shall be recorded in the appropriate RAAOs:
payment of obligations shall form part of unobligated allotment. The Chief Accountant shall adjust
accordingly the amount of recorded obligations in the RAAO using the same ALOBS number as reference.
a. RAAOCO –
At the end of each month, the Chief Accountant and the Budget Officer shall reconcile their records on
 Investments outlay (e.g. stocks, bonds)
allotments available for obligation.
 Land, Land Improvements and Leasehold Improvements outlay
Sec. 11. Accounting Procedures for Budgetary Accounts. – Summarized hereunder is the process in  Buildings and Other Structures outlay (e.g. school buildings, markets and
accounting for budgetary accounts: slaughterhouses, hospital and health centers, etc.)
 Public Infrastructures outlay (e.g. parks, plaza, monuments, bridges etc.)
 Furniture and Fixtures outlay
 Work Animals outlay

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  Breeding stocks Sec. 14. Depository Accounts. – Local treasurer shall maintain depository accounts in the name of their
 Machineries and Equipment outlay (e.g. dump trucks, construction equipment, respective local government units with banks, preferably government-owned, located in or nearest to
industrial machineries, technical and scientific equipment, etc.) their respective areas of jurisdiction. Earnings of its depository accounts shall accrue exclusively thereto.
 Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars, vans, etc.)
 Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay Sec. 15. Remittance of Government Monies to the Local Treasury. – Officers of the local government
 Books outlay authorized to receive and collect monies arising from taxes, revenue, or receipts of any kind shall remit
 Ordnance outlay the full amount received and collected to the treasury of such local government unit which shall be
 IT Equipment and Software outlay credited to the particular account or accounts to which the monies in question properly belong.
 Other Property, Plant and Equipment outlay
 Reforestation Projects Sec. 16. Sources of Income of LGUs. – The main sources of income of LGUs are as follows:
 Arts, Archeological Specimen and Other Exhibits
a. Tax revenues, fees and charges
b. RAAOPS – b. Share from Internal Revenue Collections
 Salaries and Wages (e.g. regular pay, part-time pay, overtime and night pay, holiday c. Share from National Wealth
pay, etc.)
 Allowances (e.g. PERA, hazard pay, RATA, etc.) The sources of income are further classified into general income accounts and specific income accounts.
 Benefits (e.g. bonus, cash gifts, productivity, pension, etc.)
Sec. 17. General Income Accounts. – The following shall comprise the General Income Accounts
 Government Shares on Employees’ Contributions
applicable to LGUs:
c. RAAOMO –
a. Subsidy from Other LGUs
 Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.)
b. Subsidy from Other Funds
 Livestock (e.g. swine, hogs, chicken, goats, etc.)
c. Subsidy from Special Accounts
 Crops
d. Sales Revenue
 Supplies (e.g. office, medical, dental and laboratories, spare parts, gasoline and oil,
e. Dividend Income
etc.)
f. Interest Income
 Repairs and Maintenance
g. Gain on Sale of Securities
 Printing and Binding h. Gain on Sale of Assets
 Travel i. Sale of Confiscated Goods and Properties
 Consultancy j. Foreign Exchange (FOREX) Gains
 Light, Water and Gas k. Miscellaneous Operating and Service Income
 Communication (e.g. telephone, telegraph, internet, postage, etc.) l. Fines and Penalties – Government Services and Business Operations
 Auditing Services m. Income from Grants and Donations
 Other Services (e.g. janitorial, security, hauling, etc.)
 Extraordinary and Miscellaneous Expenses Sec. 18. Specific Income Accounts. – The following major classification comprise the specific income
 All other expenditures in the Chart of Accounts for MOOE, except depreciation, accounts for LGUs:
obsolescence, bad debts, loss on sale of assets, loss of assets, discount on Real
Property Tax and Special Education Tax. 1. Property Taxes
2. Taxes on Goods and Services
d. RAAOFE – 3. Other Taxes
 Bank Charges 4. Other Specific Income
 Interest Expenses
 Commitment Charges Sec. 19. Methods of Accounting for Income. – The following accounting methods shall be adopted in
 Other Financial Charges (e.g. underwriting fees, guarantee fees) recording income:
 Loan Amortization
a. Accrual Method – Accrual method of accounting shall be used to record Share from
Internal Revenue Collections in the books of accounts. Upon receipt of the Notice
C. INCOME/COLLECTIONS AND DEPOSITS of Funding Check Issued from Department of Budget and Management (DBM),
Share from Internal Revenue Collections shall be taken up as Due from NGAs and
Sec. 13. Separation of Books and Depository Accounts. – Local accountants and treasurers shall credited to Share from Internal Revenue Collections. However, Cash in Bank shall
maintain separate books and depository accounts, respectively, for each fund in their custody or be debited upon receipt of Bank Credit Advice as to receipt of the Share from
administration. Internal Revenue Collections regardless of whether or not the Notice of Funding
Check Issued has been received from DBM.

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 b. Modified Accrual – Modified accrual method of accounting shall be used for real
property taxes. At the beginning of the year, Real Property Tax Receivable and
Special Education Tax Receivable shall be established. This is in view of the need to
record in the books not mere income estimates from real property taxes but actual
receivables from said taxes. However, to avoid appropriating uncollected revenues
which might result to huge cash overdraft, the same shall be credited to Deferred
Real Property Taxes Income/Deferred Special Education Tax Income. Real Property
Tax Income/Special Education Tax Income shall be recognized upon receipt of
collection.
c. Cash Basis – Cash basis of accounting shall be used for all other taxes, fees, charges
and other revenues.
Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. – Real Property Tax
Receivables/Special Education Tax Receivables shall be established at the beginning of the year based on
Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, the Treasurer
shall furnish the Chief Accountant of a duly certified list showing the name of taxpayers and the amount
due and collectible for the year. Based on the list, the Chief Accountant shall draw a Journal Entry
Voucher (JEV) to record the debit to Real Property Tax Receivable/Special Education Tax Receivable and
crediting to Deferred Real Property Tax Income/Deferred Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the account Deferred Real Property Tax
Income/Deferred Special Education Tax Income shall be debited while the Real Property Tax Income due
to the municipality is recognized/credited. The share of the Province and Barangay shall also be credited
to Due to LGUs.
Every end of the week, thereafter the Municipal Accountant shall furnish the Provincial Accountant with
a summary of the JEVs showing the breakdown of the amounts Due to LGUs. The summary, which shall
be supported with copies of the JEVs, shall be the basis of the Provincial Accountant to draw the JEV
taking up the RPT Income. The account Due from LGU shall be debited and Real Property Tax Income
credited.
At the end of the month, the Municipal Accountant shall likewise prepare the Abstract of Real Property
Tax to facilitate the distribution of real property tax collection. A copy of the abstract shall be furnished
the Provincial Accountant, for purposes of reconciliation with the weekly summary of JEVs.
Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior to CY 2002. – Payment of
delinquencies for real property taxes/special education taxes prior to CY 2002 shall be recognized as a
direct credit to Real Property Tax Income/Special Education Tax Income account.
Sec. 22. Discount on Real Property Tax/Special Education Tax. – Discounts for advance and prompt
payment of Real Property Tax and the additional one percent (1%) tax accruing to the Special Education
Fun shall be recognized in the year the taxes are due. Said discounts shall be apportioned to the
concerned LGUs in accordance with the sharing prescribed for real property tax and additional one
percent (1%) tax under the Local Government Code.
Sec. 23. Fines and Penalties. – Fines and Penalties, either from tax revenue or other specific income,
shall be recognized as income of the year it was collected.
Fines and Penalties arising from real property taxes shall be distributed to concerned LGUs in accordance
with the sharing prescribed under the Local Government Code for Real Property Tax and the additional
one percent (1%) tax for the Special Education Fund.
Sec. 24. Other Receipts. – Other receipts of the local government units shall be comprised of, but not
limited to, the following:
a. Borrowings
b. Sale of Property, Plant and Equipment
c. Refund of Cash Advances
d. Receipt of Performance/Bidders’ Bonds
Sec. 25. Borrowings. – Borrowings are proceeds of repayable obligations, generally with interest from
the bank, national agency, another local government unit, and private sector. All borrowings incurred
shall be recorded direct to the appropriate liability accounts. Upon receipt of the advice from the bank
or lending agency informing the release of the proceeds, the Accountant shall draw a Journal of Entry
Voucher taking up the transaction.
Sec. 26. Sale of Property, Plant and Equipment. – Sale of property, plant and equipment refers to the
proceeds from the sale of land, buildings, equipment, furniture and other similar property which are
recorded in the books as Property, Plant and Equipment. The appropriate Property, Plant and Equipment
account shall be credited upon transfer of ownership.
Sec. 27. Refund of Cash Advances. – Cash advances for official travel shall be taken up as a receivable
from the concerned official or employee. Refunds made shall be credited to the receivable account
previously set up. Cash advances for salaries and wages shall be recorded as debits to the account Cash –
Disbursing Officer. Any refund made shall be credited to this account.
Sec. 28. Receipt of Performance Bonds. – Performance bond posted by contractor or supplier to
guaranty full and faithful performance of the their work may be in the form of cash, certified check or
surety. Performance bond in cash or certified check shall be acknowledged by the issuance of official
receipt and recorded in the books by the Accountant drawing a JEV for the purpose. In case of surety
bond, an acknowledgment receipt shall be issued by the authorized official.
Sec. 29. Reporting for Collections and Deposits. – Collectors/tellers shall issue a receipt to acknowledge
collections made. The receipt maybe in the form of pre-numbered Official Receipts, or cash tickets and
the like. At the close of each business day, these collectors/tellers shall accomplish the Report of
Collections and Deposits (RCD) in four copies. The original and two copies, together with the duplicates
of the official receipts issued, shall be submitted to the treasurer/cashier to whom the cash collected
shall be turned over. The fourth copy of the RCD shall be retained by the collector/teller concerned.
Barangay Treasurers deputized to collect taxes imposed by provinces, cities and municipalities shall follow
the same procedures in turning over their collections to the treasurer/cashier concerned.
In the case of collectors assigned to the field, where travel time from their places of
assignment to the Treasurer’s Office is more than one day, turnover of collections shall be made at least
once a week or as soon as the collections reach P5,000.00.
Sec. 30. Verification of Collections and Accountable Forms. – The Treasurer/Cashier shall verify the
Report of Collections and Deposits; check the statement of accountable forms as to initial balances on
hand, receipts, issues and the ending balances on hand; make a physical count of the accountable forms
remaining in the custody of the collector/teller and check the same against the new balances on hand
column. He shall indicate his verification by affixing his signature at the back of the triplicate copy of the
last official receipt issued. He shall count the money turned over to him and sign the certification and
receipt portion of all copies of RCD.
Sec. 31. Designation of Liquidating Officers. – The Treasurer may designate liquidating officers from
among the collectors/tellers whenever necessary.
a. Collectors/
tellers shall turn over their collections to their designated liquidating officer. The RCD
shall however be prepared in five copies, four copies to be submitted to the liquidating
officer, the fifth copy to be retained by the collector/teller.
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 PROCESS PERSON / UNIT
b. The RESPONSIBLE
liquidating officer shall perform the procedures for the receipt and verification of prepares RCD. Records in the Cashbook – Cash in
collections turned over to him. He shall also accomplish the RCD in four copies to Treasury.
summarize the collections turned over to him by the collectors/tellers as well as his own
collections. Deposit collections in the appropriate bank account per Treasurer
authorized depository bank. Records deposit in the
c. The Cashbook – Cash in Bank.
liquidating officer shall turn over intact the cash collections to the Treasurer/Cashier
together with the originals and two copies of the RCDs of collectors/tellers and the Forward RCD to Accounting Unit with copies of ORs and Treasurer
duplicates of the official receipts issued. The Treasurer/Cashier shall acknowledge validated deposit slips.
receipt of the cash and all accompanying documents by signing all copies of the RCD of
liquidating officer on the certification and receipt portion of the form. The fourth copy
of the RCD of the liquidating officer and RCDs of collectors/tellers shall be retained by Prepare Journal of Entry Voucher and record in the Cash Accountant
the liquidating officer. Receipt Journal.

