CHAPTER 1:

NATURE AND SCOPE OF THE NEW

GOVERNMENT ACCOUNTING SYSTEM
NGAS – NEW GOVERNMENT ACCOUNTING
SYSTEM
• Introduced the basic policies and procedures, the new coding
system, the accounting systems, books, registries, records,
forms, reports and financial statements to be adopted by all
national government agencies effective January 1, 2002
THE NGAS WAS MADE IN ORDER TO
RESPOND TO THE NEED FOR THE
FOLLOWING:
• The adoption of a system that is in conformity with the
International Accounting Standards.
• Pursuit of eventual computerization, which will include
responsibility accounting, thereby ensuring the generation of
various reports that are useful to the management, lawmakers
and the general public.
• Generation of relevant and periodic financial statements
• Effective tool for managers and executives in effective and
efficient monitoring of Agency Performance.
GOVERNMENT ACCOUNTING
• It is defined, pursuant to Section 109 of PD 1445,
as one which “encompasses the process of
analysing, recording, classifying, summarizing and
communicating all transactions involving the
receipt and disposition of government fund and
property and interpreting the results thereof.”
..\Instructional Materials\Government Accounting\Philippine Public Financial Management Reform.mp4
OBJECTIVES
1. To provide information concerning past operations and present
conditions;
2. To provide a basis for guidance for future operations
3. To provide for control of the acts of public bodies and offices in
the receipt, disposition and utilization of funds and property.
4. To report on the financial position and the results of operations
of government agencies for the information and guidance of all
persons concerned
ACCOUNTING RESPONSIBILITY
This was emanates from the Constitution, Laws, Policies, Rules and
Regulations.

Offices charged with the accounting responsibility are:

1. Commission on Audit (COA)
2. Department of Budget and Management (DBM)
3. The Bureau of Treasury (BTr)
4. Government Agencies discharging the functions of government.
COMMISSION ON AUDIT
COAs was mandated by Article IX-D, Section 2 par. 2 of the 1987
Constitution of the Philippines.

Functions are:
1. Keeps the general accounts of the government
2. Promulgates accounting rules and regulations
3. Submission of Annual Report to the President and Congress.
DEPARTMENT OF BUDGET AND
MANAGEMENT
The DBM shall be responsible for the formulation and
implementation of the National Budget with goal of attaining our
national socio-economic plans and objectives

Under the NGAS, it shall also maintain the Registry of Allotments

and Notice of Cash Allocation for its control and monitoring of NCA
releases.
BUREAU OF TREASURY
Deals with the cash operations of the national government.

Under the Revised Administrative Code, the Bureau of Treasury, as

one of the operating bureaus of the Department of Finance is
authorized to:
1. Receive and keep national funds, manage and control the
disbursements thereof.
2. Maintain accounts of financial transactions of all national
government offices, agencies and instrumentalities.
BASIC FEATURES AND POLICIES OF NGAS
1. Accounting Methods
• A modified accrual basis of accounting shall be used.
2. One Fund Concept
• Fund – is both a sum of money set aside for a specific purpose, and
an independent fiscal and accounting entity.
3. Chart of Accounts and Account Codes
• The implementation of Unified Account Code Structure or (UACS)
on January 1, 2014 transform the coding system from Old GAS of 6
digits, then NGAS of 3 digits and UACS of 46 digits.
BASIC FEATURES AND POLICIES OF NGAS
4. Responsibility Accounting – is a part, segment, unit or function of a
government agency.
ACCOUNTING METHODS
Accrual accounting is used on most of the transaction. Then Cash
Accounting for transaction in which Accrual Accounting is impractical.

Accrual Accounting – Income is recognized when earned and expenses

when incurred.

Cash Accounting – Income and Expenses are recognized upon cash

receipt and cash payment.
ONE FUND CONCEPT
Fund is both a sum of money set aside for a specific purpose, and an
independent fiscal and accounting entity.

The NGAs adopts on fund concept.

General Fund – is a fund appropriated for the general purpose

(101101).

Special Fund – is a fund appropriated for purposes other than those

provided in the regular funds of the NGAs.
EXAMPLES OF SPECIAL FUNDS
• Contingent Fund
• DepEd – School Building Program/Educational Facilities Fund
• Miscellaneous Personnel Benefits Fund
• Pension and Gratuity Fund
• Priority Development Assistance Fund
• Calamity Fund
• Retirement Life Insurance Premium
• Comprehensive Agrarian Reform Program
EXAMPLES OF SPECIAL FUNDS
• Malampaya Gas Fund
• Special Education Fund
• Special Road Support Fund
• Special Local Road Fund
• Special Road Safety Fund
• Special Vehicle Pollution Control Fund
• Support for Infrastructure Projects and Social Programs
CHART OF ACCOUNT AND ACCOUNT CODES
The implementation of Unified Account Code Structure changes the
coding system of the government budget, accounting and auditing.

