Professional Documents
Culture Documents
Compiled by:
JERRY A. CALAYAN
2021
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
Module 2
Overview
The New Government Accounting System Manual presents the basic policies and
procedures; the new coding system and chart of accounts; the accounting books, reports/forms
and financial statements, and illustrative accounting entries to be adopted by all local
government units effective January 1, 2002.
Module Objectives
The objective of the New Government Accounting Manual for LGUs are to prescribe the
following:
a. Uniform guidelines and procedures in accounting for government funds and property;
b. New coding structure and new chart of accounts; and
c. New accounting books, reports/forms, financial statements and accounting entries.
The new government accounting system has the following basic features and policies, to wit:
One Fund Concept. This system adopts the one fund concept. Separate fund
accounting shall be done only when specifically required by law or by a donor agency or
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
Special Accounts in the General Fund. Special accounts in the General Fund
complete with subsidiary ledgers, shall be maintained for the following:
Chart of Accounts and Account Codes. A new coding structure and a new chart of
accounts was prescribed on COA Circular 2015-009 dated December 01, 2015 and
adopted the Unified Account Code Structure (UACS).
Journals
Cash Receipts Journal (CRJ)
Cash Disbursements Journal (CDJ)
Check Disbursements Journal (CKDJ)
3 General Journal (GJ)
Ledgers
General Ledger (GL)
Subsidiary Ledgers, where applicable for:
Cash
Receivables
Inventories
Investments
Property, Plant and Equipment
Liabilities
Income
Expenses
All the above records shall be maintained by the accounting unit of the LGUs. However,
treasurers and disbursing officers shall also maintain their respective cash records such
as:
The Treasurers/Collectors shall prepare the Report of Collections and Deposits (RCD)
daily and the Report of Accountability for Accountable Forms (RAAF) monthly.
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows
Notes to Financial Statements shall accompany the above statements.
Perpetual Inventory of Supplies and Materials. Supplies and materials purchased for
inventory purpose shall be recorded using the perpetual inventory system. Regular
purchases shall be coursed thru the inventory account and issuances thereof shall be
recorded as they take place except those purchased out of petty cash fund which shall
be for immediate use and not for stock. Such case shall be charged immediately to the
appropriate expense accounts.
Maintenance of Supplies and Property, Plant and Equipment Ledger Cards. The
Accounting Unit shall maintain Supplies Ledger Cards by stock number and Property,
Plant and Equipment Ledger Cards by category of assets.
Liquidated damages charged and paid for by the contractor shall be deducted from the
total cost of the asset. Any related expenses incurred during the construction of the
project, such as, license fees, permit fees, clearance fees, etc. shall be capitalized.
Public Infrastructures. Public infrastructures are assets for use of the general public,
such as roads, bridges, waterways, railways, plazas, monuments, etc. A Registry of
Public Infrastructures (RPI) shall be maintained according to classification to record all
infrastructures for use of the general public. The following are the Registries to be
maintained, classified by category of property, plant and equipment:
During construction these infrastructures shall be recorded in the books under the
account "Construction in Progress". Upon completion, the completed asset shall be
transferred to the account "Public Infrastructure". At the end of the year, completed
assets under "Public Infrastructure" shall be transferred to the respective registry.
Completed public infrastructures funded out of a loan shall, however, be retained in the
books of accounts until the loan is fully paid. A Summary of all Public Infrastructures
(based on the different registries) shall be prepared annually and included in the Notes
to Financial Statements.
5
Depreciation. The straight-line method of depreciation shall be used. A residual value
equivalent to ten percent (10%) of the cost shall be set-up and depreciation shall start
on the second month after purchase/completion of the property, plant and equipment.
Public infrastructures shall not be charged any depreciation.
Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set
up for estimated uncollectible receivables. This will allow for a fair valuation of
receivables. Allowance for Doubtful Accounts shall be provided only for trade
receivables.
Recognition of Liability. Liability shall be recognized at the time goods and services
are accepted or rendered and supplier/creditor bills are received.
Accounting for Borrowings and Loans. All borrowings and loans incurred shall be
recorded direct to the appropriate liability accounts.
Elimination of corollary and negative entries. The use of corollary and negative
entries shall be stopped. Acquisition/Disposition of assets shall be debited/credited
direct to the appropriate asset accounts. If an error is committed, a correcting entry shall
be prepared to adjust the original entry.
