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Government
Accounting Manual

Legal Basis

• Government Accounting Manual (GAM) is prescribed by COA

pursuant to Article IX-D, Section 2 par. (2) of the 1987
Constitution of the Republic of the Philippines

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Coverage

• Manual presents the basic accounting policies and principles in accordance

with the Philippine Public Sector Accounting Standards (PPSAS) adopted
thru COA Resolution No. 2014-003 dated January 24, 2014
• It shall be used by all National Government Agencies (NGAs) in the:
• preparation of the general purpose financial statements in accordance with the PPSAS
and other financial reports as may be required laws, rules and regulations; and
• reporting of budget, revenue and expenditure in accordance with
laws, rules and regulations

Definition of Terms
• Accrual basis
• means a basis of accounting under which transactions and other events
are recognized when they occur
• Assets
• are resources controlled by an entity as a result of past events, and from which
future economic benefits or service potential are expected to flow to the entity
• Contributions from owners
• means future economic benefits or service potential that have been contributed to the
entity by parties external to the entity, other than those that result in liabilities of the
entity, that establish a financial interest in the net assets/equity of the entity, which:
• conveys entitlement both to
• (i) distributions of future economic benefits or service potential by the entity during its life,
such distributions being at the discretion of the owners or their representatives; and to
• (ii) distributions of any excess of assets over liabilities in the event of the entity
being wound up; and/or
• can be sold, exchanged, transferred, or redeemed.

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• Distributions to owners
• means future economic benefits or service potential distributed by the entity to all or
some of its owners, either as a return on investment or as a return of investment.
• Entity
• refers to a government agency, department or operating/field unit. It may
be referred to in this GAM as an agency.
• Expenses
• are decreases in economic benefits or service potential during the reporting period in
the form of outflows or consumption of assets or incurrence of liabilities that result in
decreases in net assets/equity, other than those relating to distributions to owners.
• Government Accounting
• encompasses the processes of analyzing, recording, classifying, summarizing
and communicating all transactions involving the receipt and disposition of
government funds and property, and interpreting the results thereof.

• Government Budget
• is the financial plan of a government for a given period, usually for a fiscal year, which shows
what its resources are, and how they will be generated and used over the fiscal period
• Liabilities
• are firm obligations of the entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources
embodying economic benefits or service potential.
• Net assets/equity
• is the residual interest in the assets of the entity after deducting all its liabilities.
• Revenue
• is the gross inflow of economic benefits or service potential during the
reporting period when those inflows result in an increase in net assets/equity,
other than increases relating to contributions from owners.
• Revenue funds
• comprise all funds derived from the income of any agency of the government
and available for appropriation or expenditure in accordance with law.

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Responsibility over Government

Funds and Property

• It is the declared policy of the State that all resources of the government
shall be managed, expended or utilized in accordance with laws and
regulations, and safeguarded against loss or wastage through illegal or
improper disposition, with a view to ensuring efficiency, economy and
effectiveness in the operations of government. The responsibility to take
care that such policy is faithfully adhered to rests directly with the chief
or head of the government agency concerned.

• 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.
• The head of any agency of the government is immediately and primarily
responsible for all government funds and property pertaining to his
agency. Persons entrusted with the possession or custody of the funds or
property under the agency head shall be immediately responsible to him,
without prejudice to the liability of either party to the government

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Accountability over Government

Funds and Property
• Every officer of any government agency whose duties permit or require
the possession or custody of government funds or property shall be
accountable therefore and for the safekeeping thereof in conformity
with law. Every AO shall be properly bonded in accordance with law.
• Transfer of government funds from one officer to another shall,
except as allowed by law or regulation, be made only upon prior
direction or authorization of the Commission or its representative.
• When government funds or property are transferred from one AO
to another, or from an outgoing officer to his successor, it shall be
done upon properly itemized invoice and receipt which shall
invariably support the clearance to be issued to the relieved or
outgoing officer, subject to regulations of the Commission.

Liability over Government Funds

and Property

• Expenditures of government funds or uses of government property

in violation of law or regulations shall be a personal liability of the
official or employee found to be directly responsible therefore.
• Every officer accountable for government funds shall be liable for all
losses resulting from the unlawful deposit, use, or application thereof
and for all losses attributable to negligence in the keeping of the funds.

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• No AO shall be relieved from liability by reason of his having acted

under the direction of a superior officer in paying out, applying, or
disposing of the funds or property with which he is chargeable,
unless prior to that act, he notified the superior officer in writing of
the illegality of the payment, application, or disposition. The officer
directing any illegal payment or disposition of the funds or property
shall be primarily liable for the loss, while the AO who fails to serve
the required notice shall be secondarily liable.
• When a loss of government funds or property occurs while they are in
transit or the loss is caused by fire, theft, or other casualty or force
majeure, the officer accountable therefore or having custody thereof
shall immediately notify the Commission or the auditor concerned and,
within 30 days or such longer period as the Commission or auditor may
in the particular case allow, shall present his application for relief, with
the available supporting evidence.

