Government accounting is a system of analyzing, recording, classifying and summarizing transactions

and accounts related to the receipts and disbursements of public funds and interpreting the results
thereof.

Similarities and Differences of Commercial and Government Accounting

Basically, government accounting is almost the same as commercial accounting as they are founded on
the same generally accepted accounting principles and standards that are being adopted worldwide.
However, government accounting and accounting for non-profit organizations are concerned more on
accountability over funds and property that come to their possession, while commercial accounting is
focused more on how to maximize profits of business organizations and create values for their
stockholders. To a greater extent both government accounting and commercial accounting provide their
users financial information useful in making informed and economic decisions. They derive this financial
information through well-structured accounting information process/system/cycle whose end-results
are the general-purpose financial statements which are very significant in financing, investing and
operating decisions of these government and non-government organizations, profit or non-profit
organizations. Another explicit difference is government accounting is more anchored on laws and
regulations while commercial accounting on business policies and best practices in operating the
business.

The relevant agencies which have major roles and responsibilities in government budgeting, accounting
and auditing are as follows: As stated in the website of the Official Gazette of the Republic of the
Philippines

The Commission on Audit (COA) is empowered under the Philippine Constitution to promulgate
accounting and auditing rules and regulations in the government sector. Thus, COA implements the
decade old Presidential Decree No. 1445, as amended, otherwise known as the Auditing Code of the
Philippines. Aside from the issuance of rules and regulation on government accounting, COA also acts as
the independent auditor of the government agencies in terms of fulfilling its responsibility as the
precursor of accountability of government funds and property entrusted to government officials and
employees. https://lakansining.wordpress.com/2017/05/11/commonwealth-avenue-quezon-city-
commission-on-audit-complex-part-i/

The Department of Budget and Management (DBM) is the one which causes the preparation and
consolidation of the national budget of all government agencies and offices. Annually, DBM issues a
budget call to all government agencies and offices for them to prepare their respective budget proposals
that would be consolidated in a national budget to be submitted to the President of the Philippines and
the Congress of the Philippines. The national budget will be deliberated upon by both Houses of
Congress and their Bilateral Committee and will be enacted into an Annual General Appropriations Act
(GAA). The DBM is also responsible for the allocation and monitoring of the respective approved budget
of the different agencies and offices of the government. In the monitoring of the respective budget of
various government offices and departments, the DBM adopts performance-based budget evaluation
and review focusing on the outputs and outcomes of every peso allocated to these government agencies
and offices. https://www.slideshare.net/abdulmohayminm/department-of-budget-and-managemet

The Congress of the Philippines is the one legislating the budget and tax measure to finance such a
budget. It has the power of the purse, as it is portrayed. It deliberates on the national budget that
consists of the target revenues and expenditures of the government during a given year. It also has an
oversight power over the executive branch in terms of how they spend their budget allocated to them
by way of appropriations, allotments, and cash allocations. During the budget deliberations, heads of
government agencies and offices are called to present and depend on their proposed budgets before
the appropriation committees, other sub-committees, and the plenary session of both houses of
congress. This is a rigorous, heart-breaking, and mind-boggling dilemma of the Secretaries, Under-
Secretaries, Assistant Secretaries who have to undergo direct and face-to-face questionings from
congressmen and senators who possess legislative immunity and ask even incriminating and offensive
questions in the guise of an aid-in legislation.
https://www.benarnews.org/english/news/philippine/duterte-address-07242017132031.html

The Department of Finance (DOF) is the one raising money through the Bureau of Internal Revenues
and Bureau of Customs in the form of taxes, tariff, and custom duties. There are also other government
agencies that contribute non-tax revenues such as the GOCCs, Land Transportation Office, etc. The DOF
is also responsible for financing the budget deficit through local and foreign borrowings.

The Bureau of Treasury under the DOG is in charge of the issuance of Notice of Cash Allocation in
support of the budget allotments issued by the DBM to various government agencies and offices. While

Notice of Allotment is the basis for incurrence of obligation,

Notice of Cash Allocation is the basis to pay that obligation.

https://www.linkedin.com/company/department-of-finance-philippines Various government branches,
departments, agencies, instrumentalities, and offices including GOCCs and local government units. They
are responsible for the preparation and submission of their respective budget proposals for inclusion in
the national budget. They are also responsible for the maintenance of their respective separate books of
accounts to account and report the receipts and disbursements of public funds that come to their
possession and accountability. They are also responsible to provide basic and essential services to the
public and citizenry in accordance to their legal mandate. https://www.slideshare.net/afcab/political-
and-administrative-structure

