MISCELLANEOUS EXPENSES

These are the transactions that are unique and not recurring in the ordinary course of government
operations. These seldom take place or should not happen at all.

1. Issuances of office supplies, equipment and materials. To be recorded it shall be supported by a MRSMI
prepared by the property custodian regularly. This summarizes all requisitioned and issued inventory items to
various requesitioner. For issued equipment to an employee, a Memorandum Receipt (MR) must be issued to
evidence that the recipient must keep the property with utmost care since it will be his accountability and
responsibility. The MR is renewable every 3 years to update the current ownership if ever there are transfers made.

Office Supplies expense 50203010 xxxxxx

Office Supplies Inventory 10404010 xxxxxx

2. Depreciation for Property, Plant and Equipment. The cost of property, plant and equipment are allocated to
the periods benefited through the provision of accumulated depreciation. Depreciation is the systematic and
gradual allocation of the depreciable amount of assets over its useful life.

To compute and record depreciation,

a) Shall use straight-line method.
b) Shall start on the second month after purchase of the property.
c) Apply 5% residual value of the purchase cost,
d) Serviceable assets that are no longer used shall not be charged any depreciation.

Annual Depreciation = Assets Cost less Estimated

Residual/Salvage Value
--------------------------
Estimated Useful Life

Asset Cost - Purchase or Acquired Value of the Asset

Estimated Salvage Value - 5% of the asset cost
Estimated Useful Life - Estimated number of years the asset
shall be used as determined by the Commission on Audit
Example.
1. DSWD purchased an equipment costing P25,000 last 5/12/2015. The usefulness of the equipment
was determined for 6 years. Compute the depreciation as of 9/30/2018. No depreciation was
recognized and recorded in prior years from the date of purchase.

Depreciation = P25,000 – (5% of P25,000) = P4,750/yr

5 YRS
= P4,750/12 mos = P395.83/mo.

Depreciation as of 9/30/2018:
2015 = 7 mos X 395.83 = P 2,770.81
2016-2017 = 4,750 X 2 yrs = 9,500.00
2018 = 395.83 X 9 mos = 3,562.47 P

Journal Entry:
Depreciation – Machinery and Equipment 50501050 3,562.47
Accumulated Surplus 30101010 12,270.81
Accumulated Depreciation – Office Equipt 10605021 15,833.28

2. On Dec. 31, 2018, the agency transfer the equipment to other region.
Required: 1) JE recording the transferred equipment and JE to be made by the
Receiving agency.

Transferor Book:
Accumulated Surplus 30101010 12,270.81
Accumulated Depreciaiton - OE 10605021 12,729.19
Office Equipment 10605020 25,000.00
( to record the transfer)
 Transferee Book
Office Equipment 10605020 12,270.41
Accumulated Surplus 30101010 12,270.41

3. Bad Debts - shall be recorded for uncollectibles from trade/business receivables. the
determination of bad debts expense is derived from percentage and aging of accounts receivables as
follows:
Age of accounts Percentage
1 - 60 days 1%
61- 180 2%
181 – 1 yr 3%
More than 1 year 5%
Example:
A national government agency has a total accounts receivable of P50,000 which remained
outstanding for 3 yrs. And was approved by COA for write off.
1. Record the corresponding allowance for bad debts.
Impairment loss – loans and receivables 50503020 2,500
Allowance for Impairment – Accts Receivable 10301011 2,500

2. Record the write off:

Allowance for Impairment – Accts Receivable 10301011 2,500
Accounts Receivable 10301010 2,500

4. Sale of assets no longer used in operation:

Ex. Typewriter - Cost P 4,500 P 4,500
Accum. Dep’n 4,050 4,050
Book value 450 450
Selling price 400 400
Loss ( 50) Gain 50
==== ====
a. Sale at a loss
Cash – collecting officer 10101010 400
Accum dep’n – OE 10605021 4,050
Other Losses 50504990 50
Office Equipment 10605020 4,500

To remit:
Cash-Treasury/Agency Deposit, Reg 10104010 400
Cash – collecting Officer 10101010 400

Accumulated Surplus 30101010 400

Cash – Treasury/Agency Dep, Reg 10104010 400

b. Gain on sale
Cash – collecting officer 10101010 500
Accum dep’n – OE 10605021 4,050
Office Equipment 10605020 4,500
Other Gains 40501990 50

To remit:
Cash-Treasury/Agency Deposit, Reg 10104010 500
Cash – collecting Officer 10101010 500

Accumulated Surplus 30101010 500

Cash – Treasury/Agency Dep, Reg 10104010 500

5. Accounting for overpayments. Sometimes overpayments or even double payment of expenditures do happen
in agencies. These could be avoided with proper controls but some could not be avoided because of built-in
procedures. One example is the payment of payroll. Payrolls are prepared in advance and some agencies pay
their employees through the banking system (ATM). All these were done before reports of attendance were

submitted, making it impossible to know the exact amount to be paid in case there were absences without pay
 during the pay periods. In case of overpayments, refunds shall be demanded of the employees concern.