Distinguish Disbursement from

Expenditures

• Expenditures are the obligations incurred by the Agency. It

includes both the amount actually paid and those incurred and
recorded as liabilities to be paid in the future.
• Disbursements are payments made for such government
obligations by cash or check.

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Basic Requirements for Disbursements

and the Required Certifications
• Availability of allotment/budget for obligation/utilization certified by
the Budget Officer/Head of Budget Unit
• Obligations/Utilizations properly charged against available
allotment/budget by the Chief Accountant/Head of accounting Unit
• Availability of funds certified by the Chief Accountant.
• Availability of cash certified by the Chief Accountant.
• Legality of the transactions and conformity with existing rules and regulations.
• Submission of proper evidence to establish validity of the claim.
• Approval of the disbursement by the Head of Agency or by his duly
authorized representative.

Certification of Availability of Funds

• No funds shall be disbursed, and no expenditures or obligations chargeable

against any authorized allotment shall be incurred or authorized in any
department, office or agency without first securing the certification of its Chief
Accountant or head of accounting unit as to the availability of funds and the
allotment to which the expenditure or obligation may be properly charged.

• Any certification for a non-existent or fictitious obligation and/or creditor shall be

considered void. The certifying official shall be dismissed from the service, without
prejudice to criminal prosecution under the provisions of the Revised Penal Code.

• Any payment made under such certification shall be illegal and every
official authorizing or making such payment, or taking part therein or
receiving such payment, shall be jointly and severally liable to the
government for the full amount so paid or received.

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Prohibition against the

Incurrence of Overdraft

• Heads of departments, bureaus, offices and agencies shall not

incur nor authorize the incurrence of expenditures or obligations
in excess of allotments released by the DBM Secretary for their
respective departments, offices and agencies.

Disbursement Authority
• Notice of Cash Allocation (NCA)
• authority issued by the DBM to central, regional and provincial offices and
operating units to cover the cash requirements of the agencies
• Non-Cash Availment Authority (NCAA)
• authority issued by the DBM to agencies to cover the liquidation of their
actual obligations incurred against available allotments for availment of
proceeds from loans/grants through supplier’s credit/constructive cash
• Cash Disbursement Ceiling (CDC)
• authority issued by DBM to the Department of Foreign Affairs (DFA) and
Department of Labor and Employment (DOLE) to utilize their income
collected/retained by their Foreign Service Posts (FSPs) to cover their operating
requirements, but not to exceed the released allotment to the said post
• Notice of Transfer of Allocation
• authority issued by the Central Office to its regional and operating units to
cover the latter’s cash requirements

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Obligation Request and Status

• The incurrence of obligations shall be made through the
issuance of Obligation Request and Status (ORS)(Appendix 11)
• The ORS shall be prepared by the Requesting/Originating Office
supported by valid claim documents like Disbursement
Vouchers, payrolls, purchase/job orders, itinerary of travel, etc.
• The Head of the Requesting or Originating Office or his/her authorized
representative shall certify in the Section A of the ORS as to the necessity
and legality of charges to the budget under his/her supervision, and
validity, propriety and legality of Supporting Documents.
• The Head of the Budget Division/Unit shall certify to the availability of
allotment and such is duly obligated by signing in Section B of the ORS.

Subsidiary Record for Obligation

• A subsidiary record to monitor a particular obligation shall be

maintained by the Budget Division/Unit in Section C of the ORS.
• It shall contain the original amount of obligation, payable (goods
delivered and services rendered) and the actual amount paid

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Adjustment of Obligation

• Adjustment of obligation incurred after the processing of the claim by

the Accounting Division or Unit shall be made through the use of Notice
of Obligation Request and Status Adjustment (NORSA). (Appendix 12)
• The adjustment shall be effected through a positive entry (if
additional obligation is necessary) or a negative entry (if reduction
is necessary) in the ‘Obligation’ column of the ORS and RAOD.

Notice of Obligation Request and

Status Adjustment

• The NORSA shall be prepared by the Accounting Division/Unit after the

processing of the claim which shall be used in adjusting the original
amount obligated to the actual obligations incurred in the RAOD.
• It shall be forwarded by the Accounting Division/Unit to the Budget
Division/Unit to take up the adjustments of obligation in the RAOD.

