ACCOUNTING FOR DISBURSEMENT AND RELATED TRANSACTIONS

Most of the transactions in the government involves the receipt and disbursement of
cash. The cash transactions affect every classification within the financial statements – assets,
liabilities, residual equity, income and expenses.by check. Thus it is essential that cash
transactions are recorded correctly for reliability in the financial statement.

Disbursements constitute all cash paid out during a given period either in currency
(cash) or by check. It may also mean the settlement of government payables/obligation by cash
or by check. It shall be covered by Disbursement Voucher (DV), Petty Cash Voucher, or
Payroll.

How to Distinguish Disbursement from Expenditures?

Expenditures are the obligations incurred by the Agency. It includes both the amount
actually paid and those incurred and recorded as liabilities to be paid in the future. While
Disbursements are payments made for such government obligations by cash or check.

Typical transactions for disbursements include the following major classes of payments:
A. Current Operating Expenses
1. Personal Services
- Salaries and wages
- Other Compensation
- Personnel benefits
- Other personnel benefits
2. Maintenance and Other Operating Expenses
- travelling expenses
- training and scholarship program
- supplies and material expenses
- repairs, etc….
3. Financial Expenses
- bank charges
- commitment fees
- documentary stamps
- interest and other financial charges
B. Capital Expenditures – these expenditures need allotment for CO. As opposed to the
current
operating expenses, this involves investments and procurement of
assets that
is expected to be used for a longer period of time.
C. Inter-agency fund transfers - this covers the transfer of funds to other agencies for the
implementation
of specific projects. This is taken up in the books under “Due to –“ by
the
receiving agency and “Due from – “ by the releasing agency.

Basic Requirements for Disbursement:

1. Existence of a lawful and sufficient allotment certified as available by the budget
officer.
2. Existence of a valid obligation certified by the Chief Accountant/Head of Acctg. Unit;
3. Legality of transactions and conformity with laws, rules and regulation.
 4. Approval of the expense by the Chief of Officer or by his duly authorize representative;
and
5. Submission of proper evidence to establish the claim.

Sec. 6 of GAM for NGAS. Basic Government Accounting and Budget Reporting
Principles.
Each entity shall recognize and present its financial transactions and operations
conformably to the following:
a. Generally accepted government accounting principles in accordance with the
PPSAS
and pertinent laws, rules and regulations;
b. accrual basis of accounting in accordance with the PPSAS;
c. budget basis for presentation of budget information in the financial statements
(FSs) in
accordance with PPSAS 24;
d. RCA prescribed by COA;
e. double entry bookkeeping;
f. financial statements based on accounting and budgetary records; and
g. fund cluster accounting.

Disbursement System – involves the preparation and processing of disbursement voucher;

preparation
and issuance of check, payment of cash, granting, utilization, and
liquidation or
replenishment of cash advances.

All disbursement of the government requires the certification as:

1) to validity, propriety, legality of the claim by the head of office who has control of the
funds; and
2) certification that funds are available for the purpose.

Modes of disbursement in the government:

1. by check – thru MDS checks or commercial checks
2. by cash – cash advances granted to disbursing officer and petty cash fund.
3. Advices to Debit account

Disbursement by Checks – Checks shall be drawn only on duly approved DV or PCV. These
shall be reported and recorded in the books of accounts only when actually released to the
respective payees.

Two types of checks are being issued by government agencies:

1. Modified Disbursement System (MDS) checks – issued by government agencies
chargeable against the account of the Treasurer of the Phil which are maintained with
different MDS Government Servicing Banks. These are covered by Notice of Cash
 Allocation, an authorization issued by the DBM to all government agencies to withdraw
cash from the National Treasury through the issuance of MDS checks or other
authorized mode of disbursements.

2. Commercial checks – issued by government agencies chargeable against the agency

checking account with GSBs. These are covered by income/receipts authorized for
deposits with AGDBs and funding checks received by RO/OUs from CO/ROs
respectively.

All checks issuedincluding cancelled checks shall be recorded chronologically in the Check
Disbursement Record (CKDR) and indicate the date checks were actually released.

