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GOVERNMENT ACCOUNTING SUMMARY

Advance Accounting 2
New Government Accounting System

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Prof. Tina Llorca


February 7, 2015

Summary of Critical Points


1.
Budgetary accounts of appropriations and
allotments are entered in the registry maintained by
DBM. Allotments and obligations are also entered in
appropriate registries maintained by the agency.
Under NGAS budgetary accounts are no longer
journalized.
2.
The notice of cash allocation (NCA) received by
the agency from DBM is journalized in the regular
agency books. (The other set of books of an agency
is the National Government books (NG).
3.
The obligations incurred by the agency are not
journalized, but posted to the appropriate registry,
as follows:
For capital outlay
- RAOCO
Personal Services
- RAOPS
Maintenance & Others
- RAOMO
Financial expenses
- RAOFE
4.
Generally, withheld taxes by the agency are no
longer remitted to BIR, but retained and credited to
Subsidy Income from NG under the Tax Remittance
Advice (TRA) System. The NCA released to the
agency is reduced by the amount of estimated
withholding taxes pertinent to the allotment covered
by the cash allocation.
5.
Asset/perpetual inventory method will be
followed in the recording of expenditures if it applies
to more than one period or when payment is for
materials for stock. The expense is taken up when
the items are consumed.
6.
Cost of ending inventory of supplies and
materials shall be computed using the Moving
Average method.
7.
Costs of assets being constructed are debited to
construction in progress account (using construction
period theory). This CIP account is closed to the
appropriate asset account upon completion.
8.
Constructed Public Infrastructures are not shown
among the fixed assets on the balance sheet, rather
they are deducted from government equity (as part
of closing entries) and transferred out to an
appropriate registry. They are not subject to
depreciation charges.
9.
Depreciation on fixed assets are taken up on the
month following the month of purchase or completion
of construction. A 10% scrap value on the asset is
always assumed and the estimated life is prescribed
by COA.
10.
Income for which the agency is authorized to use
for its operation is recorded in the regular agency
books. If the authority is with limitations, such as any
excess is to be remitted to the National Treasury the
collections shall first be recorded in the regular
agency books, the expenses journalized, and the
excess is to be remitted to the National Treasury and
recorded in the agencys NG books.
11.
Two trial balance are prepared:
a) Pre-closing TB which is also the adjusted TB.
From this is prepared the statement of income
and expense.
b) Post-closing TB from this is prepared the
balance sheet.
12.
Adjusting entries at end of period are the same
as those recorded in commercial accounting.
13.
1.

2.

Subsidy Income from National Government


Income & Expense Summary

3.

4.

X
X

Accounts
Codes
100 299
300 399
400 499
500 599
600 799

600 699
700 799
801 850
801 850

800 899

951 960

RECORDS OF DBM
1. Registry of Appropriations and Allotments (RAPAL);
DEPARTMENT OF BUDGET & MANAGEMENT
REGISTRY OF APPROPRIATIONS AND ALLOTMENTS
(RAPAL)
OF (Name of Agency)

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Close Public Infrastructures or Reforestation


Projects accounts to Government Equity account
and transfer the corresponding amounts to the
respective registries.

Summary of Coding structures

Ref

Close the balance of the Retained Operating


Surplus to Government Equity account.

General Acct.
Specific Acct.
Expenses
Personal services
Maintenance & other
Ap. exp.
Financial expense

Close the balance of the Prior Years Adjustments


account to Retained Operating Surplus account.

Account
Assets
Contra assets
Liabilities
Equity
Revenue / Income

Date

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Government Equity
Public Infrastructures
Reforestation Projects

14.

Close the balance of the Income & Expense


Summary account to the Retained Operating
Surplus account.

Retained Operating Surplus


Government Equity

8.

Prior Years Adjustments


Retained Operating Surplus

7.

Income & Expense Summary


Retained Operating Surplus

6.

Close the balance of all expense accounts to


Income & Expense Summary account.
Income & Expense Summary
Salaries & Wages-Regular Pay

5.

