Republic of the Philippines

City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

DETAILED LEARNING MODULE

Title: General Provisions, Basic Standards and Policies

Module No. 1

I. Introduction
This module introduces Government Accounting System for National Government Agencies.
Government accounting systems are developed, generally to satisfy the operating needs of the
various government agencies or departments. The following topics will discuss the different
aspects of the New Government Accounting System issued by the Commission on Audit.

II. Learning Objectives

After studying this module, you should be able to:
1. Describe the difference of government accounting from other branches of accounting.
2. Understand the nature of government accounting.
3. Explain the general provisions from existing laws, rules, and regulations.
4. Identify the fundamental accounting principles for financial reporting by national government
agencies.

III. Topics and Key Concepts

1. Introduction to Government Accounting System

Government accounting encompasses the processes of analyzing, recording, classifying,

summarizing, and communicating all transactions involving the receipts and dispositions of
government funds and property, and interpreting the results thereof. (Sec. 109, Presidential
Decree (P.D.) No. 1445)

As a process, it is concerned with:

i. the maintenance of records that show the propriety of transactions and account for assets
and other resources available for use.

ii. the classification of items to provide useful information necessary for control and efficient
management operations.

iii. the preparation of periodic financial reports.

2. Funds: The Accounting Unit for Governmental Entity

The accounting unit for governmental entity is the fund.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Fund is defined as a sum of money or other resources set aside for the purpose of carrying out
specific activities or attaining certain objectives in accordance with special regulations,
restrictions, or limitations.

It constitutes an independent fiscal and accounting entity with a self-balancing set of accounts,
recording cash and other financial resources, together with all related liabilities and equities,
and changes therein.

Revenue funds comprise all funds derived from the income of any agency of the government
and available for appropriation or expenditure in accordance with law. (Section 3, P.D. No.
1445)

The government has various identifiable activities, each of which may justify the creation of a
separate fund for each. The two principal types of funds according to purpose are:

a. General Fund.
This fund includes all financial resources except those required to be accounted for in
another fund. This is generally available for all functions of the government.

b. Special Fund.
This fund includes the proceeds of specific revenue from taxes that are legally restricted
to expenditures for specified purposes.

3. Budgetary Procedures

Budget is a plan of financial operation composed of estimate or proposed expenditures for a

given period or purpose, and the proposed means of financing them.

Government Budget is the financial plan of a government for a given period, usually for a fiscal
year, which shows what its resources are, and how they will be generated and used over the
fiscal period.

The budget is the government's key instrument for promoting its socio-economic objectives.

The government budget also refers to the income, expenditures, and sources of borrowings of
the National Government (NG) that are used to achieve national objectives, strategies and
programs.

The operations of a fund, which embrace the principal activities of the government, are
normally controlled by a system of budgets.

The budgetary procedures are divided into four major phases, as follows:

a. Preparation and Presentation.

This phase covers the estimation, determination and translation of government revenues,
priorities, and activities.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Under this phase, government agencies prepare their budgets for the year to be submitted
to the Department of Budget and Management (DBM) for review.

The DBM then consolidate all budgets to form a government-wide budget estimate, the
national budget and shall be submitted to the President for final approval.

b. Budget Authorization
This phase involves the submission of the National Government Budget to the Legislative
Body for review, deliberation, and formulation of an Appropriation Bill to be forwarded
to the president for approval and signature.

c. Budget Execution and Operation

This phase covers the implementation of the various operational aspects of the budget,
such as the release of allotments to the various agencies, the continuing review of
government fiscal position, and other related activities.

d. Budget Accountability
This phase involves the evaluation of expenditures and performance against the
predetermined budget.

Obligations incurred, personnel used, and work accomplished are compared with the
plans and goals of various agencies submitted at the time their respective budget was
prepared.

This is accomplished by the heads of the various agencies who review the performance
of their respective agency, and the Commission on Audit (COA) who examines the
operations of the agencies.

