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Lesson Number 3: The Government Accounting Process

Lesson Objectives:
1. Record the basic transactions of a government entity.
Getting Started
Introduction
The government accounting process comprises the activities of analyzing, recording, classifying, summarizing and,
communicating transactions involving the receipt and disposition of government funds and property, and
interpreting the results thereof. This process is similar to that of a business entity, except that it incorporates
budgetary controls, such as recording in the, budget registries and preparing periodic budget accountability reports.
Books of Accounts and Registries
The books of accounts and registries of government entities consist of:
1) Journals
a) General Journal
b) Cash Receipts Journal
c) Cash Disbursements Journal
d) Check Disbursements Journal
2) Ledgers
a) General Ledgers
b) Subsidiary Ledgers
3) Registries
a) Registries of Revenue and Other Receipts (RROR)
b) Registry of Appropriations and Allotments (RAPAL)
c) Registries of Allotments, Obligations and Disbursements (RAOD)
d) Registries of Budget, Utilization and Disbursements (RBUD)
Technically, only the Journals and Ledgers are considered accounting records. These are similar to the accounting
records of a business entity. The Registries are budget records. These are used to monitor the budget. You may
think of the registries like "logbooks" or something, rather than accounting books with debit and credit columns.
The accounting unit of the agency maintains the Journals and Ledgers while the budget division of the agency
maintains the Registries.
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Budget Registries
1) Registries of Revenue and Other Receipts (RROR) - used to monitor the budgeted amounts, actual collections
and remittances of revenue and other receipts.
2) Registry of Appropriations and Allotments (RAPAL) - used to monitor appropriations and allotments. This is
to ensure that allotments will not exceed appropriations.
3) Registries of Allotments, Obligations and Disbursements (RAOD) - used to monitor the allotments received,
obligations incurred against the corresponding allotment, and the actual disbursements made. This is to ensure
that obligations incurred will not exceed allotments while actual disbursements will not exceed the obligations
incurred.
Separate RAOD shall be maintained for each object of expenditure.
Objects of Expenditure
a) Personnel Services (PS) - pertain to all types of employee benefits, e.g., salaries, bonuses, allowances, cash
gifts, etc.
b) Maintenance and Other Operating Expenses (MOOE) - pertain to various operating expenses other than
employee benefits and financial expenses, e.g., travel, utilities, supplies, etc.
c) Financial Expenses (FE) - pertain to finance costs, e.g., interest expense, bank charges, etc. Financial
expenses also include losses on foreign exchange transactions.
d) Capital Outlays (CO) - pertain to capitalizable expenditures, e.g., expenditures on the construction of
public infrastructu.res, acquisition costs of equipment, etc.
Accordingly, the following separate RAODs shall be maintained: (a) RAOD-PS; (b), RAOD-MOOE; (c)
RAOD-FE; and (d) RAOD-CO.
4) Registries of Budget, Utilization and Disbursements (RBUD) - used to record the approved special budget and
the corresponding utilizations and disbursements charged to retained income. Separate RBUDs are also
maintained for each object of expenditure, i.e., (a) RBUD-PS; {b) RBUD-MOOE; (c) RBUD-FE; and (d)
RBUD-CO.
Keeping of the General Accounts
The COA shall keep the general accounts of the Government and preserve the vouchers and other supporting
documents.
Basic Recordings
Appropriation
Entity A (a government agency) receives its GAA consisting of the following:
Personnel Services (PS) 100,000
Maintenance and Other Operating Expenses (MOOE) 60,000
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Financial Expenses (FE) 0

Capital Outlays (CO) 200,000
Total appropriation for the current year 20x1 360,000
The receipt of the appropriation is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL)
as follows:

Allotment
Entity A_ receives its allotment from the DBM consisting of the following:
Personnel Services (PS) 90,000
Maintenance and Other Operating Expenses (MOOE) 40,000
Financial Expenses (FE) 0
Capital Outlays (CO) 170,000
Total allotment 300,000
The receipt of the allotment is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL) and
Registries of Allotments, Obligations and Disbursements (RAOD) as follows:
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Incurrence of Obligation
Obligation Request and Status (ORS)
Obligations shall be incurred through the issuance of Obligation Request and Status (ORS). The Requesting Office
shall prepare this document, supported by valid claim documents like disbursement! vouchers, payrolls,
purchase/job orders, itinerary of travel, etc. The Head of the Requesting Office shall certify the necessity and
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legality of the obligation and the validity of the supporting documents. The Head of the Budget Division shall
certify the availability of the allotment.
Entity A enters into the following contracts:
a. Personnel Services - Employment contracts Job Order amounting to P70,000.
b. Maintenance and Other Operating Services – Purchase contract for office supplies worth P25,000.
c. Capital Outlays - Purchase contract for office equipment worth P160,000.
The ORS is prepared as follows:
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The obligations are recorded in the Registries of Allotments, Obligations and Disbursements (RAOD) as follows:
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Notice of Obligation Request and Status Adjustment (NORSA)