Close the balance of all revenue accounts to


Income & Expense Summary Account.
Income from Government Services
Operations
Income
from
Government
Business
Operations
Income & Expense Summary

Closing entries are as follows:


Reversion of the unused or unutilized Subsidy
Income from National Government at the end of
the year.
Subsidy Income from National Government
Cash-National Treasury, MDS

Close the balance of the Subsidy Income from


National Government to Income & Expense
Summary Account.

Capital Outlay

Maintenance & Other

P2.513

(1)

(2)

(3)
Allotment

Appropriatio
n Balance

Financial Expense
(5)
allotmen
Appropriat
t
e balance

Operating expenses
(4)
Allotment
Appropriation
Balance

Registry of Allotment and Obligations Personal


Services (RAOPS)
Registry of Allotment and Obligations Financial
Expenses (RAOFE)

Note that there is an a new expense classification, the


financial expenses. They are categorized separately from
the MOOE since they are not operating expenses.

Personal Services
(6)
allotment
Appropriate
balance

The following is a printout of one of the allotment


classes.
REGISTRY OF ALLOTMENT AND OBLIGATIONS

2.

DEPARTMENT OF BUDGET AND MANAGEMENT


REGISTRY OF ALLOTMENTS AND NCA (RANCA)
OF (Name of Agency)

CO

______________________________________
Agency Name

Registry of Allotment and Notice of Cash Allocation

MOOE

Allotments
(3)
PS

EE

Sheet No. _____________


Dat
NCA e

BUREAU OF THE TREASURY


REGISTRY OF NCA REPLEMISHMENTS (RENREP)
Ref
(2)

P.P.A

Accoun
t Code

Allotmen
t
Received

Obligatio
n
incurred

Balanc
e

Total

RECORDS OF THE BTR


Upon receipt of the copy of the NCA from the DBM, the
BTR shall enter it in the registry of NCA and
Replenishment (RENREP). It shall also enter in the
RENREP the transfer of cash from its bank account(s) to
the appropriate MDS account. The following is the
printout of the suggested format of the RENREP.

Date
(1)

Ref.

NCA
(3)

The formats presented here are only suggested ones.


The DBM and the BTr may formulate their own formats.,
which they deem will serve their purposes better.
RECORDS OF THE AGENCY
Although the Agency will not journalize its appropriation
and allotment it shall maintain four registries for the
allotments it receives and for the obligations it incurs.
These are:

Registry of Allotment and Obligations capital


Outlay (RAOCO)

Registry
of
Allotment
and
Obligations

Maintenance and other operating Expenses


(RAOMO)

Upon receipt of the NCA, the Accountant shall journalize


it as Cash in the Treasury for Modified Disbursement
System (MDS) and Subsidy Income from National
Government which in effect identifies the share, of the
Agency in the income of the National Government. The
entry will be as follows:
Cash, National Treasury MDS
Subsidy, Income from NG

100
100

The obligation is recognized and will be entered in the


appropriate RAO when obligation is incurred as evidenced
by the approved Allotment and Obligation Slips (ALOBS).
The Accountant shall credit Cash, National Treasury
MDS each time a payment is made charged against the
NCA and debit the specific account being paid for, either
asset or expense account. The following are two
examples:
Example 1:
Step 1. Memo entry in RAOCO
2. Journal Entry
Office equipment
100
Cash National Treasury - MDS
88
Withholding Taxes payable
12
Eaxmple 2:
Step 1. Memo entry in RAOMO
2. Journal Entry
Travel expenses
Cash National Treasury - MDS

10

10

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P2.513

STRAIGHT PROBLEMS

Problem 1
Agency XX is a national government agency unit.
Selected transactions completed during the agencys
2011 operations follow:
1.

2.

Approval of the annual budget of the agency for 2011


by DBM (thru a legislative enactment by Congress),
as follows:
Personal services (PS)
P2,000,000
Maintenance and other operating
expenses (MO)
1,500,000
Capital outlay (CO)
1,200,000
Financial expenses (FE)
40,000
Approval of Agencys budget matrix by DBM and
related ALLOTMENT received out of the above
APPROPRIATIONS:
Personal services
P 1,800,000
Maintenance and other operating
expenses
1,350,000
Capital Outlay
1,100,000
Financial expenses
35,000

3.

