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ACT 132 Lecture 2
ACT 132 Lecture 2
Government Accounting
Part 2 Lecture
Account Group
d. Revenue from non-exchange transactions may also arise when, in respect of an inflow of resources from a non-
exchange transaction, the entity satisfies a present obligation recognized as a liability which may be as follows:
1. Trust Liabilities – Customers’ Deposits Payable and Guaranty/Security Deposits Payable
2. Deferred Credits – Deferred Finance Lease Revenue and Other Deferred Credits
3. Unearned Revenue – Investment Property and Other Unearned Revenue
Sale of Goods or Provisions of Services to Third Parties or to Other NGAs
Required: Compute for the invoice price of the merchandise and journalize the transaction.
Interest income – charges for the use of cash or cash equivalents, or amounts due to the entity;
Example: Assume that on August 5, 2015, Entity A received a 60-day, 9%, P12,000 promissory note from X
entity for accounting manuals sold. On October 4, 2015, Entity X paid cash in settlement of its note.
Date Account Title Account Code Debit Credit
Aug 5 Notes Receivable 10301020 P12,000
Sales Revenue 40202160 P12,000
To recognize the sale
Oct 4 Cash-Collecting Officers 10101010 12,180
Notes Receivable 10301020 12,000
Interest Income 40202210 180
To recognize the collection of
notes receivable
Interest = P12,000 x 9% x 60/360 =
P180
2.2 Royalties – fees paid for the use of entity’s assets such as
trademarks, patents, software, and copyrights;
1. The cash basis of accounting shall be applied by all government agencies in the
recognition of revenue from non-exchange transaction until a reliable model of
measurement of this revenue is developed. Therefore, asset and the corresponding
revenue or liability that arises from non-exchange transaction shall be recognized when
collected or when these are measurable and legally collectible.
a. Taxation revenue shall be determined at a gross amount. It shall not be reduced
for expenses paid through the tax system.
b. Gifts and donations, other than services in kind shall be recognized as assets and
revenue when it is probable that the future economic benefits or service potential will
flow to the entity and shall be measured at fair value.
c. Goods in-kind received without conditions shall be recognized as revenue
immediately.
d. Donation in cash or in kind shall be recognized as revenue.
2. Revenue from non-exchange transactions shall be measured at the amount of the increase in net assets
recognized by the entity, unless it is also required to recognize a liability. Where a liability is recognized and
subsequently reduced, because the taxable event occurs, or a condition is satisfied, the amount of the reduction in
the liability will be recognized as revenue. (Pars. 48 and 49, PPSAS 23)
3. Measurement of Assets on Initial Recognition from Non-Exchange Transactions. An asset acquired through a non-
exchange transaction shall initially be measured at its fair value as at the date of acquisition. (Par. 42, PPSAS 33)
4. Measurement of Liabilities on Initial Recognition. Where the time value of money is material, the liability will be
measured at the present value of the amount expected to be required to settle the obligation. (Par. 58, PPSAS 23)
5. Tax Revenue. Taxes are economic benefits or service potential 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. Unless otherwise specified in laws and
regulations, the taxable event for:
a. Income tax is the earning of assessable income during the taxation period by the taxpayer;
b. Value added tax is the undertaking of taxable activity during the taxation period by the taxpayer;
c. Goods and services tax is the purchase or sale of taxable goods and services during the taxation period;
d. Customs duty is the movement of dutiable goods or services across the customs boundary;
e. Death duty is the death of a person owning taxable property; and
f. Property tax is the passing of the date on which the tax is levied, or the period for which the tax is levied, if the
tax is levied on a periodic basis
Exchanges of Goods or Services for Similar/Dissimilar Good or Services
When goods or services are exchanged or swapped for goods or services which are of a similar nature and value, the
exchange is not regarded as a transaction which generates revenue. However, when goods are sold or services are
rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue.
The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash
equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue
is measured at the fair value of the goods given up, adjusted by the amount of any cash or cash equivalents transferred.
(Par. 17, PPSAS 9)
B. Foreign Sources
• Foreign Funding Institution remits the amount in foreign currency to the Bangko Sentral ng Pilipinas (BSP);
• The BSP advices the BTr of the receipt of the foreign currency remittances;
• The BTr records the receipt in its book in peso value equivalent;
• Upon receipt of the NCA from DBM, the BTr advices the bank to transfer cash to the agency; and
• The government agency records NCA in its book.