Sec. 32. Deposit of Collections. – The Treasurer/Cashier shall deposit intact all his collections as well as Sec. 36. Pro–forma Accounting Entries. – The following are pro-forma accounting entries for income,
all collections turned over to him by the collectors/tellers with the authorized depository bank daily or collection and deposit:
not later than the next banking day. He shall record all deposits made in the cashbook and prepare the
RCD. Acct.
Particulars Account Title Code Debit Credit
The barangay treasurer shall deposit all collections intact with the city/municipal treasurer, or in a
depository bank account maintained in the name of the barangay, within five (5) days from receipt INCOME
thereof.
1. Real Property Tax – Basic
Sec. 33. Deposit of Field Collections. – Collections by field collectors shall be remitted to the Cashier or
A. Books of the
designated liquidating officer of the field office of the LGU. When travel distance of the field office to the
Municipality
local treasury may expose government funds to the risk of loss while in transit, the Cashier or designated
liquidating officer, upon authorization by the Treasurer, may deposit the collections in the authorized
a. Setting-up of RPT Real Property Tax
depository bank near the field office of the LGU. The procedures in reporting collections and deposits
Receivable Receivable 124 1,000
prescribed in this Chapter shall be observed.
RPT = P1,000 Deferred Real
RPT Sharing: Municipal - 40% Property Tax Income 448 1,000
Sec. 34. Accounting for Collections and Deposits. – The Accountant shall determine the
Province - 35%
account classification of the collections covered by the RCD and the supporting papers submitted by the
Barangay - 25%
Treasurer/Cashier and shall accomplish the Journal Entry Voucher. The accountant shall also maintain
the Abstract of Real Property Tax Collections to facilitate the distribution and remittance of the shares of
b. Receipt of Cash in Treasury 101 100
the different government units concerned in the real property tax collections.
Payment Real Property Tax
Receivable 124 100
Sec. 35. Receipts and Collection Process. – The following is a summary of the receipt and collection
process in the LGU:
c. Distribution of Collection Deferred Real Property Tax
RPT Sharing: Income 448 100
Real Property Tax 711 40
PROCESS PERSON / UNIT
Municipal - 40% Due to LGUs 431 60
RESPONSIBLE
Province - 35%
Barangay - 25%
Receive payment from taxpayers/ creditors and issue Collector/Teller
Official Receipt (OR). Prepare Report of Collections and
d. Deposit of Collections Cash in Bank – LCCA 110 100
Deposits. Remit to the Liquidating Officer (if one is
Cash in Treasury 101 100
designated) or Treasurer.
e. Remittance of Share Due to LGUs 431 35
Check remittances and verifies accountable forms of Liquidating Officer
(Province) Cash in Bank – LCCA 110 35
collectors/tellers. Consolidates collections and remits to
the Treasurer/Cashier. Prepares RCD.
f. Remittance of Share Due to LGUs 431 25
(Barangay) Cash in Bank – LCCA 110 25
Receive remitted collections, consolidates the same and Treasurer

7
 Acct. Acct.
Particulars Account Title Code Debit Credit Particulars Account Title Code Debit Credit

B. Books of the Province 5. BORROWINGS

a. Upon receipt of the Due from LGUs 131 35 a. Receipt of borrowed funds Cash in Bank –LCCA 110 1,000
Summary of the JEV from Real Property Tax 711 35 from bank - Loans Payable – Current,
the Municipal Accountant Principal - P1,000 Domestic 403 1,000
Bank Charges - 10 Bank Charges 951 10
b. Upon receipt of share Cash in Bank – LCCA 110 35 Interest Expense- 12 Interest Expenses 952 12
Due from LGUs 131 35 Cash in Bank –LCCA 110 22

b. Receipt of borrowed funds Cash in Treasury 101 1,000

2. Operating and Service Income from other agency - Loans Payable – Current,
domestic 403 1,000
a. Receipt of Income Cash in Treasury 101 100 Principal - P1,000 Interest Expenses 952 6
Receipts from Markets 783 90 Interest Expense - 6 Cash in Bank – LCCA 110 6
Garbage Fees 772 10
c. Payment of loan Loans Payable – Current,
b. Deposit of Collections Cash in Bank – LCCA 110 100 amortization Domestic 403 200
Cash in Treasury 101 100 Cash in Bank - LCCA 110 200

3. Share from Internal Revenue Collections 6. SUBSIDIES

a. Receipt of Notice of Cash in Bank –LCCA 110 1,000 a. Subsidy from Other Funds (General Fund to Special Education Fund)
Funding Check Issued from Share from Internal
the DBM and credit memo Revenue Collections 746 1,000 GENERAL FUND BOOKS
from
the bank for Share from Transfer of subsidy to Subsidy to Other Funds 897 500
Internal Revenue Collections Special Education Fund (Aid Cash in Bank – LCCA 110 500
to SEF to finance its
b. Receipt of Notice of Due from NGAs 130 1,000 projects)
Funding Check Issued Share from Internal
from the DBM for Share Revenue Collections 746 1,000
from Internal Revenue SPECIAL EDUCATION FUND BOOKS
Collections
Receipt of subsidy funds from Cash in Treasury Subsidy 101 500
4. Grants and Donations Other funds from Other
Funds 605 500
a. Receipt of grants and Cash in Treasury 101 100
donations in cash Income from Grants and
(Donations in kind shall be Donations 651 100
booked-up using the
appropriate asset account)
b. Special Accounts (subsidy from General Fund proper to Operation of Public Market)

b. Receipt of grants and Motor Vehicles 218 800 BOOKS OF GENERAL FUND PROPER
donations in kind - Invested Equity 537 800
Motor Vehicle: Transfer of subsidy to Special Subsidy to Special
Original Cost P1,000 (At the end of Year) Account Accounts 898 500
Less: Acc. Depn. 200 Invested Equity 537 800 Cash in Bank – LCCA 110 500
Book Value P 800 Government Equity 501 800

8

Particulars
BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)
Receipt of subsidy from
General Fund Proper
7. REFUND OF CASH ADVANCES
a. Cash Advance by an Officer for Local Travel
a. To take up the cash
advance
b. To take up refund of cash
advance
b. Cash Advance by a Disbursing Officer for Salaries and Wages
a. To take up the cash
advance
b. To take up refund of cash
advance
8. RECEIPT OF CASH BONDS
a. To take up receipt of
performance bond in cash
b. To take up deposit of
performance bond
c. To take up refund of
performance bond
D. DISBURSEMENTS
Sec. 37. Disbursements. – Disbursements refer to the settlement of government payables/obligations by
cash or by check.
Acct.
Account Title Code Debit Credit Typical transactions for which disbursements are made are as follows:
1. Personal Services
2. Maintenance and Other Operating Expenses
3. Capital Outlay
Cash in Bank – LCCA 110 500
4. Financial Expenses
Subsidy from Special
Accounts 606 500
Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and paid either by
check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an integral part of the DV.
Sec. 38. Certification on Disbursements. – Disbursements from the general fund shall require the
following certifications on the DV:
1. Certification and approval of vouchers and payrolls as to validity, propriety and legality of the
Due from Officers & claim (Box A of DV) by the head of the department or office who has administrative control of
Employees 128 10 the fund concerned. In case of temporary absence or incapacity of the department head or
Cash in Bank – LCCA 110 10 chief of office, the officer next-in-rank shall automatically perform his function and shall be
fully responsible therefor.
Cash in Treasury 101 10
Due from Officers & 2. Necessary documents supporting the disbursement vouchers and payrolls as certified to and
Employees 128 10 reviewed by the Accountant. (Box B of DV)
3. Certification that funds are available for the purpose by the Local Treasurer. (Box C of DV)
Sec. 39. Approval of Disbursements. – Approval of disbursements by the Local Chief Executive (LCE)
Cash – Disbursing Officers himself shall be required whenever local funds are disbursed, except for regularly recurring
107 10 administrative expenses such as: payrolls for regular or permanent employees, expenses for light, water,
Cash in Bank – LCCA 110 10 telephone and telegraph services, remittances to government creditor agencies such as GSIS, BIR,
PHILHEALTH, LBP, DBP, NPO, PS of the DBM and others, where the authority to approve may be
delegated. Disbursement vouchers for expenditures appropriated for the operation of the Sanggunian
Cash in Treasury 101 10 shall be approved by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as
Cash – Disbursing Officers the case may be.
107 10
Sec. 40. Payments by Check. – Checks shall be drawn only on duly approved disbursement vouchers. It
shall be drawn by the local Treasurer and countersigned by the local Administrator. In case of temporary
absence or incapacity of the aforesaid officials, these duties shall devolve upon their immediate
assistants. In the case of municipalities where no Administrator has been appointed, checks shall be
Cash in Treasury 101 50 countersigned by the municipal Mayor. In case, however, of expenditures appropriated for the operation
Performance/ Bidders/ Bail of the Sanggunian, checks drawn shall be countersigned by the provincial Vice Governor, the city Vice
Bonds Payable 414 50 Mayor, or the municipal Vice Mayor, as the case may be.
Cash in Bank – LCCA 110 50 Sec. 41. Recording Check Disbursements in the Cashbooks. – All checks issued including cancelled
Cash in Treasury 101 50 checks shall be recorded chronologically in the Cashbook – Cash in Bank.
Performance/ Bidders/ Bail Sec. 42. Release of Checks. – The Treasurer shall release the check only to the payee or his duly
Bonds Payable 414 50 authorized representative. For purposes of releasing checks, the Treasurer shall maintain a Check
Cash in Bank – LCCA 110 50 Register where all checks issued shall be recorded chronologically and where the claimants shall be
required to acknowledge receipt thereof.
Sec. 43. Reporting of Checks Issued. – The checks released to claimants shall be reported in the Report
of Checks Issued (RCI) which shall be prepared daily by the Treasurer for each fund. It shall be submitted
to the Accountant for preparation of Journal of Entry Voucher based on individual checks issued and
recording in the Check Disbursements Journal.
9
Sec. 44. Check Disbursement Process. – The steps in disbursements through issuance of check is shown
below:
PROCESS
a. Gather supporting documents, and
approved ALOBS, prepare DV and forward
to Head of Department.
b. Sign Box A of DV and submit to the
Accounting Unit.
c. Check completeness of documents,
assign number to DV, sign Box B and
forward to Treasurer.
d. Verify claim, certify cash availability
(Box C) and forward to approving
officer.
Note: If funds are not available, return to
Accountant for recording in the books
as Accounts Payable (AP). For AP, JEV
shall be prepared by Accounting Unit
and JEV number reflected in the DV.
JEV for AP is recorded in General
Journal. Accountant retains copy of
DV and forwards to Treasurer.
e. Approve transaction (Box D) and
forward DV to Cashier.
f. Prepare, sign check and forward check
with DV to countersigning officer.
g. Countersign check and forward to
Accountant for preparation of the
Accountant’s Advice of Local Check
Disbursements.
h. Prepare Accountant’s Advice of Local
Check Disbursements and submit to
bank. Return DV, check and
supporting documents to
Cashier/Treasurer.
i. Record check in the Check Register
and release check to claimant. Record
disbursement in Cashbook – Cash in
Bank. Prepare Report of Checks
Issued. Forward RCI with DV and
supporting documents to Accounting
Unit.
PROCESS PERSON / UNIT
RESPONSIBLE
PERSON / UNIT j. Prepare the JEV based on individual Accounting Unit
RESPONSIBLE checks/voucher; sign “Prepared By”
portion (approved by Chief
Concerned Office Accountant), and record JEV in the
Check Disbursements Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers.
Supervisor/Head of
Department k. Forward RCI, DV, supporting Accountant
documents and JEV to the Office of
Accounting Unit the Auditor.
Sec. 45. Payments in Cash. – Disbursements by cash shall be made from a cash advance drawn and
maintained in accordance with COA rules and regulations. Cash payments shall be made only on duly
Treasurer approved payrolls/disbursement vouchers. Cash advances, by regular and special disbursing officers shall
be recorded through a debit to Cash – Disbursing Officers and a credit to Cash in Bank – Local Currency,
Current Account (LCCA).
Sec. 46. Reporting of Cash Disbursements. – To account for cash disbursements, from regular and special
cash advances, the Accountable/Disbursing Officer shall prepare the Report of Disbursements and submit
the original and duplicate copy with vouchers/payrolls/petty cash vouchers to the Accountant. He shall
ensure that receipt of the report and supporting documents, are properly acknowledged by the
Accountant. The Accountant shall verify the report including the completeness of the supporting
documents, prepare the Journal of Entry Voucher (JEV) and record the transaction in the Cash
Disbursements Journal.
Sec. 47. Cash Advances for Travel. – Cash advances for travel shall be recorded as debit to the account
Local Chief Executive or Due from Officers and Employees and a credit to Cash in Bank – Local Currency, Current Account.
authorized approving
officer For liquidation of travel where the amount of cash advance is equal to or more than the travel expenses
incurred, the Liquidation Report form shall be prepared by the officers/employees concerned and
Treasurer submitted to the accounting unit as basis for preparation of the JEV to record liquidation. In case the
amount of cash advance is less than the travel expenses incurred, a Disbursement Voucher shall be
prepared to liquidate the previous cash advance and serve as a claim for reimbursement of the deficiency
Administrator/ Vice-Mayor in amount.
for the Local Sanggunian
Disbursements Sec. 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be maintained under the imprest
system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the LGU for
one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be
Accountant signed by the payee to acknowledge the amount received. The official receipt shall be attached to the
PCV.
Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be prepared for the fund,
recorded in the RAAO and obligated as Other Expenses.
Treasurer Payments out of the fund shall be made through the use of PCVs duly supported by official receipts and
other required documents. Each PCV shall not exceed Php1,000.00.
A Disbursement Voucher shall be prepared for replenishments of the petty cash fund during the year duly
supported by a list/summary of PCVs, the PCVs and its supporting documents. ALOBS shall be prepared
for each replenishment and recorded in the RAAO based on actual expenses incurred.
10
At the end of the year, the petty cash fund shall be fully liquidated by preparing a Report of Disbursement PROCESS PERSON / UNIT
supported by the list/summary of PCVs, the PCVs and its supporting documents. The ALOBS setting up RESPONSIBLE
the fund at the beginning of the year shall be cancelled. Another ALOBS shall be prepared taking up the credit to cash advance and attach OR to the
liquidation and recorded in the RAAO based on the actual expenses incurred. Unused cash shall be Cashbook – Cash Advances.
returned to the Treasurer who shall issue an Official Receipt to acknowledge the amount returned. A new
Cash Advance for Petty Cash Fund shall be set up in the ensuing year. j) Prepare Report of Disbursement, attach Disbursing Officer
paid payrolls/ supporting documents and
Sec. 49. Cash Disbursement Process. – Disbursement process for payment of salaries and wages out of copy of OR for unused cash advance
cash advances is as follows: returned to Treasurer/Cashier. Sign
"Certified Correct” portion of Report of
PROCESS PERSON / UNIT Disbursement and submit to Accounting
RESPONSIBLE Unit.