Government accounting encompasses the process of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipts and disposition of government funds and property,
and interpreting the results thereof. (PD 1445, State Auditing Code of the Philippines)

Objectives of Government Accounting are as follows:

1. To provide information concerning past operations and present conditions; To provide a basis
for guidance for future operations;
2. To provide for control of the acts of public bodies and officials in the receipts, disposition and
utilization of funds and property;
3. To report on the financial position and the results of operations of government agencies for the
information of all persons concerned.
GOVERNMENT ACCOUNTING VS COMMERCIAL ACCOUNTING
1.. Government accounting is focused on accountability while commercial accounting on
profitability.
2. Government accounting places greater emphasis on sources and uses of public funds and the
responsibility and liability thereon while commercial accounting is more concentrated on how
the capital invested in the business will achieve highest rate of return.
3. Government accounting is governed by Philippine Public Sector Accounting Standards and
laws. rules and regulation while commercial accounting is governed by Philippine Accounting
Standards and Philippine Financial Reporting Standards as well as the governing policies and
internal rules of the business organizations.
RESPONSIBILITY, ACCOUNTABILITY AND LIABILITY OVER GOVERNMENT FUNDS AND
PROPERTY
The heads of government agency and all its officials and employees shared fiscal responsibility,
accountability and liability over the use of government funds and property which must be used
solely for public purposes in accordance with laws, rules and regulations issued by proper
authorities. Public funds must be utilized in the most efficient, effective and economical manner.
These public funds must be safeguarded and protected against pilferage, misappropriations,
theft, anomalies and irregularities. Thus, no public funds must be used in an irregular,
unnecessary, unlawful and excessive expenditures. Any misuse of government funds shall be
dealt with by the force of law and regulations and sanctioned to the fullest applicable penalties
apropos to the gravity of offense committed. The government agencies responsible in
government accounting are the Commission on Audit, the Department of Finance-Bureau of
Treasury, Department of Budget and Management and various government agencies and
entities.

public sector accounting standards (IPSAS) .

The IPSAL are based on the International Financial Reporting Standards (IFRSs). The provisions of
IPSAS and IFRSs are adopted in the GAM for NGAs, which is in accordance with the power
granted to COA under the Philippine Constitution.
The GAM for NGAs covers the preparation of financial statements in accordance with generally
accepted accounting principles as well as the applicable laws, rules and regulations promulgated
by proper authorities.
OBJECTIVES OF GAM FOR NGAs
1. To update the government accounting standards, policies and procedures;
2. To update coding structures and accounts
3. To update the books of accounts, registries, records, forms and reports regarding receipts
and uses of public funds.
BASIC ACCOUNTING AND BUDGET PRINCIPLES

1. PPSAS, laws and regulations

2. Accrual Basis
3. Budget Basis
4. Revised Chart of Accounts
5. Double Entry Bookkeeping
6. Financial Statements Based on Accounting and Budget Records
7. Fund Cluster Accounting: Regular Agency Fund, Foreign Assisted Projects Fund; Special Accounts
in the General Fund, Internally Generated Fund; Business Related Funds, and Trust Funds

QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS IN GOVERNMENT

Same as with commercial accounting

A. FUNDAMENTAL CHARACTERISTICS

1. Relevance and Reliability

2. Faithful Representation-Completeness, Neutrality and Free from Error

B. ENHANCING CHARACTERISTICS

1. Understandability
2. Comparability
3. objectivity
4. Materiality
5. Prudence
6. Substance Over Form

COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS

1. Statement of Financial Position

2. Statement of Financial Performance
3. Statement of Changes in Net Assets/Equity
4. Statement of Cash Flows Statement of Comparison of Budget and Actual Amounts
5. ; and Notes to Financial Statements

ELEMENTS OF FINANCIAL STATEMENTS

 1. Assets
2. Liabilities
3. Equity/Net Assets
4. Revenue
5. Expenses

RECOGNITION OF THE ELEMENTS OF FINANCIAL STATEMENTS

MEASUREMENT OF THE ELEMENTS OF FINANCIAL STATEMENTS

PRESENTATION OF FINANCIAL STATEMENTS

I. BUDGET PREPARATION STAGE

1. DBM Budget Call- Guideline in the Preparation and Submission of Budget Proposals
2. DBM Review and Hearings
3. DBM Consolidation into National Budget
4. The President's Budget-SONA

