NGAS Manual for Local Government Units Volume I - The Accounting Policies
CHAPTER 3. ACCOUNTING SYSTEM
A. GENERAL ACCOUNTING PLAN Sec. 05. General Accounting Plan. – Plan. – The General Accounting Plan shows the overall accounting cycle in the Local Government Unit. Transactions shall emanate from the different offices/departments of the local government units (LGUs). These offices/departments will provide/produce the source documents and other accounting forms leading to the perfection of the transaction, whether it be budgetary, collections or disbursements. The source documents and accounting forms shall be the basis for the preparation of reports by the Office of the Treasurer. The Office of the Accountant shall record the transactions to the registries or to the corresponding books of original entry. Posting to the books of final entry and preparation of the financial reports shall also be undertaken by the Office of the Accountant. The General Accounting Plan ( Table Table 1 ) is presented as to the following type of transactions: a. b. c.
Appropriations, Allotments and Obligations Collections and Deposits Disbursements – Disbursements – By cash By check Miscellaneous and Other transactions
d.
B. BUDGETARY ACCOUNTS Sec. 06. Budgetary Accounts. – Accounts. – Budgetary accounts are composed of appropriations, allotments and obligations.
Sec. 07. Accounting for Appropriations. – Appropriations. – Appropriation refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes. The local sanggunian approves the annual budget thru the issuance of appropriation ordinance. On the first business day of the fiscal year, the entire annual budget of the local government unit shall be recorded in the Registry of Appropriations, Allotments and Obligations (RAAO). The appropriations, in the amounts approved by the legislative body and confirmed by the reviewing authorities, are recorded in the registries maintained by the accountant where they may be compared with the actual developments of the period. Budgetary reserves which are stand by appropriations ready for release in case of calamities, as well as supplemental budget are similarly recorded in the RAAO. In case the LGU is operating on a re-enacted budget, said re-enacted budget shall likewise be recorded in the registry. Once current budget is approved, the necessary adjustments shall be made in the registry. Separate registries shall be maintained for the four classes of expenditures per responsibility center, to wit:
1. 2. 3. 4.
Registry of Appropriations, Allotments and Obligations Registry of Appropriations, Allotments and Obligations Operating Expenses (RAAOMO) Registry of Appropriations, Allotments and Obligations Registry of Appropriations, Allotments and Obligations (RAAOFE)
- Capital Outlays (RAAOCO) - Maintenance and Other - Personal Services (RAAOPS) - Financial Expenses
Sec. 08. Accounting for Allotments. – Allotment is the authorization issued by the Local Chief Executive (LCE) to a department/office of the LGU, which allows it to incur obligations, for specified amounts, within the appropriation ordinance. Allotments are released quarterly based on the Work and Financial Plan and Request for Release of Allotment. The Accountant, upon receipt of the Advice of Allotment, shall enter the allotment in the RAAOs.
Sec. 09. Accounting for Obligations. – Obligations refer to the amounts committed to be paid by the LGU for any lawful act made by an accountable officer for and in behalf of the local government unit concerned. Obligations shall be taken up in the registries as they are incurred. For each obligation, the requesting department/office shall prepare the Allotment and Obligation Slip (ALOBS) signed by the department or office head as requesting official and forward this, together with the supporting documents, to the Budget Officer. The Budget Officer shall certify to the existence of appropriation that has been legally made for the purpose by signing the appropriate box in the ALOBS and assign the ALOBS number thereto. The Accountant shall review the ALOBS and certify as to obligation of the allotment by signing the appropriate box in the ALOBS. He shall also fill up the Status of Obligation. The Accountant shall record the amount of obligation in the RAAOs.
Sec. 10. Adjustment of Obligations. – The Chief Accountant shall record paid disbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Any balance appearing in the ALOBS after full payment of obligations shall form part of unobligated allotment. The Chief Accountant shall adjust accordingly the amount of recorded obligations in the RAAO using the same ALOBS number as reference. At the end of each month, the Chief Accountant and the Budget Officer shall reconcile their records on allotments available for obligation.
Sec. 11. Accounting Procedures for Budgetary Accounts. – Summarized hereunder is the process in accounting for budgetary accounts:
PROCESS
a.
Records in the appropriate RAAOs the approved appropriation per Appropriation
PERSON / UNIT RESPONSIBLE
Office of the Accountant
Ordinance. b.
Forwards the advice of allotments to the Office of the Accountant and returns the work plan to the concerned departments/ offices.
Office of the Budget Officer
c.
Enters the allotments in the RAAOs.
d.
Prepares ALOBS based on disbursement vouchers/purchase requests and/or supporting documents. Signs the appropriate box for requesting office. Forwards the same to the Office of the Budget Officer.
Office of the Accountant Heads of departments/offices
e.
Certifies the ALOBS as to the existence of appropriations based on the appropriation ordinance. Assigns ALOBS number and forwards the same to the Office of the Accountant.
Budget Officer
f.
Certifies the ALOBS as to the obligations of allotments. Records the obligation in the appropriate column of the RAAOs and in the Status of Obligation portion (Obligation) of the ALOBS.
Chief Accountant
g.
Records paid disbursement vouchers in the Status of Obligation portion (Payments) of the ALOBS. Any balance appearing in the ALOBS after full payment of obligations shall form part of unobligated allotment. Adjust accordingly the amount of recorded obligations in the RAAOs.
Office of the Accountant
h.
At the end of each month, reconcile records on allotments available for obligation.
Budget Officer and Chief Accountant
Sec. 12. Terminology and Classification. – A common terminology and classification shall be used consistently throughout the budget, the accounts and the financial reports. For this purpose, the following specific expenditures shall be recorded in the appropriate RAAOs: a.
RAAOCO – Investments outlay (e.g. stocks, bonds) Land, Land Improvements and Leasehold Improvements outlay Buildings and Other Structures outlay (e.g. school buildings, markets and slaughterhouses, hospital and health centers, etc.)
b.
Public Infrastructures outlay (e.g. parks, plaza, monuments, bridges etc.) Furniture and Fixtures outlay Work Animals outlay Breeding stocks Machineries and Equipment outlay (e.g. dump trucks, construction equipment, industrial machineries, technical and scientific equipment, etc.) Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars, vans, etc.) Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay Books outlay Ordnance outlay IT Equipment and Software outlay Other Property, Plant and Equipment outlay Reforestation Projects Arts, Archeological Specimen and Other Exhibits
RAAOPS – Salaries and Wages (e.g. regular pay, part-time pay, overtime and night pay, holiday pay, etc.) Allowances (e.g. PERA, hazard pay, RATA, etc.) Benefits (e.g. bonus, cash gifts, productivity, pension, etc.) Government Shares on Employees’ Contributions
c.