Refund of overpayment taken up as receivable:

Due from Officers and employees 10305020 xxxxx
Salaries and wages-regular 50101010 xxxxx

Cash – collecting officer 10101010 xxxxx

Due from Officers and employees 10305020 xxxxx

Cash – Treasury/Agency dep., reg 10401010 xxxxx

Cash-collecting officer 10101010 xxxxx

Accumulated surplus 30101010 xxxxx

Cash – Treas/Agency Dep, Reg 10401010 xxxxx

Accounting for Cash Overage. In case the cash examination of the auditor disclosed an overage, the amount
shall be forfeited in favor of the government and an official receipt shall be issued by the cashier. The cash
overage shall be taken up as Miscellaneous Income.

To take up cash overage discovered during cash examination, P500.

Cash – collecting officer 10101010 500

Other Business Income 40202990 500

To remit
Cash-Treasury/Agency Dep, Reg 10401010 500
Cash – collecting officer 10101010 500
:
6. Accounting for stale checks. Checks may be cancelled when it become stale. The depository bank considers
a check stale, if it has been outstanding for over six months from date of issue or as prescribed.

A stale check shall be marked cancelled on its face and reported as follows:
1. Unclaimed stale checks which are still with Cashier shall be cancelled and reported
in the List of Unreleased Checks as cancelled. The List of Unreleased Checks is
attached to the RCI.
2. For stale checks which are in the hands of the payees or holders in due course
and requested for replacements, new checks maybe issued upon submission of
stale checks to the accounting unit. A certified copy of the previously paid DVs shall
be attached to the request for replacement. A JEV shall be prepared to take up the
cancellation. The replacement check shall be reported in the RCI.

Stale MDS checks issued in the current year for replacement, P15,000.
Check cancellation:
Cash, MDS, Reg 10104040 15,000
Accts. Payable 20101010 15,000

Adjust obligation. (Check what type of expenditure being paid and the RAOD)

Check Replacement: (If replaced, no adjustment in the obligation)

Accts. Payable 20101010 15,000
Cash- MDS, Reg 10104040 15,000

Stale MDS checks issued in prior years for replacement:

Check cancellation:
Accumulated surplus 30101010 15,000
Accts. Payable 20101010 15,000

Check Replacement:
Accts. Payable 20101010 15,000
Cash-MDS, Reg. 10104040 15,000

Stale commercial checks issued in the current year and prior years for replacemen, P5,000:t:
Check cancellation:
CIB – LCCA 10102020 5,000
Accts. Payable 20101010 5,000

Check Replacement:
 Accts. Payable 20101010 5,000
CIB – LCCA 10102020 5,000

7. Accounting for loss of cash and property. This may be due to malversation, theft, robbery, fortuitous event or
other causes. Cash shortage discovered during cash examination conducted by auditors is reported through the
Report of Cash Examination. The Auditor issues and 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 JEV to record the shortage as a receivable from the accountable officer concerned.

In case of loss of property due to other causes like theft, force majeure ,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 or request for
relief from accountability.

8. Grant of Relief from Accountability. When a request for relief from accountability for shortage 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 receivable
account. In case the request for relief is denied, immediate payment of the shortage shall be demanded from the
AO. Restitution shall be acknowledged by the issuance of an official receipt.

In case the request for relief from accountability for loss of property caused by fire, theft, etc, 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 appropriate asset account. If request for relief is
denied, the loss shall be taken as receivable from the accountable officer and shall be credited to the appropriate
asset account.

9. Accounting for Disallowance. Disallowances shall be taken up in the books of accounts only when they become
final and executory. The accountant shall prepare the JEV to take up the Receivable-Disallowance/Charges and
credit the appropriate expense account for the current year or Prior Year’s Adjustment account if pertaining to
expenses of previous years.

Cash settlement for disallowances shall be acknowledged through the issuance of an official receipt and reported
by the cashier in the RCD.

BANK RECONCILIATION STATEMENT - the preparation of the bank reconciliation statements for “Cash
in Bank” and “Cash-Modified Disbursement System (MDS)” accounts including the
proposed adjusting entries.

