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Basic Features of the New Government Accounting System

(Government Accounting, 2015 Edition, Punzalan/Cardona)


Accounting Methods

The International Public Sector Accounting Standards Board (IPSASB) develops

International Public Sector Accounting Standards (IPSASs) which apply to the accrual
basis of accounting and IPSASs which apply to the cash basis of accounting.

One-Fund Concept

This system adopts the one fund concept, that is the general fund, which is
generally available for all functions of government. Separate fund accounting shall
be done only when specifically required by law or by a donor agency or when
otherwise necessitated by circumstances subject to prior approval of the
Commission, in which case, a Special Purpose Fund may be created.
c. Chart of Accounts and Account Codes
COA Cir. No. 2013-002 provides that the account code structure consists of eight (8)
Mandatory digits, such as: one digit: Account Group; Two digits: Major Account
Group; Two digits: Sub-Major Account Group; Two digits: General Ledger Account
Group; and one digit: General Ledger Contra Accounts.
d. Responsibility Accounting
Responsibility accounting is a system that relates the financial results to a
responsibility center, which provides access to cost and revenue information under
the supervision of a manager having direct responsibility for its performance. It is a
system that measures the plans (by budget) and actions (by actual results) of each
responsibility center.
In order to be effective in identifying the performance of a segment or unit of the
agency under the control and responsibility of the segments manager, the coding
structure has been formulated. However, this coding structure was modified and
repealed by the Commission on Audit, Department of Budget and Management, and
Department of Finance through Joint Circular No. 2013-1 dated August 6, 2013:
Unified Accounts Code Structure (UACS). Apparently, the COA, DOF-BTr, and DBM
are collectively responsible for the UACS. The validation and assignment of new
codes for funding source, organization, sub-object codes for expenditure items shall
be the responsibility of DBM. The consistency of account classification and coding
structure with the Revised Chart of Accounts shall be the responsibility of COA. And,
the consistency of account classification and coding standards with the Government
Finance Statistics shall be the responsibility of DOF-BTr.
e. Books of Accounts
Under the NGAS, the General Journal shall be the only book of original entry to be
used. The journals shall be used to record in time sequence, financial transactions

and information presented in duly certified and approved accounting documents.

The basis for recording in the journal shall be the Journal Entry Voucher (JEV).
f. Financial Statements
Under the new accounting system, the following financial statements shall be
prepared: (1.) Statement of Financial Position/Balance Sheet; (2.) Statement of
Financial Performance/Income Statement, (3.) Statement of Changes in Net
Assets/Equity, (4.) Statement of Cash Flows, (5.) Presentation of a Comparison of
Budget and Actual Amounts, and Notes to financial statements.
g. Two-Money Column Trial Balance
The advantage of a two-money column trial balance over a four-column one is that
the presentation of financial transactions is very simple. It can readily understood
by users other than accountants.
h. Allotment and Obligation
Obligation accounting is modified to simplify procedures in the incurrence and
liquidation of obligations and the recording of the budgetary accounts (allotments
and obligations incurred and liquidated). Separate registries shall be maintained to
control the allotments and obligations for each of the four classes of allotments,
Registry of Allotments
Registry of Allotments
Expenses (RAOMO)
Registry of Allotments
Registry of Allotments

and Obligations - Capital Outlay (RAOCO)

and Obligations - Maintenance and Other Operating
and Obligations - Personnel Services (RAOPS)
and Obligations - Financial Expenses (RAOFE)

i. Notice of Cash Allocation (NCA)

The receipt of Notice of Cash Allocation by the agency shall be recorded in the
books as debit to account Cash-Modified Disbursement System (MDS),Regular (if
for operating requirements, or else Special or Trust as the case may be) and credit
to account Subsidy from National Government. Pursuant to the Tax Remittance
Advice (TRA) system, the NCA released by the Department of Budget and
Management to the agency is reduced by the estimated taxes expected to be
remitted by the Agency to the Bureau of Internal Revenue through the TRA.
j. Financial Expenses
Financial expenses such as bank charges, interest expenses, commitment charges,
and other related expenses shall be separately classified from Maintenance and
Other Operating Expenses (MOOE).
k. Perpetual Inventory of Supplies and Materials
Purchase of supplies and materials for stock, regardless of whether or not they are
consumed within the accounting period, shall be recorded under the Inventory

