NEW GOVERNMENT ACCOUNTING SYSTEM FOR NON-PROFITS

NEW GOVERNMENT ACCOUNTING SYSTEM & NON-PROFIT ORGANIZATION #0005
New Government Accounting System
 Budgeted accounts of appropriations and allotments are entered in the registry maintained by DBM
(Department of Budget and Management). Allotments and obligations are entered in the registry
maintained by the agency.
 The notice of cash allocation (NCA) received by the agency from the DBM is journalized in the
regular agency books (RA books). The other set of books of an agency is the national government
books (NG books) for income items they are not authorized to use.
 The obligations incurred by the agency are not journalized, but posted to the appropriate registry, as
follows:
For Capital Outlay -RAOCO
Personal Services -RAOPS
Maintenance & Others -RAOMO
Financial Expenses -RAOFE
 Generally, withheld taxes by the agency are no longer remitted to BIR, but retained and credited to
Subsidiary Income from National Government (SING) under the Tax Remittance Advice (TRA)
System. The NCA released to the agency is reduced by the amount of estimated withholding taxes
pertinent to the allotment covered by the cash allocation.
 Asset/perpetual inventory method will be followed in the recording of expenditures if it applies to
more than one period or when payment is for materials for stock. The expense is taken up when the
items are consumed.
 Costs of assets being constructed are debited to construction in progress account (using
construction period theory). This CIP account is closed to the appropriate asset account upon
completion.
 Constructed Public Infrastructures are not shown among the fixed assets on the Statement of
Financial Position, rather they are deducted from government equity (as part of closing entries) and
transferred out to an appropriate registry.
 Depreciation on fixed assets are taken up on the month following the month of purchase or
completion of construction. A 10% scrap value on the asset is always assumed and the estimated
life is prescribed by COA.
 Income for which the agency is authorized to use for its operation is recorded in the regular agency
books. If the authority is with limitations, such as any excess is to be remitted to the National
Treasury the collections shall first be recorded in the regular agency books, the expenses
journalized, and the excess is to be remitted to the National Treasury and recorded in the agency’s
NG books.
 Two trial balances are prepared:
a) Pre-closing trial balance which is also the adjusted trial balance from which the statement of
income and expense is prepared.
b) Post-closing trial balance from which the statement of financial position is prepared.
 Adjusting entries at end of period are the same as those recorded in commercial accounting.
 Closing entries are similar to commercial accounting with some minor differences.
 Records of the BTR (Bureau of Treasury). Upon receipt of the copy of the NCA from the DBM, the
BTR shall enter it in the Registry of NCA and Replenishment (RENREP). It shall also enter the transfer
of cash from its bank account(s) to the appropriate MDS account.
 The obligation is recognized and will be entered in the appropriate RAO when obligation is incurred
as evidenced by the approved Allotment and Obligation Slips (ALOBS)
 Upon receipt of the NCA, the Accountant shall journalize it as “Cash in the Treasury for Modified
Disbursement System (MDS)” and “Subsidiary Income from National Government” which in effect
identifies the share, of the Agency in the income of the National Government.
 The accountant shall credit “Cash, National Treasury-MDS” each time a payment is made charged
against the NCA and debit the specific account being paid for, either asset or expense account.
 Note that there is a new expense classification, the financial expenses. They are categorized
separately from the MOOE since they are not operating expenses. It shall maintain separate registry
for leases from the Special Purpose Fund, the Registry for Special Purpose Funds Appropriation
(RESPFA).

 The DBM shall maintain the Registry of Allotment and NCA (RANCA) for the allotments and the NCA
issued to the agency. The RANCA shall be the control and monitoring record of the DBM. The DBM
shall furnish the Bureau of Treasury a copy of the NCA.
Not for Profit Organization
 FINANCIAL STATEMENTS REQUIRED FOR PRIVATE NOT FOR PROFIT ORGANIZATIONS