If the obligations recorded in the RAOD and ORS above need to be adjusted, the subsequent adjustment shall be
made through the use of the Notice of Obligation Request and Status Adjustment (NORSA). The adjustment shall
be effected through a positive entry (addition) or a negative entry (reduction), as appropriate.
Up to this point, nothing is recorded yet in the accounting books. The recordings above are made on the budget
registries. Journal entries shall be made only after:
a. the employees have rendered services;
b. the office supplies are delivered and received; and
c. the office equipment is delivered and received.
Only after these events occur that the entity's financial statement elements are affected, and thus, an accountable
event has occurred that needs to be recognized. In the meantime, the "obligations" recorded in the registries (but
not yet in the accounting books) are referred to as “Not Yet Due and Demandable”. Notice that government
entities and business entities use the term "obligation" or the phrase "incurrence of obligation” differently.
Disbursement Authority - Notice of Cash Allocation (NCA)
Entity A receives Notice of Cash Allocation (NCA) from the DBM amounting to 200,000, net of tax.
This time a journal entry shall be made in the accounting books because the financial statement elements of the
entity are now affected, i.e., increase in cash and increase in revenue. The entry is as follows:
Cash-Modified Disbursement System (MDS), Regular 200,000
Subsidy from National Government 200,000
To recognize receipt of NCA from DBM

The registries used to monitor the NCA are the following:

a. Registry of Allotments and Notice of Cash Allocation (RANCA) - used to determine the amount of
allotments not covered by NCA and to monitor the available balance of NCA.
b. Registry of Allotment and Notice of Transfer of Allocation (RANTA) - used to determine the amount of
allotments not covered by Notice of Transfer of Allocation (NTA) and to monitor the available balance of
NTA.
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The NCA is posted (recorded) in the RANCA as follows:

I. JOURNALS
a. General Journal - used to record transactions not recorded in the Special Journals.
Special Journals:
b. Cash Receipts Journal - used to record the Report of Collection and Deposit and Cash Receipts Register of
collecting officers.
i. Report of Collection and Deposit (RCD) - prepared by a collecting officer to report his/her
collections and deposits to an Authorized Government Depository Bank (AGDB).
ii. Cash Receipts Register (CRReg) - used by field offices without a complete set of books to record
their cash collections and deposits in the books of their mother unit (central/regional/division
office).
c. Cash Disbursements Journal - used to record the cash disbursements of the Disbursing Officer.
d. Check Disbursements Journal - used to record the check disbursements of the Disbursing Officer.
II. LEDGERS
a. General Ledger - summarizes all transactions recorded in the journals. Accounts in the general ledger are
arranged according to their sequence in the Revised Chart of Accounts.
b. Subsidiary Ledgers - show details of each control account in the general ledger.
The NCA specifies the maximum amount of withdrawal that an entity can make from a government bank for
the period indicated. The Collecting Officer shall not issue an official receipt (OR) for the receipt of NCA
since the receipt of the NCA does not constitute a collection that is recordable in the Cash Receipts Journal, it
is recorded in the General Journal as follows:
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The journal entry for the NCA is posted to the general ledger as follows:

Disbursements
Employees have rendered services and are now entitled to compensation. Journal entries shall be made because the
financial statement elements of the entity are affected, i.e., increase in expenses and increase in liability/decrease in
cash. The recordings are as follows:
a. Set up of payable to officers and employees upon approval of payroll.
Salaries and Wages 35,000
Personal Economic Relief Allowance (PERA) 5,000
Gross Compensation · 40,000
Withholding Tax (10,000)
GSIS (2,000)
Pag-IBIG (2,000)
PhilHealth (1,000)
Total Deductions (15,000)
Net 25,000
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Salaries and Wages, Regular 35,000

Personal Economic Relief Allowance (PERA) 5,000
Due to BIR 10,000
Due to GSIS 2,000
Due to Pag-IBIG 2,000
Due to PhilHealth 1,000
Due to Officers and Employees 25,000
To recognize payable to officers and employees upon approval of payroll
b. Posting of payable to the Section C of ORS

c. Grant of Cash Advance for payroll.