RAAOMO – Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.) Livestock (e.g. swine, hogs, chicken, goats, etc.) Crops Supplies (e.g. office, medical, dental and laboratories, spare parts, gasoline and oil, etc.) Repairs and Maintenance Printing and Binding Travel Consultancy Light, Water and Gas Communication (e.g. telephone, telegraph, internet, postage, etc.) Auditing Services Other Services (e.g. janitorial, security, hauling, etc.) Extraordinary and Miscellaneous Expenses All other expenditures in the Chart of Accounts for MOOE, except depreciation, obsolescence, bad debts, loss on sale of assets, loss of assets, discount on Real Property Tax and Special Education Tax.
d.
RAAOFE – Bank Charges
Interest Expenses Commitment Charges Other Financial Charges (e.g. underwriting fees, guarantee fees) Loan Amortization
C. INCOME/COLLECTIONS AND DEPOSITS Sec. 13. Separation of Books and Depository Accounts. – Local accountants and treasurers shall maintain separate books and depository accounts, respectively, for each fund in their custody or administration.
Sec. 14. Depository Accounts. – Local treasurer shall maintain depository accounts in the name of their respective local government units with banks, preferably government-owned, located in or nearest to their respective areas of jurisdiction. Earnings of its depository accounts shall accrue exclusively thereto.
Sec. 15. Remittance of Government Monies to the Local Treasury. – Officers of the local government authorized to receive and collect monies arising from taxes, revenue, or receipts of any kind shall remit the full amount received and collected to the treasury of such local government unit which shall be credited to the particular account or accounts to which the monies in question properly belong.
Sec. 16. Sources of Income of LGUs. – The main sources of income of LGUs are as follows: a. b. c.
Tax revenues, fees and charges Share from Internal Revenue Collections Share from National Wealth
The sources of income are further classified into general income accounts and specific income accounts.
Sec. 17. General Income Accounts. – The following shall comprise the General Income Accounts applicable to LGUs: a. b. c. d. e. f. g. h.
Subsidy from Other LGUs Subsidy from Other Funds Subsidy from Special Accounts Sales Revenue Dividend Income Interest Income Gain on Sale of Securities Gain on Sale of Assets
i. j. k. l. m.
Sale of Confiscated Goods and Properties Foreign Exchange (FOREX) Gains Miscellaneous Operating and Service Income Fines and Penalties – Government Services and Business Operations Income from Grants and Donations
Sec. 18. Specific Income Accounts. – The following major classification comprise the specific income accounts for LGUs: 1. 2. 3. 4.
Property Taxes Taxes on Goods and Services Other Taxes Other Specific Income
Sec. 19. Methods of Accounting for Income. – The following accounting methods shall be adopted in recording income: a. Accrual Method – Accrual method of accounting shall be used to record Share from Internal Revenue Collections in the books of accounts. Upon receipt of the Notice of Funding Check Issued from Department of Budget and Management (DBM), Share from Internal Revenue Collections shall be taken up as Due from NGAs and credited to Share from Internal Revenue Collections. However, Cash in Bank shall be debited upon receipt of Bank Credit Advice as to receipt of the Share from Internal Revenue Collections regardless of whether or not the Notice of Funding Check Issued has been received from DBM. b. Modified Accrual – Modified accrual method of accounting shall be used for real property taxes. At the beginning of the year, Real Property Tax Receivable and Special Education Tax Receivable shall be established. This is in view of the need to record in the books not mere income estimates from real property taxes but actual receivables from said taxes. However, to avoid appropriating uncollected revenues which might result to huge cash overdraft, the same shall be credited to Deferred Real Property Taxes Income/Deferred Special Education Tax Income. Real Property Tax Income/Special Education Tax Income shall be recognized upon receipt of collection. c. Cash Basis – Cash basis of accounting shall be used for all other taxes, fees, charges and other revenues.
Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. – Real Property Tax Receivables/Special Education Tax Receivables shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certified list showing the name of taxpayers and the amount due and collectible for the year. Based on the list, the Chief Accountant shall draw a Journal Entry Voucher (JEV) to record the debit to Real Property Tax Receivable/Special Education Tax Receivable and crediting to Deferred Real Property Tax Income/Deferred Special Education Tax Income. Upon collection of Real Property Taxes from taxpayers, the account Deferred Real
Property Tax Income/Deferred Special Education Tax Income shall be debited while the Real Property Tax Income due to the municipality is recognized/credited. The share of the Province and Barangay shall also be credited to Due to LGUs. Every end of the week, thereafter the Municipal Accountant shall furnish the Provincial Accountant with a summary of the JEVs showing the breakdown of the amounts Due to LGUs. The summary, which shall be supported with copies of the JEVs, shall be the basis of the Provincial Accountant to draw the JEV taking up the RPT Income. The account Due from LGU shall be debited and Real Property Tax Income credited. At the end of the month, the Municipal Accountant shall likewise prepare the Abstract of Real Property Tax to facilitate the distribution of real property tax collection. A copy of the abstract shall be furnished the Provincial Accountant, for purposes of reconciliation with the weekly summary of JEVs.
Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior to CY 2002. – Payment of delinquencies for real property taxes/special education taxes prior to CY 2002 shall be recognized as a direct credit to Real Property Tax Income/Special Education Tax Income account.
Sec. 22. Discount on Real Property Tax/Special Education Tax. – Discounts for advance and prompt payment of Real Property Tax and the additional one percent (1%) tax accruing to the Special Education Fun shall be recognized in the year the taxes are due. Said discounts shall be apportioned to the concerned LGUs in accordance with the sharing prescribed for real property tax and additional one percent (1%) tax under the Local Government Code.
Sec. 23. Fines and Penalties. – Fines and Penalties, either from tax revenue or other specific income, shall be recognized as income of the year it was collected. Fines and Penalties arising from real property taxes shall be distributed to concerned LGUs in accordance with the sharing prescribed under the Local Government Code for Real Property Tax and the additional one percent (1%) tax for the Special Education Fund.
Sec. 24. Other Receipts. – Other receipts of the local government units shall be comprised of, but not limited to, the following: a. b. c. d.
