University of San Carlos

School of Business and Economics

Department of Accountancy

AA 4102 – Accounting for Government & Non-Profit Organizations

2nd Sem, A.Y. 2022-2023 (3rd Hand-Out)

Income/Collections and Deposits System

GAM, Vol. 1, Sec. 4. Fundamental Principles for Revenue.

All revenues accruing to the NGAs shall be governed by the following fundamental principles:

a. Unless otherwise specifically provided by law, all revenues accruing to an entity by virtue of the
provisions of existing law, orders and regulations shall be deposited or remitted in the National
Treasury (NT) or in any duly authorized government depository, and shall accrue to the General
Fund (GF) of the NG. (Sec. 65(1), P.D. No. 1445)

b. Except as may otherwise be specifically provided by law or competent authority, all moneys and
property officially received by a public officer in any capacity or upon any occasion must be
accounted for as government funds and government property.
(Sec. 42, Chapter 7, Title I(B), Book V, E.O. No. 292)

c. Amounts received in trust and from business-type activities of government may separately be
recorded and disbursed in accordance with such rules and regulations as may be determined by a
Permanent Committee composed of the Secretary of Finance as Chairman, and the Secretary of
Budget and Management and the Chairman, COA, as members. (Sec. 65(2), P.D. No. 1445)

d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds other than
the GF, only when authorized by law as implemented by rules and regulations issued by the
Permanent Committee. (Sec. 66, P.D. No. 1445)

e. No payment of any nature shall be received by a collecting officer without immediately issuing an
official receipt in acknowledgement thereof. The receipt may be in the form of postage, internal
revenue or documentary stamps and the like, officially numbered receipts, subject to proper custody,
accountability, and audit. (Sec. 68(1), P.D. No. 1445)

f. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge cash receipts,
the COA may approve, upon request, exemption from the use of accountable forms.
(Sec. 68 (2), P.D. No. 1445)

g. At no instance shall temporary receipts be issued to acknowledge the receipt of public funds.
(Sec. 72, GAAM Volume I)

h. Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each receipt shall be
exact copies or carbon reproduction in all respects of the original. (Sec. 73, GAAM Volume I)

i. An officer charged with the collection of revenue or the receiving of moneys payable to the
government shall accept payment for taxes, dues or other indebtedness to the government in the form
of checks issued in payment of government obligations, upon proper endorsement and identification of
the payee or endorsee. Checks drawn in favor of the government in payment of any such indebtedness
shall likewise be accepted by the officer concerned. At no instance should money in the hands of the
CO be utilized for the purpose of cashing private checks. (Sec. 67(1) and (3), P.D. No. 1445)

j. Under such rules and regulations as the COA and the Department of Finance (DOF) may prescribe,
the Treasurer of the Philippines and all AGDB shall acknowledge receipt of all funds received by
them, the acknowledgement bearing the date of actual remittance or deposit and indicating from whom
and on what account it was received. (Sec. 70, P.D. No. 1445)

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GAM, Vol 1,Sec. 33. 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 penalties imposed for breaches of the law. (PPSAS 23)

g. Transfers are inflows of future economic benefits or service potential from non-exchange
transactions, other than taxes. (PPSAS 23)

This system covers the processes of acknowledging and reporting income/collections, deposits of
collections with Authorized Government Depository Bank (AGDB) or through the AGDB for the
account of the Treasurer of the Philippines, and recording of collections and deposits in the books of
accounts of the agency.

The sources of income and collections made by Agency are:

1. Taxes 3. Grants and donations 5. Borrowings
2. Operating and Service Income 4. Miscellaneous Receipts

Methods of Accounting for Income:

1. Accrual Method – used when income is realized (earned) during the accounting period
regardless of cash receipt. Account Receivable is set up and the general specific income
accounts according to nature and classification are credited.

2. Modified Accrual – income of an agency is recorded as “Deferred Credits to Income” and the
appropriate receivable account is debited. The income account is recognized upon receipt of
collection and “Deferred Credits to Income” account is adjusted accordingly.

3. Cash Basis - shall be used for all other taxes, fees, charges and other revenues where accrual
method is impractical. The income account is credited upon collection of the cash or its equivalent.