4. New Government Accounting System

a. Basic Government Accounting and Budget Reporting Principles

Each entity shall recognize and present its financial transactions and operations
conformably to the following:

a. generally accepted government accounting principles in accordance with the PPSAS

and pertinent laws, rules, and regulations.

b. accrual basis of accounting in accordance with the Philippine Public Sector Accounting
Standards (PPSAS).

c. budget basis for presentation of budget information in the financial statements (FSs) in
accordance with PPSAS 24.

d. Revised Chart of Accounts (RCA) prescribed by COA.

e. double entry bookkeeping.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

f. financial statements based on accounting and budgetary records; and

g. fund cluster accounting.

b. Keeping of the General Accounts

The COA shall keep the general accounts of the Government and, for such period as may
be provided by law, preserve the vouchers and other supporting papers pertaining thereto,
pursuant to Section 2, par. (1), Article IX-D of the 1987 Philippine Constitution.

c. Financial Reporting System for the National Government

The financial reporting system of the Philippine government consists of accounting system
on accrual basis and budget reporting system on budget basis under the statutory
responsibility of the NGAs, Bureau of the Treasury (BTr), Department of Budget and
Management (DBM), and the COA, as follows:

a. Each entity of the National Government (NG) maintains complete set of accounting
books by fund cluster which is reconciled with the records of cash transactions
maintained by the BTr.

b. The BTr accounts for the cash, public debt and related transactions of the NG.

c. Each entity maintains budget registries which are reconciled with the budget records
maintained by the DBM and the Government Accountancy Sector (GAS), COA.

d. The COA, through the GAS:

1. maintains budget records showing the overall approved budget of the NG and its
execution / implementation.

2. consolidates the FSs and budget accountability reports of all NGAs and the BTr
with COA’s records to come up with an Annual Financial Report (AFR) for the
NG as required in Section 4, Article IX-D of the 1987 Philippine Constitution.

3. prepares other financial reports required by law for submission to oversight

agencies.

d. Objectives of General-Purpose Financial Statements

The objectives of general-purpose financial statements (GPFSs) are to provide information

about the financial position, financial performance, and cash flows of an entity that is useful
to a wide range of users in making and evaluating decisions about the allocation of
resources.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Specifically, the objectives of general-purpose financial reporting in the public sector are
to provide information useful for decision-making, and to demonstrate the accountability
of the entity for the resources entrusted to it.

e. Responsibility for Financial Statements

The responsibility for the preparation of the FSs rests with the following:

a. for individual entity/department FSs – the head of the entity/department central office
(COf) or regional office (RO) or operating unit (OU) or his/her authorized
representative jointly with the head of the finance/accounting division/unit

b. for department/entity FSs as a single entity – the head of the entity/department COf
jointly with the head of the finance unit.

f. Components of General-Purpose Financial Statements

The complete set of GPFSs consists of:

a. Statement of Financial Position

b. Statement of Financial Performance
c. Statement of Changes in Net Assets/Equity
d. Statement of Cash Flows
e. Statement of Comparison of Budget and Actual Amounts
f. Notes to the Financial Statements, comprising a summary of significant accounting
policies and other explanatory notes.

g. Books of Accounts and Registries

The books of accounts and registries of the NG entities consist of:

a. Journals
1. General Journal
2. Cash Receipts Journal
3. Cash Disbursements Journal
4. Check Disbursements Journal

b. Ledgers
1. General Ledgers
2. Subsidiary Ledgers

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

c. Registries
1. Registries of Revenue and Other Receipts
2. Registry of Appropriations and Allotments
3. Registries of Allotments, Obligations and Disbursements
4. Registries of Budget, Utilization and Disbursements

h. Fair Presentation

The FSs shall present fairly the financial position, financial performance, and cash flows
of an entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, revenue, and expenses set out in PPSAS.