Borrowings Sale of Property, Plant and Equipment Refund of Cash Advances Receipt of Performance/Bidders’ Bonds
Sec. 25. Borrowings. – Borrowings are proceeds of repayable obligations, generally with
interest from the bank, national agency, another local government unit, and private sector. All borrowings incurred shall be recorded direct to the appropriate liability accounts. Upon receipt of the advice from the bank or lending agency informing the release of the proceeds, the Accountant shall draw a Journal of Entr y Voucher taking up the transaction.
Sec. 26. Sale of Property, Plant and Equipment. – Sale of property, plant and equipment refers to the proceeds from the sale of land, buildings, equipment, furniture and other similar property which are recorded in the books as Property, Plant and Equipment. The appropriate Property, Plant and Equipment account shall be credited upon transfer of ownership.
Sec. 27. Refund of Cash Advances. – Cash advances for official travel shall be taken up as a receivable from the concerned official or employee. Refunds made shall be credited to the receivable account previously set up. Cash advances for salaries and wages shall be recorded as debits to the account Cash – Disbursing Officer. Any refund made shall be credited to this account.
Sec. 28. Receipt of Performance Bonds. – Performance bond posted by contractor or supplier to guaranty full and faithful performance of the their work may be in the form of cash, certified check or surety. Performance bond in cash or certified check shall be acknowledged by the issuance of official receipt and recorded in the books by the Accountant drawing a JEV for the purpose. In case of surety bond, an acknowledgment receipt shall be issued by the authorized official.
Sec. 29. Reporting for Collections and Deposits. – Collectors/tellers shall issue a receipt to acknowledge collections made. The receipt maybe in the form of pre-numbered Official Receipts, or cash tickets and the like. At the close of each business day, these collectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four copies. The original and two copies, together with the duplicates of the official receipts issued, shall be submitted to the treasurer/cashier to whom the cash collected shall be turned over. The fourth copy of the RCD shall be retained by the collector/teller concerned. Barangay Treasurers deputized to collect taxes imposed by provinces, cities and municipalities shall follow the same procedures in turning over their collections to the treasurer/cashier concerned. In the case of collectors assigned to the field, where travel time from their places of assignment to the Treasurer’s Office is more than one day, turnover of collections shall be made at least once a week or as soon as the collections reach P5,000.00.
Sec. 30. Verification of Collections and Accountable Forms. – The Treasurer/Cashier shall verify the Report of Collections and Deposits; check the statement of accountable forms as to initial balances on hand, receipts, issues and the ending balances on hand; make a physical count of the accountable forms remaining in the custody of the collector/teller and check the same against the new balances on hand column. He shall indicate his verification by
affixing his signature at the back of the triplicate copy of the last official receipt issued. He shall count the money turned over to him and sign the certification and receipt portion of all copies of RCD.
Sec. 31. Designation of Liquidating Officers. – The Treasurer may designate liquidating officers from among the collectors/tellers whenever necessary. a.
b.
c.
Collectors/tellers shall turn over their collections to their designated liquidating officer. The RCD shall however be prepared in five copies, four copies to be submitted to the liquidating officer, the fifth copy to be retained by the collector/teller. The liquidating officer shall perform the procedures for the receipt and verification of collections turned over to him. He shall also accomplish the RCD in four copies to summarize the collections turned over to him by the collectors/tellers as well as his own collections. The liquidating officer shall turn over intact the cash collections to the Treasurer/Cashier together with the originals and two copies of the RCDs of collectors/tellers and the duplicates of the official receipts issued. The Treasurer/Cashier shall acknowledge receipt of the cash and all accompanying documents by signing all copies of the RCD of liquidating officer on the certification and receipt portion of the form. The fourth copy of the RCD of the liquidating officer and RCDs of collectors/tellers shall be retained by the liquidating officer.
Sec. 32. Deposit of Collections. – The Treasurer/Cashier shall deposit intact all his collections as well as all collections turned over to him by the collectors/tellers with the authorized depository bank daily or not later than the next banking day. He shall record all deposits made in the cashbook and prepare the RCD. The barangay treasurer shall deposit all collections intact with the city/municipal treasurer, or in a depository bank account maintained in the name of the barangay, within five (5) days from receipt thereof.
Sec. 33. Deposit of Field Collections. – Collections by field collectors shall be remitted to the Cashier or designated liquidating officer of the field office of the LGU. When travel distance of the field office to the local treasury may expose government funds to the risk of loss while in transit, the Cashier or designated liquidating officer, upon authorization by the Treasurer, may deposit the collections in the authorized depository bank near the field office of the LGU. The procedures in reporting collections and deposits prescribed in this Chapter shall be observed.
Sec. 34. Accounting for Collections and Deposits. – The Accountant shall determine the account classification of the collections covered by the RCD and the supporting papers submitted by the Treasurer/Cashier and shall accomplish the Journal Entry Voucher. The accountant shall also maintain the Abstract of Real Property Tax Collections to facilitate the distribution and remittance of the shares of the different government units concerned in the
real property tax collections.
Sec. 35. Receipts and Collection Process. – The following is a summary of the receipt and collection process in the LGU: PERSON / UNIT RESPONSIBLE
PROCESS
a.
Receive payment from taxpayers/ creditors and issue Official Receipt (OR). Prepare Report of Collections and Deposits. Remit to the Liquidating Officer (if one is designated) or Treasurer.
Collector/Teller
b.
Check remittances and verifies accountable forms of collectors/tellers. Consolidates collections and remits to the Treasurer/Cashier. Prepares RCD.
Liquidating Officer
c.
Receive remitted collections, consolidates the same and prepares RCD. Records in the Cashbook – Cash in Treasury.
Treasurer
d.
Deposit collections in the appropriate bank account per authorized depository bank. Records deposit in the Cashbook – Cash in Bank.
Treasurer
e.
Forward RCD to Accounting Unit with copies of ORs and validated deposit slips.
Treasurer
f.
Prepare Journal of Entry Voucher and record in the Cash Receipt Journal.