All checks actually released to the claimants including the cancelled ones shall be
included in the Report of Checks Issued, which shall be prepared daily by the Cashier. All
unreleased and cancelled as of the report date shall be enumerated in the “List of Unreleased
Checks” to be attached to the RCI.

The agency received Notice of Cash Allocation for payment of its obligations. It maybe
either for payment of prior year’s or current year obligations, the same are recorded as:

Cash –Modified Disbursement System, Regular 10104040 XXX

Subsidy from National Government 40301010 XXX

This entry will show that the NCA received, is the share of the Agency in the income of the
National Government, and it is a proof that there was an allocation of cash for the Agency by the
National Treasury.

The NCA received by the agency is net of the amount of taxes to be withheld by the
agency.

Disbursement by Cash - shall be made from cash advance drawn and maintained in
accordance
with COA rules and regulations. Cash payments are to be based on duly approved
payrolls/disbursement vouchers. It maybe either for:
1. personal services or salaries and wages
2. travels
3. miscellaneous expenses, which shall be recorded in separate cashbooks.

Recording the different types of C ash Disbursements:

A. Personal Services
The cash advance shall only be equal to the net amount due of the officials and
employees. The
said cash advance shall be fully liquidated within five (5) days after the pay period. Any
unclaimed
wages shall be remitted and receipted to close the cash advance account. Or the payment of
salaries shall be thru ATM.
 Under the new accounting system payment of salaries and wages and other remuneration to
the
personnel of the AGENCY may be made through the following:
1. Payroll Fund in the hands of a Disbursing Officer(DO) as cash advance. Payments
are made
by the DO in cash to the employees.
2. Payroll Fund deposited in an authorized depository bank, withdrawal by the
employees is
through the automated teller machine (ATM).
3. Direct payment to employees by individual check.

Example,Assume the payroll fund is established:

Salaries and wages P 55,000

Personnel Economic Relief Allowance (PERA) 16,000
Gross P 71,000
Less: Withholding tax P 4,000
GSIS contribution 3,500
PAG-IBIG contribution 3,000
PHILHEALTH contribution1,750 12,500
Net Payroll P 58,500
=======
a) Enters the obligation – RAOD-PS

Obligate the P71,000 salaries and wages for the month and post in the RAOD-PS.

b) 1. Cash Advance to be granted to the DO and liquidation after payment of salaries: and
remittance of mandatory deductions to the respective agencies:

Advances to Special Disbursing Officer 19901030 58,500

Cash – MDS, Regular 10104040 58,500

Salaries and wages – Regular 50101010 55,000

PERA 50102020 16,000
Due to BIR 20201010 4,000
Due to GSIS 20201020 3,500
Due to PAG-IBIG 20201030 3,000
Due to PhilHealth 20201040 1,750
Advances to Special DO 199010 30 58,500

Due to GSIS 20201020 3,500

Due to Pag-ibig 20201030 3,000
Due to PhilHealth 20201040 1,750
Cash – MDS, Regular 10104040 8,250
Or
2. Thru ATM

Recognize the expenses and liabilities

 Salaries and wages – Regular 50101010 55,000
PERA 50102020 16,000
Due to BIR 20201010 4,000
Due to GSIS 20201020 3,500
Due to PAG-IBIG 20201030 3,000
Due to PhilHealth 20201040 1,750
Due to Officers and Employees 20101020 58,500

To record check issuance for ATM employee’s accounts

Due to Officers and employees 20101020 58,500
Cash – MDS, Regular 10104040 58,500

To record remittance of mandatory contributions:

Due to GSIS 20201020 3,500
Due to Pag-ibig 20201030 3,000
Due to PhilHealth 20201040 1,750
Cash – MDS, Regular 10104040 8,250

c) Obligation and recording of the government share of mandatory contributions. The agency
paid P 1,000 for ECC

Obligate the government counterpart of the mandatory deductions, 9,450, and ECC of P1,000.