II. BUDGET DELIBERATION AND APPROVAL

1. House of Representatives -
2. Bill House of Senate -Bill
3. Bicameral Committee of Both Houses
4. Enacted General Appropriations Act
5. Approval of the President of the Philippines

III. BUDGET EXECUTION

1. Appropriations
2. Allotment
3. Obligation
4. Authority to Disburse
5. Disbursement

IV. ACCOUNTABILITY

1. Budget Execution Documents

2. Financial Reports/Statements
3. Independent Audit by COA
4. Oversight Bodies-DBM, DOF, OP, Congress, Ombudsman
1. 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.” (Milan, 2018)
2. “Government Agency refers to any department, bureau or office of the national government, or
any of its branches and instrumentalities, or any political subdivision, as well as any government
owned and controlled corporation (GOCC), including its subsidiaries, or self-governing board or
commission of the government.”(The State Audit Code of the Philippines (P.D. No. 1445), 1978)
3. “Entity refers to a government agency, department or operating field unit.”(Milan, 2018,)
4. “Financial reporting is the process of the preparation, presentation, and submission of general-
purpose financial statements and other reports.” (Milan, 2018)
5. “Government Accounting Manual for National Government Agencies (GAM for NGAs) was
promulgated by the Commission on Audit to harmonize the government accounting standards
with international accounting standards, particularly the International Public Sector Accounting
Standards (IPSAS) which has been adopted by the Philippine Government through the Philippine
Public Sector Accounting Standards (PPSAS) and incorporated in the GAM for NGAs.” (Milan,
2018)
6. Accrual basis of accounting- these are transactions that are recognized when they occur, not
when cash is received or paid, during the accounting period the transactions relate. (Milan,
2018)
7. Fund Cluster Accounting means that books of accounts are maintained by fund cluster (i.e,
according to the types of funds being accounted for) ,e.g, regular agency fund, foreign assisted
projects fund, special account in the general fund, trust receipts, etc.
8. Fundamental Qualitative Characteristics of financial statements refer to the relevance and
faithful representation of the accounts and figures shown in the financial statements for a given
date or period.
9. Enhancing qualitative characteristics include understandability, comparability, materiality,
timeliness, reliability, objectivity, and full disclosures of financial information found in the
financial statements for a given date or given period.
10. Elements of financial statements are the assets, liabilities, equity, income, and expense
transactions that are classified, summarized, and presented in the financial statements of an
entity.
11. Recognition of the element of financial statements means the recording of the element due to
conformity with its meaning and criteria set in the revised conceptual framework in financial
reporting and applicable accounting rules and regulations issued by the government.
12. National Budget- is the government estimation of the sources and uses of government funds
within a fiscal year. (Millan, 2018).
13. Bottom-up budgeting approach is one wherein several parties participate in the budget
preparation, starting from the lowest to the highest levels of the government. The opposite is a
top-down budgeting approach. (Millan, 2018).
14. Incremental budgeting is an approach wherein the current year’s budget is formulated based on
the previous year’s budget, which is just adjusted to any variances experienced in the past.
(Millan, 2018)
15. Zero-based budgeting is an approach wherein budget is formulated without regard to the
previous year’s budget. (Millan, 2018)
16. Budget call-the budget preparation starts when the Department of Budget and Management
(DBM) issues a budget call to all government agencies. (Millan, 2018)
17. President’s Budget Message- contains the President’s explanation of the country’s fiscal policy
and budget priorities. (Millan, 2018)
18. National Expenditure Program (NEP)- this contains the details of all the government entities’
proposed expenditures in the coming year. (Millan, 2018)
19. Budget of Expenditures and Sources of Financing (BESF)- this contains the estimated
expenditures accompanied by estimates of expected sources of financing.(Millan, 2018)
20. Budget legislation is a process of deliberating the national budget at the House of
Representatives, the House of Senate, and the Bilateral Committee of both Houses, which enact
the national budget into a General Appropriations Act (GAA) for approval by the President of the
Philippines.
21. Approved budget is the expenditure authority derived from appropriation laws, government
ordinances, and other decisions related to the anticipated revenues or receipts, and
expenditures for the budgetary period. (Millan, 2018)
22. Appropriations is the authorization made by Congress of the Philippines to allocate funds for
purposes specified by the legislative body or similar authority. (Millan, 2018)
23. New General Appropriations- are annual authorizations for incurring obligations during a
specified budget year, as listed in the GAA. (Millan, 2018)
24. Continuing Appropriations- are the authorizations to support obligations for specific purposes
of a project, such as multi-year construction projects which require the incurrence of obligations
even beyond the budget year. (Millan, 2018)
25. Supplemental appropriations are additional appropriations authorized by law to augment the
original appropriations which proved to be insufficient for their intended purpose due to
economic, political or social conditions supported by a Certificate of Availability of Funds from
the Bureau of Treasury. (Millan, 2018)
26. Automatic Appropriations are the authorizations programmed annually or for some other
period covered by law which do not require periodic action by Congress. (Millan, 2018)
27. Revolving Funds- “receipts derived from business-type activities of departments or agencies
which are authorized by law to be constituted as such and deposited in an authorized
government depository bank. These funds shall be self-liquidating and all obligations and
expenditures incurred by virtue of said business type activity shall be charged against said
fund.”(http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016/GLOSSARY.pdf)
28. “Trust Receipts-receipts by any government agency acting as agent, trustee, administrator for
the fulfilment of some obligations of conditions.” (http://www.dbm.gov.ph/wp-
content/uploads/BESF/BESF2016/GLOSSARY.pdf)
29. Budget execution is the phase in the national budget process which involves the use and
application of funds for programs, projects, and activities of government agencies. This stage is
executed or implemented by all government entities in the course of their operations.
30. Budget Execution Documents include physical and financial plan, monthly cash program,
estimate of monthly income, and list of obligations that are not yet due and demandable
required by the DBM from various government agencies.
31. Allotment is an authorization issued by the DBM to each of the government to be used for
incurring obligation of funds in accordance with the appropriation and other relevant laws based
on Allotment Release Program and Cash Release Program prepared by the DBM. It is also known
as obligation authority.
32. Obligation is a process whereby a duly authorized official binds the government for the eventual
and immediate payment of sum of money in accordance with certain appropriations and
allotment authorizations.
33. Notice of Cash Allocation is an authorization issued by the DBM to central, regional and
provincial offices, and operating units to cover their cash requirements.
34. Modified Disbursement System (MDS) Checks is a scheme wherein disbursements of
government funds are made by checks against the account of the Treasurer of the Philippines.
35. Budget accountability is the last stage in the budget process whereby all government agencies
are required by the Commission on Audit to report and account for the usages of the budget
appropriated and allotted to them.
36. Responsibility Accounting is a system of providing cost and revenue information over which a
manager has direct control of. (Millan, 2018)
37. Government accounting process comprises the activities of analyzing, recording, classifying,
summarizing, and communicating transactions involving the receipts and disbursements of
government funds and property and interpreting the results thereof.
38. Books of Accounts include journals and ledgers to record government transactions and
economic events.
39. Budget Registries are budgetary control measures to monitor the use and application of the
budgets allocated to different government agencies, namely: Registries of Revenue and Other
Receipts (RROR); Registries of Appropriations and Allotments (RAPAL); Registries of Allotments,
Obligations and Disbursements (ROAD), and Registries of Budget Utilization and Disbursements
(RBUD). (Millan, 2018)
40. Allotment classes consist of personal services, maintenance, other operating expenses, and
capital outlay .

