CHAPTER 3

THE GOVERNMENT ACCOUNTING PROCESS

This process is similar to that of a business entity, except, budget registries and
preparing periodic budget accountability reports.

Books of Accounts and Registries

The books of accounts and registries of government entities consist of:

1. Journals

a. General Journal
b. Cash Receipt Journal
c. Cash Disbursement Journal
d. Check Disbursement Journal

2. Ledgers

a. General Ledgers
b. Subsidiary Ledgers

3. Registries

a. Registries of Revenue and Other Receipt (RROR)

b. Registry of Appropriations and Allotments (RAPAL)
c. Registries of Budget, Utilization, and Disbursements (RBUD)
d. Registries of Allotments, Obligations, and Disbursements (RAOD)
e. Registry of Allotments and Notice of Cash Allocation (RANCA)
f. Registry of Allotment and Notice of Transfer of Allocation (RANTA)
Technically, only the Journals and Ledgers are considered accounting records. The
Registries are budget records. These are used to monitor the budget.

The accounting unit of the agency maintains the Journals and Ledgers while the budget
division of the agency maintains the Registries.

Budget Registries

1. Registries of Revenue and Other Receipts (RROR)

- used to monitor
 the budgeted amounts,
 actual collections, and
 remittances of revenue and other receipts

2. Registry of Appropriations and Allotments (RAPAL)

- used to monitor appropriations and allotments.

This is to ensure that allotment will not exceed

appropriations.

3. Registries of Budget, Utilization and Disbursements (RBUD)

- used to record the approved special budget and
corresponding utilizations and disbursements charged to
retained income.

Separate RBUD shall be maintained for each object of

expenditure.
 RBUD - PS
 RBUD – MOOE
 RBUD – FE
 RBUD - CO

4. Registries of Allotments, Obligations and Disbursements (RAOD)

- used to monitor
  the allotment received,
 obligations incurred against the corresponding
allotment, and
 the actual disbursements made.

This is to ensure that obligations incurred will not exceed

allotments while actual disbursements will not exceed
the obligations incurred.

Separate RAODs are also maintained for each object of

expenditure.
 RAOD - PS
 RAOD – MOOE
 RAOD – FE
 RAOD - CO

OBJECT OF EXPENDITURES
The classification of expenditures by object are as
follows:
a. Personnel Services (PS) – pertain to all types of
employee benefits, for example, salaries, bonuses,
allowances, cash gifts, etc.

b. Maintenance and Other Operating Expenses

(MOOE) – pertain to various operating expenses other
than employee benefits and financial expenses, for
example, travel, utilities, supplies, etc.

c. Financial Expenses (FE) – pertain to finance costs,

for example, interest expense, bank charges, losses on
foreign exchange transactions.

d. Capital Outlays (CO) – pertains to capitalizable

expenditures, for example, expenditures on the
 construction of public infrastructure, acquisition costs of
equipment, etc.

****************************************************************************************************

Keeping of the General Accounts

The COA shall keep the general accounts of the Government and preserve the
vouchers and other supporting documents.

****************************************************************************************************

BASIC RECORDING - APPROPRIATION

Entity A (a government agency) receives its GAA consisting of the following:

Personnel Services (PS) 100,000.00

Maintenance and Other Operating Expenses (MOOE) 60,000.00

Financial Expenses (FE) -

Capital Outlays (CO) 200,000.00

Total appropriation for the current year 20x1 360,000.00

The receipt of the appropriation is posted (recorded) in the Registry of Appropriation

and Allotments (RAPAL) as follows:

REGISTRYOFAPPROPRIATIONANDALLOTMENTS

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Date Ref Appropriations Allotments Unreleased Appropriations

PS MOOE FE CO Total PS MOOE FE CO Total PS MOOE FE CO Total
1/ 1/ x1 GAA 100,000 60,000 - 200,000 360,000

****************************************************************************************************
BASIC RECORDING – ALLOTMENT

Entity A receives its allotment from the DBM consisting of the following:

Personnel Services (PS) 90,000.00

Maintenance and Other Operating Expenses (MOOE) 40,000.00

Financial Expenses (FE) -

Capital Outlays (CO) 170,000.00

Total allotment 300,000.00

The receipt of allotment is posted (recorded)in the:

 Registry of Appropriation and Allotments (RAPAL)

 Registries of Allotments, Obligations and Disbursements (RAOD)

RAPAL

REGISTRYOFAPPROPRIATIONANDALLOTMENTS

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Date Ref Appropriations Allotments Unreleased Appropriations