To record payment and remittance of the corresponding counterparts

ECC Insurance premiums 50103040 1,000
Retirement and Life Insurance Premium 50103010 4,700
Pag-ibig contribution 50103020 3,000
PhilHealth contribution 50103030 1,750
Cash – MDS, Regular 10104040 10,450

d) To record remittance to the BIR supported with the approved TRA from DBM.

Due to BIR 20201010 4,000

Cash – Tax Remittance Advise 10104070 4,000

B. Petty Cash Fund(PCF) - another mode of cash disbursement and the fund shall be
sufficient for emergency and petty expenses of the agency. As such, all replenishment shall be
directly charged to the appropriate expense accounts and at all times, the PCF shall be equal to
the total cash on hand and the un-replenished expenses.

The PCF shall not be used to purchase regular inventory items for stock nor for the
liquidation of outstanding cash advances. It shall be used only for disbursements which cannot
be conveniently paid by check.

Disbursement through Petty Cash Fund - shall be through the PC Voucher which shall be
approved
by authorized officials and signed by the payee to acknowledge receipt of the amount from
the PC Custodian. A DV shall be prepared to replenish the fund.

At the end of the year, the PCC shall submit to the Accounting unit all outstanding PCVs.
In case the fund could not be replenished for lack of funds, a JEV shall be prepared to
recognize all un-replenished expenses in the books and the PCF account shall be credited. At
the start of the year, as soon as cash becomes available, the fund shall be replenished by a
debit to account “Petty Cash Fund” and credit to the appropriate “Cash-MDS, Regular/Cash in
Bank, LCCA” account to restore the fund to its original amount.

In case the PC Custodian resigns or ceases as the custodian of the fund, full
accounting/liquidation shall be made. Any excess cash shall be refunded and all the PCVs
together with the original supporting documents shall be surrendered to the Accounting Unit
which shall prepare a JEV to take up the expenses in the books and credit account “Petty Cash
Fund”. In no case shall the remaining cash of the former custodian be transferred to the
incoming PCC.

The Petty Cash Fund record shall be used to record all the PCs received by the PC
Custodian as well as opening of PCF at the beginning of the year or when a new PC Custodian
is designated to replace the previous one. All PCV shall be supported with valid documents to
prove the propriety of disbursements, such as ORs, invoices, etc.

Example of Petty Cash Fund transaction:

P20,000 was maintained by the agency under the imprest system. As of Dec. 31, 2017, the
used petty cash supported with receipts amounting to P14,000 remained unreplenished. The
receipted use of PC consisted of the following:

Office supplies expense P 6,000

Repairs and maintenance –Transp. Equiptment 4,500
Repairs and maintenance – Machinery Equipt 3,000
Transp and delivery exp 500

The PC fund shall be closed at year end.

Record the Transaction:

a. Obligation – RAOD-MO

b. Record the granting of cash advances

Petty Cash 10101020 20,000
Cash – MDS, Regular 10104040 20,000

c. Record unreplenished expenses, return and close the cash on hand.

 Office supplies expense 50203010 6,000
Rep and maintenance – Transp. Equipt 50213060 4,500
Rep and maintenance – Mach Equipt 50213050 3,000
Transportation and delivery expenses 50299040 500
Petty Cash 10101020 14,000

d. Return the cash on hand, P6,000.

Cash- collecting officer 10101010 6,000
Petty Cash 10101020 6,000

. Cash – Treasury/Agency Deposit, Regular 10104010 6,000

Cash – collecting officer 10101010 6,000
Or
Note: If a replenishment is requested and an MDS check will be issued, there is a need to
obligate the
total amount replenished. If only partial amount of PC fund is to be replenished and
closed
to PC account at the end of the year, the granting of the PC equivalent amount at the
beginning
of the year shall be obligated and issued with a check to restore the total amount of the
original
PCFund. No need to return the cash on hand at year end.
The journal entry at the beginning of the following year:

a) obligate the amount of P14,000- RAOD-MO

b) Petty Cash 10101020 14,000

Cash – MDS, Regular 10104040 14,000

After the above journal entry, the petty cash fund is restored to P20,000.