Accountant
Sec. 36. Pro –forma Accounting Entries. – The following are pro-forma accounting entries for income, collection and deposit:
Particulars
Account Title
Acct. Code
Debit
124
1,000
INCOME 1. Real Property Tax – Basic
A. Books of the Municipality a. Setting-up of RPT Receivable RPT = P1,000
Real Property Tax Receivable Deferred Real
Credit
RPT Sharing: Municipal - 40% Province - 35% Barangay - 25% b. Receipt of Payment
Property Tax Income
Cash in Treasury Real Property Tax Receivable
448
1,000
101 124
100
c. Distribution of Collection Deferred Real Property Tax Income RPT Sharing: Real Property Tax Municipal - 40% Due to LGUs Province - 35% Barangay - 25%
448
100
d. Deposit of Collections
Cash in Bank – LCCA Cash in Treasury
110 101
100
e. Remittance of Share (Province)
Due to LGUs Cash in Bank – LCCA
431 110
35
f. Remittance of Share (Barangay)
Due to LGUs Cash in Bank – LCCA
431 110
25
a. Upon receipt of the Summary of the JEV from the Municipal Accountant
Due from LGUs Real Property Tax
131 711
35
b. Upon receipt of share
Cash in Bank – LCCA Due from LGUs
110 131
35
Cash in Treasury Receipts from Markets Garbage Fees
101 783 772
100
Cash in Bank – LCCA Cash in Treasury
110 101
100
a. Receipt of Notice of Cash in Bank – LCCA Funding Check Issued Share from Internal from the DBM and credit Revenue Collections memo from the bank for Share from Internal Revenue Collections
110 746
1,000
b. Receipt of Notice of Due from NGAs Funding Check Issued Share from Internal from the DBM for Share Revenue Collections from Internal Revenue Collections
130 746
1,000
101 651
100
100
711 431
40 60
100
35
25
B. Books of the Province 35
35
2. Operating and Service Income
a. Receipt of Income
b. Deposit of Collections
90 10
100
3. Share from Intern al Revenue Collections
1,000
1,000
4. Grants and Donations
a. Receipt of grants and donations in cash (Donations in kind shall
Cash in Treasury Income from Grants and Donations
100
be booked-up using the appropriate asset account) b. Receipt of grants and Motor Vehicles donations in kind - Motor Invested Equity Vehicle: Original Cost P1,000 (At the end of Year) Less: Acc. Depn. 200 Invested Equity Book Value P 800 Government Equity
218 537
800
537 501
800
110 403
1,000
951 952 110
10 12
101 403
1,000
952 110
6
403
200
800
800
5. Borrow ings
a. Receipt of borrowed funds from bank Principal P1,000 Bank Charges - 10 Interest Expense - 12
Cash in Bank – LCCA Loans Payable – Current, Domestic Bank Charges Interest Expenses Cash in Bank – LCCA
b. Receipt of borrowed funds from other agency Principal - P1,000 Interest Expense - 6
Cash in Treasury Loans Payable – Current, domestic Interest Expenses Cash in Bank – LCCA
c. Payment of loan amortization
Loans Payable – Current, Domestic Cash in Bank - LCCA
1,000
22
1,000
6
110
200
6. Subsidies a. Subsidy from Other Funds (General Fund to Sp ecial Education Fund)
GENERAL FUND BOOKS Transfer of subsidy to Subsidy to Other Funds Special Education Fund Cash in Bank – LCCA (Aid to SEF to finance its projects) SPECIAL EDUCATION FUND BOOKS Receipt of subsidy funds Cash in Treasury from Other funds Subsidy from Other Funds
897 110
500
101 605
500
500
500
b. Special Accounts (subsidy from General Fund proper to Operation of Public Market
BOOKS OF GENERAL FUND PROPER Transfer of subsidy to Subsidy to Special Special Account Accounts Cash in Bank – LCCA
898
500
110
500
BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET) Receipt of subsidy from Cash in Bank – LCCA 110 500 General Fund Proper Subsidy from Special 606 Accounts 7. Refund o f Cash Adv ances a. Cash A dvance by an Officer for Local Travel
a. To take up the cash advance
Due from Officers & Employees
128
10
500
b. To take up refund of cash advance
Cash in Bank – LCCA
110
Cash in Treasury Due from Officers & Employees
101 128
10 10 10
b. Cash Advance by a Disburs ing Officer for Salaries and Wages
a. To take up the cash advance
b. To take up refund of cash advance
Cash – Disbursing Officers Cash in Bank – LCCA
107
10
110
10
Cash in Treasury Cash – Disbursing Officers
101 107
10
a. To take up receipt of performance bond in cash
Cash in Treasury Performance/ Bidders/ Bail Bonds Payable
101 414
50
b. To take up deposit of performance bond
Cash in Bank – LCCA Cash in Treasury
110 101
50
c. To take up refund of performance bond
Performance/ Bidders/ Bail Bonds Payable Cash in Bank – LCCA
414
50
10
8. Receipt pf C as h Bo nds
50
50
110
50
D. DISBURSEMENTS Sec. 37. Disbursements. – Disbursements refer to the settlement of government payables/obligations by cash or by check. Typical transactions for which disbursements are made are as follows: 1. 2. 3. 4.
Personal Services Maintenance and Other Operating Expenses Capital Outlay Financial Expenses
Disbursements shall be covered by Disbursement Vouchers (DV) or payrolls and paid either by check or in cash. The Allotment and Obligation Slip (ALOBS) shall be an integral part of the DV.
Sec. 38. Certification on Disbursements. – Disbursements from the general fund shall require the following certifications on the DV: 1.
2.
Certification and approval of vouchers and payrolls as to validity, propriety and legality of the claim (Box A of DV) by the head of the department or office who has administrative control of the fund concerned. In case of temporary absence or incapacity of the department head or chief of office, the officer next-in-rank shall automatically perform his function and shall be fully responsible therefor. Necessary documents supporting the disbursement vouchers and payrolls as
3.
certified to and reviewed by the Accountant. (Box B of DV) Certification that funds are available for the purpose by the Local Treasurer. (Box C of DV)
Sec. 39. Approval of Disbursements. – Approval of disbursements by the Local Chief Executive (LCE) himself shall be required whenever local funds are disbursed, except for regularly recurring administrative expenses such as: payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services, remittances to government creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the DBM and others, where the authority to approve may be delegated. Disbursement vouchers for expenditures appropriated for the operation of the Sanggunian shall be approved by the provincial Vice Governor, the city Vice Mayor or the municipal Vice Mayor, as the case may be.
Sec. 40. Payments by Check. – Checks shall be drawn only on duly approved disbursement vouchers. It shall be drawn by the local Treasurer and countersigned by the local Administrator. In case of temporary absence or incapacity of the aforesaid officials, these duties shall devolve upon their immediate assistants. In the case of municipalities where no Administrator has been appointed, checks shall be countersigned by the municipal Mayor. In case, however, of expenditures appropriated for the operation of the Sanggunian, checks drawn shall be countersigned by the provincial Vice Governor, the city Vice Mayor, or the municipal Vice Mayor, as the case may be.