PS MOOE FE CO Total PS MOOE FE CO Total PS MOOE FE CO Total
1/ 1/ x1 GAA 100,000 60,000 - 200,000 360,000
1/ 2/ x1 GAARD 90,000 40,000 - 170,000 300,000 10,000 20,000 - 30,000 60,000

RAODs
 REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS
PERSONNELSERVICES
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 90,000

REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS

MAINTENANCEANDOTHEROPERATINGEXPENSES
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 40,000

REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS

CAPITALOUTLAYS
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 170,000

****************************************************************************************************
BASIC RECORDING – INCURRENCE OF OBLIGATION

 Obligation shall be incurred through the issuance of Obligation Request and

Status (ORS).
 The Requesting Office shall prepare this document, supported by valid claim
documents like disbursement vouchers, payrolls, purchase/job orders, itinerary of
travel, etc.
 The Head of the Requesting Office Shall certify the necessity and legality of the
obligation and the validity of the supporting documents.
 The Head of the Budget Division shall certify the availability of the allotment.

Entity A enters into the following contracts:

a. Personnel Services – Employment contracts (Job Order) amounting to P70,000.

b. Maintenance and Other Operating Services – Purchase contract for office supplies
worth P25,000.

c. Capital Outlays – Purchase contract for office equipment worth P160,000.

The “obligations” are recorded in the Registries of Allotments, Obligations and

Disbursements (RAOD) as follows:

REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS

PERSONNELSERVICES
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 90,000
1/ 3/ x1 70,000 20,000 0 0 70,000
 REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS
MAINTENANCEANDOTHEROPERATINGEXPENSES
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 40,000
1/ 3/ x1 25,000 15,000 0 0 25,000

REGISTRYOFALLOTMENTS, OBLIGATIONS ANDDISBURSEMENTS

CAPITALOUTLAYS
For the year 20x1

Entity Name: Entity A

Fund Cluster: Regular Agency Fund

Unpaid Obligations
Unobligated Not yet due
Date Ref Allotments Obligations Disbursements Due and
Allotments and
Demandable
demandable
1/ 2/ x1 170,000
1/ 3/ x1 160,000 10,000 0 0 160,000

****************************************************************************************************

NOTICE OF OBLIGATION REQUEST AND STATUS ADJUSTMENT (NORSA)

If the obligation recorded in the RAOD and ORS need to be adjusted, the subsequent
adjustment shall be made through the use of the Notice of Obligation Request and
Status Adjustment (NORSA).

Up to this point, nothing is recorded yet in the accounting books. The recordings above
are made on the budget registries. Journal entries shall be made only after:
a. the employees have rendered services;

b. the office supplies are delivered and received; and

c. the office equipment is delivered and received.

Only after these events occur that the entity’s financial statement elements are affected,
and thus, an accountable event has occurred that needs to be recognized.

In the meantime, the “obligations” recorded in the registries (but not yet in the
accounting books) are referred to as “Not Yet Due and Demandable.”

Notice that government entities and business entities use the term “obligation” or phrase
“incurrence of obligation” differently.

Government Entity Business Entity

Obligation – is an act of a duly authorized Obligation is another term for liability.
official which binds the government to the
immediate or eventual payment of a sum
of money.

Obligation may be referred to as a

commitment that encompasses possible
future liabilities based on current
contractual agreement.

****************************************************************************************************

BASIC RECORDING - DISBURSEMENT AUTHORITY-Notice Of Cash Allocation

Entity A receives Notice of Cash Allocation (NCA) from the DBM amounting to
P200,000, net of tax.
This time a journal entry shall be made in the accounting books because the financial
statement elements of the entity are now affected – increase in cash and increase in
revenue. The entry is as follows:

Date Cash-Modified Disbursement System

(MDS), Regular 200,000.00
Subsidy from National Government 200,000.00
To recognize receipt of NCA from DBM

The registries use to monitor the NCA are the following:

a. Registry of Allotments and Notice of Cash Allocation (RANCA)

- used to determine the amount of allotments not
covered by NCA and to monitor the available balance of
NCA.

b. Registry of Allotment and Notice of Transfer of Allocation (RANTA)

- used to determine the amount of allotments not
covered by Notice of Transfer of Allocation (NTA) and to
monitor the available balance of NTA.