1. Statement of Financial Position
2. Statement of Activities
3. Statement of Cash Flows
4. Specific for Voluntary Health and Welfare Organizations – Statement of Functional Expenses
 Statement of Financial Position – shows assets and liabilities similar to commercial accounting. Net
assets are classified into:
1. Unrestricted – no donor imposed restrictions
2. Temporarity restricted – with donor imposed stipulations (expiration of time and fulfilment
of use restrictions)
3. Permanently restricted – with donor imposed restrictions that do not expire nor can be
removed by NPO activity.
 Statement of Activities – show revenues, expenses, gains and losses as well as reclassification among
the different types of net assets. The change in net assets for each type is required. Expenses are
required (reported) only in unrestricted net assets.
 Statement of Cash Flows – similar to the Cash Flows prepared in commercial accounting.
 Specific funds used by not for profit organizations:
1. Unrestricted fund – include all the resources that are available for use by authority of the
Board of Directors (even though designated for specific purposes) and are not restricted by
donors.
2. Restricted fund – accounts for assets available for current use but are not derived from the
operations of the NPOs. These assets are transferred to unrestricted funds at the time the
designated expenditure is made.
3. Endowment fund
a. Permanent – principal is to be maintained indefinitely in revenue providing investments
b. Term – principal may be expensed after passage of a period of time
c. Quasi-endowment – established by Board of Directors under its control
4. Agency fund – used to account for assets held by NPO as a custodian.
5. Others – like annuity funds, loss funds (for colleges) and plant funds.
 Revenues and gains come from own principal and auxiliary activities or from donors.
 Contributions – contributions of cash and other assets are recognized when received and credited to
contributions revenue (Restricted or Unrestricted). Contributed services and facilities are recognized
both as expense and contributions revenues, net of expenses.
 Pledges – unconditional pledges are recognized as receivables and contributions revenue (restricted
or unrestricted). Appropriate provisions for doubtful pledges are also to be set up.
 Expenses and losses – all expenses of the NPO are recognized in the unrestricted fund.
 Expenses can be classified into:
a. Program – activities that result in the distribution of goods and services to beneficiaries.
b. Supporting – all other activities other than program, fund raising and membership development.
GOVERNMENT ACCOUNTING
1. The Department of Health received an allotment from Department of Budget and Management for
capital outlay P2,300,000; Maintenance and other operating expenses, P740,000; and Personal
services P1,100,000. What will be the entry of the DOH in its regular agency books upon receipts of
allotment?

A. Cash – National Treasury, MDS 4,140,000

Subsidy Income from National Gov’t 4,140,000
B. National Clearing Account 4,140,000
Notice of Cash Allocation 4,140,000
C. Cash Collecting Officer 4,140,000
Cash in Bank – LCCA 4,140,000
D. Memo entry
2. The Department of Foreign Affairs issued purchase order for the acquisition of office equipment
costing P1,920,000. The equipment was received with the charge invoice and was subsequently paid
by check after withholding taxes of 10%. The DFA remitted the tax withheld to Bureau of Internal
Revenue thru an authorized government depository bank. What is the entry of DFA to record the
payment?
A. Accounts Payable 1,920,000
Cash – Disbursing Officer 1,728,000
Due to BIR 192,000
B. Office Equipment 1,920,000
Cash – Disbursing Officer 1,728,000
Due to BIR 192,000
C. Accounts Payable 1,920,000
Cash – Collecting Officer 1,728,000
Due to BIR 192,000
D. Accounts Payable 1,920,000
Due to BIR 192,000
Cash – National Treasury, MDS 1,728,000
3. On July 28, 2012, Department of Public Works and Highways transfers cash of P5,400,000 to
Department of Tourism for a People’s Park project. The project was completed by the implementing
agency/department on December 17, 2012. What is the entry of source agency/department to
record the completion of the project?
A. People’s Park Project 5,400,000
Cash – Check Disbursements-MDS 5,400,000
B. People’s Park Project 5,400,000
Cash – National Treasury-MDS 5,400,000
C. People’s Park Project 5,400,000
Due to National Gov’t-DOT 5,400,000
D. People’s Park Project 5,400,000
Due to National Gov’t-DOT 5,400,000
4. The Department of Education signed a construction contract with ABC Builders Corp. for the
construction of Building, P7,500,000. The agency paid 20% of the contract price. After 6 months, the
Department of Education received its first billing from ABC Builders Corp., 90% of the contract price.
On the 7th month, the company paid the first billing less P1,500,000 withholding tax. What will be
the entry of the department on its books upon receiving the first billing?
A. Building 6,750,000
Accounts Payable 6,750,000
B. Accounts Payable 6,750,000
Cash National Treasury MDS 5,250,000
Due to BIR 1,500,000
C. Construction in progress 6,750,000
Advances from contractors 1,500,000
D. Construction in progress 6,750,000
Advances to contractors 1,500,000
5. What is the entry to record the collection of P3,250,000 corporate income tax by the Bureau of
Internal Revenue in its national government books?

