Chapter 4.

TRIAL BALANCE, FINANCIAL REPORTS

AND STATEMENTS

Sec. 67. Trial Balance. – Trial balance is a list of all the

general ledger accounts and their balances at a given time. The
accounts are listed in the order in which they appear in the ledger,
with the debit balances in the left column and credit balances on the
right column.

Sec. 68. Purpose of the Trial Balance. – The trial balance

is prepared:

a. To prove the mathematical equality of the debits

and credits after posting;
b. To uncover errors in journalizing and posting; and
c. As basis for the preparation of the financial
statements.

Sec. 69. Procedures in the Preparation of the Trial

Balance. – The procedures in trial balance preparation shall be:

a. List the account titles and their debit/credit

balances based on the accounts and amount
reflected in the general ledger;
b. Total the debit and credit columns; and
c. Prove the equality of the two columns.

Sec. 70. Pre-Closing Trial Balance. – The pre-closing trial

balance is the trial balance prepared from the general ledger accounts
after the adjusting journal entries have been journalized and posted.
This is also termed as adjusted trial balance.

Monthly pre-closing trial balance for each fund shall be

submitted not later than the twentieth day after the end of the month.
It shall be supported by the Status of Appropriations, Allotments and
Obligations, for both the current and continuing appropriations.

These reports shall be submitted to the following:

COA Unit Auditor – Original copy

Local Sanggunian – 1 copy

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 Local Treasurer – 1 copy
Local Accountant – 1 copy

The trial balance at the end of the quarter shall also be

supported by a schedule of subsidiary ledger balances of the
controlling accounts in the General Ledger and an additional copy
shall be submitted to the COA Regional Office thru the Unit Auditor.

Sec. 71. Status of Appropriations, Allotments and

Obligations. – The status of appropriations, allotments and
obligations is a schedule prepared showing the appropriation,
allotments and obligations of each function, program project and
activity (See Annex 1). Separate schedules shall be prepared for
current appropriation and for continuing appropriations using the
following column headings:

Function/Program/ Appropriations Allotment Obligation Unobligated

Project/ Activity Balance

Sec. 72. Post-closing Trial Balance. – Post-closing trial

balance is the trial balance prepared at the end of the year after the
closing entries are journalized and posted in the general ledgers. In
the Post-closing Trial Balance, all the nominal accounts (revenue,
expense and intermediate) are closed and the real accounts (assets,
liability and equity) are shown with balances. It shall be submitted
not later than the fourteenth day of February after the end of the
calendar year with the following supporting schedules:

a. Status of Appropriations, Allotments and

Obligations;
b. Subsidiary Schedule of General Ledger account
balances; and
c. Summary of Public Infrastructures (Annex 8).

The post-closing trial balance with supporting schedules

shall be distributed as follows:

COA Central Office thru the Unit Auditor – 1 copy

COA Regional Office – 1 copy
COA Unit Auditor – 1 copy
Local Chief Executive – 1 copy
Local Sanggunian – 1 copy
Local Treasurer – 1 copy
Local Accountant – 1 copy

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 Sec. 73. Interim Reports. – Interim reports are financial
statements required to be prepared at any given period or at a
financial reporting period shorter than a full financial year, without
closing the books of accounts. The following interim financial
statements and the Notes to Financial Statements shall be prepared
and submitted quarterly:

a. Balance Sheet;
b. Statement of Income and Expenses; and
c. Statement of Cash Flows

The interim reports shall be prepared employing the same

accounting principles used for annual reports. Adjusting entries shall
be prepared for the interim period.

To facilitate the preparation of the interim financial

statements, the use of the worksheet is recommended.

Sec. 74. Worksheet. – A worksheet is the accountants

informal device for accumulating and sorting information needed for
the financial statements. It is a columnar sheet of paper used to
adjust the account balances and prepare the financial statements.

The use of the worksheet facilitates the end-of-period

accounting and reporting process. Also, it helps accountants prepare
the financial statements on a more timely basis. The following
worksheet format shall be used:

Name of LGU
Worksheet
As of ____________, 20_____

Statement
Accounts Trial Adjustments Adjusted of Income Balance
Balance T/B & Sheet
Expenses
Title Code Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

1. Account title and code columns show the account

titles/codes of the general ledger accounts.
2. Trial balance column reflects amounts obtained from the
general ledger balances.

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 3. Adjustment columns are the adjustments effected for the
prepayments and accruals.
4. Adjusted trial balance shows the balances of all the
accounts after the adjustment at the end of the accounting
period.
5. Statement of Income and Expenses shows all the debit
and credit items in the adjusted trial balance for all the
income and expense accounts. The difference between
the income and expenses shall be reflected as Net
Income/Loss to be extended to the credit column of the
Balance Sheet.
6. Balance Sheet show all the debit and credit items in the
adjusted trial balance of all the asset, liability, equity and
intermediate accounts affecting directly the Government
Equity account.

Sec. 75. Statement of Management Responsibility for

Financial Statements. Statement of Management Responsibility for
Financial Statements (Annex 2) shows the agencies’ responsibility for
the preparation and presentation of its financial statements. The
statement shall be signed by the Chief Accountant and the Head of
the Agency or his authorized representative. It shall form an integral
part of the financial statements, all of which shall be transmitted to
the concerned agencies.

Sec. 76. Year-end Financial Statements. – Local

accountants shall prepare at the end of the year the following
financial statements for each fund:

a. Balance Sheet;
b. Statement of Income and Expenses; and
c. Statement of Cash Flows

The Chief Accountant shall likewise prepare the

consolidated financial statements for all funds and the Notes to the
Financial Statements.

Sec. 77. Balance Sheet. – The Balance Sheet (Annex 3)

shows the financial condition of the agency at a specific date. It
presents information on the assets, liability and the government
equity of the agency.

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 Sec. 78. Statement of Income and Expenses. – The
Statement of Income and Expenses (Annex 4) shows the income and
expenses of the agency at the end of a particular period. It presents
the detailed information of the income and expenses recognized
during the period covered.

Sec. 79. Statement of Cash Flows. – The Statement of Cash

Flows (Annex 5) shows the agency’s cash activities. It reports cash
receipts and cash payments and net change in cash resulting from
operating, investing and financing activities of an agency during a
period, in a format that reconciles the beginning and ending cash
balances.

Sec. 80. Notes to the Financial Statements. – The Notes to

the Financial Statements (Annex 6) are the accountant’s means of
amplifying or explaining the items presented in the main body of the
statements. These are explanatory notes on the accounts and/or
accounting policies which will give additional information value to
the financial statements. In the Notes, the accountant is expected to
report the economic substance rather than the legal form of the
transactions and to make adequate disclosure.

The Notes to Financial Statements include the following:

1. Summary of significant accounting policies adopted

and followed by the reporting entity;

2. Narrative descriptions or detailed analyses of amounts

shown on the face of the balance sheet, statement of
income and expenses and statement of cash flows;

3. Customary or routine disclosure – which are

information about measurement bases of important
assets, restrictions on assets, contingent
assets/liabilities, important long term commitments not
recognized in the body of the statements, etc.;

4. Disclosures of changes in accounting principles-

changes in accounting principles, practices or methods
of applying them; and

5. Disclosures of subsequent events – disclosure of events

that affect the agency directly and that occur between

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the date of, or end of the period covered by, the
financial statements and date of completion of the
statements are necessary; if knowledge of the events
might affect the interpretation of the statements, even
though the events do not affect the propriety of the
financial statements themselves.

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