The General Accounting Plan shows the overall accounting cycle in the Local Government
Unit. Transactions shall emanate from the different offices/departments of the local government
units (LGUs). These offices/departments will provide/produce the source documents and other
accounting forms leading to the perfection of the transaction, whether it be budgetary,
collections or disbursements. The source documents and accounting forms shall be the basis
for the preparation of reports by the Office of the Treasurer. The Office of the Accountant shall
record the transactions to the registries or to the corresponding books of original entry. Posting
to the books of final entry and preparation of the financial reports shall also be undertaken by
the Office of the Accountant. 6
BUDGETARY ACCOUNTS
The local sanggunian approves the annual budget thru the issuance of appropriation
ordinance. On the first business day of the fiscal year, the entire annual budget of the local
government unit shall be recorded in the Registry of Appropriations, Allotments and Obligations
(RAAO). The appropriations, in the amounts approved by the legislative body and confirmed by
the reviewing authorities, are recorded in the registries maintained by the accountant where
they may be compared with the actual developments of the period.
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
Budgetary reserves which are stand by appropriations ready for release in case of calamities,
as well as supplemental budget are similarly recorded in the RAAO. In case the LGU is
operating on a re-enacted budget, said re-enacted budget shall likewise be recorded in the
registry. Once current budget is approved, the necessary adjustments shall be made in the
registry.
Separate registries shall be maintained for the four classes of expenditures per responsibility
center, to wit:
Obligation. It refers to the amounts committed to be paid by the LGU for any lawful act made
7 by an accountable officer for and in behalf of the local government unit concerned.
Local accountants and treasurers shall maintain separate books and depository accounts,
respectively, for each fund in their custody or administration. Local treasurer shall maintain
depository accounts in the name of their respective local government units with banks,
preferably government-owned, located in or nearest to their respective areas of jurisdiction.
Earnings of its depository accounts shall accrue exclusively thereto. Officers of the local
government authorized to receive and collect monies arising from taxes, revenue, or receipts of
any kind shall remit the full amount received and collected to the treasury of such local
government unit which shall be credited to the particular account or accounts to which the
monies in question properly belong.
The sources of income are further classified into general income accounts and specific income
accounts.
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
The following shall comprise the General Income Accounts applicable to LGUs:
The following major classification comprise the specific income accounts for LGUs:
Property Taxes
Taxes on Goods and Services
Other Taxes
Other Specific Income
8
The following accounting methods shall be adopted in recording income:
a. Accrual Method – Accrual method of accounting shall be used to record Share from
Internal Revenue Collections in the books of accounts. Upon receipt of the Notice of
Funding Check Issued from Department of Budget and Management (DBM), Share
from Internal Revenue Collections shall be taken up as Due from NGAs and credited to
Share from Internal Revenue Collections. However, Cash in Bank shall be debited
upon receipt of Bank Credit Advice as to receipt of the Share from Internal Revenue
Collections regardless of whether or not the Notice of Funding Check Issued has been
received from DBM.
b. Modified Accrual – Modified accrual method of accounting shall be used for real
property taxes. At the beginning of the year, Real Property Tax Receivable and Special
Education Tax Receivable shall be established. This is in view of the need to record in
the books not mere income estimates from real property taxes but actual receivables
from said taxes. However, to avoid appropriating uncollected revenues which might
result to huge cash overdraft, the same shall be credited to Deferred Real Property
Taxes Income/Deferred Special Education Tax Income. Real Property Tax
Income/Special Education Tax Income shall be recognized upon receipt of collection.
c. Cash Basis – Cash basis of accounting shall be used for all other taxes, fees, charges
and other revenues.
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
Real Property Tax Receivables/Special Education Tax Receivables shall be established at the
beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At
the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certified list
showing the name of taxpayers and the amount due and collectible for the year. Based on the
list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the debit to Real
Property Tax Receivable/Special Education Tax Receivable and crediting to Deferred Real
Property Tax Income/Deferred Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the account Deferred Real Property
Tax Income/Deferred Special Education Tax Income shall be debited while the Real Property
Tax Income due to the municipality is recognized/credited. The share of the Province and
Barangay shall also be credited to Due to LGUs.