The NCA is posted (recorded) in the RANCA as follows:

 REGISTRYOFALLOTMENTS ANDNOTICEOFCASHALLOCATION
For the period January 20x1

Entity Name: Entity A Fund Cluster: Regular Agency Fund

Sheet Number: 1

AMOUNT
Notice of Cash Allocation Balance
Allotment
Date Ref Unfunded
Received Received Utilized Unutilized NCA
Allotment
(a) (b) (c ) (b-c) (a-b)
1/ 4/ x1 300,000 200,000 200,000 100,000

****************************************************************************************************

I. JOURNALS

a. General Journal – used to record transaction not recorded in the Special Journals.

Special Journals:

b. Cash Receipt Journal – used to record the Report of Collection and Deposit and
Cash Receipt Register of collecting officers.

 Report of Collection and Deposit (RCD) – prepared by a collecting officer to

report his/her collections and deposits to an Authorized Government Depository
Bank (AGDB).
 Cash Receipts Register (CRReg) – used by field offices without a complete set of
books to record their cash collections and deposits in the book of their mother
unit (central/regional/division office).

c. Cash Disbursement Journal – used to record the cash disbursements of the

Disbursing Officer.
d. Check Disbursement Journal – used to record the check disbursements of the
Disbursing Officer.

****************************************************************************************************

II. LEDGERS

a. General Ledger – summarizes all transactions recorded in the journals.

b. Subsidiary Ledger – show details of each control account in the general ledger.

The NCA specifies the maximum amount of withdrawal that an entity can make from a
government bank for the period indicated. The Collecting Officer shall not issue an
official receipt (OR) for the receipt of NCA.

Since the receipt of the NCA does not constitute a collection that is recordable in the
Cash Receipt Journal, it is recorded in the General Journal.

****************************************************************************************************

BASIC RECORDING - DISBURSEMENT

Employees have rendered services and are now entitled to compensation.

Journal entries shall be made because the financial statement elements of the entity are
affected – increase in expense and increase in liability/decrease in cash. The recordings
are as follows:

a. Set up of payable to officers and employees upon approval of payroll.

Salaries and Wages 35,000.00

Personal Economic Relief Allowance (PERA) 5,000.00

Gross Compensation 40,000.00

Withholding Tax (10,000.00)

GSIS (2,000.00)

Pag-IBIG (2,000.00)

PhilHealth (1,000.00)

Total Deductions (15,000.00)

Net 25,000.00

Date Salaries and Wages, Regular 35,000.00

Personal Economic Relief Allowance (PERA) 5,000.00
Due to BIR 10,000.00
Due to GSIS 2,000.00
Due to Pag-IBIG 2,000.00
Due to PhilHealth 1,000.00
Due to Officers and Employees 25,000.00
To recognize payable to officers and
employees upon approval of payroll

b. Grant of Cash Advance for payroll.

Date Advances for Payroll 25,000.00

Cash, Modified Disbursement System-
Modified Disbursement System(MDS),
Regular 25,000.00
To recognize grant of cash advance for
payroll.
c. Liquidation of Payroll Fund.

Date Due to Officers and Employees 25,000.00

Advances for Payroll 25,000.00
To recognize liquidation of Payroll Fund.

****************************************************************************************************

BASIC RECORDING – REMITTANCE OF AMOUNTS WITHHELD

Entity A remits the P15,000 withheld to the other government agencies. The breakdown
is re-provided below:

Withholding Tax (10,000.00)

GSIS (2,000.00)

Pag-IBIG (2,000.00)

PhilHealth (1,000.00)

Total Deductions (15,000.00)

Remittance of Withholding Tax

The Tax Remittance Advice (TRA) is used to recognize:

a. In the books of government agencies, the constructive remittance of taxes withheld
to the Bureau of Internal Revenue (BIR) or customs duties withheld to the Bureau of
Customs (BOC), and the constructive receipt of NCA for those taxes and customs
duties;

b. In the books of the BIR and BOC, the constructive receipt of tax revenue and
custom duties; and
 c. In the books of the BTr, the constructive receipt of the taxes and customs duties
remitted.

The remittance of the tax withheld is recorded as follows:

Books of Entity A

Date Cash-Tax Remittance Advice 10,000.00

Subsidy from National Government 10,000.00
To recognize the constructive receipt of
NCA for TRA.