Receipt and Collection Process
Process Person/Unit Responsible
Agency’s Book
Account Title Account Code Debit Credit
Cash – Collecting Officer 1-01-01-010 P100,000
Seminar/Training Fees 4-02-02-150 P100,000
To record collection of income
Cash in Bank - LCCA 1-01-02-020 100,000
Cash – Collecting Office 1-01-01-010 100,000
To record deposit of collection
Office Supplies Expenses 5-02-99-050 P25,000
Rent Expenses 4-02-02-050 15,000
Printing and Publication Expense 5-02-99-020 5,000
Cash in Bank – LCCA 1-01-02-020 45,000
To record expenses charge against collection
Seminar/Training Fee 4-02-02-040 100,000
Office Supplies Expenses 5-02-99-050 25,000
Rent Expenses 4-02-02-050 15,000
Printing and Publication Expense 5-02-99-020 5,000
Cash in Bank – LCCA 1-01-02-020 55,000
To close the income for the transfer to NG books
Agency’s National Government Books
Cost P2,000,000
Accumulated Depreciation 1,700,000
Sales Price P400,000
DPWH wants to purchase a new car in the amount of P1,500,000 and received a SARO for the purpose.
Journalize the stated transactions
Account Title Account Code Debit Credit
Cash – Collecting Officer 1-01-01-010 P400,000
Accumulated Depreciation – Motor Vehicle 1-06-05-021 1,700,000
Motor Vehicle 1-06-05-020 2,000,000
Gain on Sale of PPE 4-05-01-040 100,000
To record sale of office equipment
Gain on Sale of PPE 4-05-01-040 100,000
Government Equity 3-01-01-010 300,000
Cash – Collecting Officer 1-01-01-010 400,000
To record remittance of collection to BTr
Grants and Donations Intended for Agency Uses: If there is no specific
authority for their use, grants and donations from whatever source
shall also be recorded in the NG books and shall be remitted to the
National Treasury. This agency shall prepare a special budget for the
use of the income remitted but it is intended for the agency’s use
such as donations and grants. Upon approval of the special budget,
The DBM will issue the SARO and the NCA. The former is the agency’s
additional allotment and shall be recorded in the appropriate registry.
The SARO is the agency’s additional subsidy income from the national
government and is journalized in its RA books.
Agency’s National Government Books
1. No money shall be paid out of any public treasury or depository except in pursuance of an
appropriation law or other specific statutory authority.
2. Government funds or property shall be spent or used solely for public purposes.
3. Trust funds shall be available and may be spent only for the specific purpose for which the trust was
created or the funds received.
4. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the
financial affairs, transactions, and operations of the government agency.
5. Disbursement or disposition of government funds or property shall invariably bear the approval of
the proper officials.
6. Claims against government funds shall be supported with complete documentation.
7. All laws and regulations applicable to financial transactions shall be faithfully adhered to.
8. Generally accepted principles and practices of accounting as well as of sound management and
fiscal administration shall be observed, provided that they do not contravene existing laws and
regulations.
Expenditure is the obligation incurred by the agency.
Journalizing Transactions/Events
In accounting, it is the policy that transactions/events are journalized based
on facts without recognizing the regularity/legality of the transaction/event.
Types of Disbursement
1. By check
Example: Department of Education paid its accounts payable arising from the purchase of
supplies and materials in the
Account amount of P500,000.
Title Account Code Debit Credit
2. By Cash. Made by cash advance drawn and maintained in accordance with COA
rules and regulations.
Typical Disbursements Transactions
Salaries and wages of the agency may be made through the following:
PhilHealth, 40,000
Retirement and Life Insurance Premium Contribution 240,000
PagIbig Contribution 20,000
PhilHealth Contribution 40,000
Due to GSIS 2-02-01-020 240,000
Due to PagIbig 2-02-01-030 20,000
Due to PhilHealth 2-02-01-040 40,000
To record government share
Due to GSIS 2-02-01-020 360,000
Due to PagIbig 2-02-01-030 30,000
Due to PhilHealth 2-02-01-040 40,000
Cash-MDS-Regular 1-01-04-040 430,000
To records remittances govt institutions
Due to DIR 2-02-01-010 120,000
Subsidy from national Government 4-03-01-010 120,000
Clothing Allowance and Productivity Incentive Bonus
Advances to Payroll 1-99-01-020 100,000
Cash-MDS-Regular 1-01-04-040 100,000
To record cash advance granted for clothing and other
bonuses/allowances
Clothing/Uniform Allowance 80,000
Productivity Incentive Allowance 20,000
Advances for Payroll 1-99-01-020 100,000
To record payment and liquidation of clothing and other
bonuses/allowances
Overtime Pay, P6000
Overtime and Night Pay 6,000
Due to BIR 2-02-01-010 100
Cash-MDS-Regular 1-01-04-040 5,900
To record payment of overtime work
Due to BIR 2-02-01-010 100
Subsidy from national Government 4-03-01-010 100
To record tax remittance for overtime pay
2. Maintenance and Other Operating Expenses
Cash-MDS-Regular 9,750
Cash-MDS-Regular 1,000