Receipt of NOTICE of CASH ALLOCATION for the


above-mentioned ALLOTMENT for a total of
P4,100,000

4.

Incurred OBLIGATION and


paid
maintenance and operating expenses
a. Various operating expenses
b. Prepaid rent
c. Travelling and other expenses of
the Treasurer, Pol Buba, for a
scheduled seminar in Kutawi.

Refund of excess cash


advance for travelling
expenses by Pol B

Liquidation of the actual


travel and related expenses
by Pol B.

Deposit of collection for


excess cash advance to
Bureau of Treasury

the

following

P 1,100,000
P 120,000
P

40,000
3,000

37,000

3,000

5.

Incurred OBLIGATION for the acquisition


of office equipment
P 800,000

Receipt of office equipment per invoice


and delivery receipt
800,000

Payment of office equipment, less 12%


withholding tax
704,000

Issuance of TRA for the


withholding tax
96,000

6.

Collection of other income which the Agency is


authorized to use in their operations:

Other service income


P 15,000

Sales revenue
35,000

Deposited the above collections in the


bank
P
50,000

7.

Incurred an OBLIGATION for personal


services
P 1,775,000

The disbursing officer is granted a cash


advance of
1,420,000

Salaries and other allowances are paid by the


disbursing officer,
as follows: Salaries P1,562,000

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PERA
213,000
P 1,775,000
Less salary deductions
(see schedule)
355,000#
Net amount paid (disbursing officers
cash advance)
P 1,420,000
# Withheld taxes
P131,350
GSIS premiums
188,150
Pag-ibig premiums
14,200
Phil Health premiums 21,300 P 355,000
Remitted withholding taxes to the BIR P 131,350
Remitted other salary deductions to
pertinent payees
223,650
8.

Incurred an OBLIGATION for the Agencys share on


the following mandated contributions:
Life and Retirement
P266,250
Pag-ibig
14,200
Philhealth
21,300 P 301,750

9.

Incurred an OBLIGATION and paid bank


service charges of
P 33,500

Required:
(1) Account for the above-mentioned information I n the
books of the Agency.
(2) Prepare adjusting entries at year-end for the
following information
a. Three-fourths of the prepaid rent must be
expensed.
b. Various operating expenses are accrued at yearend, P35,000
c. Fifteen percent (15%) of the recorded various
operating expenses are prepayments
d. The office equipment will be depreciated over an
estimated life of 10 years, Depreciation expense
for 8 months will be charged during the current
year.
(3) Prepare a pre-closing trial balance for 2011.
Problem 2.
The following is the pre-closing trial balance of XYZ, a
national government agency for the fiscal year ended,
June 30, 2011.
Debit
Credit
Cash-NT-MDS
P 25,750
Cash in Bank LCCA
50,000
Prepaid rent
30,000
Prepaid expenses
165,000
PI Municipal park
376,000
Office equipment
400,000
Accumulated
depreciation
P 24,000
Accrued Expenses
35,000
Subsidy Income from NG
4,193,000
Other service income
15,000
Sales revenue
35,000
Traveling
37,000
Salaries
1,562,000
PERA
213,000
Life and retirement
266,250
Pag-ibig
14,200
Philhealth
21,300
Depreciation
48,000
Rent
90,000
Various operating
expenses
970,000
Bank service charges
33,500
Totals
P4,302,000
P4,302,000