1. The Department of Budget and Management (DBM) is the one which causes the preparation
and consolidation of the national budget of all government agencies and offices. Annually, DBM
issues a budget call to all government agencies and offices for them to prepare their respective
budget proposals that would be consolidated in a national budget to be submitted to the
President of the Philippines and the Congress of the Philippines. The national budget will be
deliberated upon by both Houses of Congress and their Bilateral Committee and will be enacted
into an Annual General Appropriations Act (GAA). The DBM is also responsible for the allocation
and monitoring of the respective approved budget of the different agencies and offices of the
 government. In the monitoring of the respective budget of various government offices and
departments, the DBM adopts performance-based budget evaluation and review focusing on
the outputs and outcomes of every peso allocated to these government agencies and offices.
2. The Congress of the Philippines is the one legislating the budget and tax measure to finance
such a budget. It has the power of the purse, as it is portrayed. It deliberates on the national
budget that consists of the target revenues and expenditures of the government during a given
year. It also has an oversight power over the executive branch in terms of how they spend their
budget allocated to them by way of appropriations, allotments, and cash allocations. During the
budget deliberations, heads of government agencies and offices are called to present and
depend on their proposed budgets before the appropriation committees, other sub-committees,
and the plenary session of both houses of congress. This is a rigorous, heart-breaking, and mind-
boggling dilemma of the Secretaries, Under-Secretaries, Assistant Secretaries who have to
undergo direct and face-to-face questionings from congressmen and senators who possess
legislative immunity and ask even incriminating and offensive questions in the guise of an aid-in
legislation.
3. The Department of Finance (DOF) is the one raising money through the Bureau of Internal
Revenues and Bureau of Customs in the form of taxes, tariff, and custom duties. There are also
other government agencies that contribute non-tax revenues such as the GOCCs, Land
Transportation Office, etc. The DOF is also responsible for financing the budget deficit through
local and foreign borrowings. The Bureau of Treasury under the DOG is in charge of the issuance
of Notice of Cash Allocation in support of the budget allotments issued by the DBM to various
government agencies and offices. While Notice of Allotment is the basis for incurrence of
obligation, Notice of Cash Allocation is the basis to pay that obligation.
4. Various government branches, departments, agencies, instrumentalities, and offices including
GOCCs and local government units. They are responsible for the preparation and submission of
their respective budget proposals for inclusion in the national budget. They are also responsible
for the maintenance of their respective separate books of accounts to account and report the
receipts and disbursements of public funds that come to their possession and accountability.
They are also responsible to provide basic and essential services to the public and citizenry in
accordance to their legal mandate.
5. As stated in the website of the Official Gazette of the Republic of the Philippines The
Commission on Audit (COA) is empowered under the Philippine Constitution to promulgate
accounting and auditing rules and regulations in the government sector. Thus, COA implements
the decade old Presidential Decree No. 1445, as amended, otherwise known as the Auditing
Code of the Philippines. Aside from the issuance of rules and regulation on government
accounting, COA also acts as the independent auditor of the government agencies in terms of
fulfilling its responsibility as the precursor of accountability of government funds and property
entrusted to government officials and employees.
The sheer size and complexities of government transactions manifests the need for an advanced and
computerized government accounting information system in order to improve the quality of public
services. Like commercial accounting which is always attuned to the modern and globalized business
environment, government accounting must be aligned with the political, legal, and regulatory
environment that besets government operations.