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Transactions Supporting Documents

Refund of cash advance granted during the year Certified copies of official receipts and other SDs

Over/Underpayment of expenditures during the Certified copies of official receipts and bills and

year other SDs

Disallowances pertaining to expenses incurred Certified copies of official receipts and bills, notice

during the validity period of the budget that the disallowances became final
and executory during the same period

Modes of disbursement in the government

• By check
• thru MDS checks or commercial checks
• Checks shall be drawn only on duly approved Disbursement Voucher or Petty cash voucher
• Treasury single account (TSA)
• Bureau of Treasury (BTr) shall operate a Treasury Single Account (TSA) to receive remittance
of collections of internal revenue taxes/customs duties from Bureau of Internal Revenue
(BIR)/Bureau of Customs (BOC) authorized agent banks as well as other national collections
of National Government Agencies from authorized government depository banks.
• By cash
• cash advances granted to disbursing officer and petty cash fund.
• Advice to Debit account (ADA)
• is an accountable form equivalent to the MDS check. It is a disbursement
document issued by the agency to its MDS servicing bank authorizing the
latter to debit the agency’s MDS account for payments.
• Non-Cash Availment Authority (NCAA)

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Two types of checks

• Modified Disbursement System (MDS) checks

• issued by government agencies chargeable against the account of the Treasurer
of the Phil which are maintained with different MDS Government Servicing Banks.
These are covered by Notice of Cash Allocation, an authorization issued by the
DBM to all government agencies to withdraw cash from the National Treasury
through the issuance of MDS checks or other authorized mode of disbursements.
• Commercial checks
• issued by government agencies chargeable against the agency checking
account with Government Servicing Banks. These are covered by
income/receipts authorized for deposits with AGDBs and funding checks
received by RO/OUs from CO/ROs respectively.

Accounting Books, Records, Forms and

Reports to be Prepared and Maintained
• All checks drawn during the day, whether released or unreleased
including cancelled checks shall be recorded chronologically in
the Checks and ADA Disbursements Record (CkADADRec)
(Appendix 34) maintained by the Cash/Treasury Unit.
• The dates the checks were actually released shall be indicated in the
appropriate column provided for in the CkADADRec
• All checks/ADA drawn whether released or unreleased shall be included in
the Report of Checks Issued (RCI)(Appendix 35) or Report of ADA Issued
(RADAI)(Appendix 13), which shall be prepared daily by the Cashier.
• The RCI/RADAI together with the original copies of the supporting documents (SDs)
shall be submitted to the Accounting Division/Unit for the preparation of JEV
• At the end of the year, a Schedule of Unreleased Commercial
Checks shall be prepared by the Cashier for submission to the
Accounting Division/Unit for adjustments

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Disbursements by Cash

• Cash disbursements constitute payments out of cash advances

granted to the regular and special disbursing officers for personal
services, petty expenses and MOOE for field operating requirements
• All cash payments shall be covered by duly approved
Disbursement Vouchers/payrolls/petty cash vouchers
• The cash advances may be granted to the cashiers/disbursing
officers/officials and employees to cover the following: salaries and wages,
travels, special time-bound undertakings and petty operating expenses.

• The granting and liquidation of cash advances shall be governed by the

following existing COA rules and regulations and other pertinent issuances:
• No cash advance shall be given unless for a legally authorized specific purpose
• A cash advance shall be reported on and liquidated as soon as the purpose
for which it was given has been served
• No additional cash advance shall be allowed to any official or employee
unless the previous cash advance given to him/her is first settled/liquidated
or a proper accounting thereof is made
• Except for cash advance for official travel, no officer or employee shall be
granted cash advance unless he/she is properly bonded in accordance with
existing laws or regulations. The amount of cash advance which may be granted
shall not exceed the maximum cash accountability covered by his/her bond
• Only permanently appointed officials shall be designated as disbursing officers
• Only duly appointed or designated disbursing officer may perform
disbursing functions. Officers and employees who are given cash
advances for official travel need not be designated as Disbursing Officers
• Transfer of cash advance from one accountable officer to another shall not be allowed
• The cash advance shall be used solely for specific legal purpose for which
it was granted. Under no circumstance shall it be used for encashment of
checks or for liquidation of a previous cash advance

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Cash Advance for Payroll

• Advances for Payroll shall be granted to Regular Disbursing
Officers for payment of salaries, wages, honoraria, allowances
and other personnel benefits of officials and employees
• The Advances for Payroll shall not be used for encashment of checks
or for liquidation of previous or other types of cash advances.
• It shall be equal to the net amount of the processed payroll
corresponding to the pay period
• Liquidation of the advances shall be made within five (5) days
after the end of the pay period
• Any unclaimed salaries/allowances shall be refunded and
issued official receipt to close the account

Accounting Books, Records, Forms and

Reports to be Prepared and Maintained

• The Disbursing Officer shall maintain the Cash Disbursements

Record (CDRec)(Appendix 40) to monitor the cash
advances/payroll, current operating expenses, and special
purpose/time-bound undertakings and prepare the Report of Cash
Disbursements (RCDisb )(Appendix 41) to report its utilization.