Every end of the week, thereafter the Municipal Accountant shall furnish the Provincial
Accountant with a summary of the JEVs showing the breakdown of the amounts Due to LGUs.
The summary, which shall be supported with copies of the JEVs, shall be the basis of the
Provincial Accountant to draw the JEV taking up the RPT Income. The account Due from LGU
shall be debited and Real Property Tax Income credited.
At the end of the month, the Municipal Accountant shall likewise prepare the Abstract of Real
Property Tax to facilitate the distribution of real property tax collection. A copy of the abstract
9 shall be furnished the Provincial Accountant, for purposes of reconciliation with the weekly
summary of JEVs.
A. Books of Municipality
1. Setting-up of receivable
Real Property Tax Receivable xxx
Deferred Real Property Tax xxx
2. Receipt of payment
Cash Local Treasury xxx
Real Property Tax Receivable xxx
4. Deposit of Collections
Cash in Bank-LCCA xxx
Cash Local Treasury xxx
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
5. Remittance of Share
Due to LGUs xxx
Cash in Bank-LCCA xxx
2. Deposits of collections
Cash in Bank-LCCA xxx
Cash Local Treasury xxx
Borrowings
1. Receipt of Borrowed Funds from Bank
Cash in Bank-LCCA xxx
Loans Payable-Domestic xxx
1. Personal Services
2. Maintenance and Other Operating Expenses
3. Capital Outlay
4. Financial Expenses
PERSONAL SERVICES
1. Cash advance for personal services
Payment of rent/utilities
CAPITAL OUTLAY
EQUIPMENT
Readings:
https://www.coa.gov.ph/index.php/2013-06-19-13-06-41/manuals/category/163-for-
local-government-units
https://www.coa.gov.ph/phocadownload/userupload/Issuances/Circulars/Circ2015/anne
x_a_charts_of_account.pdf
QUESTIONS
1. What registries are maintained by the local government accounting units to control the 12
appropriations, allotments and obligations?
4. Briefly explain the basic features and policies relating to local government units.
RESEARCH ACTIVITIES
3. Compare the accounting system with the published accounting manual on local
government units.
1. Budgetary procedures
ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
2. Accounting system
3. Financial statements
Exercises
1. Received the Notice of Funding Check Issued from DBM for the share of the municipality for
internal revenue collections, P50,000,000.
2. Collected receivables for real property taxes , P10,000,000 and special education tax,
P10,000,000 from various taxpayers. (Real property tax and special education tax are both
based on 2% of the assessed values of real property.)
3. Deposited the total collections to LANDBANK.
4. Paid MERALCO bill of P67,200, less tax.
5. Purchased office supplies on account from National Company, a VAT registered supplier,
P20,000.
6. Paid the bills for the following: PLDT landline -P33,600; GLOBE cel-P22,400.
7. Collected real property tax and special education tax, assessed value of real property is
P150,000,000, from new taxpayers.
8. Deposited the total collections to LANDBANK.
9. Paid the account with National Company, net of tax.
10. Received the credit memo from the bank for its share of internal revenue collections,
P30,000,000.
11. Collected P200,000 from Income from market operations.
12. Collected permit fees, P150,000, and garbage fees, P50,000.
13. Deposited the total collections from above receipts to LANDBANK.
13 14. Distributed the total amount of real property tax collected based on the following sharing:
Municipality-40%; Province-35%; Barangay-25%
15. Remitted the share due to Province and Barangays for real property tax.
Exercise 2
Journalize the following selected transactions of a municipality (local government unit):
a. Setting up of the estimated receivables on real property tax, P10,000,000 and special education
tax.
b. Collection of receivable on real property tax, P1,000,000 and P1,000,000 special education tax.
c. Distribution of real property tax: Municipality-40%, Province-35%, Barangay-25%.
d. Deposited total collections for real property and special education tax.
e. Remittance of Share due to Provinces and Barangays for real property tax collected.
f. Garbage fees collected, P150,000.
g. Received income from the operations of the following utilities:
Markets, P100,000
Hospitals, P200,000
Cemeteries, P50,000
Slaughterhouses, P30,000
h. Collected permit fees, P50,000; registration fees, P20,000 and other local taxes, P30,000.
i. Deposited receipts and collections amounting to P630,000.
j. Receipt of Notice of Funding Check Issued from the DBM for Internal Revenue Allotment,
P5,000,000