a) Processing of Payrolls to be paid by cash is
the same as that of steps (a) to (e) for
check disbursements.
b) Gather duly certified and approved payrolls
to be paid out of cash advance. Prepare DV
for cash advance corresponding to the net
amount of payroll/s. Sign Box A of DV and
submit to the Accounting Unit.
c) Check completeness of documents/
previous cash advance liquidated, assign
number to DV, sign Box B and forward to
Approving Officer.
d) Approves DV and forward to Treasurer for
preparation of checks.
e) Prepare and sign check, and forward check
with DV to countersigning officer.
f) Countersign check and forward to
Accountant for preparation of Advice.
g) Prepare Accountant’s Advice of Local Check
Disbursements and return DV, check and
supporting documents to
Cashier/Treasurer.
h) Encash check and pay claimants. Record
disbursement in Cashbook – Cash
Advances.
i) Return unused cash to the Treasurer/
Cashier. An official receipt (OR) shall be
issued by the Treasurer/Cashier to
acknowledge the return of unused cash and
indicate check no. of cash advance granted
on the face of OR. Record the refund as
Concerned offices k) Prepare JEV to record the liquidation of Accountant
cash advance. Record JEV in the Cash
Disbursements Journal (CDJ). Post monthly
to the General Ledger/ Subsidiary Ledger.
Office of the Treasurer
l) Forward Report of Disbursement and Accountant
supporting documents including JEV to the
Office of the Auditor.
Sec. 50. Purchase or Construction of Property, Plant and Equipment. – Property, plant and equipment
include land and land improvements, buildings, equipment, motor vehicles, books, machineries,
Accounting Unit ordnance, etc. and public infrastructure. These are charged against appropriations/allotments for capital
outlay when obligated.
Property, plant and equipment acquired through purchase shall include all costs incurred to bring it to
the location necessary for its intended use, like transportation, freight, installation costs, etc. In the books
Local Chief Executive of accounts, the purchase is immediately recorded as asset.
Property, plant and equipment to be constructed may be classified as agency assets and public
infrastructures. Agency assets are those to be used by the LGU concerned, like buildings, while public
infrastructures are those to be used by the general public. The construction period theory shall be used
Treasurer in recording both types of assets. This means that expenses such as license fees and bonus paid to
contractor for completing the work ahead of schedule, etc. during the construction period shall be added
to the total cost of the project. However, liquidated damages charged to the contractor for delayed
Administrator completion should be deducted from the total cost.
During the construction period, agency assets and public infrastructures shall be taken up in the books as
Accountant "Construction in Progress” with the appropriate asset classification. As soon as the project is completed,
the Construction in Progress for agency asset is closed to the appropriate asset account.
For public infrastructures funded out of regular income, the Construction in Progress account is
transferred to the Public Infrastructures account upon completion. At the end of the year, the latter
Treasurer/ Disbursing account is closed to the Government Equity and the asset is recorded in the Registry of Public
Officer Infrastructures (RPI). However, completed public infrastructures funded out of a loan shall be closed to
the Government Equity account only upon full payment of the loan. A disclosure of public infrastructures
completed funded from loans shall be made in the Notes to Financial Statements.
Disbursing Officer
Sec. 51. Purchase of Supplies. – Purchase of supplies and materials for stock regardless of whether or not
they are consumed within the accounting period shall be recorded as assets using the Inventory account
following the Perpetual Inventory Method (refer to Chapter 7 – Supplies or Property). However, supplies
and materials purchased out of the Petty Cash Fund for immediate use or for emergency shall be taken
up as expenses.

11
 Acct.
Sec. 52. Pro-forma Accounting Entries. – Pro-forma accounting entries for disbursement transactions are Particulars Account Title Code Debit Credit
shown below:
Enter obligation in RAAOMO for Office Supplies P2,500, Travelling Expenses P500, Office
Acct. Equipment Maintenance P1,000 and Other Expenses of P800.
Particulars Account Title Code Debit Credit
2. Replenishment of petty Traveling Expenses –
1. Payment through Cash Advances cash fund during the year Local 831 500
Office Supplies Expenses
a. Cash advance for personal services 849 2,500
Office Equipment
Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000 Additional Compensation, Maintenance 882 1,000
and P3,000 Personnel Economic Relief Allowance (PERA). Other Expenses 950 800
Cash in Bank – LCCA 110 4,800
1. Grant of cash advance for Cash – Disbursing Officers
payroll Cash in Bank – LCCA 107 21,000
110 21,000 Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling Expenses of P1,000.

3. Liquidation at year end Traveling Expenses –

2. Liquidation of cash Salaries and Wages – Local 831 1,000
advance for payroll Regular Pay 801 18,000 Office Supplies Expenses
PERA 804 3,000 849 4,000
Additional Compensation Petty Cash Fund 105 5,000
805 5,000
Withholding Taxes
Payable 410 2,000
GSIS Payable 411 1,500 Cancel RAAOMO for setting up of petty cash fund at the start of the year and refund for a
PAG-IBIG Payable 412 1,500 total of P6,000.
Cash – Disbursing Officers
107 21,000 4. Return of unused Petty Cash in Treasury 101 1,000
Cash Fund. Petty Cash Fund 105 1,000

Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance Contributions and
P1,500 PAG-IBIG Contributions. c. Cash advance for travel

3. Government share for Life and Retirement Enter obligation in RAAOMO for Travel of P1,000
life and retirement Insurance
insurance and PAG-IBIG Contributions 817 1,500 1. Grant of cash advance Due from Officers and
Contributions PAG-IBIG Contributions Employees 128 1,000
818 1,500 Cash in Bank – LCCA 110 1,000
GSIS Payable 411 1,500
PAG-IBIG Payable 412 1,500 2. Liquidation of cash Traveling Expenses –
advance during the current Local 831 900
year (assuming only P900 Due from Officers and
b. Petty Cash Fund was utilized and P100 was Employees 128 900
refunded)
For establishment of fund, Enter obligation in RAAOMO as Other Expenses for P6,000

1. Release of cash advance Petty Cash Fund 105 6,000 Adjust RAAOMO for refund of cash advance of P100
for petty cash fund Cash in Bank – LCCA 110 6,000
miscellaneous expenses 3. For amount refunded Cash in Bank – LCCA 110 100
where official receipt was Due from Officers and
issued Employees 128 100

12
 Acct. Acct.
Particulars Account Title Code Debit Credit Particulars Account Title Code Debit Credit
for 50% accomplishment – Roads, Highways and
2. Payment by Check Bridges
232 400,000
a. Maintenance and Other Operating Expenses Withholding Taxes
Payable 410 40,000
Enter obligation in RAAOMO for rent P3,000 Cash in Bank – LCCA 110 360,000

1. Payment of rent Rent Expense 841 3,000 2. Payment of second Construction in Progress
Cash in Bank – LCCA 110 3,000 billing 100% – Roads, Highways and
accomplishment Bridges
232 400,000
Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet of P2,000 Withholding Taxes
Payable 410 40,000
2. Payment of utilities Electricity 835 1,500 Cash in Bank – LCCA 110 360,000
(MERALCO and PLDT) Telephone/Telegraph and
Internet 837 2,000 3. Remittance of taxes Withholding Taxes
Cash in Bank – LCCA 110 3,500 withheld Payable 410 80,000
Cash in Bank – LCCA 110 80,000

Enter obligation in RAAOMO for training and seminar expenses of P1,000 If funded from regular agency income –

3. Payment of seminar fee Training and Seminar 4. To take up roads Public Infrastructure 243 800,000
Expenses 833 1,000 completed Construction in
Cash in Bank – LCCA 110 1,000 Progress – Roads,
Highways and Bridges
232 800,000
b. Financial Expenses
5. To transfer completed Government Equity 501 800,000
Enter obligation in RAAOFE for bank charges of P300 roads to Registry of Public Public Infrastructures 243 800,000
Infra- structures at the end
1. Bank charges upon Bank Charges 951 300 of the year
receipt of bank statement Cash in Bank – LCCA 110 300

Note: Using the JEV for the above transactions, the public infrastructures shall be recorded
Enter obligation in RAAOFE for interest expense of P400 in the Registry of Public Infrastructures.

2. Interest Expense Interest Expenses 952 400

Cash in Bank – LCCA 110 400 If funded from a loan –

6 To record completed Public Infrastructures 243 800,000

c. Office Equipment – Enter obligation in RAAOCO for P6,000 for purchase of equipment roads Construction in Progress
– Roads, Highways and
1. Issuance of PO to dealer No entry Bridges
232 800,000
2. Receipt of office Office Equipment 222 6,000
equipment Cash in Bank – LCCA 110 6,000 At year end,upon full Government Equity 501 800,000
payment of laon – Public Infrastructures 243 800,000

d. Construction of Roads by Contract – Enter obligation in RAAOCO for P800,000 for

construction of road. e. General Repair/Construction of Building by Administration
1. Payment of first billing Construction in Progress

13
 Acct. Acct.
Particulars Account Title Code Debit Credit Particulars Account Title Code Debit Credit

1. Approval of the project No entry Enter obligation in RAAOCO for P2million for purchase of land
P1M
1. Payment made for land Land 201 2M
purchased Withholding Taxes
Enter obligation in RAAOCO for P600,000 for construction materials Payable 410 200,000
Cash in Bank – LCCA 110 1.8M
2. Issue PO for building No Entry
materials: Lumber, nails,
cement, sand and gravel,
paints, etc. = P600,000

2. Remittance of Withholding taxes

3. Payment for construction Construction Materials withholding tax Payable 410 200,000
materials received Inventory 156 600,000 Cash in Bank – LCCA 110 200,000
Withholding Taxes
Payable 410 60,000
Cash in Bank – LCCA 110 540,000 g. Land and Building

4. Issuance of materials Construction in Progress Enter obligation in RAAOCO for P600,000 for land and P400,000 for building
P590,000 – Agency Assets
230 590,000 1. Payment of the land and Land 201 600,000
Construction Materials building (assessed value of Building 204 400,000
Inventory 156 590,000 land is P600,000) for Withholding Taxes 410 100,000
P1,000,000 Payable
Cash in Bank – LCCA 110 900,000
Enter obligation in RAAOCO for P380,000 for labor
2. Remittance of Withholding Taxes
5. Cash advance granted to Cash – Disbursing Officers withholding tax Payable 410 100,000
Disbursing Officer for payroll Cash in Bank – LCCA 107 350,000 Cash in Bank – LCCA 110 100,000
110 350,000

