SUBJECT CODE: DYBSAgn313

Government Accounting and Accounting for NPOs

EVANGELINE A. BALBOA
Instructor, College of Accountancy
Declaration:
This learning module is an exclusive property of Dr. Yanga’s Colleges, Inc., as an essential part of the
REIMAGINED Learning Program for the Academic Year 2020-2021, and shall only be used by and for
DYCIans. No part of this learning module shall be reproduced, distributed, transmitted, and/or sold, without
the consent of DYCI.
This module is intended to have you learners of 3rd year BSA to state the sources of a
government entity.

At the end of this module, you are expected to:

1. State the recognition and measurement of revenue.

2. State the main concept(s) in the disbursement of government funds.
3. Account for the different modes of disbursements.

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 Fundamental Principles for Revenue
• All revenues shall be remitted to the BTr and included in the General Fund, unless
another law specifically allows otherwise. Recording in other types of funds (e.g., Special
Fund) shall be made only when authorized by law.
• Receipts shall be properly acknowledged through pre-numbered ORs. Receipts can be in
the form of checks.

Sources of Revenue
Revenues may arise from exchange and non-exchange transactions.
• Exchange transaction - examples: sale of goods and rendering of services.
• Non-exchange transactions - examples: tax revenue, fines and penalties and donations.

Sale of Goods
Revenue from the sale of goods shall be recognized when all of the following conditions are
satisfied:
a. Significant risks and rewards of ownership of the goods are transferred to the buyer;
b. The entity does not retain continuing managerial involvement or effective control over
the goods sold;
c. It is probable that economic benefits will flow to the entity;
d. Revenue can be measured reliably; and
e. Costs relating to the transaction can be measured reliably.

Rendering of Services
• Revenue from rendering of services is recognized on a straight line basis over the
contact term.
• However, revenue is recognized by reference to the stage of completion if the outcome
of the transaction can be estimated reliably, such as when all of the following conditions
are satisfied:
a. The stage of completion can be measured reliably;
b. It is probable that economic benefits will flow to the entity;
c. Revenue can be measured reliably; and
d. Costs relating to the transaction can be measured reliably.
• When the outcome cannot be estimated reliably, revenue is recognized only to the
extent of recoverable costs.

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Interest, Royalties & Dividends
• Interest is recognized on a time proportion basis that takes into account the effective
yield on the asset;
• Royalties is recognized as they are earned in accordance with the substance of the
relevant agreement; and
• Dividends are recognized when the entity’s right to receive payment is established.

Measurement of Revenue from Exchange Transactions

• Revenue from exchange transactions are measured at the fair value of the
consideration received or receivable.
• Any trade discounts and volume rebates shall be taken into account.
• When cash flows are deferred, the fair value of the consideration is the present value of
the consideration receivable.

Exchanges of Goods or Services

• Similar – no revenue is recognized.
• Dissimilar – revenue is recognized, measured using the following order of priority:
a. Fair value of the goods or services received, adjusted by the amount of any cash
transferred.
b. Fair value of the goods or services given up, adjusted by the amount of any cash
transferred.

Non-exchange Transactions
• Revenue from non-exchange transactions are derived mostly from taxes, fines and
penalties, gifts, donations and goods in-kind.

Tax Revenue

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 Gifts, Donations and Goods In-kind
- Recognized as revenue measured at fair value when it is probable that future economic
benefits will flow to the entity.
- If without condition, recognized immediately as revenue.
- If with condition, initially recognized as liability and recognized as revenue only when
the condition is satisfied.

• Services in-kind – not recognized as revenue.

• Debt Forgiveness – carrying amount of debt forgiven is recognized as revenue.
• Bequests – (transfers made according to the provisions of a deceased person’s will)
recognized as revenue measured at fair value, if asset recognition criteria are met.
• Grant with Condition – initially recognized as liability until condition is satisfied.
• Pledges – (unenforceable promises to give) not recognized as revenue.
• Concessionary Loans – (loans w/ below-market rate) difference b/w fair value and
transaction price is recognized as revenue, if non-exchange transaction.

Impairment Losses and Allowance for Impairment Losses

• When an amount already recognized as revenue becomes uncollectible, it is recognized
as expense (i.e., impairment loss) rather than as an adjustment to the revenue originally
recognized.

Other Receipts

Disbursements
- constitute all payments in cash, in whatever manner, i.e., cash, check or cashless
payment.
- shall be supported by Disbursement Vouchers (including Petty Cash Vouchers) or
Payroll.