Date Due to BIR 10,000.00

Cash-Tax Remittance Advice 10,000.00
To recognize the constructive receipt of
taxes withheld to the BIR through TRA

Notice that there is actually no physical transfer of cash to the BIR (debit and credit to
‘Cash-TRA’), thus the term “constructive”. The TRA is another form of disbursement
authority, thus it is recorded similarly to the receipt of the regular NCA (credit to
‘Subsidy from National Government’). This means that Entity A has the authority to use
the amount withheld in its operations. Amounts used from the TRA will be reported in
Entity A’s Monthly Report of Disbursement.

The TRA is recorded by the other government agencies as follows:

Books of BIR

Date Cash-Tax Remittance Advice 10,000.00

Income Tax 10,000.00
To recognize the constructive receipt of
taxes remitted by National Government Agencies
(NGAs) through TRA
Books of BTr

Date Subsidy to NGAs 10,000.00

Cash-TRA 10,000.00
To recognize the constructive receipt of
taxes remitted by National Government Agencies
(NGAs) through TRA

Remittance of GSIS, Pag-IBIG, and PhilHealth

Date Due to GSIS 2,000.00

Due to Pag-IBIG 2,000.00
Due to PhilHealth 1,000.00
Cash, Modified Disbursement System- 5,000.00
Modified Disbursement System(MDS),
Regular
To recognize remittance to GSIS, Pag-
IBIG, and PhilHealth.

The Obligation Request and Status (ORS) and the RAOD-PS are updated for the
payments above.

****************************************************************************************************

BASIC RECORDING – BILLINGS, COLLECTIONS, AND REMITTANCE

a. Entity A bills revenue of P100,000 for rent income.

Date Accounts Receivable 100,000.00

Rent/Lease Income 100,000.00
To recognize billing of income.

b. Entity A collects P100,000 from the billed revenue and remits the collection to the
BTr.

Date Cash – Collecting Officer 100,000.00

Accounts Receivable 100,000.00
 To recognize collection of billed income.

Date Cash-Treasury/Agency Deposit, Regular 100,000.00

Cash – Collecting Officer 100,000.00
To recognize remittance of income of BTr.

P.D. No. 1445 requires that all collections must be remitted to the National Treasury,
unless another law specifically allows otherwise.

The billing revenue is recorded in the General Journal while the collection and
remittance are recorded in the Cash Receipt Journal.

****************************************************************************************************

BASIC RECORDING – REVERSION OF UNUSED NOTICE OF CASH ALLOCATION

Government entities are required to revert any unused NCA at the end of the
accounting period.

Date Subsidy from National Government 170,000.00

Cash, Modified Disbursement System- 170,000.00
Modified Disbursement System(MDS),
Regular
To recognize reversion of unused NCA.

Notice that the entry above is the exact opposite of the entry to record the receipt of the
NCA.

****************************************************************************************************

The Revised Chart of Accounts

A Chart of Accounts is a list of all the accounts used by an entity. Government entities
shall use the account titles and account codes in the Revised Chart of Accounts issued
by COA.

Each account in the RCA is assigned an 8-digit code as follows:

0 00 00 00 0

Contra-Accounts
General Ledger

General Ledger
Account Group

Account Group
Major Account

Sub-Major
Accounts
Group

Code Account Groups

1 Assets

2 Liabilities

3 Equity

4 Income

5 Expenses

****************************************************************************************************

The Government Accounting Cycle

Here is a list of the things that we will be learning:

1. Appropriation

2. Allotment

3. Incurrence of Obligation

4. Disbursements Authority - NCA

5. Disbursements
6. Billings, Collections & Remittances

7. Unadjusted trial balance

8. Adjusting entries

9. Closing entries

10. Preparation of financial statements

REMEMBER THE FOLLOWING:

Common Fund System

To maximize the available NCAs of the agency, the Common Fund System policy
shall be adopted whereby cash allocation balances of agencies under the Regular MDS
Account may be used to cover payment of current year’s accounts payable after
satisfying their regular operating requirements as reflected in their Monthly Cash
Program.

Adjusting Entries

1. Reversion of unused Notice of Cash Allocation (NCA)

2. Depreciation

3. Allowance for impairment

Closing Entries

The following are the necessary closing entries:

a. Closing of the “Cash-Treasury/Agency Deposit, Regular” account to the

“Accumulated Surplus/(Deficit)” account.
b. Closing of the “Subsidy from National Government” account to the “Revenue and
Expense Summary” account.

c. Closing of income and expense accounts to the “Revenue and Expense Summary”
account.

d. Closing of the net balance of “Revenue and Expense Summary” account to the
“Accumulated Surplus/(Deficit)” account.