UACS was effected on January 1, 2014.

UACS incorporates the Agency, location, fund source, programs/projects

and object codes/account codes.

It is a uniform coding system for the whole government that improves the
consolidation process of reporting.
RESPONSIBILITY ACCOUNTING
It is a system that relates the financial results to responsibility center,
which provides access to cost and revenue information under the
supervision of a manager having direct responsibility for its performance.
It aims to:
1. Cost and revenues are properly charged to a specific budget.
2. Basis for making decisions for future operations
3. Facilitate review activities, monitoring the performance and
evaluation of effectiveness of operations.
BOOKS OF ACCOUNTS
The basis for recording in the journals shall be the Journal Entry Voucher
(JEV):

Before the implementation of UACS, NGAs shall maintain to sets of

accounting books:
• Regular Agency (RA) Books
• National Government (NG) Books
After the implementation of UACS, NG Books was no longer
maintained.
BOOKS OF ACCOUNTS
Journals:
• General Journal (GJ)

Ledgers:
• General Ledger (GL)
• Specific Subsidiary Ledgers (SL)
FINANCIAL STATEMENTS
Under Philippine Public Sector Accounting Standard (PPSAS), the
following financial statements shall be prepared:
1. Statement of Financial Position (Balance Sheet) – show the financial
condition of the agency as of a certain date.
2. Statement of Financial Performance (Income Statement) – show the
operation of the agency for a specified period.
3. Statement of Cash Flows – show the receipt and disposition of cash for
a specified period.
4. Statement of Changes on Net Assets or Equity – show the balance of
government equity and other prior period adjustments as of a certain
date.
5. Statement of Comparison of Budget and Actual Amount – show the
relationship between allotments and utilizations as of a certain date.
ALLOTMENT AND OBLIGATIONS
Appropriation – this a legislative authorization for a specific
budget. One example is General Appropriations Act (GAA).

Allotment – is the authorization issued by the Department of Budget

and Management (DBM) to an NGA thereby enabling the Agency to
incur obligations up to a specified amount that is within the
appropriation.

Obligation – it is commitment by gov. agency arising from an act of

a duly authorized official.
OBLIGATION ACCOUNTING
Procedures in the incurrence and liquidation of obligations and the
recording of budgetary accounts.

Four Classes of Allotments

• Personnel Services (PS) – pertains to personnel benefits.
• Maintenance and Other Operating Expenses (MOOE)
• Capital Outlay (CO) – for capital expenditures.
• Financial Expenses (FE) – for payment of interest and other
financial cost.
Note: all allotment class required by the rule to have a separate
registries.
NOTICE OF CASH ALLOCATION
Is an authorization issued by the DBM to Gov. Agencies to withdraw
cash from the National Treasury through Modified Disbursement
System (MDS).
Entry for the receipt of NCA:
Cash – Modified Disbursement System (MDS) – Regular------xx,xxx.xx
Subsidy from National Government----------------------------xx,xxx.xx

The NCA released by DBM was net of tax that is expected to be remitted by
the Agency to BIR. In effect, remittance of taxes is thru a cashless method, Tax
Remittance Advice.
ACCOUNTING METHOD ADAPTED BY THE NGAS
• Perpetual Inventory System – an inventory control account is
maintained in the General Ledger on a current basis.
• Moving average method – weighted average is used in costing the
materials and supplies.
• Construction of assets – all construction related cost and incurred
during the construction period shall be capitalized.
• Registry of Public Infrastructure – under NGAS, all completed
construction projects shall removed from the RA books and
recorded in this registry. During the implementation of UACS and
PPSAS, it recognized as PPE on the books of the Gov. Agency in
which the project were appropriated.
ACCOUNTING METHOD ADAPTED BY THE NGAS
• Depreciation – straight-line method of depreciation shall be used
for government PPE,
• the computation of depreciation will commence on the 2nd month
after acquisition.
• Salvage value is equivalent to 10% of acquisition cost
• Under NGA, Infrastructure assets is not subject to depreciation.
Under PPSAS, it is subject to depreciation.
• Life of the PPE is provided under COA Circular# 2003-007 dated
12/11/03.
• Recognition of Liability – at the time goods and services are
accepted or rendered and supplier/creditor bills are received.
ACCOUNTING METHOD ADAPTED BY THE NGAS
• Petty Cash Fund – the imprest system. All replenishment shall be
directly charged to the expense account.
• This is granted to Regular or special disbursing officer, the liquidation and
replenishment of which is the responsibility of the said bonded official.
• Foreign Currency Adjustment – Foreign currency loan balances
shall valued using the prescribed exchange rate by BSP.