Sec. 41. Recording Check Disbursements in the Cashbooks. – All checks issued including cancelled checks shall be recorded chronologically in the Cashbook – Cash in Bank.
Sec. 42. Release of Checks. – The Treasurer shall release the check only to the payee or his duly authorized representative. For purposes of releasing checks, the Treasurer shall maintain a Check Register where all checks issued shall be recorded chronologically and where the claimants shall be required to acknowledge receipt thereof.
Sec. 43. Reporting of Checks Issued. – The checks released to claimants shall be reported in the Report of Checks Issued (RCI) which shall be prepared daily by the Treasurer for each fund. It shall be submitted to the Accountant for preparation of Journal of Entry Voucher based on individual checks issued and recording in the Check Disbursements Journal.
Sec. 44. Check Disbursement Process. – The steps in disbursements through issuance of check is shown below: PROCESS
PERSON / UNIT
RESPONSIBLE
a.
Gather supporting documents, and approved ALOBS, prepare DV and forward to Head of Department.
Concerned Office
b.
Sign Box A of DV and submit to the Accounting Unit.
Supervisor/Head of Department
c.
Check completeness of documents, assign number to DV, sign Box B and forward to Treasurer.
Accounting Unit
d.
Verify claim, certify cash vailability (Box C) and forward to approving officer.
Treasurer
N o t e : If funds are not available, return to Accountant for recording in the books as Accounts Payable (AP). For AP, JEV shal l be prepared by Accounting Unit and JEV number reflected in the DV. JEV for AP is recorded in General Journal. Accountant retains copy of DV and forwards to Treasurer.
e.
Approve transaction (Box D) and forward DV to Cashier.
Local Chief Executive or authorized approving officer
f.
Prepare, sign check and forward check with DV to countersigning officer.
Treasurer
g.
Countersign check and forward to Accountant for preparation of the Accountant’s Advice of Local Check Disbursements.
Administrator/ ViceMayor for the Local Sanggunian Disbursements
h. Prepare Accountant’s Advice of Local Check Disbursements and submit to bank. Return DV, check and supporting documents to Cashier/Treasurer.
Accountant
i.
Record check in the Check Register and release check to claimant. Record disbursement in Cashbook – Cash in Bank. Prepare Report of Checks Issued. Forward RCI with DV and supporting documents to Accounting Unit.
Treasurer
.
Prepare the JEV based on individual checks/voucher; sign "Prepared By" portion (approved by Chief Accountant), and record JEV in the Check Disbursements Journal. Post monthly to
Accounting Unit
the General Ledger/Subsidiary Ledgers. k.
Forward RCI, DV, supporting documents and JEV to the Office of the Auditor.
Accountant
Sec. 45. Payments in Cash. – Disbursements by cash shall be made from a cash advance drawn and maintained in accordance with COA rules and regulations. Cash payments shall be made only on duly approved payrolls/disbursement vouchers. Cash advances, by regular and special disbursing officers shall be recorded through a debit to Cash – Disbursing Officers and a credit to Cash in Bank – Local Currency, Current Account (LCCA).
Sec. 46. Reporting of Cash Disbursements. – To account for cash disbursements, from regular and special cash advances, the Accountable/Disbursing Officer shall prepare the Report of Disbursements and submit the original and duplicate copy with vouchers/payrolls/petty cash vouchers to the Accountant. He shall ensure that receipt of the report and supporting documents, are properly acknowledged by the Accountant. The Accountant shall verify the report including the completeness of the supporting documents, prepare the Journal of Entry Voucher (JEV) and record the transaction in the Cash Disbursements Journal.
Sec. 47. Cash Advances for Travel. – Cash advances for travel shall be recorded as debit to the account Due from Officers and Employees and a credit to Cash in Bank – Local Currency, Current Account. For liquidation of travel where the amount of cash advance is equal to or more than the travel expenses incurred, the Liquidation Report form shall be prepared by the officers/employees concerned and submitted to the accounting unit as basis for preparation of the JEV to record liquidation. In case the amount of cash advance is less than the travel expenses incurred, a Disbursement Voucher shall be prepared to liquidate the previous cash advance and serve as a claim for reimbursement of the deficiency in amount.
Sec. 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be maintained under the imprest system. The fund shall be sufficient for the non-recurring, emergency and petty expenses of the LGU for one month. Disbursements from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed by the payee to acknowledge the amount received. The official receipt shall be attached to the PCV. Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be prepared for the fund, recorded in the RAAO and obligated as Other Expenses. Payments out of the fund shall be made through the use of PCVs duly supported by official receipts and other required documents. Each PCV shall not exceed Php1,000.00. A Disbursement Voucher shall be prepared for replenishments of the petty cash fund during the year duly supported by a list/summary of PCVs, the PCVs and its supporting documents. ALOBS shall be prepared for each replenishment and recorded in the RAAO
based on actual expenses incurred. At the end of the year, the petty cash fund shall be fully liquidated by preparing a Report of Disbursement supported by the list/summary of PCVs, the PCVs and its supporting documents. The ALOBS setting up the fund at the beginning of the year shall be cancelled. Another ALOBS shall be prepared taking up the liquidation and recorded in the RAAO based on the actual expenses incurred. Unused cash shall be returned to the Treasurer who shall issue an Official Receipt to acknowledge the amount returned. A new Cash Advance for Petty Cash Fund shall be set up in the ensuing year.
Sec. 49. Cash Disbursement Process. – Disbursement process for payment of salaries and wages out of cash advances is as follows:
PROCESS
PERSON / UNIT RESPONSIBLE
a.
Processing of Payrolls to be paid by cash is the same as that of steps (a) to (e) for check disbursements.
Concerned offices
b.
Gather duly certified and approved payrolls to be paid out of cash advance. Prepare DV for cash advance corresponding to the net amount of payroll/s. Sign Box A of DV and submit to the Accounting Unit.
Office of the Treasurer
c.
Check completeness of documents/ previous cash advance liquidated, assign number to DV, sign Box B and forward to Approving Officer.
Accounting Unit
d.
Approves DV and forward to Treasurer for preparation of checks.
Local Chief Executive
e.
Prepare and sign check, and forward check with DV to countersigning officer.
Treasurer
f.
Countersign check and forward to Accountant for preparation of Advice.
Administrator
g. Prepare Accountant’s Advice of Local Check Disbursements and return DV, check and supporting documents to Cashier/Treasurer.
Accountant
h.
Treasurer/ Disbursing Officer
i.