Definition of Terms:
Bank Charges –charges imposed by the bank for various services rendered excluding interest charges.
This also includes cost of checkbooks, penalties and surcharges on overdrafts.
Bank Reconciliation – settlement of differences contained in the bank statement and the cash account
in the agency’s/entity’s books of accounts.
Bank Statement – reflects the transactions in the agency’s/entity’s (depositor’s) bank account for a
period such as deposits made to the account as well as checks/ADAs drawn on the
account, bank charges, returned items, etc.
Canceled Check/ADA – checks/ADAs issued and chargeable to the agency bank account but was later
voided due to expiration of validity, and other valid reasons.
Credit Memorandum – document issued by the bank informing an increase in the depositor’s
(Agency’s/Entity’s) account, such as previous bank debit errors and collection directly
deposited to the agency’s/entity’s bank account.
Debit Memorandum – document issued by the bank informing a decrease in the account, such as
previous bank credit errors or service charges and fees.
Deposits-in-Transit – are amounts of agency/entity deposits in the bank but which are yet to be recorded by the
bank until the next period. These usually pertain to late deposits in the last day of business for a period.
Lapsed NCAs – NCAs which are no longer valid or its validity has expired but remain unadjusted by the bank
or the agency/entity.
Notice of Cash Allocation – authority issued by the DBM to central, regional and provincial offices and
operating units to cover the cash requirements of the agency/entity.
Outstanding Checks – checks the agency/entity has issued and recognized but which have not been presented to
the bank for payment.

Returned Check – a check returned by the bank due to errors or deficiencies in the maker’s or agency’s/entity’s
 account.
Unrecorded Deposits – are collections of the agency/entity which are directly deposited by the debtor/client to
the bank account of the agency/entity but remain unrecorded by the agency/entity as at the period
under reconciliation.

Objectives. The Bank Reconciliation Statement (BRS) shall be prepared in order to:
a. check correctness of both the bank’s and agency’s/entity’s records,
b. serve as a deterrent to fraud, and
c. enable the agency/entity or bank to take up charges or credits recognized by the bank or
agency/entity but not yet known to the agency/entity or bank.

This shall be used in the reconciliation of bank and treasury accounts maintained with
Government Servicing Bank (GSB).

Method of Bank Reconciliation. The monthly BRS shall be prepared by the Chief Accountant
/designated staff for each of the bank accounts maintained by the agency/entity using the
Adjusted Balance Method. Under this method, the book balance and the bank balance are
brought to an adjusted cash balance that must appear on the Statement of Financial Position.

Illustrative Accounting Entries for Adjustments in the Bank Reconciliation Statement for “Cash-
Modified Disbursement System (MDS)” accounts.
The illustrative accounting entries for the adjustments are as follows:

a. Unrecognized/Understatement of NCA for regular and special account with allotment release order
Account Title Account Code Debit Credit
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
or Cash- MDS, Trust 10104060 xxx
Subsidy from National Government 40301010 xxx

b..Unrecognized/Understatement of NCA for special account without allotment release order and
trust account
Cash- MDS, Special Account 10104040 xxx
or Cash- MDS, Trust 10104050 xxx
Cash-Treasury/Agency Deposit,
or Special Account 10104020 xxx
Cash-Treasury/Agency Deposit, Trust 10104030 xxx

c. Cancelled MDS checks/ADAs (without intention to replace)

Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
or Cash- MDS, Trust 10104060 xxx
Expenses or other appropriate account xxxxxxxx xxx

d. Understatement of “Cash in Bank” account due to erroneous recording of amount of checks issued
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
or Cash- MDS, Trust 10104060 xxx
Accounts Payable or Other Liabilities xxxxxxxx xxx

e. Lapsed NCA or unused NCA at yearend (For regular and special account with allotment release
Order)
Subsidy from National Government 40301010 xxx
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
For special account without allotment release order and trust account
Cash-Treasury/Agency Deposit, Special Account 10104020 xxx
or Cash-Treasury/Agency Deposit, Trust 10104030 xxx
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx

f. Overstatement of “Cash in Bank” account due to erroneous recording of the amount of checks issued
Expenses or Accounts Payable or Other Liabilities xxxxxxxx xxx
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
or Cash- MDS, Trust 10104060 xxx

For regular and special account with allotment release order

Subsidy from National Government 40301010 xxx
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx

For special account without allotment release order and trust account
Cash-Treasury/Agency Deposit, Special Account 10104020 xxx
Or Cash-Treasury/Agency Deposit, Trust 10104030 xxx
Cash- MDS, Regular 10104040 xxx
Or Cash- MDS, Special Account 10104050 xxx

h. Bank Charges
Bank Charges or any appropriate Account xxxxxxxx xxx
Cash- MDS, Regular 10104040 xxx
or Cash- MDS, Special Account 10104050 xxx
or Cash- MDS, Trust 10104060 xxx