6. Liquidation by Construction in Progress h. Purchase of Inventories

Disbursing Officer of paid – Agency Assets
payroll 230 380,000 Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
Withholding Taxes
Payable 410 30,000 1. Payment of delivered Spare Parts Inventory 155 2,500
Cash – Disbursing Officers spare parts Withholding Taxes
107 350,000 Payable 410 250
Cash in Bank – LCCA 110 2,250
7. Remittance of Withholding Taxes 410 30,000
withholding tax Payable
Cash in Bank – LCCA 110 30,000 i. Enter obligation in RAAOMO for purchase of office supplies

8. Accomplishment Report Buildings 204 970,000 1. Payment of office Office Supplies Inventory
approved by the LCE Construction in Progress supplies delivered Withholding Taxes 149 3,000
– Agency Assets Payable
230 970,000 410 300
Cash in Bank – LCCA 110 2,700

f. Acquisition of Land
j. Fund Transfers

14
 Acct.
Particulars Account Title Code Debit Credit Sec. 55. Grant of Relief from Accountability. – When a request for relief for shortages or loss of funds is
granted, a copy of the decision shall be forwarded to the Chief Accountant who shall draw a JEV to record
the transaction. The loss shall be debited to the Loss of Assets account and credited to the appropriate
Enter obligation in RAAOMO for subsidy to LGU – XYZ
receivable account. In case the request for relief is denied, immediate payment of the shortage shall be
demanded from the accountable officer. Restitution shall be acknowledged by the issuance of an official
1. Cash assistance to LGU – Subsidy to Local
receipt.
XYZ Government Units 895 30,000
Cash in Bank – LCCA 110 30,000
In case the request for relief from accountability for loss of property caused by fire, theft, force majeure
or other causes is granted, a copy of the decision shall likewise be forwarded to the Chief Accountant for
the preparation of the JEV. The loss shall be debited to the Loss of Assets account and credited to the
k. Enter obligation in RAAOMO for subsidy to SEF
appropriate asset account. If request for relief from accountability is denied, the loss shall be taken up as
a receivable from the accountable officer/persons liable and shall be credited to the appropriate asset
1. Cash transfer to SEF as Subsidy to Other Funds
account.
subsidy Cash in Bank – LCCA 897 10,000
110 10,000
Sec. 56. Cash Overage. – In case the cash examination disclosed cash overage, as determined by the
auditor, the amount shall be forfeited in favor of the government and an official receipt shall be issued by
the collector/teller. The cash overage shall be taken up as Other Specific Income.
l. Enter obligation in RAAOMO for grants and donation to Trust Fund
Sec. 57. Dishonored Checks. – A check is said to be dishonored when upon its being duly presented for
1. Cash transfer to Trust Grants and Donations 889 500,000 payment, such payment is refused or cannot be obtained.
Fund as counterpart LGU Cash in Bank – LCCA 110 500,000
funds. Upon receipt of the debit memo and the dishonored check(s) from the bank, constructive cancellation of
the official receipt covering the dishonored check shall be immediately effected by the Treasurer on the
copy in his possession. The Treasurer shall immediately photocopy the dishonored checks and record as
credit in the Cashbook–Cash in Bank and cancel payment in the taxpayer’s index card. He shall also notify
the collector/teller of the dishonor and the cancellation of the official receipt. The collector/teller shall
E. MISCELLANEOUS TRANSACTIONS note the cancellation in the triplicate copies of the receipt. The Treasurer shall then inform the Auditor
who shall effect the cancellation in the duplicate copy of official receipt, in case the same has already
Sec. 53. Miscellaneous Transactions. – Miscellaneous transactions refer to transactions that are unique been submitted for audit.
and not recurring in the ordinary course of operations of the government. These transaction types
seldom take place or ideally should not happen at all. The following maybe considered miscellaneous The Treasurer shall forward the debit memo and the photocopy of the dishonored checks to the
transactions: Accountant. The Accountant shall cancel the official receipt if still in his possession. He shall prepare the
Journal of Entry Voucher (JEV) taking up the dishonored check by crediting the Cash in Bank account and
1. Loss of Cash and Property Accountability debiting the appropriate income account. In case of dishonor of check payments for Real Property Tax
2. Cash Overage (RPT) or Special Education Tax (SET), the RPT/SET Receivables and corresponding Deferred RPT/SET
3. Dishonored Check Income shall be restored. The accounts Due to LGUs, RPT Income, Cash in Bank and RPT Discount shall
4. Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check be adjusted accordingly. He shall furnish the Treasurer with a copy of the duly approved JEV. The
5. Settlement of Suspensions/Disallowances/Charges Treasurer shall record the JEV number in the Cashbook-Cash in Bank as reference in the entry effecting
6. Refund of Overpayments the cancellation of the dishonored check.

Sec. 54. Loss of Cash and Property. – Loss of cash and property may be due to malversation, theft,
robbery or other causes.
Cash shortage discovered during cash examination conducted by auditors is reported through the Report
of Cash Examination within ten (10) working days from the completion of examination pursuant to COA
Memorandum No. 84-373A. The auditor issues an audit report in case of shortage in property
accountability. As soon as a shortage is definitely established, the Auditor shall issue a memorandum
pertaining thereto and the Accountant shall draw a Journal of Entry Voucher to take up the shortage as a
receivable from the accountable officer concerned.
In case of loss of property due to other causes (theft, force majeure, fire, etc.), a report thereon shall be
prepared by the accountable officer concerned for purposes of requesting relief from accountability. No
accounting entry shall be made but the loss shall be disclosed in the notes to financial statements
pending result of request for relief from accountability.
Sec. 58. Cancellation of Lost Check Issued. – A check is considered lost when it is misplaced, waylaid or
left behind inadvertently/negligently by the payee or holder in due course or by the custodian/carrier
thereof and after diligent search cannot be found or located; or when it is lost due to fortuitous event,
theft or robbery.
Upon submission of sworn statement from the payee that a check issued by the LGU is lost,
the treasurer shall immediately notify the bank concerned for the stoppage of payment. He shall forward
the sworn statement to the accountant who shall prepare the JEV to cancel the payment made. Copy of
the JEV shall be furnished the treasurer as basis for him to debit the amount in the Cashbook – Cash in
Bank.
Sec. 59. Spoiled and Stale Checks. – Checks may be cancelled when they become spoiled or stale. A
check is considered spoil when, it is torn, mutilated, defaced or with erasures/errors affecting the
genuineness of any material information contained therein.

15
 Acct.
It is stale, if it has been outstanding for over six months from date of issue or as prescribed by the Particulars Account Title Code Debit Credit
depository bank. At least one month before a check becomes stale, the Treasurer shall send a written
notice to the payee of the existence of the check. To take up cash shortage Due from Officers and
Employees 128 50
A spoiled or stale check shall be marked cancelled on its face and reported as follows: Cash in Treasury 101 50
1. For spoiled checks which are immediately cancelled
and for which the Report of Checks Issued (RCI) has not yet been prepared, the
2. Grant of Relief from Accountability for Loss of Government Funds
cancelled check shall be attached to the RCI and reported chronologically with the other
checks issued and the word “Cancelled” shall be indicated on the report.
To record the loss of fund by Due from Officers and
a Disbursing Officer Employees 128 50
2. For stale checks which have been unclaimed and thus,
(allegedly thru theft ) = P50 Cash – Disbursing Officers
the original DV and supporting documents are still with the Treasurer, the cancelled
107 50
check shall be presented in the RCI after the last check issued for the period indicated in
the report. The original DV and supporting documents shall be returned to the
To take up relief from Loss of Assets (current
Accountant who shall prepare a JEV to record the transaction as Accounts Payable.
accountability year) or Prior Years’
adjustments (prior years)
3. For checks which became spoiled or stale in the hands
948 50
of the payee and which require replacement, a new check may be issued upon
Due from Officers and
submission of the spoiled or stale check to the Treasurer. A certified copy of the DV shall
Employees 128 50
be requested from the Auditor for presentation to the Administrator/Local Chief
Executive who shall countersign the check. The cancelled check shall be reported and
attached to the RCI prepared at the period of cancellation. The replacement check shall
also be reported chronologically in the RCI.
3. Cash Settlement in case of denial of Request for Relief from Accountability
Sec. 60. Suspensions, Disallowances and Charges. – Disallowances and charges shall be taken up in the
books of accounts only when they become final and executory. The Accountant shall prepare the Journal To take up Cash in Treasury 101 50
of Entry Voucher (JEV) to take up the Receivable – Disallowances and Charges and credit the appropriate payment/settlement Due from Officers and
expense account for the current year or prior years’ adjustment if pertaining to expenses of previous Employees 128 50
years.

Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash in Treasury and 4. Cash Overage
crediting the Receivable – Disallowances and Charges account.
To take up cash overage Cash in Treasury 101 50
Suspensions in audit and settlement thereof shall not be recorded in the books of accounts. discovered during cash Other Specific Income of
examination LGU 792 50
Sec. 61. Pro-forma Accounting Entries. – The following the are pro-forma accounting entries for
miscellaneous transactions:
5. Dishonored Checks
Acct.
Particulars Account Title Code Debit Credit From payment of real property tax in the current year or prior year

1. Cash Shortage Upon receipt of advice of Real Property Tax

dishonored check and Receivable 124 50
a. Cash shortage of the of the Disbursing Officer cancellation of Official Deferred Real Property
Receipt Tax
To take up cash shortage Due from Officers and Income 448 50
Employees 128 50
Cash – Disbursing Officers Due to LGUs 431 30
107 50 Real Property Tax Income
711 20
Cash in Bank – LCCA 110 50
b. Cash Shortage of the Treasurer
Receipt of Cash in Treasury 101 50

16
 Acct. Acct.
Particulars Account Title Code Debit Credit Particulars Account Title Code Debit Credit
refund/settlement Real Property Tax
Receivable 124 50 c.1 Recording of charges which collection were made in the current year

When the charge becomes

6. Lost/Destroyed/Stale/Obsolete Checks final and executory – Receivables –
Underpayment of Franchise Disallowances/ Charges
Check issued in the current/prior year for replacement Tax Franchise Tax 138 10
724 10
Check cancellation Cash in Bank – LCCA 110 50 Amount Paid - P 100
Accounts Payable 401 50 Should be - 110
Charge - 10
Replacement Accounts Payable 401 50
Cash in Bank – LCCA 110 50

Settlement Cash in Treasury 101 10

Receivables –
7. Disallowances and Charges Disallowances/ Charges
138 10
a. Recording of disallowance for current year’s transaction

When the disallowance c.2 Recording of charges which collection were made in the prior year
becomes final and Receivables –
executory – Disallowances/ When the charge becomes Receivables –
Overpayment of Office Charges 138 10 final and executory Disallowances/ Charges
Supplies Office Supplies 138 10
Amount paid - P100 Expense 849 10 Prior Years’ Adjustments
Should be - 90 533 10
Difference - 10

Settlement of Disallowance Cash in Treasury 101 10 Settlement Cash in Treasury 101 10

Receivables – Receivables –
Disallowances/ Disallowances/ Charges
Charges 138 10 138 10

b. Recording of disallowance for prior year’s transaction 8. Refund of Overpayment

When the disallowance Receivables – a. Overpayment taken up as receivable

becomes final and executor Disallowances/ Charges
138 10 To record overpayment of Due from Officers and
Prior Years’ Adjustments salaries and wages (When Employees 128 10
533 10 overpayment is ascertained) Salaries and Wages –
Regular Pay 801 10

Settlement of disallowance Cash in Treasury 101 10

Receivables – To record refund of Cash in Treasury 101 10
Disallowances/ overpayment Due from Officers and
Charges 138 10 Employees 128 10

c. Settlement of Charges b. Refund of overpayment not taken up as receivable

17
 Acct.
Particulars Account Title Code Debit Credit
2. Application of Deferred Credits to
Refund of overpayment of Cash in Treasury 101 10 advance RPT for Income 440 2,500
Salaries and Wages – Salaries and Wages – P2,500. Real Property Tax 711 2,500
Regular Pay during the Regular Pay 801 10
current year
Sec. 65. Accruals. – Accruals are revenues earned and expenses incurred in the current accounting
period that have not yet been recorded. Adjusting entries for accruals are required to record revenues
To take up refund of over – Cash in Treasury 101 10 earned and expenses incurred in the accounting period.
payment in the ensuing year Prior Years’ Adjustments
533 10 Adjusting entry for accrued revenues is a debit to a receivable account and a credit to an income account.
Examples are interest, share from internal revenue collections covered by notice of funding checks
issued, etc.
F. ADJUSTING AND CLOSING ENTRIES
Adjusting entry for accrued expenses is a debit to the appropriate expense account and a
Sec. 62. Adjusting Entries. – Adjusting entries are accounting journal entries made in order to ensure that
credit to a payable account. Examples are accrued salaries, bad debts, etc. For bad debts, the entry is a
revenues and expenses are recorded in the period when they are earned or incurred following the
debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
revenue recognition and the matching principles.