C. Cash advances granted for travel shall be accounted for as Due from Officers and
Employees and these are subject to liquidation upon completion. 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 submitted to the accounting unit as basis
for JEV preparation. This shall close the receivable account. If there are changes in the
itinerary of travel, a revised itinerary of travel shall be prepared and will support the liquidation of
cash advance for travel.

The excess cash advance shall be refunded and an OR shall be issued to acknowledge
receipt thereof and shall be noted in the Liquidation Report. In the case the amount of cash
advance is less than the travel expenses incurred, a Liquidation Report shall be submitted to
liquidate the cash advance previously granted and a DV shall be prepared to claim
reimbursement of the deficiency in amount. If there are changes in the total amount of travelling
expenses granted, adjustment shall be made of the obligation originally incurred.

The Report of Disbursement shall serve as the liquidation report of the cash advance
granted to the Disbursing Officer.
Example of travelling expense transactions:

The Accountant of DOST, Region 7, was ordered officially to attend a training at the COA
Training Center in Manila. The travel was for 3 days but it was cut short due to an
emergency
meeting at the regional office. An itinerary of travel was prepared to support the granting of
cash
advance showing the following information:

Transportation expenses (1st day and last day) and other incidental expenses
During the duration of the travel period P 1,700
Per diem (1,200 per day) 1st day left 12:10pm, arrival from Manila, 9:30am,
stayed 3 full days for the training 4,500
Plane fare (rdtrip) 6,000
Training registration fee 7,500
An amended itinerary was made and showed a reduction of the per diem (1 day) 1.200

Journalize the transaction of travelling expenses:

1. Obligate and post P19,700 in the obligation column of the RAOD-MO.

2. Grant cash advance for the travel.

Due from Officers and Employees 10305020 19,700
Cash – MDS, Regular 10104040 19,700

3. Recognize the actual travelling and training expenses and record liquidation of the
cash
advance.
Travelling expenses – local 50201010 11,000
Training expenses 50202010 7,500
Due from Officers and Employees 10305020 18,500

4. Record the refunded amount of P1,200 representing reduction of per diem since the
travel
was cut short.
Cash – collecting officer 10101010 1,200
Due from Officers and employees 10305020 1,200

5. Remit the refunded amount.

Cash – treasury/agency deposit, regular 10104010 1,200
Cash – collecting officer 10101010 1,200
6. Close the treasury acct to accumulated surplus/deficit account
Accumulated surplus/deficit 30101010 1,200
Cash – treasury/agency deposit-regular 10104010 1,200

Adjust the original obligation by posting a negative entry of P1,200 in the obligation
column of RAOD-MO.

For additional claim of travelling expenses maybe due to an extended official

stay, request for an obligation of the equivalent amount of the extended stay. It
has to be processed in the budget and accounting offices for
payment/reimbursement. It has to be an official travel duly supported with proper
documentation.

If the travel requested is not duly supported, the auditor will disallow the claim
upon post-audit of said transaction.

D. Advice to Debit Account (ADA) – This is a system by which no check is issued to the
payee in payment of government obligations, but instead, the current account number of the
payee in the bank where the government maintains a deposit, shall be obtained by the
accounting unit. If payment is to be made, the ADA shall be issued by the Accounting Unit of
the agency to the bank where it maintains an account. All payments shall be made to the credit
of the payee’s account and a debit to the account maintained by the government agency in the
same bank. A JEV shall be prepared to record the transaction in the GJ.

Disbursement by check (MDS check or commercial check):

Under NGAS, the Asset Method will be used in recording disbursements when expenditures
apply to more than the accounting period.

Example, Assume the following types of expenditures:

Rent: The government signed a contract for the rental of office space with 3 months advance
payment
of P1,200 starting November.

