FELLOWSHIP BAPTIST COLLEGE

COLLEGE OF BUSINESS AND ACCOUNTANCY

Bachelor of Science in Accountancy

Subject Code: PrE 8

Subject Title: Accounting for Government and Non-profit Organizations
Term: Prelim
Schoology Access Code: NNV9-DNNS-K4ZGZ
Consultation time: Tuesday and Thursday (09:30-10:30)
Contact Information of the Instructor/s: FB/Messenger: Aprilyn Vidal
Phone: 09504421449
Email: aprilynvidal@gmail.com

Module # 1
OVERVIEW OF GOVERNMENT ACCOUNTING
September 01, 2020 / 09:00-10:30

Learning Objectives
1. Differentiate government accounting from the accounting for business entities.
2. State the government entities charged with accounting responsibility.
3. Describe briefly the GAM for NGAs.
4. State the basic principles used in government accounting.
5. State the recognition criteria for assets.
Introduction
This module involves discussions on principles and theories about government accounting and
reporting the government transactions using the Philippine Government Accounting Standards
(PGAS) and the New Government Accounting System (NGAS) prescribed by the Commission on
Audit and International Public-Sector Accounting Standards (IPSAS).

Discussion
Definition of Government Accounting
“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.” (State Audit Code of the
Philippines, P.D. No. 1445, Sec. 109)
Objectives of the Government Accounting
a. To produce information concerning past operations and present conditions;
b. To provide a basis for guidance for future operations;
c. To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and
d. To report on the financial position and the results of operations of government agencies for
the information and guidance of all persons concerned.
Government Accounting vs. Business Accounting
Compared to the accounting for business entities, government accounting places greater emphasis
on the following:
 Sources and utilization of government funds; and
 Responsibility, accountability and liability of entities entrusted with government funds and
properties.
Responsibility, Accountability and Liability over Government Funds and Property
 The head of a government agency is directly responsible in implementing this policy.
 All other personnel entrusted with the custody of government resources are responsible to
the head of the government agency, are accountable for the safeguarding thereof, and are
liable for any losses.

Government resources must be utilized efficiently and effectively in accordance with the law.
Government officials are responsible in implementing this policy, are accountable for the
government resources in their custody, and are liable for any loss.

Accounting Responsibility
The following offices are charged with government accounting responsibility:
1. Commission on Audit (COA)
2. Department of Budget and Management (DBM)
3. Bureau of Treasury (BTr)
4. Government agencies

Commission On Audit (COA)

Responsibilities of COA
 Promulgate accounting and auditing rules
 Keep the general accounts
 Submit financial reports

Department of Budget and Management (DBM)

Responsibility of DBM
 Implementation of the national budget
The Department shall be responsible for the efficient and sound utilization of government funds
and revenues to effectively achieve the country’s development objectives
Bureau of Treasury (BTr)
Responsibility of BTr
 Cash custody and control of disbursements.
o Receive and keep national funds, manage and control the disbursements
o Maintain accounts of financial transactions of all national government offices,
agencies and instrumentalities.
(Thus, the Bureau of Treasury shall control and monitor the Notice of Cash
Allocation (NCA) released by the Department of Budget and Management; as well
as the bank transfers it makes in replenishing its Modified Disbursement System
(MDS) accounts.)

Government Agencies
Responsibility of government agencies
 Maintain accounting books and budget registries which are reconciled with the cash
records of the BTr and the budget records of the COA and DBM.

Financial Reporting System of the National Government

The GAM for NGAs

 The Government Accounting Manual for National Government Agencies (GAM for
NGAs) is promulgated by the COA under the authority conferred to it by the Philippine
Constitution.
  The GAM for NGAs was promulgated primarily to harmonize the government accounting
standards with the International Public Sector Accounting Standards (IPSAS). The
IPSASs are based on the IFRSs.

Objectives of the GAM for NGAs

To update the following:
 Standards, policies, guidelines and procedures in accounting for government funds and
property;
 Coding structure and accounts; and
 Accounting books, registries, records, forms, reports and financial statements.