Adjusting entries are required every time financial statements are prepared. The use of the Illustrative accounting entries:
adjusting entries makes it possible to report on the Balance Sheet the appropriate assets, liabilities and Acct.
equity accounts at the statement date and the Statement of Income and Expenses the net income/(loss) Particulars Account Title Code Debit Credit
for the period.
1. Receipt of the Notice of Due from NGAs 130 20,000
Sec. 63. Types of Adjusting Entries. – There are two types of adjusting entries: Funding Check Issued for Share from Internal
the December Share from Revenue Collections 746 20,000
a. Prepayments; and Internal Revenue Collections
b. Accruals for P20,000.

Sec. 64. Prepayments. – Prepayments are expenses paid or revenues received before they are incurred
or earned. Adjusting entries for prepayments are required at the statement date to record the portion of
the prepayment that represents the expense incurred or the revenue earned in the current accounting 2. Unpaid salaries and Salaries and Wages –
period. Sub-categories of prepayments are prepaid expenses and unearned revenues. wages of employees, at end Regular Pay 801 50,000
of accounting period, Due to Officers &
Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed. P50,000. Employees 428 50,000
Prepaid expenses expire either with the passage of time (e.g. rent) or through use and consumption (e.g.
supplies). The adjusting entry for prepaid expenses is a debit to the expense account and a credit to the
asset account. Examples are rent, supplies, etc. Acquisition of productive facilities is viewed essentially as Sec. 66. Closing Journal Entries. – Closing journal entries are the accounting entries prepared to reduce
long term prepayments, hence, periodic adjusting entries for depreciation are included in this category. all balances of the nominal accounts to zero at the end of the accounting period in order to prepare the
For depreciation, the entry is a debit to depreciation expense and a credit to accumulated depreciation. accounts for the next accounting period. The procedure followed in the reduction of the balances is
The depreciable or estimated life for different types of agency assets are presented in Table 2 (Annex 7). called the closing process. The closing process is as follows:

Unearned revenues are recorded as a liability when received and considered earned upon rendition of 1. Debit all revenue accounts balances and credit the total to the Income and
service (e.g. tuition fees) or the passage of time (e.g. advance payment of real property taxes). The Expense Summary account.
adjusting entry for unearned revenues is a debit to a liability account and a credit to revenue account. 2. Credit all expense accounts balances and cost of goods sold and debit the total to
the Income and Expense Summary account.
Illustrative accounting entries: 3. Debit the credit balance of the Income and Expense Summary account and credit
Acct. the amount in the Retained Operating Surplus account, in case of a net income.
Particulars Account Title Code Debit Credit 4. Credit the debit balance of the Income and Expense Summary account and debit
the amount in the Retained Operating Surplus account, in case of a net loss.
1. Report of supplies Office Supplies Expense 5. Debit all credit balances of the intermediate accounts and debit the total to the
utilized for P2,000. Office Supplies Inventory 849 2,000 Government Equity account.
6. Credit all debit balances of the intermediate accounts and credit the total to the
149 2,000 Government Equity account.

18
 c. Prove the equality of the two columns.
Illustrative accounting entries:
Sec. 70. Pre-Closing Trial Balance. – The pre-closing trial balance is the trial balance prepared from the
Acct.
general ledger accounts after the adjusting journal entries have been journalized and posted. This is also
Particulars Account Title Code Debit Credit
termed as adjusted trial balance.
1. To close the Revenue Real Property Tax 711 100
Monthly pre-closing trial balance for each fund shall be submitted not later than the twentieth day after
accounts to the Income and Share from Internal
the end of the month. It shall be supported by the Status of Appropriations, Allotments and Obligations,
Expense Summary account. Revenue Collections 746 10,000
for both the current and continuing appropriations.

These reports shall be submitted to the following:

Business Taxes & Licenses
COA Unit Auditor – Original copy
Registration Fees 723 50
Local Sanggunian – 1 copy
Income and Expense 761 20
Local Treasurer – 1 copy
Summary
Local Accountant – 1 copy
532 10,170
The trial balance at the end of the quarter shall also be supported by a schedule of subsidiary ledger
balances of the controlling accounts in the General Ledger and an additional copy shall be submitted to
2. To close the Income and Expense
the COA Regional Office thru the Unit Auditor.
Income and Expense Summary 532 5,670
Summary to Retained Retained Operating
Sec. 71. Status of Appropriations, Allotments and Obligations. – The status of appropriations,
Operating Surplus account. Surplus 534 5,670
allotments and obligations is a schedule prepared showing the appropriation, allotments and obligations
of each function, program project and activity (See Annex 1). Separate schedules shall be prepared for
current appropriation and for continuing appropriations using the following column headings:
3. To close the Retained Operating
Function/Program/ Appropriations Allotment Obligation Unobligated
Retained Surplus 534 5,670
Project/ Activity Balance
Operating Government Equity 501 5,670
Surplus to
Sec. 72. Post-closing Trial Balance. – Post-closing trial balance is the trial balance prepared at the end of
Government
the year after the closing entries are journalized and posted in the general ledgers. In the Post-closing
Equity account.
Trial Balance, all the nominal accounts (revenue, expense and intermediate) are closed and the real
accounts (assets, liability and equity) are shown with balances. It shall be submitted not later than the
fourteenth day of February after the end of the calendar year with the following supporting schedules:
Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS
a. Status of Appropriations, Allotments and Obligations;
AND STATEMENTS
b. Subsidiary Schedule of General Ledger account balances; and
c. Summary of Public Infrastructures (Annex 8).
Sec. 67. Trial Balance. – Trial balance is a list of all the general ledger accounts and their balances at a
The post-closing trial balance with supporting schedules shall be distributed as follows:
given time. The accounts are listed in the order in which they appear in the ledger, with the debit
balances in the left column and credit balances on the right column.
COA Central Office thru the Unit Auditor – 1 copy
COA Regional Office – 1 copy
Sec. 68. Purpose of the Trial Balance. – The trial balance is prepared:
COA Unit Auditor – 1 copy
Local Chief Executive – 1 copy
a. To prove the mathematical equality of the debits and credits after posting;
Local Sanggunian – 1 copy
b. To uncover errors in journalizing and posting; and
Local Treasurer – 1 copy
c. As basis for the preparation of the financial statements.
Local Accountant – 1 copy
Sec. 69. Procedures in the Preparation of the Trial Balance. – The procedures in trial balance
Sec. 73. Interim Reports. – Interim reports are financial statements required to be prepared at any given
preparation shall be:
period or at a financial reporting period shorter than a full financial year, without closing the books of
accounts. The following interim financial statements and the Notes to Financial Statements shall be
a. List the account titles and their debit/credit balances based on the accounts
prepared and submitted quarterly:
and amount reflected in the general ledger;
b. Total the debit and credit columns; and
a. Balance Sheet;

19
 b. Statement of Income and Expenses; and Sec. 77. Balance Sheet. – The Balance Sheet (Annex 3) shows the financial condition of the agency at a
c. Statement of Cash Flows specific date. It presents information on the assets, liability and the government equity of the agency.

The interim reports shall be prepared employing the same accounting principles used for annual reports. Sec. 78. Statement of Income and Expenses. – The Statement of Income and Expenses (Annex 4) shows
Adjusting entries shall be prepared for the interim period. the income and expenses of the agency at the end of a particular period. It presents the detailed
information of the income and expenses recognized during the period covered.
To facilitate the preparation of the interim financial statements, the use of the worksheet is
recommended. Sec. 79. Statement of Cash Flows. – The Statement of Cash Flows (Annex 5) shows the agency’s cash
activities. It reports cash receipts and cash payments and net change in cash resulting from operating,
Sec. 74. Worksheet. – A worksheet is the accountants informal device for accumulating and sorting investing and financing activities of an agency during a period, in a format that reconciles the beginning
information needed for the financial statements. It is a columnar sheet of paper used to adjust the and ending cash balances.
account balances and prepare the financial statements.
Sec. 80. Notes to the Financial Statements. – The Notes to the Financial Statements (Annex 6) are the
The use of the worksheet facilitates the end-of-period accounting and reporting process. Also, it helps accountant’s means of amplifying or explaining the items presented in the main body of the statements.
accountants prepare the financial statements on a more timely basis. The following worksheet format These are explanatory notes on the accounts and/or accounting policies which will give additional
shall be used: information value to the financial statements. In the Notes, the accountant is expected to report the
economic substance rather than the legal form of the transactions and to make adequate disclosure.
Name of LGU
Worksheet The Notes to Financial Statements include the following:
As of ____________, 20_____
1. Summary of significant accounting policies adopted and followed by the reporting entity;
Statement of
Accounts Trial Balance Adjustments Adjusted Income & Balance 2. Narrative descriptions or detailed analyses of amounts shown on the face of the balance
T/B Expenses Sheet sheet, statement of income and expenses and statement of cash flows;
Title Code Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
3. Customary or routine disclosure – which are information about measurement bases of
1. Account title and code columns show the account titles/codes of the general ledger accounts. important assets, restrictions on assets, contingent assets/liabilities, important long term
2. Trial balance column reflects amounts obtained from the general ledger balances. commitments not recognized in the body of the statements, etc.;
3. Adjustment columns are the adjustments effected for the prepayments and accruals.
4. Adjusted trial balance shows the balances of all the accounts after the adjustment at the end 4. Disclosures of changes in accounting principles- changes in accounting principles, practices
of the accounting period. or methods of applying them; and
5. Statement of Income and Expenses shows all the debit and credit items in the adjusted trial
balance for all the income and expense accounts. The difference between the income and 5. Disclosures of subsequent events – disclosure of events that affect the agency directly and
expenses shall be reflected as Net Income/Loss to be extended to the credit column of the that occur between the date of, or end of the period covered by, the financial statements and
Balance Sheet. date of completion of the statements are necessary; if knowledge of the events might affect
6. Balance Sheet show all the debit and credit items in the adjusted trial balance of all the asset, the interpretation of the statements, even though the events do not affect the propriety of
liability, equity and intermediate accounts affecting directly the Government Equity account. the financial statements themselves.

Sec. 75. Statement of Management Responsibility for Financial Statements. Statement of

Management Responsibility for Financial Statements (Annex 2) shows the agencies’ responsibility for the
preparation and presentation of its financial statements. The statement shall be signed by the Chief Chapter 5. SPECIAL FUNDS
Accountant and the Head of the Agency or his authorized representative. It shall form an integral part of
the financial statements, all of which shall be transmitted to the concerned agencies.
A. ACCOUNTING FOR SPECIAL EDUCATION FUND
Sec. 76. Year-end Financial Statements. – Local accountants shall prepare at the end of the year the
following financial statements for each fund:
Sec. 81. Special Education Fund. – The Special Education Fund (SEF) consist of the proceeds of one
a. Balance Sheet; percent (1%) tax on the assessed value of real property in addition to the basic real property tax, which a
b. Statement of Income and Expenses; and province or city, or a municipality within the Metropolitan Manila Area, may levy and collect.
c. Statement of Cash Flows
Sec. 82. Application of Proceeds of the Additional One Percent (1%) Special Education Fund Tax. – (a)
The Chief Accountant shall likewise prepare the consolidated financial statements for all funds and the The proceeds of the additional one percent (1%) real property tax accruing to special education fund
Notes to the Financial Statements. shall be automatically released to the local school boards.

20
 (b) In case of provinces, the proceeds of the special education fund shall be divided equally Sec. 87. Separate Cashbooks for Special Education Fund. – The Treasurer and/or the concerned
between the provincial and municipal school boards. accountable officers shall maintain separate cashbooks for the SEF which shall be in accordance with the
prescribed format.
(c) Said proceeds shall be allocated as determined and approved by the local school boards
concerned only for the following purposes: Sec. 88. Separate Registries, Books of Accounts, and Financial Reports for Special Education Fund. – The
Chief Accountant shall maintain separate registries for appropriation, allotment and obligations and
1. Operation and maintenance of public schools; books of accounts for SEF. He shall likewise prepare separate financial reports such as the Trial Balance,
2. Construction and repair of school buildings, facilities and equipment; Balance Sheet, Statement of Income and Expenses, Statement of Cash Flows and supporting schedules,
3. Educational research; to be submitted within the prescribed timeframe.
4. Purchase of books and periodicals; and
5. Sports development. For disbursements, separate set of JEVs shall also be prepared which shall be numbered in
(Article 363 of the IRR of the Local Government Code) accordance with the prescribed codes.