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Illustrative Accounting Entries for Granting and Liquidation of

Advances for Payroll and the Set-up of Salary Deductions and
Due to Officers and Employees
Set-up of Due to Officers and Employees and Salary Deductions Assumptions:
Salaries and Wages P35,000
PERA 15,000
Total 50,000
Less: Salary Deductions
Withholding Tax 5,000
Life and Retirement Premiums 3,000
Pag-IBIG premiums 500
PhilHealth premiums 600
GSIS Salary loan 200
Employees' Association 100 9,400
Net Amount P40,600

Set-up of Due to Officers and Employees and Salary

Deductions Assumptions:

Salaries and Wages-Regular 50101010 P 35,000

PERA 50102010 15,000
Due to BIR 20201010 P 5,000
Due to GSIS 20201020 3,200
01 Life and Retirement
Premiums 3,000
02 Salary Loan 200
Due to Pag-IBIG 20201030 500
Due to PhilHealth 20201040 600
Other Payables 29999990 100
Due to Officers and Employees 20101020 40,600
To recognize payable to Officers and employees and to set up salary deductions

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Granting of Advances for Payroll

Advances for Payroll 19901020 P 40,600

Cash-MDS, Regular 10104040 P 40,600

To record grant of advances to cover payment of salaries and wage of employees

Liquidation of Payroll Fund

Due to Officers and Employees 20101020 P 40,600

Advances for Payroll 19901020 P 40,600

To recognize liquidation of Advances for Payroll based on the RCDisb and SDs

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Cash Advances for Operating Expenses of Government

Units without Complete Set of Books of Accounts

• Field/Extension/Satellite Offices are some of the government

units under the central/regional/district offices without
complete set of books of accounts.
• Those offices may be granted cash advances covering two months
requirements for MOOE/authorized expenses to finance their operations
• The cash advance shall be granted to the duly designated or
appointed Disbursing Officers.

Illustrative Accounting Entries to be recorded in the

Central/Regional/Division Office or OU Books for Advances for MOOE/Authorized
Expenses Granted to Government Units without Complete Set of Books of
Account

Central/Regional/Division Office or OU Books Assumptions:

Estimated Expenses for 2 months requirements:
Office Supplies Expenses P 10,000
Traveling Expenses 15,000
Water Expenses 8,000
Telephone Expenses 5,000
Electricity Expenses 12,000
Total P50,000
======

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Advances for Operating Expenses 19901010 P50,000

Cash-MDS, Regular 10104040 P50,000
To recognize granting of cash advance to field units without books of accounts
Office Supplies Expenses 50203010 P 10,000

Traveling Expenses-Local 50201010 15,000

Water Expenses 50204010 8,000
Electricity Expenses 50204020 5,000
Telephone Expenses 50205020 12,000
Advances for Operating Expenses 19901010 P 50,000
To recognize liquidation of cash advance upon receipt of the certified
copies of CDReg with paid DVs and other supporting documents from
field/extension/ satellite offices/operating units

Cash Advances for Travel

• Travels shall cover only those that are urgent and extremely
necessary, will involve the minimum expenditure and are
beneficial to the agency concerned and/or the country
• No government fund shall be utilized to defray foreign travel expenses
of any government official or employee, except in the case of training,
seminar or conference abroad when the officials or other personnel of
the foreign mission cannot effectively represent the country therein,
and travels necessitated by international commitments
• No official or employee, including uniformed personnel of the
Department of the Interior and Local Government (DILG) and
Department of National Defense (DND) will be sent to foreign
training, conferences or attend international commitments when
they are due to retire within one year after the said foreign travel

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• For local travel, liquidation shall be done within a period of 30

days upon return to the personnel’s workstation
• On the other hand, cash advance for foreign travel shall be
liquidated within 60 days upon return to the Philippines.
• The excess cash advance shall be refunded and an OR shall
be issued to acknowledge receipt thereof
• In case the amount of cash advance is less than the travel
expenses incurred, the LR shall be submitted to liquidate the
cash advance previously granted and a DV shall be prepared
to claim reimbursement of the deficiency in amount

Accounting Books, Records, Forms and

Reports to be Prepared and Maintained

• The officers/employees who made the travel shall prepare the Liquidation
Report which shall be the basis for the preparation of the JEV

• The Accounting Division/Unit shall record the JEV in the GJ and maintain
SL/IP for officers and employees where the granting and liquidation of
travel allowances shall be posted for monitoring purposes

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Illustrative Accounting Entries for the Granting and Liquidation of