A. Cash National Treasury MDS 3,250,000

Income tax – Corporation 3,250,000
B. Cash – Collecting Officer 3,250,000
C. Cash in Bank – LCCA 3,250,000
D. Income tax – Corporation 3,250,000
Cash – Disbursing officer 3,250,000
6. The Department of Labor and Employment received an allotment from the Department of Budget
and Management amounting to P25,000,000 which is accompanied by a notice of cash allocation of
90% of the allotment. During the year, the agency incurred an obligation of 90% of the allocation but
only 40% of these obligation were paid by the agency. The entry to record the unused NCA is:
A. Subsidy Income from National Gov’t 12,150,000
Cash – NT, MDS 12,150,000
B. Subsidy Income from National Gov’t 14,400,000
Cash – NT, MDS 14,400,000
C. Cash – NT, MDS 12,150,000
Subsidy Income from NG 12,150,000
D. Cash – NT, MDS 14,400,000
Subsidy Income from NG 14,400,000
7. The Department of Justice provided travelling expenses to one of its officers, Mr. Ping for an amount
of P25,000. The travelling expenses was granted to Mr. Ping on February 1, 2013. Subsequently, Mr.
Ping liquidated its cash advance in the amount of P20,000. The excess were returned to DOJ by Mr.
Ping.
The entry to record the granting of cash advance to Mr. Ping was:
A. Due from Officers and employees 25,000
Cash – NT, MDS 25,000
B. Travelling expenses – Local 25,000
C. Cash Disbursing Officer 25,000
D. Cash Collecting Officer 25,000
8. The Department of Social Welfare and Development’s obligation of rent for four years amounted to
375,000. The entry to record this transaction would be:
A. Prepaid Rent 375,000
B. Memorandum entry in RAOMO
C. Rent Expense 375,000
D. Prepaid Rent 375,000
Cash Disbursing Officer 375,000
9. The Department of Trade and Industry was granted advances for payroll amounting to P1,500,000.
The entry would be:
A. Cash Disbursing Officer 1,500,000
Payroll 1,500,000
B. Cash – NT, MDS 1,500,000
Cash Disbursing Officer 1,500,000
C. Memorandum entry in RAOPS
D. Cash Disbursing Officer 1,500,000
Cash – NT, MDS 1,500,000
10. Agency ABC collected cash of P200,000 for services rendered. The collection was deposited to
PSBank. What is the entry to record the deposit?

A. Cash in Bank – LCCA 200,000

Cash – Disbursing Officer 200,000
B. Cash – NT, MDS 200,000
Cash – Collecting Officer 200,000
C. Cash in Bank – LCCA 200,000
Cash – Collecting Officer 200,000
D. Cash – NT, MDS 200,000

Cash – Disbursing Officer 200,000
11. The entry to record bank charges of P10,000
A. Bank Charges 10,000
Accounts Payable 10,000
B. Bank Charges 10,000
C. Bank Charges 10,000
Cash in Bank – LCCA 10,000
D. Bank Charges 10,000
Cash Disbursing Officer 10,000
NON-PROFIT ORGANIZATION
1. QPS Hospital had the following cash receipts and disbursements for the year ended December 31,
2013:
Collection from patients P2,500,000
Contribution for an establishment of term endowment 500,000
Tuition from nursing school 1,000,000
Interest received from investment in permanent endowments 175,000
Dividends received from investment in term endowments 200,000
Payment of supporting expenses 750,000
Payment of program expenses 1,075,000
The interest received from permanent endowment is restricted by the donor for acquisition of
medical equipment.
How much is the net cash provided by operating activities?
A. P1,675,000 B. P1,875,000 C. P2,050,000 D. P2,175,000

2. NPC University, a private not-for-profit university, had the following cash inflows during the year
ended June 30, 2013:
 P4,000,000 from students for tuition.
 P2,250,000 from a donor who stipulated that the money be invested indefinitely.
 P1,400,000 from a donor who stipulated that the money be spent in accordance with the wishes
of NPC’s governing board.
On NPC University’s statement of cash flows for the year ended June 30, 2013, what amount of
these cash flows should be reported as financing activities?
A. P1,400,000 B. P3,650,000 C. P5,400,000 D. P2,250,000