Only National Government Agencies maintain one set of books:

1. Regular Agency books – this shall be used to record the regular transactions of the agency like
receipt and utilization of Notice of Cash Allocation (NCA), and collections of income and other
receipts which the agency are authorize to use. This shall consist of journals and ledgers:
Journals:
Cash Receipts Journal (CRJ)
Cash Disbursement Journal (CDJ)
Check Disbursement Journal (CkDJ)
General Journal (GJ)

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 Ledgers:
General Ledger (GL)
Subsidiary Ledgers (SL)

Receipt and Collection Process

1. The Collecting Officer (CO) receives payment from creditors and issues Official Receipt.
2. The CO records collections in Cash Receipt Record.
3. The CO deposits all collections.
4. The CO records deposit in Cash Receipt Record.
5. The CO prepares the Report of Collections and Deposits and forwards to accounting unit with
copies of official receipts and validated Deposit Slips.
6. The accounting unit prepares Journal Entry Voucher (JEV) and records in the Cash Receipts
Journal.

Types of collections as to authority to use:

1. Without authority to use.
2. With authority to use.
3. Authority with limitations
4. Income from sale of equipment.
5. Grants and donations intended for agency use.
6. Miscellaneous collections.

Illustrative Accounting Entries:

A. Without Authority to Use

As a general rule, all revenues regardless of amount and frequency of collection are to be remitted
to the National Treasury.

1. Receipt of cash payment of hospital fees

Cash – collecting officers 10101010 xxx

Hospital fees 40202170 xxx

2. Remittance to the treasury

Cash-Treasury/Agency Deposit, Regular10104010 xxx

Cash-collecting officers 10101010 xxx

(At year-end, the Cash-Treasury/Agency Deposit, Regular account shall be

closed to Accumulated Surplus/Deficit account 30101010).

B. With Authority to Use

For agencies which are authorized to use income for their operations, the collections shall be
recorded as income in the Regular Agency (RA) books

1. Collection of prior year’s receivables

Cash- collecting officers 10101010 xxx

Accounts Receivables 10301010 xxx

2. Issuance of bill for the rent of an office space.

Accounts Receivables 10301010 xxx

Rent/Lease income 40202050 xxx

3. Record collection of rent payment.

Cash – collecting officer 10101010 xxx

Accounts Receivable 10301010 xxx

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3. Record deposit in the bank.

Cash-Treasury/Agency Deposit –Trust 10104010 xxx

Cash – collecting officer 10101010 xxx

4. Release of NCA by DBM after request is being made to the Bu of Treasury to use the
deposited collections to augment the MOOE.

Cash – MDS, Trust 10101060 xxx

Cash-Treasury/Agency Deposit –Trust 10104010 xxx

5. Record disbursement for the repair (use of income).

Repairs and Maintenance – Buildings

And Other Structures 50213040 xxx
Cash- MDS, Trust 10101060 xxx

6. Cash from another agency to implement its project (Inter-agency Transferred Funds). Under
existing regulations, the collections made by an Implementing Agency (IA) of cash from a
source agency (SA) to implement the latter’s project shall be remitted by the recipient
agency, the IA, to the BTr. The IA shall request the necessary NCA from the DBM)

SA bks:

1. Obligate the amount of funds to be transferred to the IA.

2. JE for the transfer

Due from NGA 10303010 xx

Cash – MDS, Regular 10104010 xx

IA books:
6.a Receipt of the check from the SA.

Cash – collecting officers 10101010 xxx

Due to NGAs ( SA) 20201050 xxx

6.b Remittance of cash to the BTr:

Cash-Treasury/Agency Deposit –Trust 10104010 xxx

Cash-Collecting officers 10101010 xxx

6.c Receipt of NCA from DBM

Cash-, MDS, Trust 10104060 xxx

Cash-Treasury/Agency Deposit –Trust 10104010 xxx

6.d Purchase of technical equipment (withholding tax – P 5,000)

Technical & Scientific Equipment 10606140 xx

Cash- MDS, Trust 10104060 xx
Due to BIR 20201010 xx

Payment remitted to BIR:

Due to BIR 20201010 xx

Cash – MDS –Trust 10104060 xx

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 6.e Submission of liquidation report to the SA.

Due to NGAs 20201050 xx

Technical and Scientific Equipment 10606140 xx

If there is still a balance or refund of fund balances of completed projects.