Basic Accounting and Budget Reporting Principles

 Compliance with PPSAS (Philippine Public Sector Accounting Standards) and relevant

laws, rules and regulations

 Accrual basis of accounting

 Budget basis for presentation of budget information in the financial statements

 Revised Chart of Accounts prescribed by COA

 Double entry bookkeeping

 Financial statements based on accounting and budgetary records

 Fund cluster accounting

Fund Clusters
Qualitative Characteristics of Financial Reporting
1. Understandability

2. Relevance

3. Materiality

4. Timeliness

5. Reliability

6. Faithful representation

7. Substance over form

8. Neutrality

9. Prudence

10. Completeness

11. Comparability

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;
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements

Recognition of an Asset
An item is recognized as asset if it meets all of the following criteria:
(1) It meets the definition of an asset;
(2) Probable inflow of future economic benefits; and
(3) Reliable measurement of cost or other value (e.g., fair value).
The following are indicators of probable inflow of future economic benefits:
a) the chance of benefits arising is more likely rather than less likely (e.g. greater than 50%).
b) benefits can be expected on the basis of available evidence or logic.
The following are indicators of reliable measurement:
a) valuation method is free from material error or bias.
b) faithful representation of the asset’s benefits.
c) reliable information will, without bias or undue error, faithfully represent those
transactions and events.

Summary
Government accounting also aims to demonstrate accountability of the entity for the
resources entrusted to it.
COA, DMB, BTr and other government agencies are those charged with government
responsibility
The GAM for NGAs provides the principles and procedures to be applied in the financial
reporting of government entities.
The basic principles of government accounting are:
 Compliance with PPSAS (Philippine Public Sector Accounting Standards) and
relevant laws, rules and regulations
 Accrual basis of accounting
 Budget basis for presentation of budget information in the financial statements
 Revised Chart of Accounts prescribed by COA
 Double entry bookkeeping
 Financial statements based on accounting and budgetary records
 Fund cluster accounting
The 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;
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements
Assess Yourself (Multiple Choice)
1. A primary characteristic that distinguishes governmental entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.

2. Which of the following characteristics distinguishes a governmental or not-for-profit entity

from a business entity?
a) There is always a direct link between revenues generated and expenditures/expenses
incurred.
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
3. Which of the following can be affected by GAAP?
a) Legal ability to issue bonds.
b) Ability to balance the budget.
c) Amount reported as employee pension plan contributions.
d) Claims and judgments settled.

4. Which of the following characteristics is unique to a governmental entity?

a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by grants.

5. Which of the following characteristics is unique to a governmental entity?

a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by grants.

6. Which of the following objectives is considered to be the cornerstone of financial reporting by

a governmental entity?
a) Accountability.
b) Budgetary compliance.
c) Interperiod equity.
d) Service efforts and accomplishments.

7. The most significant financial document provided by a governmental entity is the

a) The balance sheet.
b) The operating statement.
c) The operating budget.
d) The cash flow statement.

8. Which of the following is common to both governments and not-for-profit entities but
distinguishes these entities from for-profit entities?
a) The budget is a legal, financial document.
b) Revenues are usually indicative of demand for goods or services.
c) There is direct matching of revenues and expenses.
d) There are no defined ownership interests.

9. Which of the following is NOT a purpose of external financial reporting by governments?

External financial reports should allow users to
a) Assess financial condition.
b) Compare actual results with the budget.
c) Assess the ability of elected officials to effectively manage people.
d) Evaluate efficiency and effectiveness.
10. Users of government financial statements should be interested in information about
compliance with laws and regulations for which of the following reasons?
a) To determine if the entity has complied with bond covenants.
b) To determine if the entity has complied with taxing limitations.
c) To determine if the entity has complied with donor restrictions on the use of funds.
d) To determine all of the above.

Note: This is not a graded activity; rather, an assessment on how well you understand the topic.
A separate quiz will be announced and given.

Source: Accounting for Government and Non-profit Organizations by Zeus Vernon Millan

Reviewed by:

Mr. Sammie R. Parreño, CPA

Program Head

Approved by:

Engr. Sharon Rose B. Albayda, LPT, PhD

Dean, College of Business and Accountancy

b, d, c, c, c, a, c, d, c, d