3. NGO College, a private not-for-profit college received P4,800,000 from Dr. Wu on May 25, 2013. Dr.
Wu stipulated that his contribution can be used to support faculty research and book writing
seminars during the fiscal year beginning on July 1, 2013. On July 15, 2013, administrators of NGO
College awarded seminar and training grants totalling P3,900,000 to several faculty members in
accordance with the wishes of the donor.
For the year ended June 30, 2013, NGO College should report the P4,800,000 contribution as
A. Temporarily restricted revenues on the statement of activities.
B. Unrestricted revenue on the statement of activities

C. Temporarily restricted deferred revenue on the statement of activities

D. An increase in fund balance on the statement of financial position
4. VPS College, a private not-for-profit college, received the following contributions during 2013:
 P3,125,000 from CHED for faculty academic advancements starting academic year 2014.
 P625,000 from a donor who stipulated that the contribution be invested in perpetuity and that
the earnings be used for renovation of the main library. As of December 31, 2013, earnings from
investment amounted to P31,250.
For the year ended December 31, 2013, what amount of these contributions should be reported as
temporarily restricted revenues on the statement of activities?
A. P31,250 B. P3,156,250 C. P3,125,000 D. P3,781,250
5. YKB hospital, a not-for-profit hospital affiliated with a religious group, reported the following
information for the year ended December 31, 2013:
Gross patient service rendered P12,000,000
Bad debts expense 250,000
Contractual adjustments with third party payors 1,000,000
Charity care 750,000
Courtesy allowances to hospital employees 450,000
A. P11,250,000 B. P10,550,000 C. P9,800,000 D. P9,550,000
6. During 2013, ZTS hospital purchased medicines for hospital use totalling P1,000,000. Included in the
P1,000,000 was an invoice of P100,000 that was cancelled in 2013 by the vendor because the
vendor wished to donate this medicine to ZTS. The donation should be recorded as
A. An increase of P100,000 to Patient Service Revenue
B. An increase of P100,000 to Other Non-Operating Revenue
C. An increase of P100,000 to Other Operating Revenue
D. A decrease of P100,000 to Other Non-Operating Revenue
7. Fund established at a public college by donors who have stipulated that the principal is
nonexpendable, but that the income generated may be expended by current operating funds, would
be accounted for in the
A. Annuity fund
B. Temporarily restricted fund
C. Pure-endowment fund
D. Current-fund restricted
8. Which of the following is most likely to be classified as other operating revenue?
A. Unrestricted gift
B. State research grant
C. Dividend income
D. Parking fee
9. The statement of financial position for JDS Library, a private non-profit organization, should report
separate amounts for the library’s net assets according to which of the following classifications?
A. Unrestricted and permanently restricted
B. Temporarily restricted and permanently restricted
C. Unrestricted and temporarily restricted
D. Unrestricted, temporarily restricted, and permanently restricted
10. On the statement of activities for a private not-for-profit performing arts center, expenses should be
deducted from
I. Unrestricted revenue
II. Temporarily restricted revenues
III. Permanently restricted revenues
A. I, II and III B. Both I and II C. I only D. II only
11. OBT Museum, a private non-profit organization, has both regular and term endowments. On the
museum’s statement of financial position, how should the net assets of each type of endowment be
reported?

Term Endowments Regular Endowments

A. Temporarily restricted Permanently restricted
B. Permanently restricted Permanently restricted
C. Unrestricted Temporarily restricted
D. Temporarily restricted Temporarily restricted
12. Revenue from room charges for telephone calls and television, proceeds from cafeterias, gift shops
and snack bars of not for profit hospitals are recorded as:
A. Patent service revenue – Unrestricted
B. Resident Service Revenue – Unrestricted
C. Other operating revenue – Unrestricted
D. Non – operating revenue – Unrestricted
13. During the year ended December 31, 2013 a not for profit performing arts entity received the
following donor-restricted contribution and investment income:
 Cash contribution of P1,350,000 to be permanently invested
 Cash dividends and interest of P75,000 to be used for the acquisition of theatre equipment.
As a result of these cash receipts, the statement of cash flows for the year ended December 31,
2013, would report an increase of:
A. P1,425,000 from operating activities

B. P1,425,000 from financing activities
C. P75,000 from operating activities and an increase of P1,350,000 from financing activities
D. P1,350,000 from operating activities and an increase of P75,000 from financing activities
*** END ***

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NEW GOVERNMENT ACCOUNTING SYSTEM & NON-PROFIT ORGANIZATION #0005