Advances to Officers and Employees Covering Official Travel

Advances to Officers and Employees 19901040 P2,000

Cash-MDS, Regular 10104040 P2,000

To recognize granting of cash advance for local travel to officers and

employees based on duly approved and paid DV, Authority to Travel and IT

Traveling Expenses-Local 50201010 P 2,000

Advances to Officers and Employees 19901040 P 2,000

To recognize liquidation of cash advance for local travel upon

receipt of LR and supporting documents

Advances to Officers and Employees 19901040 P 200,000

Training Expenses 50202010 80,000
Cash-MDS, Regular 10104040 P 280,000
To recognize granting of cash advance for training abroad
Traveling Expenses-Foreign 50201020 P 200,000

Advances to Officers and Employees 19901040 P 200,000

To recognize liquidation of cash advance for training abroad

upon receipt of LR and supporting documents

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Petty Cash Fund(PCF)

• Another mode of disbursement and the fund shall be
sufficient for emergency and petty expenses of the agency.
• As such, all replenishment shall be directly charged to the
appropriate expense accounts and at all times, the PCF shall be
equal to the total cash on hand and the unreplenished expenses.
• The PCF shall not be used to purchase regular inventory items for stock
nor for the liquidation of outstanding cash advances. It shall be used only
for disbursements which cannot be conveniently paid by check.

Disbursement through Petty Cash Fund

• Shall be through the PC Voucher which shall be approved by

authorized officials and signed by the payee to acknowledge
receipt of the amount from the PC Custodian.
• A DV shall be prepared to replenish the fund.
• At the end of the year, the PCC shall submit to the
Accounting unit all outstanding PCVs.
• In case the fund could not be replenished for lack of funds, a
JEV shall be prepared to recognize all unreplenished expenses
in the books and the PCF account shall be credited

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• At the start of the year, as soon as cash becomes available, the

fund shall be replenished by a debit to account “Petty Cash
Fund” and credit to the appropriate “Cash in Bank” account to
restore the fund to its original amount.
• In case the PCC resigns or ceases as the custodian of
the fund, full accounting/liquidation shall be made.
• Any excess cash shall be refunded and all the PCVs together
with the original supporting documents shall be surrendered to
the Accounting Unit which shall prepare a JEV to take up the
expenses in the books and credit account “Petty Cash Fund”.
• In no case shall the remaining cash of the former custodian be
transferred to the incoming PCC.

Illustrative Accounting Entries for

Disbursements Out of Petty Cash
Estimated Expenses:
Traveling Expenses P10,000
Office Supplies Expenses 8,000
Postage and Courier Expenses 5,000
Fuel, Oil and Lubricants Expenses 2,000
Other MOOE 5,000
Total P 30,000

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Petty Cash 10101020 P 30,000

Cash-MDS, Regular 10104040 P 30,000
To record the establishment of PCF.
Traveling Expense-Local 50201010 P 10,000

Office Supplies Expenses 50203010 8,000

Fuel, Oil and Lubricants 50203090 2,000
Postage and Courier Expenses 50205010 5,000
Other Maintenance and Operating Expenses 50299990 4,800
Cash-MDS, Regular 10104040 P 29,800

To record the replenishment of Petty Cash based on the DV, RPPCVs and SDs

Cash-Collecting Officer 10101010 P 200

Petty Cash 10101020 P 200
To record return of unused PCF upon retirement, resignation, separation
and termination of the Petty Cash Custodian based on the OR

Assume the following are the unreplenished PCVs as at December 31:

Office Supplies P 300
Traveling Expenses-Local 400
P 700
Traveling Expenses-Local 50201010 P 300
Office Supplies Expenses 50203010 400
Petty Cash 10101020 P 700
To record the unreplenished petty cash at the end of the year

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Cash Advances for Petty Cash Fund of

Government Units without Complete Set of
Books of Accounts

• Government Units without complete set of books of accounts

may be granted cash advance covering two months
operating requirements for authorized petty and other
miscellaneous expenses to finance their operations.
• The cash advance shall be granted to the duly designated or
appointed Disbursing Officer

Accounting for Cash Shortage/Overage

of Disbursing Officer

• Cash overage discovered by the Auditor that cannot be

satisfactorily explained by the Disbursing Officer shall be
forfeited in favor of the government and an official receipt shall
be issued by the Collecting Officer or Cashier.
• The cash overage shall be taken up as Miscellaneous Income.
• Cash shortage which is not restituted by the Disbursing
Officer despite demand in writing by the Auditor shall be taken
up as receivable from the Disbursing Officer.

