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ACCOUNTNG FOR

DISBURSEMENTS
AND RELATED TRANSACTIONS
Why is it essential to record cash transactions?

→ Most of the transactions in the government involves the receipt and


disbursement of cash.
→ The cash transactions affect every classification within the financial
statements – assets,
liabilities, residual equity, income and expenses.
→ Thus it is essential that cash transactions
are recorded correctly for reliability in the financial statements.
DISBURSEMENTS

→ constitute all cash paid


EXAMPLES
out during a given period either
in currency (cash) or by check.  Disbursement Voucher (DV)
→ settlement of government  Petty Cash Voucher
payables/obligation by cash or
by check.  Payroll
How to Distinguish Disbursement from Expenditures?
DISBURSEMENTS EXPENDITURE

→ payments made for → obligations incurred


such government obligations by the Agency.
by cash or check.
→ It includes both the
amount actually paid and
those incurred and recorded
as liabilities to be paid
in the future.
Basic Requirements for Disbursement:
1. Existence of a lawful and sufficient allotment certified as available by the
budget officer.

2. Existence of a valid obligation certified by the Chief Accountant/Head of


Acctg. Unit;

3. Legality of transactions and conformity with laws, rules and regulation

4. Approval of the expense by the Chief of Officer or by his duly authorize


representative; and

5. Submission of proper evidence to establish the claim.


AVAILABILITY OF FUNDS
‼ No fund shall be disbursed and no obligations shall be incurred in any department
w/o first securing the certification of its chief accountant as to the availability of funds

‼ No obligation shall be certified to A/P unless the obligation is founded on a valid claim
 Any certification for non-existent or fictitious obligation shall be consider void.
 The certifying official shall be dismissed from service
 Any payment made under such s\certification shall be illegal
 Every official involved shall be jointly and severally liable to the government for
the full amount so paid or received.
Non cash Availment Authority(NCAA)
→ Authority issued by DBM to
agencies to cover the Cash Disbursement Ceiling (CDC)
liquidation of their actual
obligations incurred. [ch 4] → Authority issued by DBM to the
DFA and DOLE to utilize their
income collected by Foreign
Service Posts to cover
operating requirements but
not to exceed the released
allotment to said post. [ch 4]
DISBURSEMENT ACTIVITY

DEPARTMENT OF BUDGET AND


NOTICE OF CASH ALLOCATION MANAGEMENT

NATIONAL GOVERNMENT
AGENCIES
Notice of Cash Allocation (NCA)
→ Authority, issued by DBM to government agencies to pay current
operating expenses, capital expenditure, inter-agency fund transfers
through different modes of disbursement.
→ No disbursement shall be issued without the covering NCA.
→ The NCA specifies the maximum amount of withdrawal that an entity can
make from government bank.
MAJOR CLASSES OF PAYMENTS

• Current Operating Services


• Capital Expenditures
• Inter-agency Fund Transfers
Current Operating Services

 travelling expenses
 training and
scholarship program
 supplies and material
expenses
 repairs, etc….
FINANCIAL EXPENSES
PERSONNEL SERVICES

MAINTENANCE AND OTHER


OPERATION EXPENSES
Capital Expenditure Inter-agency Fund Transfer
As opposed to the current operating expenses, this covers the transfer of funds to other
this involves investments and procurement of agencies for the implementation of specific
assets that is expected to be used for a longer projects. This is taken up in the books under
period of time. “Due to –“ by the receiving agency and “Due
from – “ by the releasing agency.
DISBURSEMENT SYSTEM
→ involves the preparation and processing of disbursement voucher;
preparation and issuance of check, payment of cash, granting,
utilization, and liquidation/replenishment of cash advances.
→ All disbursement of the government require the certification as:
1. validity, propriety, legality of the claim by the head of office who has control
of the funds , and;
2. certification that funds are available for the purpose.
Modes of Disbursements
 Checks (MDS or commercial checks)
 Cash (out of cash advance granted to authorized Disbursing Officer)
 Advice to debit the account
 Tax remittance advice
 Working Fund/CDC Direct payment method
DISBURSEMENT BY CHECK
These shall be reported and recorded in the books of accounts only when actually released to the respective payees.

Modified Disbursement
System (MDS) checks Commercial checks

→ These are covered by NCA, an → These are covered by


authorization issued by the income/receipts authorized for
DBM to all government deposits with AGDBs and
agencies to withdraw cash funding checks received by
from the National Treasury RO/OUs from CO/ROs
through the issuance of MDS
checks or other authorized respectively.
mode of disbursements.
Illustration:
Agency X of national government received the following NCA from DBM for the first
quarter of the year:
Regular Agency Fund P500, 000
Special account in the General Fund 300, 000
Trust Receipt Fund 200, 000
‼ What are the accounting entries to recognize the receipt of NCA?
Regular Agency Fund [ P500, 000 ]

Account Title Account Code Debit Credit

Cash- MDS, regular 10100404 500, 000


Subsidy form National Government 40301010 500, 000
(TO RECOGNIZE RECEIPT OF NCA FOR REGULAR AGENCY FUND)

Special Account in the General Fund [ P300, 000 ]

Account Title Account Code Debit Credit


Cash- MDS, special account 10104050 300, 000
Cash- Agency Deposit, special account 10104020 300, 000
(TO RECOGNIZE RECEIPT OF NCA FOR REGULAR AGENCY FUND)

Trust Receipt Fund [ P200, 000 ]


Account Title Account Code Debit Credit
Cash- MDS, trust 10104060 200, 000
Cash- Agency Deposit, trust 10104030 200, 000
(TO RECOGNIZE RECEIPT OF NCA FOR REGULAR AGENCY FUND)
ACCOUNTING FOR
INVENTORY
Inventory Accounting System
→ consists of the system of monitoring, controlling and recording of acquisition and
disposal of inventory.
1. The system starts with the receipt of the purchases inventory items and equipment.
2. The requesting office in need of the inventory items (after determining that the items
are not available in stock) shall prepare and cause the approval of the Purchase Request
(PR).
3. Based on the approved PR and after accomplishing all the required procedures
adopting a particular mode of procurement, the agency shall issue a duly approved
Purchase Order (PO)
4. Procedures relative to the obligation of the purchase order and payment of the
deliveries follow the procedures in the obligation accounting system and disbursement
system.
Sub-systems for inventory accounting:

Transfer and/or disposal of


Receipt, Inspection, acceptance and inventory items
recording of deliveries of inventory items

Requisition and issue of inventory


items
Illustration:
At the beginning of the first quarter, Agency ABC received its P2, 000, 000 allotment for Maintenance and other operating expenses
(MOOE) and the corresponding Notice of Cash Allocation (NCA). This transaction was appropriately posted in the Registry of
Appropriations and Allotments (RAPAL) and Registry of Allotments and Notice of Cash Allocation (RANCA) and the corresponding journal
entry to record the receipt of NCA.

Agency ABC, then, issued Obligation Request and Status (ORS) for the purchase of office supplies to be used in its research and
development project in the amount of P30, 000 . Accordingly, said amount was obligated.

Upon delivery by the supplier, the agency paid the purchase order, bet of withholding tax. Eventually, office supplies amounting to
P10, 000 were based on the Requisition and Issue Slip.