P2.513

Required:
1. Prepare closing entries at year-end.
2. Prepare a post-closing trial balance for year ended
2011.
3. Prepare a Statement of Revenues and Expenses and
a Statement of Financial Position for 2011.
Problem 3
Department ABC is a national government agency. It
derives income only from appropriations out of the
national budget. Some transactions for the agency during
the current fiscal year follows:
1. Obligation for construction of a building upon signing
of the contract, P2,000.
2. Payment of 15% of the contract amount as advances
to the contractor, P300.
3. Receipt of progress billings for construction work as
follows:
50% of P2,000
P1,000
Less recoupment of cash advance
150
Net amount billed
P 850
4. Payment of bill for construction of building, as follows
Accounts payable, as above
P 850
Less: withholding tax at 10% of gross
100
Net amount paid
P 750
5. Remittance of withholding tax to the BIR, P100.
6. Presentation of final billing for construction of
buildings:
50% of P2,000
P1,000
Less recoupment of cash advance
P 150
Net amount billed
850
7. Payment of bill for construction of building, as
follows:
Accounts payable, as above
P850
Less withholding tax at 10% of gross
100
Net amount paid
P750
8.
9.

Remittance of withholding taxes to BIR, P100.


Turnover and acceptance of the building, P2,000.

Required:
1. Prepare journal entries for the above information.
2. Discuss relevant accounting consequences if the
construction were for a road or for a monument,
instead.

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P2.814

SUGGESTED SOLUTIONS TO STRAIGHT PROBLEMS


Problem 1.
1. APPROVAL OF ANNUAL BUDGET (APPROPRIATION)

*DBM enters in appropriate columns of RAPAL


*COA prepares spreadsheets on appropriations.
2.

a.
b.
c.
d.
3.

Due to BIR
Subsidy Income from
the
NG

APPROVAL OF AGENCYS BUDGET MATRIX (ALLOTMENT)


*DBM enters in RAPAL and in RANCA
*Agency enters in RALOBS, as follows

6.

RAOCO for capital outlay-type of


expenditures
RAOMO
for
maintenance
and
other
operating expenses
RAOPS for expenses classified as personal
services; and
RAOFE for financial expenses.

DBM enters in RANCA


BTR enters in RENREP
Agency prepares a journal entry:
Cash National
Treasury Modified
Disbursement System
P4,100,000
Subsidy Income
from the National
Government

7.

50,000

Agency enters in RAOPS


Journal entry for the cash advance

Cash Disbursing Officer

1,420,00
0

1,420,00
0

INCURRED OBLIGATION FOR VARIOUS MOOEs

Due from Officers


and employees
*
Liquidation of cash
advance

Agency prepares a journal entry


Traveling expenses
37,000
Due from Officers
and employees

Deposit of collection

Agency prepares a journal entry


Subsidy income from NG
3,000
Cash Collecting Officer
INCURRED
EQUIPMENT

OBLIGATION

FOR

3,000 8.
OF

Journal entry for payment


Accounts payable
Cash NT MDS
Due to BIR

704,000
96,000

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800,000

21,300
1,420,000

INCURRED
OBLIGATION
CONTRIBUTIONS

188,150
14,200
21,300
223,650
FOR

SHARE

Agency enters in RAOPS

Journal entry for the payments


Life & Retirement
266,250
contributions
Pag-ibig contributions
14,200
Phil-health contributions
21,300
Cash NT MDS

Agency enters in RAOCO

800,000

131,350
188,150
14,200

Journal entry for remittance to various payees

GSIS premiums payable


Pag-ibig premiums
payable
Phil-health premiums
payable
Cash NT MDS

37,000

Journal entry for receipt of eqpt


Office Equipment
800,000
Accounts payable

1,562,000
213,000

Journal entry for remittance to BIR of WT


Due to BIR
131,350
Cash NT- MDS
131,350

3,000

ACQUISITION

Journal entry for the payment

Salaries & wages


PERA
Due to BIR
GSIS premiums payable
Pag-ibig premiums
payable
Philhealth premiums
payable
Cash disbursting
officer

Refund of excess cash advance


Agency enters in RAOMO (negative entry)
Agency prepares a journal entry:
Cash Collecting
3,000
officer

50,000

INCURRED OBLIGATION FOR PERSONAL SERVICES

4,100,000

15,000
35,000

Journal entry for the deposit

Cash in Bank LCCA


Cash Collecting officer

Agency enters in RAOMO


*Agency prepares the following compound entry:
Prepaid rent
120,000
Due from officers and
40,000
employees
Various other Operating
Expenses
1,100,000
Cash NT MDS
1,260,000

5.