The application of PPSAS, with appropriate disclosures, if necessary, would result in fair
presentation of the FS.

i. Fund Accounting

The books of accounts shall be maintained by fund cluster as follows:

j. Going Concern

The FSs shall be prepared on a going concern basis unless there is an intention to
discontinue the entity operation, or if there is no realistic alternative but to do so.

k. Consistency of Presentation

The presentation and classification of items in the FSs shall be retained from one period to
the next unless laws, rules, and regulations, and PPSAS require a change in presentation.

l. Statement of Financial Position

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

An entity shall present current and noncurrent assets, as well as current and non-current
liabilities, as separate classifications on the face of the Statement of Financial Position
(SFP).

m. Statement of Financial Performance

The Statement of Financial Performance (SFPer) shall include line items that present the
revenue, expenses and net surplus or deficit for the period.

n. Statement of Changes in Net Assets/Equity

An entity shall present in the Statement of Changes in Net Assets/Equity (SCNA/E) the
following:

a. Net Income or Deficit for the period.

b. Each item of revenue and expenses for the period that, as required by Standards, is
recognized directly in net assets/equity, and the total of these items

c. Total revenue and expenses for the period.

d. For each component of net assets/equity separately disclosed, the effects of

changes in accounting policies and corrections of errors recognized in accordance
with PPSAS 3-Accounting Policies, Changes in Accounting Estimates and Errors.

o. Statement of Cash Flows

The Statement of Cash Flows (SCF) provides information to users of FSs a basis to assess
the ability of the entity to generate cash and cash equivalents and to determine the entity’s
utilization of funds.

This also provides information on how the entity generates income authorized to be used
in their operation and its utilization.

p. Statement of Comparison of Budget and Actual Amounts

A comparison of budget and actual amounts will enhance the transparency of financial
reporting in government.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

This shall be presented by government agencies as a separate additional financial statement

referred in this Manual as the Statement of Comparison of Budget and Actual Amounts
(SCBAA).

q. Notes to Financial Statements

The Notes to FSs contain information in addition to that presented in the SFP, SFPer,
SCNA/E, SCF and SCBAA.

Notes provide narrative descriptions or disaggregation of items disclosed in those FSs and
information about items that do not qualify for recognition in those statements.

r. Qualitative Characteristics of Financial Reporting

An entity shall present information including accounting policies in a manner that meets a
number of qualitative characteristics such as understandability, relevance, materiality,
reliability and comparability. These qualitative characteristics are the attributes that make
the information provided in the FSs useful to users.

s. Key Features of Assets

The key features of an asset are:

a. the benefits must be controlled by the entity

b. the benefits must have arisen from a past event

c. future economic benefits or service potential must be expected to flow to the entity.

The following are indicators of control of the benefits by the entity:

a. the ability of an entity to benefit from the asset and to deny or regulate the access of
others to that benefit.

b. an entity can, depending on the nature of the asset, exchange it, use it to provide goods
or services, exact a price for others’ use of it, use it to settle liabilities, hold it, or perhaps
even distribute it to owners.

c. possession or ownership of an object or right would normally be synonymous with

control over the future economic benefits embodied in the right or object.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

However, there are instances when an entity may possess an object or right but not expect
to enjoy the benefits embodied in it, e.g. under a finance lease agreement, control over the
leased property owned by the lessor is transferred to the lessee.

The following are indicators of past event:

a. the specification of a past event differentiates assets from intentions to acquire assets,
which are not to be recognized.

b. a transaction or event giving rise to control of the future economic benefits must have
occurred.

The following are indicators of future economic benefits:

a. distinguishable from the source of the benefit i.e. the particular physical resource or
legal right

b. does not imply that assets necessarily generate cash flows, the benefits can also be in
the form of ‘service potential’

c. in determining whether a resource or right needs to be accounted for as an asset, the

potential to contribute to the objectives of the entity should be the prime consideration

d. capacity to contribute to activities/objectives/programs

e. the fact that an asset cannot be sold does not preclude it from providing future economic
benefits.

t. Recognition of an Asset

An asset shall be recognized in the financial position when and only when (a) it is probable
that the future economic benefits will flow to the entity; and (b) the asset has a cost or value
that can be measured reliably.