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Illustrative Accounting Entries for Cash

Overage/Shortage of Disbursing Officer

Cash Overage

Cash-Collecting Officers 10101010 xxx

Miscellaneous Income 40609990 xxx
To recognize forfeiture of cash overage of the Disbursing Officer
Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx

To recognize the remittance of forfeited cash overage to the BTr

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Cash Shortage
Due from Officers and Employees 10305020 xxx
Advances for Operating Expenses/ 19901010
Advances for Payroll/ 19901020
Advances to Special Disbursing Officer 19901030 xxx
To recognize cash shortage of Disbursing Officer
Cash-Collecting Officers 10101010 xxx

Due from Officers and Employees 10305020 xxx

To recognize restitution of cash shortage
Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx

To recognize the remittance of restituted cash shortage to the BTr

Accounting for Cancelled Checks

• Checks may be cancelled when they become stale, voided or spoiled
• The depository bank considers a check stale, if it has been
outstanding for over six months from date of issue or as prescribed
• A stale, voided or spoiled check shall be marked cancelled on
its face and reported as follows:
• Voided, spoiled or unclaimed stale checks with the Cashier shall be reported as
cancelled in the List of Unreleased Checks that will be attached to the RCI
• New checks may be issued for the replacement of stale/spoiled checks in the
hands of the payees or holders in due course, upon submission of the stale/spoiled
checks to the Accounting Division/Unit. A certified copy of the previously paid DVs
shall be attached to the request for replacement. A JEV shall be prepared to take up
the cancellation. The replacement check shall be reported in the RCI

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Illustrative Accounting Entries

for Cancelled Checks

Cancellation and Replacement of

Stale/Voided/Spoiled MDS check issued in
the current year
Cash-MDS, Regular 10104040 xxx
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled MDS checks.
Accounts Payable 20101010 xxx

Cash-MDS, Regular 10104040 xxx

To recognize the replacement of stale/voided/spoiled MDS checks.
Cash- MDS, Regular 10104040 xxx

Appropriate Account xxxxxxxx xxx

To recognize the cancellation of stale/voided/spoiled MDS checks without Replacement

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Cancellation and Replacement of

Stale/Voided/Spoiled MDS check issued in
the prior year
Accumulated Surplus/(Deficit) 30101010 xxx
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled MDS checks
Accounts Payable 20101010 xxx

Cash-MDS, Regular 10104040 xxx

To recognize the replacement of stale/voided/spoiled MDS checks
Accumulated Surplus/(Deficit) 30101010 xxx

Appropriate Account xxxxxxxx xxx

To recognize the cancellation of stale/voided/spoiled MDS checks without replacement

Cancellation and Replacement of

Stale/Voided/Spoiled commercial check issued in
the current and prior year
Cash in Bank-LCCA 10102020 xxx
Accounts Payable 20101010 xxx
To recognize the cancellation of stale/voided/spoiled commercial checks
Accounts Payable 20101010 xxx

Cash in Bank-LCCA 10102020 xxx

To recognize the replacement of stale/voided/spoiled commercial checks
Accumulated Surplus/(Deficit) 30101010 xxx

Appropriate Account xxxxxxxx xxx

To recognize the cancellation of stale/voided/spoiled commercial checks without replacement.

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Accounting for Disallowances

• Disallowances shall be taken up in the books of accounts

only when they become final and executory
• The Accountant shall prepare the JEV to take up the
Receivable-Disallowances/Charges and credit the appropriate
account for the current year or Accumulated Surplus/(Deficit)
account if pertaining to expenses of previous years
• Cash settlement of disallowances shall be acknowledged through the
issue of an official receipt and reported by the Cashier in the RCD

Illustrative Accounting Entries

for Disallowances

Assume that the entity incurred overpayment of Office Supplies:

Amount paid P 100,000
Should be 90,000
Difference P 10,000

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Recording of disallowances for

current year’s transaction
Receivables-Disallowances/Charges 10305010 P10,000
Office Supplies Expense 50203010 P10,000
To recognize the overpayment of purchased office supplies directly issued to end-user
Cash-Collecting Officers 10101010 P10,000

Receivables-Disallowances/Charges 10305010 P10,000

To recognize the settlement of disallowance
Cash-Treasury/Agency Deposit, Regular 10104010 P10,000

Cash-Collecting Officers 10101010 P10,000

To recognize the deposit of collection

Recording of disallowance for

prior year’s transaction
Receivables-Disallowances/Charges 10305010 P 10,000
Accumulated Surplus/(Deficit) 30101010 P 10,000
To recognize the overpayment of office supplies purchased during the prior year
Cash-Collecting Officers 10101010 P 10,000

Receivables-Disallowances/Charges 10305010 P 10,000

To recognize the settlement of disallowance
Cash-Treasury/Agency Deposit, Regular 10104010 P 10,000

Cash-Collecting Officers 10101010 P 10,000

To recognize the deposit of collection

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Accounting for Overpayments

• Sometimes overpayments or even double payment of

expenditures do happen in agencies
• One example is the payment of payrolls. Payrolls are prepared in advance
and some agencies pay their employees through the banking system.