Encash check and pay claimants. Record disbursement in Cashbook – Cash Advances. Return unused cash to the Treasurer/
Disbursing Officer
Cashier. An official receipt (OR) shall be issued by the Treasurer/Cashier to acknowledge the return of unused cash and indicate check no. of cash advance granted on the face of OR. Record the refund as credit to cash advance and attach OR to the Cashbook – Cash Advances. .
Prepare Report of Disbursement, attach paid payrolls/ supporting documents and copy of OR for unused cash advance returned to Treasurer/Cashier. Sign "Certified Correct" portion of Report of Disbursement and submit to Accounting Unit.
Disbursing Officer
k.
Prepare JEV to record the liquidation of cash advance. Record JEV in the Cash Disbursements Journal (CDJ). Post monthly to the General Ledger/ Subsidiary Ledger.
Accountant
l.
Forward Report of Disbursement and supporting documents including JEV to the Office of the Auditor.
Accountant
Sec. 50. Purchase or Construction of Property, Plant and Equipment. – Property, plant and equipment include land and land improvements, buildings, equipment, motor vehicles, books, machineries, ordnance, etc. and public infrastructure. These are charged against appropriations/allotments for capital outlay when obligated. Property, plant and equipment acquired through purchase shall include all costs incurred to bring it to the location necessary for its intended use, like transportation, freight, installation costs, etc. In the books of accounts, the purchase is immediately recorded as asset. Property, plant and equipment to be constructed may be classified as agency assets and public infrastructures. Agency assets are those to be used by the LGU concerned, like buildings, while public infrastructures are those to be used by the general public. The construction period theory shall be used in recording both types of assets. This means that expenses such as license fees and bonus paid to contractor for completing the work ahead of schedule, etc. during the construction period shall be added to the total cost of the project. However, liquidated damages charged to the contractor for delayed completion should be deducted from the total cost. During the construction period, agency assets and public infrastructures shall be taken up in the books as "Construction in Progress" with the appropriate asset classification. As soon as the project is completed, the Construction in Progress for agency asset is closed to the appropriate asset account. For public infrastructures funded out of regular income, the Construction in Progress account is transferred to the Public Infrastructures account upon completion. At the end of the year, the latter account is closed to the Government Equity and the asset is recorded in the
Registry of Public Infrastructures (RPI). However, completed public infrastructures funded out of a loan shall be closed to the Government Equity account only upon full payment of the loan. A disclosure of public infrastructures completed funded from loans shall be made in the Notes to Financial Statements.
Sec. 51. Purchase of Supplies. – Purchase of supplies and materials for stock regardless of whether or not they are consumed within the accounting period shall be recorded as assets using the Inventory account following the Perpetual Inventory Method (refer to Chapter 7 – Supplies or Property). However, supplies and materials purchased out of the Petty Cash Fund for immediate use or for emergency shall be taken up as expenses.
Sec. 52. Pro-forma Accounting Entries. – disbursement transactions are shown below:
Particulars
Pro-forma
Account Title
Acct. Code
accounting
Debit
Credit
1. Payment through Cash Advances a. Cash advance for p ersonal services
Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000 Additional Compensation, and P3,000 Personnel Economic Relief Allowance (PERA). 1. Grant of cash advance for payroll
2. Liquidation of cash advance for payroll
Cash – Disbursing Officers Cash in Bank – LCCA Salaries and Wages – Regular Pay PERA Additional Compensation Withholding Taxes Payable GSIS Payable PAG-IBIG Payable Cash – Disbursing Officers
107
21,000
110
21,000
801
18,000
804 805 410
3,000 5,000 2,000
411 412 107
1,500 1,500 21,000
Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance Contributions and P1,500 PAG-IBIG Contributions. 3. Government share for life Life and Retirement and retirement insurance Insurance Contributions and PAG-IBIG PAG-IBIG Contributions Contributions GSIS Payable PAG-IBIG Payable
817
1,500
818 411 412
1,500
128
1,000
1,500 1,500
c. Cash advance for travel
Enter obligation in RAAOMO for Travel of P1,000 1. Grant of cash advance
Due from Officers and Employees Cash in Bank – LCCA
110
1,000
entries
for
2. Liquidation of cash Traveling Expenses – advance during the Local current year (assuming Due from Officers and only P900 was utilized Employees and P100 was refunded)
831
900
128
900
Adjust RAAOMO for refund of cash advance of P100 3. For amount refunded Cash in Bank – LCCA where official receipt was Due from Officers and issued Employees
110 128
100
841 110
3,000
100
2. Payment by Check a. Maint enance and Other Operating Expenses
Enter obligation in RAAOMO for rent P3,000 1. Payment of rent
Rent Expense Cash in Bank – LCCA
3,000
Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet of P2,000 2. Payment of utilities (MERALCO and PLDT)
Electricity Telephone/Telegraph and Internet Cash in Bank – LCCA
835 837
1,500 2,000
110
3,500
Enter obligation in RAAOMO for training and seminar expenses of P1,000 3. Payment of seminar fee Training and Seminar Expenses Cash in Bank – LCCA
833 110
1,000 1,000
E. MISCELLANEOUS TRANSACTIONS Sec. 53. Miscellaneous Transactions. – Miscellaneous transactions refer to transactions that are unique and not recurring in the ordinary course of operations of the government. These transaction types seldom take place or ideally should not happen at all. The following maybe considered miscellaneous transactions: 1. 2. 3. 4. 5. 6.
Loss of Cash and Property Accountability Cash Overage Dishonored Check Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check Settlement of Suspensions/Disallowances/Charges Refund of Overpayments
Sec. 54. Loss of Cash and Property. – Loss of cash and property may be due to malversation, theft, robbery or other causes. Cash shortage discovered during cash examination conducted by auditors is reported through the Report of Cash Examination within ten (10) working days from the completion of examination pursuant to COA Memorandum No. 84-373A. The auditor issues an audit report in case of shortage in property accountability. As soon as a shortage is definitely established, the Auditor shall issue a memorandum pertaining thereto and the Accountant shall draw a Journal
of Entry Voucher to take up the shortage as a receivable from the accountable officer concerned. In case of loss of property due to other causes (theft, force majeure, fire, etc.), a report thereon shall be prepared by the accountable officer concerned for purposes of requesting relief from accountability. No accounting entry shall be made but the loss shall be disclosed in the notes to financial statements pending result of request for relief from accountability.
