Professional Documents
Culture Documents
Gutierrez, CPA
LIABILITIES
• Liability – is a present obligation arising from past event, the settlement of which
is expected to result in an outflow of resources embodying economic benefits or
service potential.
• Present obligation means that as of the reporting date, an obligating event must
have already occurred.
• An obligating event is an event that creates either:
a. Legal Obligation – is an obligation that results from a contract,
legislation, or other operation of law; or
b. Constructive Obligation – is an obligation that results from an entity’s
actions (e.g., past practice, published policies) that create a valid
expectation from others that the entity will accept and discharge certain
responsibilities.
FINANCIAL LIABILITIES
Examples:
• Accounts Payable
• Notes Payable
• Interest Payable
• Loans Payable
• Bonds Payable
• Accrued Payables
Katrine Celine C. Gutierrez, CPA
INITIAL MEASUREMENT
• Financial liabilities are initially measured at fair value minus transaction costs,
except for financial liabilities at fair value through surplus or deficit (e.g.,
designated financial liabilities and derivative liabilities) whose transaction costs
are expensed.
• Transaction costs are incremental costs that are directly attributable to the
acquisition, issue, or disposal of a financial instrument.
SUBSEQUENT MEASUREMENT
DERECOGNITION OF LIABILITY
PROVISION
2 GOVERNMENT ACCOUNTING
• Provision – is a liability of uncertain timing or amount.
• A provision is recognized if all the recognition criteria for a liability are met (i.e.,
present obligation, probable outflow, and reliable measurement). If one or more
of the criteria are not met, the item is a contingent liability, not a provision, and
therefore not recognized as liability.
CONTINGENT LIABILITY
CONTINGENT ASSET
• Contingent Asset – is a possible asset that arises from past events, and whose
existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of the entity.
Katrine Celine C. Gutierrez, CPA
ILLUSTRATION:
The Collecting Officer of Agency DEF received P20,000 cash for the performance bond
from Contractor X to guaranty full performance of their contract. Said amount was
remitted to Bureau of Treasury.
The following journal entries shall be prepared to record the above transactions:
3 ACCOUNTGOVERNMENT ACCOUNTING
ACCOUNT TITLE DR. CR.
CODE
Cash Collecting Officer 10101010 P 20,000
Guaranty/Security Deposits Payable 19901010 P 20,000
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash – Treasury/Agency Deposit, Trust 10104010 P 20,000
Cash Collecting Officer 10101010 P 20,000
These are receipts of income, receivables or trust funds for the account of other NGAs,
LGUs, GOCCs or non-government/private organizations. These collections are later
remitted to the government agencies or non-government/private organizations
concerned.
Katrine Celine C. Gutierrez, CPA
ILLUSTRATION:
Agency X collected fees accruing to the University of the Philippines legal research fund
in the amount of P3,000 and remitted the same to the Bureau of Treasury. The UP legal
research fund and Bureau of Treasury appropriately recognized this in their respective
books.
Books of Agency X
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash Collecting Officer 10101010 P 3,000
Due to NGAs 20201050 P 3,000
4 GOVERNMENT ACCOUNTING
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Due to NGAs 20201050 P 3,000
Cash Collecting Officer 10101010 P 3,000
Books of BTr
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash In Bank – Local Currency, Savings
Account 10102030 P 3,000
Cash – Treasury/Agency Deposit,
Trust 10104030 P 3,000
Books of UP-LRF
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash – Treasury/Agency Deposit, Trust 10104030 P 3,000
Trust Liabilities 20401010 P 3,000
These are cash received from central office/regional office/operating units of an entity
for the purpose of implementing specific projects.
ILLUSTRATION:
5 GOVERNMENT
In an intra-agency transaction, the Central Office (CO) of DOH made fundACCOUNTING
transfer to its
Regional Office (RO) in the amount of P500,000 for the implementation of its campaign
against dengue in Zone A of Region X. Said amount was accordingly remitted to the
Bureau of Treasury by the RO.
The following journal entries shall be prepared to record the above transactions:
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash Collecting Officer 10101010 P 500,000
20301030/
Due to Regional Offices (Due to NGAs) (20201050) P 500,000
ACCOUNT
ACCOUNT TITLE DR. CR.
CODE
Cash Treasury/Agency Deposit - Trust 10104030 P 500,000
Cash Collecting Officer 10101010 P 500,000