account. Under the perpetual inventory method, an inventory control account is

maintained in the General Ledger on a
current basis. Purchases out of petty cash fund shall be charged immediately to the
appropriate expense accounts. The moving average method of costing shall be used
for costing inventories.
l. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards
For appropriate check and balance, the accounting units of agencies, as well as the
Property Offices, shall maintain Supplies Ledger Cards/ Stock Cards by stock
number, and Property, Plant and Equipment Ledger Cards/Property Cards by
category of property, plant and equipment, respectively.
m. Construction of Assets
For assets under construction, the Construction Period Theory shall be applied for
costing purposes. Bonus paid to the contractor for completing the work ahead of
time shall be added to the total cost of the project. Liquidated damages charged
and paid for by the contractor shall be deducted from the total cost of the project.
Any related expenses incurred during the construction of the project, such as taxes,
interest, license fees, permit fees, clearance fee, etc. shall be capitalized, and those
incurred after the construction shall form part of operating costs.
n. Registry of Public Infrastructures/Registry of Reforestation Projects
For agencies that construct public infrastructures, such as: roads, bridges,
waterways, railways, plaza, monuments, etc., and invest on reforestation projects, a
Registry of Public Infrastructures (RPI)/Registry of Reforestation Projects (RRP) shall
be maintained for each specific infrastructure/reforestation project.
o. Depreciation
Through depreciation, each period benefiting from the use of the asset was charged
an equitable share of its cost. PPSAS No. 17, Property, Plant and Equipment,
provides that the periodic depreciation charge shall be recognized in surplus or
deficit, unless it is included in the carrying amount of another asset.
According to PPSAS No. 17, depreciation is recognized even if the fair value of the
asset exceeds its carrying amount, as long as its residual value does not exceed its
carrying amount. The residual value and the useful life of an asset shall be reviewed
at least at each annual reporting date and, if expectations differ from previous
estimates, the change/s shall be accounted for as change in accounting estimate to
be treated currently and prospectively.
A variety of depreciation methods can be used to allocate the depreciable amount
of an asset on a systematic basis over its useful life. These methods include the
straight line method, the diminishing balance method, and the units of production

For uniformity in the application of useful life and simplification in its computations,
the estimated useful life of government property, plant and equipment by
classification per COA circular No. 2003-007 dated December 11, 2003 shall be
p. Reclassification of Assets
Serviceable assets no longer being used shall be reclassified to the Other Assets
account and shall not be subject to depreciation. Also included under Other Assets
are obsolete and unserviceable assets awaiting final disposition.
q. Allowance for Impairment Accounts Receivable
An allowance for impairment accounts receivable shall be set-up for estimated
uncollectible trade receivables to allow for their fair valuation.
r. Recognition of Liability
Liability shall be recognized at the time goods and services are accepted or
rendered and supplier/creditor bills are received.
s. Interest Accrual
Whenever practical and appropriate, interest income and/or expense shall be
accrued and recognized in the books of accounts.
t. Accounting for Borrowings and Loans
All borrowing and loans incurred shall be recorded under the appropriate liability
accounts, which includes among others the following: (1.) Loans Payable
Domestic, (2.) Loans Payable Foreign.
u. Petty Cash Fund
The Petty Cash Fund shall be maintained under the imprest system. As such, all
replenishments shall be directly charged to the expense account. At all times, the
Petty Cash Fund shall be equal to the total cash on hand and the unreplenished
expenses. The Petty Cash Fund shall no be used to purchase regular inventory/items
for stock.
v. Foreign Currency Adjustments
Cash deposits in foreign currency and outstanding foreign loans shall be computed
at the exchange rate prescribed by the Bangko Sentral ng Pilipinas at the balance
sheet date. The total cash deposits and foreign loans payable shall be adjusted at
the end of each month and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign currency obligations shall reflect the
appropriate foreign currency in which the loan is payable. The liability shall be
expressed both in the foreign and local currency.