Sec. 55. Grant of Relief from Accountability. – When a request for relief for shortages or loss of funds is granted, a copy of the decision shall be forwarded to the Chief Accountant who shall draw a JEV to record the transaction. The loss shall be debited to the Loss of Assets account and credited to the appropriate receivable account. In case the request for relief is denied, immediate payment of the shortage shall be demanded from the accountable officer. Restitution shall be acknowledged by the issuance of an official receipt. In case the request for relief from accountability for loss of property caused by fire, theft, force majeure or other causes is granted, a copy of the decision shall likewise be forwarded to the Chief Accountant for the preparation of the JEV. The loss shall be debited to the Loss of Assets account and credited to the appropriate asset account. If request for relief from accountability is denied, the loss shall be taken up as a receivable from the accountable officer/persons liable and shall be credited to the appropriate asset account.
Sec. 56. Cash Overage. – In case the cash examination disclosed cash overage, as determined by the auditor, the amount shall be forfeited in favor of the government and an official receipt shall be issued by the collector/teller. The cash overage shall be taken up as Other Specific Income.
Sec. 57. Dishonored Checks. – A check is said to be dishonored when upon its being duly presented for payment, such payment is refused or cannot be obtained. Upon receipt of the debit memo and the dishonored check(s) from the bank, constructive cancellation of the official receipt covering the dishonored check shall be immediately effected by the Treasurer on the copy in his possession. The Treasurer shall immediately photocopy the dishonored checks and record as credit in the Cashbook –Cash in Bank and cancel payment in the taxpayer’s index card. He shall also notify the collector/teller of the dishonor and the cancellation of the official receipt. The collector/teller shall note the cancellation in the triplicate copies of the receipt. The Treasurer shall then inform the Auditor who shall effect the cancellation in the duplicate copy of official receipt, in case the same has already been submitted for audit. The Treasurer shall forward the debit memo and the photocopy of the dishonored checks to the Accountant. The Accountant shall cancel the official receipt if still in his possession. He shall prepare the Journal of Entry Voucher (JEV) taking up the dishonored check by crediting the Cash in Bank account and debiting the appropriate income account. In case of dishonor of check payments for Real Property Tax (RPT) or Special Education Tax (SET), the RPT/SET Receivables and corresponding Deferred RPT/SET Income shall be restored. The accounts Due to LGUs, RPT Income, Cash in Bank and RPT Discount shall be adjusted accordingly. He shall furnish the Treasurer with a copy of the duly approved JEV. The Treasurer shall record
the JEV number in the Cashbook-Cash in Bank as reference in the entry effecting the cancellation of the dishonored check.
Sec. 58. Cancellation of Lost Check Issued. – A check is considered lost when it is misplaced, waylaid or left behind inadvertently/negligently by the payee or holder in due course or by the custodian/carrier thereof and after diligent search cannot be found or located; or when it is lost due to fortuitous event, theft or robbery. Upon submission of sworn statement from the payee that a check issued by the LGU is lost, the treasurer shall immediately notify the bank concerned for the stoppage of payment. He shall forward the sworn statement to the accountant who shall prepare the JEV to cancel the payment made. Copy of the JEV shall be furnished the treasurer as basis for him to debit the amount in the Cashbook – Cash in Bank.
Sec. 59. Spoiled and Stale Checks. – Checks may be cancelled when they become spoiled or stale. A check is considered spoil when, it is torn, mutilated, defaced or with erasures/errors affecting the genuineness of any material information contained therein. It is stale, if it has been outstanding for over six months from date of issue or as prescribed by the depository bank. At least one month before a check becomes stale, the Treasurer shall send a written notice to the payee of the existence of the check. A spoiled or stale check shall be m arked cancelled on its face and reported as f ollows: 1.
For spoiled checks which are immediately cancelled and for which the Report of Checks Issued (RCI) has not yet been prepared, the cancelled check shall be attached to the RCI and reported chronologically with the other checks issued and the word "Cancelled" shall be indicated on the report. 2. For stale checks which have been unclaimed and thus, the original DV and supporting documents are still with the Treasurer, the cancelled check shall be presented in the RCI after the last check issued for the period indicated in the report. The original DV and supporting documents shall be returned to the Accountant who shall prepare a JEV to r ecord the transaction as Accounts Payable. 3. For checks which became spoiled or stale in the hands of the payee and which require replacement, a new check may be issued upon submission of the spoiled or stale check to the Treasurer. A certified copy of the DV shall be requested from the Auditor for presentation to the Administrator/Local Chief Executive who shall countersign the check. The cancelled check shall be reported and attached to the RCI prepared at the period of cancellation. The replacement check shall also be reported chronologically in the RCI.
Sec. 60. Suspensions, Disallowances and Charges. – Disallowances and charges shall be taken up in the books of accounts only when they become final and executory. The Accountant shall prepare the Journal of Entry Voucher (JEV) to take up the Receivable – Disallowances and Charges and credit the appropriate expense account for the current year or
prior years’ adjustment if pertaining to expenses of previous years. Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash in Treasury and crediting the Receivable – Disallowances and Charges account. Suspensions in audit and settlement thereof shall not be recorded in the books of accounts.