Due to NGAs 20201050 xx

Cash- MDS , Trust 10104060 xx

SA record the liquidation from the IA

\ Cash – collecting officer 10101010 xx

Technical and Scientific Equipment 10605140 xx
Due from NGA 10303010 xx

Remit the collection representing the return of cash from IA:

Cash – Treasury/Agency Deposit, Regular 10104010 xx

Cash – collecting officer 10101010 xx

Close the treasury account:

Accumulated Surplus/Deficit 30101010 xx

Cash –Treasury/Agency Deposit, Regular 10104010 xx

C. Authority with Limitations

If the authority is subject to the limitation, any excess shall be remitted to the National
Treasury, like collections for seminar and convention fees, the collections shall be recorded in
the regular agency books. The collections shall be deposited either to BTr under trust account
or to the agency under trust account depending of its immediate use. The expenses shall be
journalized, the balance/excess to be remitted to the National Treasury.

1. Record collection of (ex.)seminar fees.

Cash – collecting officer 10101010 xx

Seminar/Training fees 40202040 xx

2. Record deposit of collection.

Cash in Bank – LCCA 10102020 xx

Cash – collecting officer 10101010 xx

3. Record payment of expenses.

Office supplies expense 50203010 xx

Due to BIR 20201010 xx
Cash in Bank –LCCA 10102020 xx

Remittance to the BIR:

Due to BIR 20201010 xx

Cash in Bank –LCCA 10102020 xx

4. Record remittance of the balance to the NT..

Cash – Treasury/Agency Deposit, Regular 10104010 xx

Cash-in Bank-LCCA 10102020 xx

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 Journal Entry at year end to close the treasury account:

Accumulated Surplus/Deficit 30101010 xx

Cash-Treasury/Agency Deposit, Regular 10104010 xx

Income from Sale of Equipment

Proceeds from sales of non-serviceable, obsolete and other unnecessary equipment, including
cars, vans and the like, maybe requested for appropriation to purchase a new one and for the repair and
maintenance of existing vital equipment. It should be noted that the purchase of cars and vans are
subject to prior authority under the existing rules.

Illustration:
NEDA 7 sold a non-serviceable car with the following information:
Cost - P500,000
Accum. Depeciation 250,000
Sales price 300,000

The proceeds from sale were accordingly remitted to the National Treasury through the bank. The
agency received Special Allotment Release Order (SARO) in the amount of P500,000 for the purchase
of a new car with Notice of Cash Allocation (NCA) in the amount of P450,000 net of withholding tax of
P50,000. After approval of the purchase order, the motor vehicle was delivered and accordingly, paid
in full, net of withholding tax. The said tax was aftgerwards remitted to the BIR through a Tax
Remittance Advice (TRA).

1. To record the sale of motor vehicle:

Cash – collecting officer 10101010 300,000

Accum. Depreciation – Motor Vehicles 10606011 250,000
Motor Vehicles 1606010 500,000
Gain on sale of Asset 40501060 50,000

2. To record remittance of collection to the BTr through the bank:

Cash – Treasury/Agency Deposit, Regular 10104010 300,000

Cash – collecting officer 10101010 300,000

3. Close the treasury account and income/gain on sale at year-end.

Accumulated Surplus 30101010 300,000

Cash-Treasury/agency deposit, Regular 10104010 300,000

Gain on sale of Asset 40501060 50,000

Accumulated Surplus/Deficit 30101010 50,000

Receipt of SARO for the request to purchase a new one:

1. Record in the RAOD-CO under the Allotment column.

2. Record the NCA received:

Cash – MDS, Regular 10104040 450,000

Subsidy from National Government 40301010 450,000

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3. Record the obligation in the RAOD-CO.

Post the amount of obligation in the Obligation Col of the RAOD-CO

4. Record Accounts Payable for the motor vehicle delivered:

Motor Vehicle 10606010 500,000

Accounts Payable 20101010 500,000

5. Record full payment of obligation:

Accounts Payable 20101010 500,000

Due to BIR 20201010 50,000
Cash-MDS, Regular 10104040 450,000

6. Record remittance of withholding tax through TRA to BIR:

Due to BIR 20201010 50,000

Cash – Tax Remittance Advice 10104070 50,000

7. Close Cash – Tax Remittance Advice to Accumulated Surplus:

Cash – Tax Remittance Advice 10104070 50,000

Accumulated Surplus/Deficit 30101010 50,000

- Nothing Follows -