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.

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

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.

u. Accounting Standards for Revenue

The following accounting standards shall apply for revenue and receipts of government
entities:

a. Revenue includes only the gross inflows of economic benefits or service potential
received and receivable by the entity in its own account. (PPSAS 9)

b. Receipts/Collections shall refer to all cash actually received from all sources during
a given accounting period.

c. Fines shall include economic benefits or service potential received or receivable by

a public sector agency, as determined by a court or other law enforcement body, as
a consequence of the breach of laws or regulations. Fines and penalties, either on
tax revenue or other specific income account, shall be recognized as income of the
year these were collected.

d. Gifts and donations shall consist of voluntary transfers of assets including cash or
other monetary assets, goods in-kind and services in-kind that one agency makes
to another, normally free from stipulations. (PPSAS 23)

e. Goods in-kind are tangible assets transferred to an agency in a non-exchange

transaction, without charge, but may be subject to stipulations. External assistance
provided by multilateral or bilateral development organizations often includes a
component of goods in-kind. (PPSAS 23)

f. Taxes are economic benefits or service potentials compulsory paid or payable to

public sector agencies, in accordance with laws and or regulations, established to
provide revenue to the government. Taxes do not include fines or other penalties
imposed for breaches of the law. (PPSAS 23)

g. Transfers are inflows of future economic benefits or service potential from

nonexchange transactions, other than taxes. (PPSAS 23)

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

IV. Learning Tasks

Read the following questions carefully and choose the letter that corresponds to the best answer.

1. The accounting unit of a government entity

a. budget
b. fund
c. cash
d. equity

2. The fund that is available for all functions of the government is

a. special fund
b. fiduciary fund
c. plant fund
d. general fund

3. This fund includes the proceeds of specific revenue from taxes that are legally restricted to
expenditures for specified purposes
a. special fund
b. fiduciary fund
c. plant fund
d. general fund

4. This phase of the Budgetary Procedures which involves the submission of the National
Budget to the Legislative Body for review, deliberation, and formulation of an Appropriation
Bill
a. Preparation and Presentation
b. Budget Authorization
c. Budget Execution
d. Budget Accountability

5. Under the New Government Accounting System (NGAS), the method of accounting that is
used on recording transactions of the government is
a. Obligation Accounting
b. Commercial Accounting
c. Liquidation Accounting
d. Fund Accounting

6. The government agency that is responsible for the release of allotments to various
government agencies is
a. Bureau of Treasury
b. Department of Budget and Management
c. Department of Finance
d. Commission on Audit

7. A plan of financial operation embodying an estimate or proposed expenditures for a given

period, and the proposed means of financing them is a

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

a. budget
b. master plan
c. financial plan
d. fund plan

8. The government agency that is responsible for keeping the general accounts of the
Government and, for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto.
a. Bureau of Internal Revenue
b. Commission on Audit
c. Department of Finance
d. Bureau of Treasury

9. The government-wide budget estimate is called

a. financial budget
b. fiduciary fund
c. master budget
d. national budget

10. It encompasses the processes of analyzing, recording, classifying, summarizing, and

communicating all transactions involving the receipts and dispositions of government funds
and property, and interpreting the results thereof.
a. Commercial Accounting
b. Government Accounting
c. Fund Accounting
d. Intermediate Accounting

V. Teaching and Learning Materials and Resources

1. Government Accounting Manual for National Government Agencies Volume 1

2. Government Accounting Manual for National Government Agencies Volume 2
3. Government Accounting Manual for National Government Agencies Volume 3

Accounting for Government & Non-Profit Organization. 2 nd Sem 2022-2023

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