Chapter 1

INTRODUCTION

Recent developments brought about by the Philippine Public Financial Management

Reforms and significant changes in the field of accounting prompted the harmonization of the
existing accounting standards with the international accounting standards. This Commission
revised the New Government Accounting System (NGAS) Manual prescribed under Commission
on Audit (COA) Circular No. 2002-002 dated June 18, 2002 to make it responsive to dynamic
changes and modern technology.

Sec. 1. Legal Basis. The Government Accounting Manual (GAM) is prescribed by COA
pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the
Philippines which provides that:

“The Commission on Audit shall have exclusive authority, subject to the

limitations in this Article, to define the scope of its audit and examination,
establish the techniques and methods required therefor, and promulgate
accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of government funds
and properties". (Underscoring supplied)

Sec. 2. Coverage. This Manual presents the basic accounting policies and principles in
accordance with the Philippine Public Sector Accounting Standards (PPSAS) adopted thru COA
Resolution No. 2014-003 dated January 24, 2014 and other pertinent laws, rules and regulations.
It includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002
dated January 30, 2013, as amended; the accounting procedures, books, registries, records, forms,
reports, and financial statements; and illustrative accounting entries. It shall be used by all
National Government Agencies (NGAs) in the:

a. preparation of the general purpose financial statements in accordance with the PPSAS
and other financial reports as may be required by laws, rules and regulations; and

b. reporting of budget, revenue and expenditure in accordance with laws, rules and
regulations.

Sec. 3. Objective of the Manual. The Manual aims to update the following:

a. standards, policies, guidelines and procedures in accounting for government funds

and property;

b. coding structure and accounts; and

c. accounting books, registries, records, forms, reports and financial statements.

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 GENERAL PROVISIONS, BASIC STANDARDS AND POLICIES

Sec. 1. Scope. This chapter covers the general provisions from existing laws, rules and
regulations; and the basic standards/fundamental accounting principles for financial reporting by
national government agencies.

Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used as stated
below shall be construed to mean as follows:

a. Accrual basis – means a basis of accounting under which transactions and other
events are recognized when they occur (and not only when cash or its equivalent is
received or paid). Therefore, the transactions and events are recognized in the
accounting records and recognized in the financial statements of the periods to which
they relate. The elements recognized under accrual accounting are assets, liabilities,
net assets/equity, revenue, and expenses.

b. Assets – are resources controlled by an entity as a result of past events, and from
which future economic benefits or service potential are expected to flow to the entity.

c. Contributions from owners – means future economic benefits or service potential that
have been contributed to the entity by parties external to the entity, other than those
that result in liabilities of the entity, that establish a financial interest in the net
assets/equity of the entity, which:

1. conveys entitlement both to (i) distributions of future economic benefits or

service potential by the entity during its life, such distributions being at the
discretion of the owners or their representatives; and to (ii) distributions of any
excess of assets over liabilities in the event of the entity being wound up; and/or

2. can be sold, exchanged, transferred, or redeemed.

d. Distributions to owners – means future economic benefits or service potential

distributed by the entity to all or some of its owners, either as a return on investment
or as a return of investment.

e. Entity – refers to a government agency, department or operating/field unit. It may be

referred to in this GAM as an agency.

f. Expenses – are decreases in economic benefits or service potential during the

reporting period in the form of outflows or consumption of assets or incurrence of
liabilities that result in decreases in net assets/equity, other than those relating to
distributions to owners.

g. Government Accounting – encompasses the processes of analyzing, recording,

classifying, summarizing and communicating all transactions involving the receipt
and disposition of government funds and property, and interpreting the results
thereof. (Sec. 109, Presidential Decree (P.D.) No. 1445)

h. Government Budget – is the financial plan of a government for a given period, usually
for a fiscal year, which shows what its resources are, and how they will be generated

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