The Agency enters the obligation of P1,200 in the RAOMO, and records the payment as:

Prepaid Rent 19902020 1,200

Accounts Payable 20101010 1,200
 Accounts Payable 20101010 1,200
Cash – MDS, Regular 10104010 1,200

Rent/lease expense 50299050 200

Prepaid rent 19902020 200

Payment of utilities

Ex. The agency received their bills from the following:

PLDT P3,000
Water 2,500
VECO(electricity) 7,500

1. Obligate the bills totaling P 13,100 and post in the obligation column of RAOD-MO

2. Record the bills :

Telephone expenses 50205020 3,000
Water expenses 50204010 2,500
Electricity expenses 50204020 7,500
Due to BIR 20201010 350
Accounts Payable 20101010 12,650

3. Record payment
Accounts Payable 20101010 12,050
Cash – MDS, regular 10104040 12,050

4. Remittance of withholding taxes

Due to BIR 20201010 350
Cash – TRA 10104070 350

Property and Inventory accounting System - consists of monitoring, controlling and

recording
system for acquisition and disposal of property and inventory.

The system starts with the receipt of the purchased inventory items and equipment. The
requesting office determines their need of inventory items and equipment. Check if the items
are not available in stock and shall prepare and cause the approval of the Purchase Request
(PR). Based on the approved PR, follow the procedures in adopting a particular mode of
procurement. The agency
shall issue a duly approved Purchase Order. Procedures relative to the obligation of the
purchase order and payment of the deliveries shall follow the procedures of obligation
accounting system and disbursement system.

The sub-system are as follows:

1. Receipt, Inspection, Acceptance and Recording Deliveries of Inventory Items and
Equipment,
2. Requisition and Issuance of Inventory Items
3. Requisition and Issuance of Equipment
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
account. Under the perpetual inventory method, an inventory control account is maintained in
the General Ledger on a current basis.

Regular purchases shall be recorded under the Inventory account and issuance thereof
shall be recorded based on the Report of Supplies and Materials Issued.

The accounting Unit shall maintain perpetual inventory records, such as the Supplies Ledger
Cards for each inventory stock, Property, Plant and Equipment Ledger Cards for each category
of plant, property and equipment including work and other animals, livestock, etc. The
subsidiary ledger cards shall contain the details of the General Ledger accounts.

For check and balance, the Property and Supply Officer/Unit shall maintain Property
Cards (PC) for property, plant and equipment, and Stock Cards (SC) for inventories. The
balance in quantity per PC and SC should always reconcile with the ledger cards of the
Accounting Unit.

The Moving Average Method shall be used for costing inventories. This is the method of
calculating cost of inventory on the basis of weighted average on the date of issue. The
Accounting Unit shall be responsible in computing the cost of inventory on a regular basis.

Supplies and Materials: Assume the following transactions about office supplies:
1. Issued Purchase Order (PO) for office supplies,
a. Obligation
b. Payment (thru Procurement Service). Compare with purchases made to outside
supplier.
c. Record the asset received/delivered
d. Record the used supplies.
e. Remittance of withholding tax thru TRA
Like the prepaid expenses, the expense shall be taken up upon utilization/consumption.

Example:
The agency processed a bulk purchase of requisitioned office supplies amounting to
P250,000.
The purchase was made to the Procurement Service of DBM, hence, no bidding required. The
office also purchased 1 unit of copier machine amounting to P175,000. It was awarded to ABC
Corp, an outside supplier and the lowest bidder. There was no available stock in the
Procurement Service Office. The agency has enough balance in their allotment for MOOE and
CO.

A week after the delivery, P120,000 of office supplies were used in operation. The supply officer
prepared the report of supplies and materials issued and submitted to the accounting
department to record the expense.

Purchase (Procurement Service)

1. Obligate P250,000 and post in the obligation column of RAOD-MO.

2. Record advance payment of the purchase of office supplies to the Procurement Service
Office.
Due from NGAs 10303010 250,000
Cash – MDS, Regular 10104040 250,000

3. Record acceptance of the delivery of office supplies

Office supplies inventory 10404010 250,000
Due from NGAs 10303010 250,000

4. Record issues of office supplies to different requisitioner as per report

Office supplies expense 50203010 120,000
Office supplies inventory 10404010 120,000

Purchase (Outside supplier)

: Purchase of office equipment either thru the Procurement Service/outside suppliers.