The government does not operate to make a profit, but its focus is more on how to manage and be
accountable for the money and funds it has collected from taxes and non-taxes revenues. These
government revenues are kept and treated in the general fund of the government and used to defray
the national budget that amounts to around four trillion pesos in 2020 and is growing year on year by a
considerable amount. Thus, government accounting becomes more significant in this regard.

Accordingly, fund accounting is the one applied more appropriately in accounting for revenues, receipts
and disbursements of government funds. Public funds are considered as an accounting entity that must
have separate and distinct books of accounts to analyze, record, classify, summarize and report on all
transactions related to these funds. In government, there is a “one-fund concept” wherein all funds
must be managed and kept in the “General Fund” unless otherwise provided for in a special law or
regulation.

The Commission on Audit prescribes the accounting rules and regulations in government financial
operations. COA has adopted the “Philippine Public Sector Accounting Standards” and the “Philippine
Financial Reporting Standards” in the development and implementation of government accounting rules
and regulations. These accounting rules and regulations are enshrined in the New Government
Accounting System (NGAS) in government.

The NGAS is basically similar with commercial or private accounting systems in the sense that it follows
the same steps in the accounting process or cycle, has made use of general and special journals as well
as general and subsidiary ledgers, formulates its own government standard chart of accounts, among
others. However, NGAS is different from a commercial accounting system because of some peculiar
nature and characteristics of certain accounts and records found in government budget, accounting, tax,
and audit systems. For example, the presence of appropriations, allotments, cash allocations, the budget
registries, and execution documents in relation thereto which are not applied in private business
accounting.

In broad sense, we have to start with the budgetary system before we understand clearly the essence of
government accounting. There are four phases or stages in this budgetary system, namely:

1. Budget preparation

2. Budget legislation and approval

3. Budget execution and implementation, and

4. Budget monitoring and accountability.

 First, budget preparation deals with the coordination and cooperation among government agencies
and offices on how to come up with the national budget to be presented by the President of the
Philippines before both houses of Congress of the Philippines during his State of the Nation Address
(SONA). The DBM takes the lead in formulating the policies and standards in preparing the national
budget. The DBM issues a “budget call” which provides for the guidelines and calendar by which the
various government agencies and entities will follow in preparing their respective budget proposals.
Then, DBM collates and consolidates each of the budget proposals submitted by all government
agencies and offices. The consolidated budget becomes the national budget that contains the estimated
annual revenues, receipts, and expenditures of the government for the ensuing fiscal year.