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Disbursement Authority
a. Notice of Cash Allocation (NCA)
b. Notice of Transfer of Allocation (NTA)
c. Tax Remittance Advice (TRA)
d. Non-Cash Availment Authority (NCAA)
e. Cash Disbursement Ceiling (CDC)

Notice of Cash Allocation (NCA)

• The NCA is an authority issued by the DBM to central, regional and provincial offices and
operating units to cover their cash requirements. The NCA specifies the maximum
amount of cash that can be withdrawn from a government servicing bank in a certain
period.

Notice of Transfer of Allocation (NTA)

• The NTA is an authority issued by an agency’s Central Office to its regional and operating
units to cover the latter’s cash requirements.

Tax Remittance Advice (TRA)

• The TRA is used to recognize: (1) in the books of national government agencies, the
constructive remittance to BIR and BOC of taxes and customs’ duties withheld, and the
constructive receipt of NCA for those taxes and customs duties; (2) in the books of the
BIR and BOC, the constructive receipt of tax revenue and customs duties; and (3) in the
books of the BTr, the constructive receipt of the taxes and customs duties remitted.

Non-Cash Availment Authority (NCAA)

• The NCAA is the authority issued by the DBM to agencies to cover the liquidation of
their actual obligations incurred against available allotments for availment of proceeds
from loans/grants through supplier’s credit/constructive cash.

Cash Disbursement Ceiling (CDC)

• The CDC is the disbursement authority issued by the DBM to agencies with foreign
operations allowing them to use the income collected by their Foreign Service Posts to
cover their operating requirements.

Basic Requirements & Certifications for Disbursements

• Budget Officer - certifies the availability of allotment.
• Chief Accountant - certifies the availability of funds and the completeness of the
supporting documents.
• Head of the Requesting Unit - certifies the necessity and legality of disbursements.
• Head of Agency - approves all Disbursement Vouchers (DVs) and Payroll.

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 Modes of Disbursements
• Check
• Cash
• Cashless payments:
– Advice to Debit Account (ADA)
– Electronic Modified Disbursement System (eMDS)
– Cashless Purchase Card System (Credit Card)
– Non-Cash Availment Authority (NCAA)
– Tax Remittance Advice (TRA)

Disbursements through Check

Disbursements through Cash

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 Disbursements through Advice to Debit Account (ADA)
• The ADA is an accountable form used as an authorization issued by a government
agency to the MDS-GSB instructing the bank to debit a specified amount from its
available NCA to pay the creditors/payees listed in the LDDAP-ADA.

Accounts Payable xxx

Cash-Modified Disbursement
System (MDS), Regular xxx
To recognize payment of payables to suppliers/contractors through ADA

Disbursements through electronic Modified Disbursement System (eMDS)

• The eMDS is like the ADA except that disbursements are made directly from the
accounts of the BTr that are maintained with the Land Bank of the Philippines (LBP).
Agencies subscribed under LBP’s eMDS can make online disbursements for selected
transactions.

Disbursements through Cashless Purchase Card (CPC) System

• Disbursements under the CPC System are made through the use of an electronic card
(i.e., credit card).

Disbursements through Non-Cash Availment Authority (NCAA)

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 Disbursements through Tax Remittance Advice (TRA)

Books of Entity A
Cash-Tax Remittance Advice 10,000
Subsidy from National Government 10,000
To recognize the constructive receipt of NCA for TRA
Due to BIR 10,000
Cash-Tax Remittance Advice 10,000
To recognize constructive remittance of taxes withheld to the BIR through TRA

Disallowances
• Disallowances refer to expenditures made by an agency that are subsequently
invalidated or disallowed by the COA because they are found to be irregular,
unnecessary, excessive, extravagant or unconscionable. Disallowances are recorded in
the books of accounts only when they become final and executory.

SAMPLE QUESTIONS:

1. A government entity recognizes revenue from exchange or non-exchange transactions. Which of the
following may not give rise to revenue by a government entity?
a. Receipt of military equipment as donation from a foreign government.
b. Receipt of cash donation from an international organization.
c. Receipt of free trainings and seminars regarding process technology on farming from an
international organization.
d. Receipt of a bequest from the king of a foreign realm.

2. All of the following give rise to the recognition of revenue from non-exchange transaction except
a. sale of goods c. fines and penalties
b. taxes d. donation of goods in-kind

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3. According to P.D. 1445, all revenues of an entity shall be remitted to the National Treasury and
included in the
a. General Fund c. National Fund
b. Special Fund d. Official Fund

4. Remittances of collections to the National Treasury are recorded as a debit to which of the following
accounts
a. Cash – Collecting Officers
b. Cash-Treasury/Agency Deposit, Regular
c. Cash-Modified Disbursement System (MDS), Regular
d. Subsidy from National Government

5. The national government received a foreign grant conditioned on the construction of a public
infrastructure. Entity A was chosen as the implementing agency. When the national government
received the grant, the entry in the BTr’s books included a
a. credit to the “Subsidy from National Government” account.
b. debit to the “Cash – Modified Disbursement System (MDS), Regular” account.
c. credit to the “Cash in Bank-Local Currency, Bangko Sentral ng Pilipinas” account.
d. credit to the “Other Deferred Credits” account.