96,000

COLLECTION OF OTHER INCOME WHICH THE AGENCY IS


AUTHORIZED TO USE

Cash NT MDS
4.

96,000

Journal entry for the collection


Cash Collecting Officer
50,000
Other service income
Sales revenue

RECEIPT OF NOTICE OF CASH ALLOCATION (NCA)

Journal entry for issuance of TRA

9.

IN

301,750

INCURRED OBLIGATION FOR BANK SERVICE CHARGES

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P2.814

Agency enters in RAOFE


Journal entry for payment

3.

Bank service charges


Cash NT MDS

33,500
33,500

REQUIREMENT 2 ADJUSTING ENTRIES


a. Rent expense
Prepaid rent
b. Various operating
expenses
Accrued expenses
c. Prepaid expense
Other operating
supplies
d. Depreciation expenses
Accumulated
depreciation

90,000
35,000

165,000
48,000

165,000
48,000
4.

PROBLEM 2
1. Closing entries at year-end
SI from NG
Cash-NT-MDS

25,750
25,750

SI from NG
Income & Expense

4,167,250

Service income
Sales revenue
Income & Expense

15,000
35,000

Income & Expense


3,255,250
Travelling
Salaries
PERA
Life & retirement
Pag-ibig
Philhealth
Depreciation
Rent
Various operating
Expenses
Bank service charges

Income & expense


Retained operating
surplus
Retained operating
surplus
Government Equity
Government Equity
PI-municipal park
2.

4,167,250

50,000
37,000
1,562,000
213,000
266,250
14,200
21,300
48,000
90,000
970,000
33,500

962,000

P33,500
37,000
90,000
48,000
266,250
14,200
21,300
1,562,000
213,000
970,000

Accrued expense
Government equity
Total
Problem 3.
1. Agency enters in RAOCO
2. Agency prepares a journal entry
Advances to contractor
Cash NT MDS
3.

4.

5.
6.

962,000

4,167,250
15,000
35,000
P4,217,250

STATEMENT OF FINANCIAL POSITION


Cash-in-bank LCCA
Prepaid rent
Prepaid expense
Office equipment
P400,000
Less accumulated
depreciation
24,000
Total

962,000

962,000

Agency prepares a journal entry


CIP Building
Accounts payable
Advances to contractors
Agency prepares a journal entry
Accounts payable
Due to BIR
Cash NT MDS
Agency prepares a journal entry
Due to BIR
Cash NT MDS
Agency prepares a journal entry
CIP Building
Accounts payable
Advances to contractor

3,255,250
P 962,000
P50,000
30,000
165,000
376,000
P621,000
P35,000
586,000
P621,000

P 300

P 300

1,000
850
150

850
120
730

120
120
1,000

850
150

376,000
376,000

POST-CLOSING TRIAL BALANCE AT FISCAL-YEAR-END


Debits
Credits
Cash-in-Bank LCCA
P 50,000
Prepaid expenses
165,000
Prepaid rent
30,000
Office equipment
400,000
Accumulated depreciation
P 24,000
OE
Accrued expense
35,000
Government equity
________
586,000
Totals
P645,000
P645,000

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Less Expenses:
Bank service charges
Traveling
Rent
Depreciation
Life & Retirement
contributions
Pag-ibig contributions
Phil-health contributions
Salaries
PERA
Other operating
Net Savings

90,000
35,000

STATEMENT OF REVENUES AND EXPENSES


Revenues:
Subsidy income from the
National Govt.
Other service income
Sales revenues
Total

7.

8.

9.

Agency prepares a journal entry


Accounts payable
Due to BIR
Cash NT MDS
Agency prepares a journal entry
Due to BIR
Cash NT MDS

850

120

120
730

120

Agency prepares a journal entry

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P2.814

Buildings
CIP Building

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2,000

2,000

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P2.814