Second, budget legislation and approval is the province of the legislative branch of government, which
is the House of Representatives and the House of Senate. Both houses of Congress deliberate on the
national budget submitted by the President of the Philippines. They call the cabinet members by cluster
to explain and depend on their respective budget before subcommittees, committee on appropriations
and the plenary session before the national budget is enacted into the General Appropriations Act. Once
the GAA is enacted, it is submitted to the President of the Philippines for approval and signature before
it can be implemented. Then, the President has the right to veto or approve certain items in the GAA
that he may find appropriate and necessary.

Third, budget execution and implementation start with the approval of the President of the GAA. Based
on the duly approved GAA, DBM starts the allocation and allotment of the budget to the various
government agencies and offices which will obligate and disburse their respective budget in a manner
that is in accordance with the rules and regulations prescribed by the Commission on Audit and other
fiscal authorities of government. These government agencies and offices use their budget allotment and
allocation in performing their programs/projects/activities during the budget year which include
personal services (PS) , maintenance and operating expenses (MOOE), and capital outlay(CO). Personal
Services refer to the salaries and wages, allowances and other fringe benefits of government officials
and employees. Maintenance and Other Operating Expenses include transportation, communication,
repairs and maintenance, rentals, office supplies, advertising, representation, fuels, utilities, and other
operating expenses. Capital Outlay is used to buy and construct equipment, machineries, buildings,
bridges, roads, and other infrastructures of the government. These government agencies and offices
maintain books and records for their receipts and uses of these government funds and submit reports
thereon.

Fourth, budget monitoring and accountability is done by the DBM, COA, and Congress Oversight
Committees. It involves the review and evaluation of the programs, projects, activities accomplished and
not accomplished by concerned government agencies and offices. The target outputs and outcomes set
by these government agencies and offices must be met. Variances, if any, are well explained and
justified. The COA suspends or disallows disbursements of funds that do not comply with laws, rules,
and regulations related thereto. Suspension of disbursements means that an explanation and supporting
evidence need to be submitted to COA within ninety (90) days, or else they become disallowed.
Disallowance means there is an illegality and irregularity in the use of funds and refund thereof is
required of the concerned officials and/or employees. But the decision of COA can be appealed before
the Supreme Court on certiorari. On the other hand, the DBM may withhold release of additional funds
to a government agency which does not observe the proper use of funds to programs/projects/activities
and does not achieve certain set performance targets.

The NGAS is used by government agencies and offices in accounting for the receipts and disbursements
of funds in accordance with the following underlying disbursement principles set by COA:

1. No public funds shall be disbursed without an appropriation provided for by law.

2. Public funds must be used solely for public purpose.
3. All disbursement of public funds must bear the approval of a proper government official.
4. All disbursement of public funds must be supported by complete, proper, and valid documents.
5. Trust funds shall be used only for the specific purpose intended.
6. Disbursement of funds must comply with relevant laws, rules and regulation.
7. Public officers and employees entrusted with the custody and disbursements of public funds
must be bonded with the fidelity fund of the Bureau of the Treasury.

The NGAS observes the same steps in the accounting cycle similar to commercial accounting such as the
following:

1. Identification and analysis of financial transactions based on underlying documentation.

2. Journalization or recording of these transactions in the general and/or special journals in a
systematic and chronological manner.
3. Posting – classifying accounts balances from the journals to the ledgers.
4. Trial Balance -checking the equality of debit balances and credit balances of the accounts
recorded and classified in the ledgers.
5. Worksheet- an optional device used to facilitate the preparation of the Statement of Income
and Statement of Financial condition. This becomes obsolete under a computerized accounting
system.
6. Adjusting Entries- update and adjustment of certain accounts to prepare fair and accurate
financial statements free from error like overstatement and understatement of certain
accounts.
7. Preparing the Statement of Income/Comprehensive Income and Statement of Financial
Statements based on the Worksheet, if any.
8. Closing entries- the temporary or nominal accounts presented in the Statement of Income and
Comprehensive Income are closed to Income and Expense Summary Account and finally to
Equity Account to line with the start of the next accounting period. Simply stated, all income and
expense accounts are closed to equity accounts.
9. Post-closing trial balance- to check the equality of debit balances and credit balances of
permanent or real accounts after closing entries on temporary and nominal accounts are done.
10. Reversing entries – all adjusting entries which affected the asset accounts and liability accounts
are reversed to avoid duplication of transaction entries in the next accounting period. Thus,
reversing entries are done before the start of the next accounting period.