SUBJECT: Accounting 16

Descriptive Title: Accounting of Government and Non-Profit Organization

Instructor: Alfredo R. Cabiso

LESSON NO. 1 – Government Accounting –

New Government Accounting System (NGAS)

Definition (Section 109 of PD 1445)

Government Accounting encompasses the processes of analyzing, recording, classifying,
summarizing and communicating all transactions including the receipt, disposition and utilization
of government funds and property and interpreting the results thereof.

As a process, it puts together all activities, pertaining to the gathering of data which are to be
used as the bases for management decisions. It includes:

1. bookkeeping
2. posting or grouping or classifying of similar terms
3. preparation of periodic, financial reports
4. analysis of reports to determine their accuracy and adequacy and effectiveness of
agency operations.

Like commercial accounting, government accounting is an art and are based on fundamental
concepts regarding accounting functions and the rules governing accounting practices. These
rules which are derived from experience and reason are flexible and in a constant process of
evolution.
Primary purpose of Government Business
To render service to the public as distinguished from the usual profit business
Peculiarities of Government Business
As to Purpose
The primary purpose of the government business is to render service to the public at the lowest
cost possible as distinguished from the usual profit motive of the private business.

As to ownership
There are no defined individual ownership interests in the government business, that can be
acquired, sold, transferred re redeemed in the commercial sense. Although every citizen is said
to have a share in the assets of the government, no one may dispose of his share and realize
from it.

As to Management
Managers of private businesses have relatively few internal limitations unlike the officers and
administrators of the government business who are governed by specific laws and regulations.

As to Income
Private business derives from charges made to services rendered or commodities sold while the
government derives most of its income from the collection of taxes and fees.

Basic Objectives of Government Accounting

1. To provide information concerning past operations and present conditions

2. To provide as a basis for guidance for future operations
3. To provide for control the acts of public bodies and offices regarding the receipt,
disposition and utilization of government funds and property.
4. To report on the financial condition and the results of operations of government agencies
for the information of all concerned.
 OBJECTIVE OF NGAS
1. Simplify government accounting
2. Conform to international accounting standards
3. Generate periodic and relevant financial reports for better monitoring of performance

Subjects of Government Accounting

1. National Government – consisting of departments, bureaus, commissions, boards, state
colleges and universities
2. Local Government – provinces, chartered cities, municipalities, and barangays
3. Government-owned or controlled corporations – which were created by law to manage
specific type of business
Basic features and policies
The NGAS has the following basic features and policies:
1. Accrual Accounting. A modified accrual basis of accounting shall be used.
Under this method, all expenses shall be recognized when incurred and reported
in the financial statements in the period to which they relate. Income shall be on
accrual basis except for transactions where accrual basis is impractical or when
other methods are required by law.
2. 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 when otherwise necessitated by circumstances subject to prior
approval of the Commission on Audit (COA).
The NGAS adopts the fund concept and that is the general fund.
General Fund. General funds are funds which are generally available for all
functions of government or for any purpose that Congress may choose to apply
and are composed of all receipts or revenues that do not otherwise accrue to
other funds.
Separate fund accounting shall be done only when specifically required by law or
by a donor agency or when otherwise necessitated by circumstances subject to
prior approval of the Commission on Audit (COA), in which case, a Special
Purpose Fund may be created.
Special-purpose Fund. Special-purpose Fund is a fund appropriated for
purposes other than those provided in the regular funds of government agencies,
such as Miscellaneous Personnel Fund and Organizational Adjustment Fund.
3. New General Appropriations. New General Appropriations are annual
authorizations for incurring obligations during a specified budget year, as listed in
the General Appropriations Act (GAA). The GAA is the legislative authorization
that identifies new appropriations in terms of specific amounts for salaries, wages
and other personnel benefits, Maintenance and Other Operating Expenses
(MOOE), Financial Expenses (FEx) and Capital Outlays (CO) for the
implementation of programs, projects and activities of all departments, bureaus
and offices of government for a given year.
4. Continuing Appropriations. Continuing appropriations are authorizations to
support obligations for a specified purpose or project, even when these
obligations are incurred beyond the budget year. Because MOOE and CO
appropriations in the GAA are valid for two years, unobligated and unreleased
appropriations for these budget items are valid until the end of their second year
and are classified as Continuing Appropriations.
5. Supplemental Appropriations. Supplemental Appropriations are additional
appropriations enacted by Congress to augment original appropriations that have
proven insufficient for their intended purpose because of economic political or
social conditions, Supplemental Appropriations must also be supported by a
certification of availability of funds by the Bureau of Treasury (BTr).
6. Automatic Appropriations. Automatic Appropriations are authorizations
made annually or for some other period prescribed by law, by virtue of standing
legislation, which do not require periodic action by the Congress.
7. Unprogrammed Funds. Unprogrammed Funds are standby appropriations for
priority programs or projects of the government.
8. Retained Income/Funds. Retained Income/Funds are collections that are
authorized by law to be used directly by agencies for their operation or specific
purposes.
9. Revolving Funds. Revolving Funds are receipts derived from business-type
activities of departments/agencies as authorized by law, and which are deposited
in an authorized government depository bank. These funds shall be self-
liquidating. All obligations and expenditures incurred because of these business
type activities shall be charged against the Revolving Fund
10. Trust Receipts. Trust Receipts are receipts that are officially in the
possession of government agencies or a public officer as trustee, agent or
administrator, or which have been received for the fulfillment of a particular
obligation.
11. Chart of Accounts and Unified Account Codes Structure (UACS). The
chart of accounts provides the framework within which the accounting records
are constructed. It is defined as a list of general ledger accounts consisting of
real and nominal accounts prepared for the use of national and local government
units.
Accounting System
The General Accounting Plan (GAP) shows the overall accounting system of a
government agency/unit. It includes the source documents, the flow of transactions
and its accumulation in the books of accounts and finally, the conversion into
financial information presented in the financial reports. The following accounting
systems are:
1. Budgetary accounts System
2. Receipts/income and Deposit system
3. Disbursement System
4. Financial Reporting System