1. Issue PO for the office equipment and record the obligation, RAOCO
2. Record payment (Procurement Service/outside supplier) or recognize
the liability and taxes withheld

3. Record the asset receive/delivered

4. Remit taxes withheld upon receipt of TRA

A bidding/canvass is conducted and award the purchase to the lowest bidder. A demo is to be
conducted and the Purchase Order is prepared to be signed by both the agency head and the
supplier. Upon delivery of the items purchased and accepted:

1. Obligate the amount P175,000, for the purchase of 1 copier machine and post in the
obligation
column of the RAOD-CO.

2. Record the delivery and acceptance of the delivered equipment/machine:

Office Equipment 10605020 175,000
Due to BIR 20201010 7,292
Accounts Payable 20101010 167,708

3. Record payment of copier machine:

Accounts Payable 20101010 167,708
Cash – MDS, Regular 10104040 167,708

4. Record remittance to BIR supported with TRA

Due to BIR 20201010 7,292
Cash – TRA 10104070 7,292
(When the purchase was charged to a trust account and not from allotment and NCA
when paid, No obligation is necessary and payment shall be charged to the Cash In
Bank–LCCA account)

Purchase and/or Construction of Fixed Assets

Property, Plant and Equipment and Inventory Accounts acquired through purchase shall
include all costs incurred to bring them to the location necessary for their intended use, like
transportation cost, freight charges, installation costs, etc. These are recorded in the books of
accounts as Asset after inspection and acceptance of delivery.

Construction Period Theory

Fixed assets are charged against capital outlay. Since corollary entry is no longer made,
the asset account is taken up upon purchase. Under the depreciation accounting, depreciation
will be taken up starting on the month succeeding the month of purchase or completion of
construction. Straight-line method will be used. The rate of depreciation shall depend on the
nature of the assets, guidelines for this shall be issued by the COA.

In recording the fixed assets, the Construction Period Theory shall be followed. All
expenses such as interests, license fees, etc., during the construction period shall be
capitalized.

During the construction period, property, plant and equipment shall be classified and
recorded as “Construction in Progress” with the appropriate asset classification. As the
construction is completed, the “Construction in Progress” account shall be transferred to the
appropriate asset account.

Purchase/Construction of Fixed Assets

A. Purchase of office equipment either thru the Procurement Service/outside suppliers.
1. Issue PO for the office equipment
Record the obligation, RAOCO
2. Record payment (Procurement Service/outside supplier) or recognize
the liability and taxes withheld
3. Record the asset receive/delivered
4. Remit taxes withheld upon receipt of TRA

B. Construction of Building by Contract

1. Signed the construction contract. Record the obligation – RAOCO
2. Record performance bond posted by the contract(cash-5%, bank guarantee-10%,
and surety bond-30% of the contract cost)

3. Grant 15% advances to the contractor if requested

4. Payment based on the percentage of completion billed
5. Imposed retention fees and observed if needed up to the last claims
6. Required withholding taxes to be deducted for every billing
 7. Record completion and turn-over
8. Return the performance bond, retention fees and remittance of withholding taxes

Example:
TESDA Reg. 7 expand their administration building. The expansion project was included in the
approved
budget amounting to P5,000,000. It was awarded to MegaWorld Construction Co. The company
was made
to start in July 2, 2016 to be finished 90 days after.. However, the contractor was delayed in the
completion
of the project and the agency charged a liquidating damages totaling P66,000.

The contractor claimed its first billing when it was 50% completion. There were deficiencies noted
during
the inspection. The 2nd billing followed when it was 65% completion and final billing when it was
100%
completion.