• All these are done before reports of attendance are submitted, making it
impossible to know the exact amount to be paid in case there are
absences without pay during the pay periods. In case of overpayments,
refunds shall be demanded of the employees concerned.

Illustrative Accounting Entries

for Overpayments

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Overpayment taken up as
receivable
Due from Officers and Employees 10305020 xxx
Salaries and Wages-Regular 50101010 xxx
To recognize overpayment of salaries and wages (When overpayment is ascertained)

Cash-Collecting Officers 10101010 xxx

Due from Officers and Employees 10305020 xxx
To recognize receipt of refund
Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officers 10101010 xxx

To recognize the deposit of collection

Refund of overpayment not taken

up as receivable
Cash-Collecting Officers 10101010 xxx
Salaries and Wages-Regular 50101010 xxx
To recognize receipt of refund of Salaries and Wages-Regular during the current year

Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officers 10101010 xxx
To recognize the deposit of collection
Cash-Collecting Officers 10101010 xxx

Accumulated Surplus/(Deficit) 30101010 xxx

To recognize receipt of refund of overpayment in the ensuing year
Cash-Treasury/Agency Deposit, Regular 10104010 xxx

Cash-Collecting Officer 10101010 xxx

To recognize the deposit of collection

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Advice to Debit Account (ADA)

• This is a system by which no check is issued to the payee in
payment of government obligations, but instead, the current
account number of the payee in the bank where the government
maintains a deposit, shall be obtained by the accounting unit.
• If payment is to be made, the ADA shall be issued by the Accounting
Unit of the agency to the bank where it maintains an account.
• All payments shall be made to the credit of the payee’s account and a debit
to the account maintained by the government agency in the same bank.
• A JEV shall be prepared to record the transaction in the GJ.

Property and Inventory

accounting System

• The system starts with the receipt of the purchases inventory

items and equipment
• The requesting office need of the inventory items and equipment
after determining that the items are not available in stock shall
prepare and cause the approval of the Purchase Request (PR).
• Based on the approved PR and after accomplishing all the
required procedures adopting a particular mode of procurement,
the agency shall issue a duly approved Purchase Order.

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• Procedures relative to the obligation of the purchase order and

payment of the deliveries follow the procedures in the obligation
accounting system and disbursement system
• The sub-system are as follows:
• Receipt, Inspection, Acceptance and Recording Deliveries of
Inventory Items and Equipment,
• Requisition and Issuance of Inventory Items
• Requisition and Issuance of Equipment

Perpetual Inventory Method

• Purchase of supplies and materials for stock regardless of

whether or not they are consumed within the accounting
period, shall be recorded as Inventory account
• Under the perpetual inventory method, an inventory control
account is maintained in the General Ledger on a current basis
• Regular purchases shall be recorded under the Inventory
account and issuance thereof shall be recorded based on the
Report of Supplies and Materials Issued

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• The accounting Unit shall maintain perpetual inventory records, such

as the Supplies Ledger Cards for each inventory stock, Property, Plant
and Equipment Ledger Cards for each category of plant, property and
equipment including work and other animals, livestock, etc.
• The subsidiary ledger cards shall contain the details of the
General Ledger accounts
• For check and balance, the Property and Supply Officer/Unit shall
maintain Property Cards (PC) for property, plant and equipment,
and Stock Cards (SC) and for inventories
• The balance in quantity per PC and SC should always
reconcile with the ledger cards of the Accounting Unit.
• The Moving Average Method of costing shall be used for costing inventories

• Property, Plant and Equipment and Inventory Accounts acquired through

purchase shall include all costs incurred to bring them to the location
necessary for their intended use, like transportation cost, freight charges,
installation costs, etc. These are recorded in the books of accounts as
Asset after inspection and acceptance of delivery.
• During the construction period , property, plant and equipment
shall be classified and recorded as “Construction in Progress”
with the appropriate asset classification.
• As soon as these are completed, the “Construction in Progress”
account shall be transferred to the appropriate asset accounts

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ILLUSTRATIVE JOURNAL ENTRIES

FROM SAMPLED TRANSACTION
NEDA paid the salaries of their employees. The following are the information taken
from the June’17 payroll, salaries and wages and its mandatory deduction.