Sec. 83. Special Education Fund Budget. – The Local School Board shall determine in accordance with the
criteria set by DECS, the annual supplementary budgetary needs for the operation and maintenance of
public schools within the province, city, or municipality as the case maybe, and the supplementary local
cost of meeting such needs, which shall be reflected in the form of an annual school board budget
corresponding to its share of the proceeds of the special levy on real property constituting the special
education fund and such other sources of revenue as the Local Government Code and other laws or
ordinances may provide. (Article 184(b)(1) of the IRR of the Local Government Code)
The division superintendent, city superintendent, or district supervisor, as the case maybe,
shall prepare the budget of the school board concerned. Such budget shall be supported by programs,
projects and activities of the school board for the ensuing fiscal year. A majority of all the members shall
be necessary to approve the budget. (Article 184(f) of the IRR of the Local Government Code)
The annual school board shall give priority to the following:
Sec. 89. Preparation and Control of ALOBS for Special Education Fund. – The Allotment and Obligation
Slips (ALOBS) pertaining to the fund shall be prepared and signed by authorized official of the requesting
department or office. This shall be forwarded to the Budget Officer who, based on the approved school
board budget, shall verify the existence of appropriation for the proposed expenditure. He shall certify
the ALOBS to that effect and number the same in accordance with the prescribed codes. This shall then
be forwarded to the Chief Accountant who shall certify as to obligations of allotments and shall record
the same in the appropriate Registry of Appropriations, Allotments and Obligations (RAAO). The ALOBS
shall form an integral part of the disbursement voucher/payroll and the certifications of the local budget
officer and the accountant thereon shall serve as their certification of the disbursement as required by
law.
Sec. 90. Certification as to Cash Availability. – The Treasurer shall certify as to cash availability for the
fund in the Disbursement Voucher and Purchase Request. For infrastructure projects undertaken by
contract, the Treasurer shall also certify as to cash availability in the contract. This certification shall
serve as the required certification under the law.

1. Construction, repair and maintenance of school buildings and other facilities of public elementary
and secondary schools;
2. Establishment and maintenance of extension classes when necessary; and
3. Holding of sports activities at the division, district, municipal, and barangay levels.
Sec. 84. Basis of Recording Special Education Tax – Special Education Tax Receivables shall be established
at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the
beginning of the year, the Treasurer shall furnish the Chief Accountant with a duly certified list of the
name of taxpayers and the amount due and collectible for the year. Based on the list, the Chief
Accountant shall draw a Journal Entry Voucher (JEV) to record the Special Education Tax Receivables.
Sec. 85. Delinquencies for Special Education Tax prior to CY 2002. – Payment of delinquencies for special
education taxes prior to CY 2002 shall be recognized as a direct credit to Special Education Tax Income
account.
Sec. 91. Disbursement Procedures. – Disbursement procedures including the reports to be submitted by
the accountable officer concerned are the same as those for the General Fund. However, disbursements
shall be approved by the Local Chief Executive concerned as co-chairman of the local school board. The
division/city superintendent of schools or the district supervisor concerned, as the case maybe, shall
certify vouchers or payrolls as to validity, propriety, and legality of the claim involved.
Sec. 92. Inventory Process. – The perpetual inventory method and the moving average method shall
likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and
reports for the holding of inventory shall also be followed. However, separate perpetual inventory
records and stock cards shall be maintained by the Accounting Unit and the General Services Officer or
the Treasurer, as the case maybe. Likewise, separate weekly Summary for Supplies and Materials Issued
pertaining to the fund shall be prepared.
Sec. 93. Pro-forma Accounting Entries. – Pro-forma accounting entries for the fund, follows:

Sec. 86. Collection Procedures for the Special Education Tax. – The additional one percent (1%) tax on SPECIAL EDUCATION FUND (SEF)
real property shall be collected simultaneously with the basic real property tax. A single official receipt
Acct.
shall be issued for both taxes, indicating therein the amount paid for the basic tax and the additional one
I. Particulars Account Title Code Debit Credit
percent tax. However, the collecting officer shall prepare separate reports of collections for the two
taxes. Further, the proceeds of the additional one per cent tax shall be deposited in a separate depository
1. Set-up Special education Special Education Tax
account.
Tax Receivable 125 500,000
Receivable Deferred Special
Procedures for the turn over of collections, frequency of deposit of collection with the bank,
Total Receivables – Education Tax
preparation of report of collections, verification of collections and accountable forms, preparation of
P500,000 Income 449 500,000
report of accountability for accountable forms as well as consolidation of reports of accountable forms
Provincial Share –
shall be the same as that prescribed for collections in the General Fund.
P250,000

21
 Acct. Acct.
I. Particulars Account Title Code Debit Credit I. Particulars Account Title Code Debit Credit
(Personal Share) Withholding Taxes
Life & Ret. P 2,850 Payable 410 1,050
2. Collection of Special Cash in Treasury Special 101 200,000 Pag-ibig 600
Education Tax – P200,000. Education
Tax Receivable 125 200,000
PhilHealth 500 GSIS Payable 411 2,850
W/holding Tax 1,050 PAG-IBIG Payable 412 600
Computation of Shares of Deferred Special 5,000 PHILHEALTH
LGUs in RPT – 50% of Education Tax Net Pay per Payroll Payable 413 500
Income 449 200,000 P25,000
P200,000 for Provincial Special Education Tax
713 100,000
Share Due to LGUs 431 100,000 9. Remittance of salary Withholding Taxes
deductions Payable 410 1,050
GSIS Payable 411 2,850
3. Deposit of collections with Cash in Bank – LCCA 110 200,000 PAG-IBIG Payable 412 600
authorized depository bank Cash in Treasury 101 200,000 PHILHEALTH Payable
413 500
Cash in Bank – LCCA 110 5,000

4. Remittance of share to Due to LGUs (Province) 431 100,000

Province ( Special 10. Obligation for Memo entry in RAAOPS
Education Tax) Cash in Bank – LCCA 110 100,000 Government Share:
– P100,000 Life & Ret. Ins.
Contributions
P2,850
Pag-ibig
5. Receipt of allotment for – Memo entry in Registry Contributions
Allotment Class: of 600
Personal Services - Appropriations , PhilHealth
P50,000 Allotments and Contributions
MOOE - 20,000 Obligations (Personal 500
Capital Outlay - Services– (RAAOPS, Total P3,950
MOOE – RAAOMO,
30,000 Capital Outlay –
Total P100,000 RAAOCO) 11. Payment of Government Life & Retirement
Share Insurance
Contributions 817 2,850
6. Obligation for PS – Salaries Memo entry in RAAOPS PAG-IBIG Contributions
of teachers for extension 818 500
class – P30,000 PHILHEALTH
Contributions 819 600
Cash in Bank – LCCA 110 3,950
7. Grant of cash advance for Cash Disbursing Officers
payroll Cash in Bank – LCCA 107 25,000
110 25,000 12. Obligation of Traveling Memo entry in RAAOMO
Expenses – P500

8. Payment of Salaries Salaries and Wages –

Salaries per Payroll P Regular Pay 801 30,000 13. Grant of cash advance Due from Officers &
30,000 Cash – Disbursing Employees 128 500
Less: Deductions – Officers 107 25,000 Cash in Bank – LCCA 110 500

22
 Acct. Acct.
I. Particulars Account Title Code Debit Credit I. Particulars Account Title Code Debit Credit

14. Liquidation of cash Traveling Expenses – 24. Receipt of fund transfer Cash in Bank – LCCA 110 5,000
advance Local 831 480 from General Fund thru bank Subsidy from Other
Due from Officers & Funds 605 5,000
Employees 128 480

Adjusting Entries:
15. Adjustment of obligation Memo entry in RAAOMO
of travel. 1. Depreciation of Equipment Depreciation–Office
using the Straight Line Equipment 922 6,000
Method: Accumulated
16. Refund of cash advance Cash in Treasury 101 20 Equipment : Depreciation –
Due from Officers & Life Amount Office Equipment 322 6,000
Employees 128 20 5 yrs. P6,000

17. Deposit of cash refund Cash in Bank – LCCA 110 20 Closing Entries :
Cash in Treasury 101 20
1. Closing of Income Special Education Tax 713 100,00
0
18. Obligation of bill received Memo entry in RAAOMO Accounts Subsidy from Other
from MERALCO Funds 605 5,000
Income and Expense
Summary 532 105,000
19. Payment of MERALCO bill Electricity 835 800
– P800 Cash in Bank – LCCA 110 800
2. Closing of Expense Income and Expense
Accounts Summary 532 41,230
20. Obligation for the Memo entry in RAAOMO Salaries & Wages –
purchase of Office Supplies – Regular Pay 801 30,000
P500 Life & Retirement
Insurance
Contributions 817 2,850
21. Payment of office supplies Office Supplies Inventory PAG-IBIG Contributions
149 500 818 600
Withholding Taxes PHILHEALTH
Payable 410 20 Contributions 819 500
Cash in Bank – LCCA 110 480 Traveling Expenses –
Local 831 480
Electricity 835 800
22. Obligation of Equipment Memo entry in RAAOCO Depreciation–Office
per Purchase Order – P30,000 Equipment 922 6,000

23. Payment of equipment Office Equipment 222 30,000 3. Closing of Income and Income and Expense 532 63,770
with Invoice/Delivery Withholding Taxes Expense Summary Summary
Receipt Payable 410 3,000 Retained Operating
Cash in Bank – LCCA 110 27,000 Surplus 534 63,770

23
 Acct. Sec. 101. Certification and Approval of Disbursements from Trust Funds. – Disbursements
I. Particulars Account Title Code Debit Credit from the Trust Fund shall require:

a. Certification and approval of vouchers and payrolls as to validity, propriety

4. Closing of Retained Retained Operating and legality of the claim involved by the department/ office head concerned;
Operating Surplus Surplus 534 63,770 b. Certification as to existence of funds held in trust and completeness and
Government Equity 501 63,770 propriety of supporting documents by the Accountant;
c. Certification as to cash availability by the Treasurer; and
d. Approval by the Administrator of the fund.
B. TRUST FUND
Sec. 102. Disbursement Process. – Disbursements from the Trust Fund shall be as follows:
Sec. 94. Definition of Trust Fund. – Trust Fund shall consist of private and public monies which have
officially come into the possession of the local government or of a local government official as trustee, a. Disbursement by check
agent or administrator, or which have been received as a guaranty for the fulfillment of some obligation.
A trust fund shall only be used for the specific purpose for which it was created or for which it came into PROCESS PERSON / UNIT RESPONSIBLE
the possession of the local government unit.
1. Gather supporting documents, prepare Concerned Office
Sec. 95. Receipts Accruing to the Trust Fund. – Grants and donations coming from foreign DV/payroll and forward to Head of
funding institutions, other levels of government and private institutions/individuals for specific Department.
projects/purpose shall accrue to the Trust Fund. Equity of the LGU on projects under a trust agreement
shall also accrue to the Trust Fund. These receipts shall be credited to the Project Equity account. 2. Sign Box A of DV and submit to the Supervisor/Head of
Accounting Unit. Department
Loans of LGUs for income generating projects from the Municipal Development Fund Office (MDFO)
requiring counterpart funding from LGUs shall not be recorded in the Trust Fund but as a Special Account 3. Check completeness of documents and Accounting Unit
in the General Fund. verify existence of funds held in trust, assign
number to DV/Payroll, sign Box B and
Sec. 96. Collection Procedures for the Trust Fund. – Cash collections for the Trust Fund shall be forward to Treasurer.
acknowledged through the issuance of an official receipt. Procedures for the turn over of collections,
frequency of deposit of collection with the bank, preparation of report of collections, verification of 4. Verify claim, certify cash availability (Box C) Treasurer
collections and accountable forms, preparation of report of accountability for accountable forms as well and forward to approving officer.
as consolidation of reports of accountable forms shall be the same as that prescribed for collections in
the General Fund. 5. Approve transaction (Box D) and forward DV Local Chief Executive/
to Cashier. Administrator of the Fund
In case of receipt of funds through the bank, the Accountant shall draw a JEV based on the bank credit
memo. 6. Prepare and sign check and forward check Treasurer
with DV to countersigning officer.
Sec. 97. Project Expenditures. – The construction period theory shall apply for expenditures on
infrastructure projects of the Trust Fund. For other projects, expenditures shall be debited to the 7. Countersign check and forward to Administrator
appropriate expenditure account. Expenditures shall be closed to Project Equity account at year-end or Accountant for preparation of the
upon project completion, whichever comes first. Accountant’s Advice.