Journalize the transaction

1. Obligate the P5,000,000, cost of expansion project and post in the obligation col of the RAOD-CO

2. Record receipt of cash from the contractor as performance bond (cash bond-5% of cc)
Cash – collecting officer 10101010 250,000
Guaranty/Security Deposit Payable 20401040 250,000

3. Record the temporary deposit of the performance bond to the National Treasury
Cash – Treasury/Agency Deposit – Trust 10104030 250,000
Cash – collecting officer 10101010 250,000

4. Record the 15% of the contract cost as advances to the contractor.

Advances to Contractors 19902010 750,000
Cash – MDS, Regular 10104040 750,000
(15% X 5,000,000)

5. Record the 1st progress billing, 50% completion.

Construction in Progress – Bldg and
Other Structures 10610030 2,500,000
Accounts Payable 20101010 2,125,000
Advances to Contractors 19902010 375,000

6. Record payment of the 1st billing.

Accounts Payable 20101010 2,125,000
Cash – MDS, regular 10104040 1,770,833
Guranty/Security and Deposit Payable(Ret Fee) 20401040 250,000
Due to BIR 20201010 104,167

7. Record the receipt of 2nd billing.

Construction in Progress – Bldg and Other Structures10610030 750,000
Accounts Payable 20101010 637,500
Advances to Contractors 19902010 112,500
8. Record payment of 2nd billing
Accounts Payable 20101010 637,500
Cash – MDS, Regular 10104040 531,250
Guaranty/Security and Deposit Payable(Ret fee) 20401040 75,000
Due to BIR 20201010 31,250

9. Record the receipt of final billing

( cost – 5,000,000 less 66,000 LD and 750,000 of advances to contractors)
Construction in Progress- Bldg and Other Structures 10610030 1,684,000
Accounts Payable 20101010 1,421,500
Advances to contractors 19902010 262,500

Adjust obligation by negative entry in the obligation column of the RAOD-CO reducing the original
amount by P66,000 Liquidating Damages.

10. Record final payment

Accounts Payable 20101010 1,421,500
Cash – MDS, regular 10104040 1,182,933
Guaranty/Security and Deposit Payable 20401040 168,400
Due to BIR 20201010 70,167

11. Record remittance of withholding taxes to BIR thru TRA.

Due to BIR 20201010 205,584
Cash – TRA 10104070 205,584

12. Record the turn-over and acceptance of the building expansion:

Contract amount P5,000,000
Less: Liquidating Damages 66,000
Net cost P4,934,000

Building 10604010 4,934,000

Construction in Progress-Bldg
And Other Structures 10610030 4,934,000

13. Record receipt of NCA for deposited performance bond.

Cash – MDS, Trust 10104060 250,000
Cash – Treasury/Agency Deposit- Trust 10104030 250,000

14. Record release of performance bond.

Guaranty/Security Deposit Payable 20401040 250,000
Cash – MDS, Trust 10104060 250,000

15. Return of retention fees to contractor.

Guaranty/Security Deposits Payable 20401040 493,400
Cash – MDS, regular 10104040 493,400
Infrastructure Assets. Besides the five criteria for recognizing PPE, infrastructure assets
have the following additional characteristics:
a. Part of a system or network;
b. Specialized in nature and do not have alternative uses;
c. Immovable; and
d. May be subject to constraints on disposal.
In accordance with PPSAS 17, public infrastructures shall be recognized as PPE in the
entity’s financial statements. These shall be recorded in the books of accounts as infrastructure
Assets such as road networks, sewer system, water and power supply systems, communication
networks, etc.

Reforestation Projects. With the implementation of PPSAS, reforestation projects are

recognized as Land Improvements, Reforestation Projects in the books of accounts of the
DENR or other entity concerned.

Initial Costs for Reforestation Projects. The following constitutes the initial costs of Land
Improvements-Reforestation Projects:
a. Survey, Mapping and Planning (SMP)
b. Nursery Operation and Seedling Production or Procurement
c. Plantation Establishment (Site preparation, hauling of seedlings and planting)

Physical Count of PPE. The entity shall have a periodic physical count of PPE, which shall be
done annually and presented on the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE) as at December 31 of each year. This shall be submitted to the Auditor
concerned not later than January 31 of the following year. Equipment found at station and
losses discovered during the physical count shall be reported to the Accounting Division/Unit for
proper accounting/recording.

Financial Expenses

These are expenses which are not used in the actual operation of the agency such as interest
expenses, bank charges, etc.