6. At the end of the period, the “Cash-Treasury/Agency Deposit, Regular” account is closed to the
a. Subsidy from National Government account.
b. Accumulated Surplus or Deficit account.
c. Cash-Modified Disbursement System (MDS), Regular account.
d. This account is not closed.

7. Which of the following does not give rise to revenue from assistance or subsidy?
a. Inter-agency Fund Transfer
b. Notice of Cash Allocation
c. Tax Remittance Advice
d. Non-Cash Availment Authority

8. According to P.D. 1445,

a. Amounts received in trust and from business-type activities of the government may be
separately recorded.
b. All revenues of an entity shall be retained by the entity and included in its General Fund, unless
another law specifically allows otherwise.
c. A collecting officer shall immediately issue a temporary receipt upon collecting a payment of any
nature.
d. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge cash receipts,
the BIR may approve, upon request, the exemption from the use of accountable forms.

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 9. According to the GAM for NGAs, revenue includes only those that are received or receivable by the
entity in its own account. Accordingly, receipts on behalf of another entity are
a. recorded as liability.
b. recognized as revenue.
c. recorded only in the registries but not in the books of accounts.
d. remitted only through the use of the TRA.

10. Government entities and business entities use the same accounting treatment for all of the following
except
a. trade discounts allowed to customers.
b. recognizing revenue from royalty agreements.
c. recognizing revenue from dividends.
d. remittance of taxes withheld to the BIR

Name: _____________________________________________ Rating: ________________

Year and Section: _____________ Professor / Instructor: __________________________
Due of Submission: ____________________________

INSTRUCTION: Choose the letter of the best answer.

1. Which of the following shall certify the availability of allotment before obligations can be incurred and
disbursements are made?
a. Budget Officer
b. Head of Agency
c. Chief Accountant
d. COA Auditor

2. Which of the following shall certify the availability of funds and completeness of supporting
documents before the Head of Agency or his/her authorized representative can enter into contracts
that obligate the government for the eventual payment of government funds?
a. BTr
b. Budget Officer
c. Chief Accountant
d. COA Auditor, jointly with DBM

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3. All Disbursement Vouchers (DVs) or Payroll shall be approved by the
a. Budget Officer
b. Head of Agency
c. Chief Accountant
d. COA Auditor

4. Which of the following is not one of the modes of disbursements by a government entity?
a. check
b. credit card
c. online payment
d. payment through Short Messaging System (SMS)

5. Payments of checks that are chargeable against the Treasury Account are credited to the
a. Modified Disbursement System Checks
b. Commercial Checks
c. Advice to Debit Account
d. Cash-Modified Disbursement System (MDS) account

6. According to the GAM for NGAs, cash disbursements are made through
a. cash advances to authorized personnel
b. direct cash payments by the Head of Agency to the payees
c. direct cash payment by Collecting Officers to payees
d. any of these

7. Which of the following statements regarding the disbursement of government funds is incorrect?
a. No additional cash advance shall be given to any official or employee unless the previous cash
advance given to him is first liquidated.
b. Transfer of cash advance from one officer to another is prohibited.
c. A cash advance shall not be used to encash checks or to liquidate a previous cash advance.
d. Officials and employees authorized to travel shall be granted cash advance to cover traveling
expenses. The amount granted shall be accounted for as “Due to Officers and Employees.”

8. It is an authority issued by an agency’s Central Office to its regional and operating units to cover the
latter’s cash requirements.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Notice of Transfer of Allocation (NTA)

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 9. Which of the following reflects a Non-Cash Availment Authority (NCAA) mode of disbursement?
a. Accounts Payable xxx
Cash-Constructive Income
Remittance xxx
b. Accounts Payable xxx
Cash – Modified Disbursement
System (MDS), Regular xxx
c. Accounts Payable xxx
Subsidy from National Government xxx
d. None of these.

10. Entity A makes payment through bank transfer. This mode of disbursement is most likely through the
use of a(an)
a. MDS check
b. Commercial check
c. Advice to Debit Account
d. Credit Card

GOVT ACCTG & ACCTG FOR NPOs

by: Z. B. Millan

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