Sec. 98. Separate Cashbooks for Trust Fund. – The Treasurer and/or the concerned accountable officers
shall maintain separate cashbooks for the Trust Fund which shall be in accordance with the prescribed
format. 8. Prepare Accountant’s Advice of Local Check Accountant
Disbursements and return DV, check and
Sec. 99. Separate Books of Accounts and Financial Reports for Trust Fund. – The Chief Accountant shall supporting documents to Cashier/Treasurer.
maintain separate books of accounts for Trust Fund. He shall likewise prepare separate financial reports
such as the Trial Balance, Balance Sheet, Statement of Cash Flows and supporting schedules, to be 9. Issue check to claimant. Record Treasurer
submitted within the prescribed timeframe. disbursement in Cashbook – Cash in Bank.
Prepare Report of Checks Issued (RCI),
Sec. 100. Disbursements within Trust Agreement/Approved Budget. – Disbursements from forward RCI with DV and supporting
trust funds shall be in accordance with the specific purpose stated in the trust agreement/approved documents to Accounting Unit.
budget between the trustor and trustee (LGU) as certified by the Chief Accountant. The certification on
the DV as to existence of funds held in trust shall serve this purpose. 10. Prepare the JEV based on individual Accounting Unit
checks/voucher; sign “Prepared By” portion

24
PROCESS PERSON / UNIT RESPONSIBLE Acct. II.
(approved by Chief Accountant), and record Particulars Account Title Code III. Debit Credit
JEV in the Check Disbursements Journal. Post
monthly to the General Ledger/Subsidiary d. Issuance of check Construction in Progress
Ledgers with approved DV for – Roads,
payment to contractor Highways & Bridges
11. Forward RCI, DV, supporting documents and Accountant upon receipt of second Withholding Taxes 232 1,000,000
JEV to the Office of the Auditor for final billing – 100% Payable
custody and post audit. accomplished Cash in Bank – LCCA 410 100,000
110 900,000

b. Payments through cash advances

For payments through cash advances, procedures 1 to 5 for check disbursement shall be followed. The
rest of the procedures shall be the same as that of the General Fund.

Sec. 103. Inventory Process. – The perpetual inventory method and the moving average method shall
likewise be adopted in the accounting and costing of inventory. The general procedures, the forms and e. Transfer of completed Public Infrastructures 243 1,000,000
reports for the holding of inventory shall also be followed. However, separate perpetual inventory construction to Public Construction in Progress
records and stock cards shall be maintained by the Accounting Unit and the General Services Officer or Infrastructure –
the Treasurer as the case maybe. Likewise, separate weekly Summary for Supplies and Materials Issued Roads, Highways &
pertaining to the fund shall be prepared. Bridges 232 1,000,000

Sec. 104. Pro-forma Accounting Entries for Trust Funds. – Accounting entries for typical transactions
under the trust funds are as follows: f. Remittance of taxes Withholding Taxes
w/held Payable 410 200,000
Acct. II. Cash in Bank – LCCA 110 200,000
Particulars Account Title Code III. Debit Credit

1. Receipt of grant from NGA g. Purchase of Construction and Heavy

equipment Equipment 212 500,000
a. Receipt of grant direct Withholding Taxes
to bank from NGA for: Payable 410 50,000
a. Construction of road Cash in Bank – LCCA 110 2,500,000 Cash in Bank – LCCA 110 450,000
– P2M Project Equity
b. Purchas 502-01 P2,500,000 502 2,500,000
e of h. Payment of Withholding Taxes
constru withholding tax Payable 410 50,000
ction Cash in Bank – LCCA 110 50,000
Equipment – P500,000

i. Submission of full Project Equity 502 2,500,000

b. Issuance of check Construction in Progress liquidation to grantor and Public Infrastructures 243 2,000,000
with approved DV for – transfer of completed Construction and Heavy
payment to contractor Roads, Highways & road and equipment to Equipment 212 500,000
upon receipt of first Bridges 232 1,000,000 GF for LGU use
billing – 50% Withholding Taxes
accomplished Payable 410 100,000
Cash in Bank – LCCA 110 900,000 Note: Under the GF books, completed infrastructure project shall be recorded in the Registry of
Public Infrastructures with the TF JEV No. as basis. The transferred equipment shall be
recorded as follows:
c. Submission of No entry General Fund Books: Public Infrastructures 243 2,000,000
statement of Construction and Heavy
disbursements to grantor Equipment 212 500,000

25
 Acct. II. Acct. II.
Particulars Account Title Code III. Debit Credit Particulars Account Title Code III. Debit Credit
Invested Equity 537 2,500,000 withholding tax Payable 410 50,000
Cash in Bank – LCCA 110 50,000
At the end of the year:

a. Closing of Invested Invested Equity 537 2,500,000

Equity to Government Government Equity 502 2,500,000
Equity

b. Transfer of Public Government Equity 502 2,000,000

Infra- structure to RPI Public Infrastructures 243 2,000,000 e. Issuance of check Cash – Disbursing
with approved DV Officers 107 170,000
for cash advance on Cash in Bank – LCCA 110 170,000
2. Receipt of grant with counterpart fund from LGU salaries and wages
of project
a. Project budget as administrative
agreed upon between personnel
grantor and LGU for
project:
f. Liquidation of Cash Salaries and Wages –
Grantor Advances Casual/
Building - 1.2M Contractual 803 200,000
Equipment - .3M Withholding Taxes
LGU Funded Payable 410 30,000
Office supplies -1M Cash – Disbursing Officers
Salaries of project 107 170,000
Personnel - .4M
Total 2M
g. Remittance of tax Withholding Taxes
withheld Payable 410 30,000
b. Receipt of funds Cash in Bank – LCCA 110 2,000,000 Cash in Bank – LCCA 110 30,000
from foreign Project Equity 502 2,000,000
funding institution 502-01 - 1,500,000
thru national 502-02 - 500,000 h. Issuance of check Office Supplies Inventory
government agency with approved DV for Cash in Bank – LCCA 149 100,000
purchase of supplies and 110 100,000
materials
Note: Entry in LGU General Fund books shall be –

Grants and Donations 889 500,000 i. Issuance of office Office Supplies Expenses
Cash in Bank – LCCA 110 500,000 supplies 849 60,000
Office Supplies Inventory
149 60,000
c. Issuance of check with Construction in Progress
approved DV for payment –
to contractor for Agency Assets 230 500,000 j. Purchase of IT IT Equipment and
Construction of Building, Withholding Taxes equipment Software 215 250,000
50% accomplished. Payable 410 50,000 Withholding Taxes
Cash in Bank – LCCA 110 450,000 Payable 410 25,000
Cash in Bank – LCCA 110 225,000

d. Remittance of Withholding Taxes k. Remittance of Withholding Taxes

26
 Acct. II. Acct. II.
Particulars Account Title Code III. Debit Credit Particulars Account Title Code III. Debit Credit
withholding tax Payable 410 25,000 Cash – Disbursing Officers
Cash in Bank – LCCA 110 25,000 107 170,000

s. Remittance of Withholding Taxes

withholding tax Payable 410 30,000
Cash in Bank – LCCA 110 30,000
l. Issuance of check for IT Equipment and
installation of equipment Software 215 50,000
Cash in Bank – LCCA 110 50,000 t. Issuance of office Office Supplies Expenses
supplies 849 40,000
Office Supplies Inventory
End of Year 149 40,000
m.Closing. of expenses to Project Equity 502 260,000
Project Equity 502-02 - P260,000
Salaries and Wages – End of Year
Casual/ Contractual 803 200,000 u. Closing of expenses Project Equity 502 240,000
Office Supplies to Salaries and Wages –
Expenses 849 60,000 Project Equity Casual/
Contractual 803 200,000
Office Supplies Expenses
Succeeding year 849 40,000
n. Issuance of Construction in Progress
check with approved DV –
for payment to Agency Assets 230 700,000 Project Completion
contractor for Withholding Taxes v. Transfer of building Project Equity 502 1,500,000
Construction of Building Payable 410 70,000 and equipment to the Building 204 1,200,000
– 100% accomplished. Cash in Bank – LCCA 110 630,000 General Fund as follows: IT Equipment and
Software 215 300,000

o. Remittance of Withholding Taxes General Fund Books: Building 204 1,200,000

withholding tax Payable 410 70,000 IT Equipment and
Cash in Bank – LCCA 110 70,000 Software 215 300,000
Invested Equity 537 1,500,000

p. Transfer of Property Plant and At end of year: Invested Equity 537 1,500,000
construction in progress Equipment – Building Government Equity 501 1,500,000
to property, plant and Construction in 204 1,200,000
equipment account Progress – Agency Assets

230 1,200,000

q. Issuance of Cash – Disbursing Officers

check for cash advance Cash in Bank – LCCA 107 170,000
on salaries and wages 110 170,000 Chapter 6. SPECIAL ACCOUNTS

r. Liquidation of Salaries and Wages – Sec. 105. Special Accounts in the General Fund. – Local government units shall maintain special
salaries and wages Casual/Contractual 803 200,000 accounts in the General Fund for public utilities and other economic enterprises, loans, interests, bond
Withholding Taxes issues, and other contributions for specific purposes; and development projects funded from the share
Payable 410 30,000

27
of the local government concerned from the internal revenue collections and development of national
wealth and such other special accounts which may be created by law or ordinance. Sec. 110. Reporting. – At the end of the year, post-closing trial balance shall be prepared for
each special account. Also, the following financial statements shall be prepared:
Sec. 106. Objectives for the Maintenance of Special Accounts. – Accounting procedures for the
operation of the special accounts are adopted in order to: a. Balance Sheet
b. Statement of Income and Expenses
a. Determine whether the income generated by the public utilities or economic enterprises c. Statement of Cash Flows
are sufficient to meet their respective operating costs.
These reports shall form part of the schedules of the General Fund trial balance.
b. Provide adequate information as to the assets, liabilities and equity of each special
account.
Sec. 111. Pro-forma Accounting Entries.
Sec. 107. Special Accounts Subsidiary Ledger. – Special accounts shall be maintained through the use of
complete subsidiary ledger. In case the local government unit maintains a number of the same economic Acct.
enterprise, each shall have its own set of subsidiary ledger (e.g. 8 markets - 8 subsidiary ledgers for the Transaction Code Debit Credit
market).
a. Receipt of Share from IRC for P100,000.
Sec. 108. Sub-codes for the Special Accounts. – The following shall be the sub-codes for the special Cash in Bank – LCCA 110 100,000
accounts: Cash in Bank –LCCA (01) P80,000
(18) 20,000
Share from Internal Revenue Collections (IRC) 746 100,000
SPECIAL ACCOUNT SUB-CODE Share from IRC (01) 80,000
(18) 20,000
General Fund Proper 01
Market Operation 02
b. Receipt of collections for P148,500.
Slaughterhouse Operation 03
Distribution:
Waterworks System 04
RPT- Basic 58,500 (net of 10% discount)
Electric, Light and Power System 05 Market fees 40,000
Telephone System 06 Bus. Tax 50,000
Toll Roads, Bridges and Ferries 07
Transportation System 08 Cash in Treasury 101 148,500
Hospital 09 Cash in Treasury (01) 108,500
School 10 Cash in Treasury (02) 40,000
Sports Center 11 Discount on RPT 937 6,500
Recreational Center 12 Discount on RPT (01) 6,500
Housing Projects 13 RPT Receivable 124 65,000
Convention/Conference Center 14 RPT Receivable (01) 65,000
Parking Space 15 Business Taxes & Licenses 723 50,000
Ice Plant 16 Business Taxes & Licenses (01) 50,000
Cemetery 17 Receipts from Markets 783 40,000
20% Development Fund 18 Receipts from Markets (02) 40,000
80% Share from Energy Sources 19
Share from Development of National Wealth 20
Loans 21 c. Requisition of Office Supplies for the following:
Operation of Market P10,000 No accounting entry
Interests 22
Programs under the 20% Dev. Fund 2,000
Bond Issues 23
Office of the Treasurer 8,000

Sec. 109. Profit from Operation. – Profits or income derived from the operation of public utilities and
d. Obligation of the requested supplies. Entry in the RAAOMO
other economic enterprises, after deduction of the cost of improvement, repair and other related
expenses of the public utility or economic enterprises concerned, shall first be applied for the return of
the advances or loans made therefor, any excess shall form part of the general fund of the local
e. Payment of Office Supplies for the following:
government unit concerned.
Operation of Market P10,000