Advances for Payroll 25,000
Cash-Modified Disbursement System (MDS), Regular 25,000
To recognize grant of cash advance for payroll
The entries above are posted to the appropriate ledgers.
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d. Posting of disbursement to the payment column of Section of C of the ORS and disbursements column of the
RAOD.
The Section C of the ORS will show the following information:

The recording in the RAOD-PS is as follows:

e. Liquidation of Payroll Fund

Due to Officers and Employees 25,000
Advances for Payroll 25,000
To recognize Liquidation of Payroll fund
Remittance of Amount Withheld
Entity A remits the P15,000 withheld to the other government agencies.
Withholding Tax 10,000
GSIS 2,000
Pag-IBIG 2,000
PhilHealth 1,000
Total Deductions 15,000
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Remittance of Withholding Tax

Tax Remittance Advice (TRA)
The Tax Remittance Advice (TRA) is used to recognize:
a. In the books of government agencies, the constructive remittance of taxes withheld to the Bureau of Internal
Revenue (BIR) or customs duties withheld to the Bureau of Customs (BOC) and the constructive receipt of
NCA for those taxes and customs duties;
b. In the books of the BIR and BOC, the constructive receipt of tax revenue and customs duties; and
c. In the books of the BTr, the constructive receipt of the taxes and customs duties remitted.
The remittance of the tax withheld is recorded as follows:
Cash-Tax Remittance Advice 10,000
Subsidy from National Government 10,000
To recognize the constructive receipt of NCA for TRA
Due to BIR 10,000
Cash-Tax Remittance Advice 10,000
To recognize the constructive remittance of taxes withheld to the BIR through TRA
Notice that there is actually no physical transfer of cash to the BIR (i.e., debit and credit to 'Cash-TRA'), thus the
term "constructive." The TRA is another form of disbursement authority, thus it is recorded similarly to the receipt
of the regular NCA (i.e., credit to 'Subsidy from National Government'). This means that Entity A has the
authority to use the amount withheld in its operations. Amounts used from the TRA will be reported in Entity A's
Monthly Report of Disbursements.
The use of the account "Cash-Tax Remittance Advice" is as if Entity A remits the cash to the BIR and BTr, which
the latter then remits back to Entity A, without the cash being physically transferred. The use of TRA is necessary
in order for the BIR to record the taxes as its income and for the BTr to record the withholding agency's
disbursement authority as subsidy.
Remittance to GSIS, Pag-IBIG & PhilHealth
Due to GSIS 2,000
Due to Pag-IBIG 2,000
Due to PhilHealth 1,000
Cash-Modified Disbursement System (MDS), Regular 5000
The Obligation Request and Status (ORS) and the RAOD-PS are updated for the payments above.
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Billings, Collections & Remittances

a. Entity A bills revenue of 100,000 for rent in come.
Accounts receivable 100,000
Rent/Lease income 100,000
To recognize billing of income
b. Entity A collects 100,000 from the billed -revenue and remits the collection to the BTr.
Cash - Collecting Officers 100,000
Accounts receivable 100,000
To recognize collection of billed income
Cash - Treasury Agency Deposit, Regular 100,000
Cash - Collecting Officers 100,000
To recognize remittance of income to BTr
The billing of revenue is recorded in the General Journal while the collection and remittance are recorded in the
Cash Receipts Journal as follows:

Reversion of Unused Notice of Cash Allocation (NCA)

Government entities are required to revert any unused NCA at the end of the accounting period. The unused NCA
is computed as follows:

Subsidy from National Government 170,000

Cash - Modified Disbursement System (MDS), Regular 170,000
To recognize the reversion of unused NCA
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The Revised Chart of Accounts

A chart of accounts is a list of all the accounts used by an entity. Government entities shall use the account titles
and account codes in the Revised Chart of Accounts (RCA) issued by the COA. The RCA includes numerous
accounts. Please see separate worksheet on your LMS.

Summary of the Lesson

 A government entity's books of accounts and registries consist of
 Journals,
 Ledgers, and
 Registries.
 The classifications of expenditures by object are:
 Personnel Services (PS),
 Maintenance and Other Operating Expenses (MOOE),
 Financial Expenses (FE), and
 Capital Outlays (CO).
 Appropriations, allotments, and incurrence of obligations are recorded only in the registries. Recording in the
books of accounts starts from the receipt of disbursement authority.
 Appropriations are recorded in the Registry of Appropriations and Allotments (RAPAL).
 Allotments are recorded in the RAPAL and Registries of Allotments, Obligations and Disbursements (RAOD).
 Obligations incurred are recorded in the RAOD and Obligation Request and Status (ORS).
 Disbursement authority (e.g., Notice of Cash Allocation) is recorded in the books of accounts.

REFERENCES:
1) Millan, Z. V. (2019) Government Accounting and Accounting for Non-Profit Organizations, Baguio City,
Philippines, Bandolin Enterprise Publishing and Printing