Salaries and wages – regular P 485,000

PERA 30,000
Withholding taxes 32,000
Retirement and Life (GSIS) 40,000
Pag-ibig premium 28,700
PhilHealth premium 12,000

The agency paid their counterpart of the mandatory deductions. The agency contributed P
1,500 for ECC. Withholding taxes were remitted to BIR 2 weeks after end of the month

• Obligate the P515,000 salaries and wages for the month of

June, 2017 and posted in the Registry of Allotment, Obligation
and Disbursement in the obligation column of PS

• To record the expenses and establish the liabilities

50101010 Salaries and wages – regular 485,000
50102020 PERA 30,000
20201010 Due to BIR 32,000
20201020 Due to GSIS 40,000
20201030 Due to Pag-ibig 28,700
20201040 Due to PhilHealth 12,000
20101020 Due to Officers and Employees 402,300

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• To record check issuance for ATM employee’s accounts.

20101020 Due to Officers and Employees 402,300
10104040 Cash-MDS-Regular 402,300

• To record remittance of mandatory deductions.

20201010 Due to GSIS 40,000
20201030 Due to Pag-ibig 28,700
20201040 Due to PhilHealth 12,000
10104040 Cash- MDS, Regular 80,700

• To obligate the government counterpart of the mandatory deductions, P92,200,

recording in the obligation column of the Registry.

• To record payment and remittance of the corresponding counterpart.

50103040 ECC Insurance Premiums 1,500
50103010 Ret. And Life Insurance Premium 50,000
50103020 Pag-ibig Contributions 28,700
50103030 PhilHealth Contribution 12,000
10104040 Cash – MDS, Regular 92,200

• To record remittance to the BIR supported with the approved TRA from DBM.
10104070 Cash-Tax Remittance Advice 32,000
40301010 Subsidy from National Government 32,000
20201010 Due to BIR 32,000

10104070 Cash-Tax Remittance Advice 32,000

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ILLUSTRATIVE JOURNAL ENTRIES

FROM SAMPLED TRANSACTION
The Regional Director of NEDA 7 was directed to attend and Executive
Committee Conference in Manila NEDA Central Office. The travel was for 3 days
but it was cut short due to an emergency meeting at the regional office with the
RDC 7. An itinerary of travel was prepared showing the following information:
st
Transportation expenses (1 and last day) and other incidental
expenses during the duration of the travel period. . . . . . . . . . . . P 1,600
Per diem (1,200 x 3 days). . . . . . . . . . . . . . . . . . . . . . 3,600
Plane fare. . . . . . . . . . . . . . . . . . . . . . 5,000
An amended itinerary was made and showed a reduction of the

Per diem equivalent to . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 1,500

• Obligate and post P10,200 to the obligation column of the registry for
MOOE

• To grant cash advance for the travel.

19901040 Advances to Officers and Employees 10,200
10104040 Cash – MDS , Regular 10,200

• To recognize the actual travelling expenses and record

liquidation of the Cash advance.
50201010 Travelling expenses – local 8,700
19901040 Advances to Officers and Employees 8,700

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• To record the refunded amount made upon return from travel.

10101010 Cash – collecting officer 1,500
19901040 Advances to Officers and Employees 1,500

• To remit the refunded amount to the national treasury.

40301010 Cash – treasury/Agency Deposit, Regular 1,500
10101010 Cash – collecting officer 1,500

• To adjust the obligation by posting a negative entry of P1,500 in the

obligation Column of the Registry. The obligation was 10,200 for
travelling expenses but the actual travelling expenses was only 8,700

• For additional claim of travelling expenses maybe due to an

extended official stay, request for an obligation for the equivalent
amount of the extended stay and it has to be processed in the
accounting office for payment/reimbursement. It has to be an
official travel duly supported with proper documentation.

• If the travel is not fully supported, the auditor will disallow the
claim upon post-audit of said transaction

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ILLUSTRATIVE JOURNAL ENTRIES

FROM SAMPLED TRANSACTION

Petty Cash Fund – P10,000 was maintained by the agency under the
imprest system. As of December 31, 2017, the used petty cash supported
with receipts amounting to P8,200 remained unreplenished. The
receipted use of PC consisted of the following expenses:
Office supplies expense 4,000
Repairs and maintenance – OE 3,200
Other General Services 1,000

• To obligate the PCF to be established amounting to P10,000 to be

posted in the obligation column of MOOE in the Registry of
Allotment, Obligation and Disbursement

• Granting of PCF
10101020 Petty Cash 10,000
10104040 Cash – MDS, Regular 10,000

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• To record the unreplenished expenses and partially closing the

equivalent petty cash account.
50203010 Office supplies expenses 4,000
50213050 Repairs and Maintenance-Office Equipment 3,200
50212990 Other General Services 1,000
10101020 Petty Cash 8,200

• Obligate the PC of P8,200 the following year to return the

original petty cash of P10,00.
10101020 Petty Cash 8,200
10104040 Cash – MDS, Regular 8,200

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