28
 Acct. Acct.
Transaction Code Debit Credit Transaction Code Debit Credit
Programs under the 20% Dev. Fund 2,000
Office of the Treasurer 8,000
Total 20,000
Less: Withholding tax 1,000 h. Obligation of the requested equipment Entry in the RAAOCO
Net 19,000

Office Supplies Inventory 149 20,000

Office Supplies Inventory (01) 8,000
i. Payment of the procured equipment:
Office Supplies Inventory (02) 10,000
Office Supplies Inventory (18) 2,000 Office of the Accountant 4,800
Cash in Bank – LCCA 110 19,000 Office of the Market Master 4,000
Cash in Bank - LCCA (01) 7,600
Gross 8,800
IV. Cash in Bank - LCCA (02) 9,500
Withholding Tax 440
Cash in Bank - LCCA (18) 1,900
Net 8,360
Withholding Taxes Payable 410 1,000
Office Equipment 222 8,800
Withholding Taxes Payable (01) 400
Office Equipment (01) 4,800
Withholding Taxes Payable (02) 500
Office Equipment (02) 4,000
Withholding Taxes Payable (18) 100
Withholding Taxes Payable 410 440
Withholding Taxes Payable (01) 240
Withholding Taxes Payable (02) 200
f. Report of Utilization of Office Supplies
Cash in Bank – LCCA 110 8,360
Operation of Market 2,000
Cash in Bank – LCCA (01) 4,560
Office of the Treasurer 3,000
Cash in Bank – LCCA (02) 3,800
20% Dev. Fund 1,000

j. Obligation of Subsidy to the Operation of the

Office Supplies Expenses 849 6,000
Market from the GF Proper for P12,000 Entry in the RAAOMO
Office Supplies Expense (01) 3,000
Office Supplies Expense (02) 2,000
Office Supplies Expense (18) 1,000 k. Transfer of the funds for P12,000.
Office Supplies Inventory 149 6,000 Subsidy to Special Accounts 898 12,000
Office Supplies Inventory (01) 3,000 Subsidy to Special Accounts (01) 12,000
Office Supplies Inventory (02) 2,000 Cash in Bank – LCCA 110 12,000
Office Supplies Inventory (18) 1,000 Cash in Bank – LCCA (01) 12,000

g. Request for procurement of office equipment l. Receipt of the transferred funds.

of the following offices.
No accounting entry Cash in Bank – LCCA 110
Office of the Accountant 5,000
12,000
Office of the Market Master 4,000 Cash in Bank – LCCA (02) 12,000

29
 Acct. The Chief Accountant shall maintain the perpetual inventory records comprising of Supplies
Transaction Code Debit Credit Ledger Cards (SLC) for each commodity/stock, Property, Plant and Equipment Ledger Card (PPELC) for
Subsidy from Special Accounts 606 12,000 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,
Subsidy from Special Accounts (02) 12,000
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
Chapter 7. SUPPLIES OR PROPERTY 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).
ACCOUNTING FOR SUPPLIES OR PROPERTY
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
Sec. 112. Definition of Supplies or Property. – Supplies or property include everything, except real of issue. The Chief Accountant shall compute the inventory cost monthly using the method. Illustrative
property, which may be needed in the transaction of public business or in the pursuit of any undertaking, calculation of inventory using this method is as follows:
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 Ball pen
maintenance of equipment and furniture, as well as trucking, hauling, janitorial, security, and related
services. ( Sec. 356c of the LGC) Reference Date Received Issued Balance
Beg. Balance
Sec. 113. Classification of Supplies or Property. – Supplies or property shall have the following per actual Jan. 1 200 @
classification: inventory P10 P2,000
Delivery Jan 12 400 @
a. Expendable supplies or property – referring to articles which are normally consumed in Receipt/ 12 4,800 600 @
use within one year or converted in the process of manufacture or construction, or Invoice No. 11.33 6,800
those having a life expectancy of more than one year but which shall have decreased RIS No. Jan. 16 500 @ 100 @
substantially in value after being put to use for only one year. Examples are stationery, 11.33 5,665 11.35 1,135
fuel, spare parts. Expendable supplies forms part of the maintenance and operating Delivery Jan. 26 300 @ 400 @
expenses of the LGU. Receipt/ 11 3,300 11.09 4,435
Invoice No.
b. Non-expendable supplies or property – referring to articles which are not consumed in RIS No. Jan. 29 200 @
use and ordinarily retain their original identity during the period of use, whose 11.09 2,218 200 2,217
serviceable life is more than one year and which add to the assets of the government. @11.09
Examples are furniture, fixtures, transport equipment and other equipment. Non- Delivery 100 @ 1,200 300 @
expendable supplies or property are proper charges to capital outlay of the LGU. Receipt/ Jan. 30 12 11.39 3,417
Invoice No.
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 (On Jan. 12, the new unit cost of P11.33 was found by dividing P6,800, the total cost, by 600,
performed. Examples are contractual services like trucking, hauling, janitorial, security the number of units at hand. Then on Jan. 16, the peso balance, P1,135 represented the previous balance
and related services. Non-personal services are proper charges to maintenance and P6,800 less P5,665, the cost assigned to the 500 units issued on this date. New unit costs were calculated
operating expenses of the LGU. on Jan. 26 and 30 when additional units were acquired. )

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.
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:

Regular purchases shall be coursed thru the inventory account and issuances thereof shall be (1) Requisition Issue Slip (RIS) - for supplies carried in stock; and
recorded as they take place, except those purchased out of the petty cash fund which shall be for (2) Purchase Request (PR) - for supplies not carried in stock.
immediate use and for stock in which case shall be charged immediately to the appropriate expense
accounts. (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

30
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 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.
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.

The head of office or department needing the supplies shall certify as to their necessity for Sec. 122. Inventory Process. – The following is the general process to be followed in the control of
official use and shall specify the project or activity where the supplies or property are to be used. inventory:

(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 PROCESS PERSON / UNIT RESPONSIBLE
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. a. Prepare Purchase Request (PR) for Office of the General Services Officer (GSO) or the
supplies and materials needed Municipal Treasurer as the case maybe.
(e) Approval of Requisitions - Approval of requisitions by the head of office or department for the quarter based on the
concerned who has administrative control of the appropriation against which the proposed expenditure approved annual procurement
is chargeable is deemed sufficient, except in case of requisition for supplies to be carried in stock which program, at the beginning of the
shall be approved by the local chief concerned. year and of each subsequent
quarters.
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 b. Prepare ALOBS covering the Office of the GSO or the Municipal Treasurer or the
shall be issued. requisition under the PR. office authorized to prepare the same.

The date when the purchase/letter order was received by the supplier or contractor shall be indicated
clearly. c. Approve ALOBS and the PR. The Budget Officer and the Chief Accountant, for the
ALOBS; and the Local Chief Executive and the Local
The purchase order or contract shall be released only to, and signed for by, the awardee or his duly Treasurer, for the PR.
authorized representative.

Sec. 118. Acceptance and Inspection of Purchases. – Deliveries of items purchased by the local d. Prepare Purchase Order. GSO/Local Treasurer
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 e. Approve Purchase Order. Local Chief Executive
Acceptance and Inspection Report (AIR).

Sec. 119. Property Records to be Maintained. – The General Services Officer or the Local Treasurer, as f. Receive delivered items, prepare GSO/Local Treasurer
the case maybe, shall number each type of supplies and maintain Stock Cards per stock number. He shall Acceptance and Inspection
likewise maintain Property Cards per category of property, plant and equipment. Report (AIR) and signs
acceptance portion.
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 g. Inspect items, and signs Property Unit/LGU Inspector
appropriate ledger cards. inspection portion of the AIR.
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.
h. Record delivered items in the GSO/Local Treasurer
stock/property cards. Prepare
Upon receipt of the AIR and other supporting documents, the Chief Accountant shall record
Disbursement Voucher (DV), sign
the deliveries in the appropriate ledger cards. Upon completion of the disbursement process pertaining
box A and forward the same
thereto the Chief Accountant shall prepare the JEV taking up the in the books the procurement made.
with the delivery
Thereafter, the Chief Accountant shall reconcile the JEV with the appropriate ledger cards.
receipt/invoice/ appropriate
documents to Accounting Unit.

31
 PROCESS
i. Record delivered items in Supply
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.
PERSON / UNIT RESPONSIBLE 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
Accounting Unit 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 .

j. Prepare Stock Availability Inquiry Requisitioning Unit Sec. 126. Pro–Forma Accounting Entries. – The following are the pro-forma accounting entries for
(SAI) and forward to Accounting supplies or property:
Unit.
Acct.
Particulars Account Title Code Debit Credit
k. Verify records, advise Accounting Unit
requisitioning unit. 1. Supplies and Materials
1.1 Spare parts -

l. Prepare Requisition and Issue Requisitioning Unit Issuance of PR (enter Obligation in the
Slip (RIS) and forward to for spare parts RAAOMO- P100)
Property /Supply Unit.
10
Record delivery of Spare Parts Inventory 155 0
m. Release supplies/equipment and GSO/Local Treasurer items and charge Accounts Payable 401 100
record issuance in the stock invoice, if procurement
cards/property cards. is on credit

Payment of
Invoice Accounts Payable 401 100
n. Consolidate RIS for which GSO/Local Treasurer Withholding Taxes
supplies and materials were Payable 410 20
issued and prepare the Cash in Bank – LCCA 110 80
Summary of Supplies and
Materials Issued (SSMI) and If Procurement is Spare Parts Inventory 155 100
forward to Accounting Unit. on Cash Withholding Taxes
Payable 410 20
Cash in Bank – LCCA 110 80
o. Prepare JEV on the basis of Accounting Unit
SSMI, and record withdrawals in Spare Motor Vehicles
Supply Ledger Cards (SLC). parts worth P50 used Maintenance 878 50
for repairs of motor Spare Parts Inventory 155 50
vehicles.
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 1.2 Office Supplies
however be used. -
(Enter obligation in the
Issuance RAAOMO-P100)
of PR for office

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 Acct. Acct.
Particulars Account Title Code Debit Credit Particulars Account Title Code Debit Credit
supplies P100. Accounts Payable 401 20,000
Office Supplies Inventory 149 100 Record charge 20,000
Record Accounts Payable invoice and Accounts Payable 401
delivery of items and 401 100 Delivery of item. Withholding Taxes
charge invoice, if Payable 410 2,000
procurement is on Payment of Cash in Bank – LCCA 110 18,000
credit. Accounts Payable delivered
Withholding Taxes 401 100 Equipment
Payment of Payable
Charge Invoice Cash in Bank – LCCA 410 20
110 80

Office Supplies Inventory

Withholding Taxes 2.2 Issuance of PR (Enter Obligation in
If procurement is Payable 149 100 for Furniture and RAAOCO-P20,000)
on cash basis Cash in Bank – LCCA Fixture - P20,000
410 20
Office Supplies Expenses 110 80 Record Charge Furniture and Fixtures 224 20,000
Office Supplies Inventory Invoice and Accounts Payable 401 20,000
delivery of item
Withdrawal of 849 100
Office Supplies Payment of Accounts Payable 401 20,000
for office use. 149 100 delivered Withholding Taxes
furniture and Payable 410 2,000
fixture Cash in Bank – LCCA 110 18,000
1.3 Accountable
Forms -
(Enter obligation in the
Issuance RAAOMO – P100.00) 3. Non-Personal Services
of PR for accountable
forms Accountable Forms 3.1 Security Services -
Inventory
Withholding Taxes 148 100 Issuance of (Enter obligation in the
Procurement on Payable contract for RAAOMO-P120,000)
a cash basis Cash in Bank – LCCA 410 20 security services -
110 80 P120,000 Security and Janitorial
Accountable Forms Services
Expenses Receipt of Accounts Payable 858 10,000
Accountable Forms 848 100 monthly Billing- 401 10,000
Withdrawal Inventory P10,000 Accounts Payable
of office supplies 148 100 Withholding Taxes 401 10,000
Payable
Payment of Cash in Bank – LCCA 410 1,000
2. Equipment monthly billing 110 9,000
2.1 Office
Equipment -
3.2 Plumbing Services
(Enter obligation in
-
Issuance of PR RAAOCO-P20,000)
(Enter obligation in the
for Office
Signing of contract RAAOMO-P120,000)
Equipment
for Plumbing
-P20,000 Office Equipment 222 20,000

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 Acct.
Particulars Account Title Code Debit Credit
Services – General Services
P120,000 Accounts Payable 857 10,000
401 10,000
Receipt of monthly Accounts Payable
billing – P10,000 Withholding Taxes 401 10,000
Payable
Payment of Cash in Bank – LCCA 410 1,000
Monthly Billing 110 9,000

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