Sec. 61. Pro-forma Accounting Entries. – The following the are pro-forma accounting entries for miscellaneous transactions:
Particulars
Account Title
Acct. Code
Debit
Credit
1. Cash Shortage a. Cash sho rtage of the of t he Disbursing Officer
To take up cash shortage
Due from Officers and Employees Cash – Disbursing Officers
128
50
107
50
b. Cash Short age of the Treasurer
To take up cash shortage
Due from Officers and Employees Cash in Treasury
128
50
101
50
2. Grant of Relief from Accountability for Loss of Government Funds To record the loss of fund by Due from Officers and a Disbursing Officer Employees (allegedly thru theft ) = P50 Cash – Disbursing Officers To take up relief from Loss of Assets (current accountability year) or Prior Years’ adjustments (prior years) Due from Officers and Employees
128
50
107 948
50 50
128
50
3. Cash Settlement in case of denial of Request for Relief from Accountability To take up payment/settlement
Cash in Treasury Due from Officers and Employees
101 128
50
Cash in Treasury Other Specific Income of LGU
101 792
50
50
4. Cash Overage To take up cash overage discovered during cash examination 5. Dishonored Checks From payment of real property tax in the current year or prior year
50
Upon receipt of advice of dishonored check and cancellation of Official Receipt
Real Property Tax Receivable Deferred Real Property Tax Income
124
Due to LGUs Real Property Tax Income Cash in Bank – LCCA
431 711
Receipt of refund/settlement Cash in Treasury Real Property Tax Receivable
50
448
50
30 20
110
50
101 124
50
Cash in Bank – LCCA Accounts Payable
110 401
50
Accounts Payable Cash in Bank – LCCA
401 110
50
50
6. L ost/Destroyed/Stale/Obsolete Checks Check issued in the current/prior year for replacement Check cancellation
Replacement
50
50
7. Disallowances and Charges a. Recording of disallowance for current year’s transaction When the disallowance becomes final and executory – Overpayment of Office Supplies Amount paid - P100 Should be - 90 Difference - 10
Receivables – Disallowances/ Charges Office Supplies Expense
Settlement of Disallowance
Cash in Treasury Receivables – Disallowances/ Charges
138
10
849
10
101 138
10
When the disallowance Receivables – becomes final and executory Disallowances/ Charges Prior Years’ Adjustments
138
10
Settlement of disallowance
101 138
10
b. Recording of disallowance for prior year’s transaction
Cash in Treasury Receivables – Disallowances/ Charges
533
10 10 10
c. Settlement of Charges
c.1 Recording of charges which collection were made in the current year When the charge becomes final and executory – Underpayment of Franchise Tax Amount Paid - P 100
Receivables – Disallowances/ Charges Franchise Tax
138
724
10
10
Should be Charge
- 110 - 10
Settlement
Cash in Treasury Receivables – Disallowances/ Charges
101 138
10 10
c.2 Recording of charges which collection were made in the prior year When the charge becomes final and executory
Receivables – Disallowances/ Charges Prior Years’ Adjustments
138
Cash in Treasury Receivables – Disallowances/ Charges
101 138
10
To record overpayment of Due from Officers and salaries and wages (When Employees overpayment is ascertained) Salaries and Wages – Regular Pay
128
10
To record refund of overpayment
101 128
10
10
101 801
10
10
101 533
10
10
Settlement
10
533
10
10
8. Refund of Overpayment a. Overpaym ent taken up as receivable
Cash in Treasury Due from Officers and Employees
801
10
b. Refund of overpaym ent not taken up as receivabl e
Refund of overpayment of Salaries and Wages – Regular Pay during the current year
Cash in Treasury Salaries and Wages – Regular Pay
To take up refund of over – Cash in Treasury payment in the ensuing year Prior Years’ Adjustments
F. ADJUSTING AND CLOSING ENTRIES Sec. 62. Adjusting Entries. – Adjusting entries are accounting journal entries made in order to ensure that revenues and expenses are recorded in the period when they are earned or incurred following the revenue recognition and the matching principles. Adjusting entries are required every time financial statements are prepared. The use of the adjusting entries makes it possible to report on the Balance Sheet the appropriate assets, liabilities and equity accounts at the statement date and the Statement of Income and Expenses the net income/(loss) for the period.
Sec. 63. Types of Adjusting Entries. – There are two types of adjusting entries: a.
Prepayments; and
b.
Accruals
Sec. 64. Prepayments. – Prepayments are expenses paid or revenues received before they are incurred or earned. Adjusting entries for prepayments are required at the statement date to record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period. Sub-categories of prepayments are prepaid expenses and unearned revenues. Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed. Prepaid expenses expire either with the passage of time (e.g. rent) or through use and consumption (e.g. supplies). The adjusting entry for prepaid expenses is a debit to the expense account and a credit to the asset account. Examples are rent, supplies, etc. Acquisition of productive facilities is viewed essentially as long term prepayments, hence, periodic adjusting entries for depreciation are included in this category. For depreciation, the entry is a debit to depreciation expense and a credit to accumulated depreciation. The depreciable or estimated life for different types of agency assets are presented in Table 2 (Annex 7). Unearned revenues are recorded as a liability when received and considered earned upon rendition of service (e.g. tuition fees) or the passage of time (e.g. advance payment of real property taxes). The adjusting entry for unearned revenues is a debit to a liability account and a credit to revenue account. Illustrative accounting entries: Particulars 1. Report of supplies utilized for P2,000.
Account Title Office Supplies Expense Office Supplies Inventory
2. Application of advance RPT Deferred Credits to for P2,500. Income Real Property Tax
Acct. Code 849
Debit 2,000
149 440
Credit
2,000 2,500
711
2,500
Sec. 65. Accruals. – Accruals are revenues earned and expenses incurred in the current accounting period that have not yet been recorded. Adjusting entries for accruals are required to record revenues earned and expenses incurred in the accounting period. Adjusting entry for accrued revenues is a debit to a receivable account and a credit to an income account. Examples are interest, share from internal revenue collections covered by notice of funding checks issued, etc. Adjusting entry for accrued expenses is a debit t o the appropriate expense account and a credit to a payable account. Examples are accrued salaries, bad debts, etc. For bad debts, the entry is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts. Illustrative accounting entries: Particulars 1. Receipt of the Notice of
Account Title Due from NGAs
Acct. Code 130
Debit 20,000
Credit
Funding Check Issued for the December Share from Internal Revenue Collections for P20,000.
Share from Internal Revenue Collections
2. Unpaid salaries and wages Salaries and Wages – of employees, at end of Regular Pay accounting period, P50,000. Due to Officers & Employees
746
801
20,000
50,000
428
50,000
Sec. 66. Closing Journal Entries. – Closing journal entries are the accounting entries prepared to reduce all balances of the nominal accounts to zero at the end of the accounting period in order to prepare the accounts for the next accounting period. The procedure followed in the reduction of the balances is called the closing process. The closing process is as follows: 1. 2. 3.
4.
5. 6.
Debit all revenue accounts balances and credit the total to the Income and Expense Summary account. Credit all expense accounts balances and cost of goods sold and debit the total to the Income and Expense Summary account. Debit the credit balance of the Income and Expense Summary account and credit the amount in the Retained Operating Surplus account, in case of a net income. Credit the debit balance of the Income and Expense Summary account and debit the amount in the Retained Operating Surplus account, in case of a net loss. Debit all credit balances of the intermediate accounts and debit the total to the Government Equity account. Credit all debit balances of the intermediate accounts and credit the total to the Government Equity account. Illustrative accounting entries: Particulars
Account Title
Acct. Code
Debit
1. To close the Revenue Real Property Tax accounts to the Income and Share from Internal Expense Summary account. Revenue Collections Business Taxes & Licenses Registration Fees Income and Expense Summary
711 746
100 10,000
723
50
761 532
20
2. To close the Income and Income and Expense Expense Summary to Summary Retained Operating Surplus Retained Operating account. Surplus
532
5,670
3. To close the Retained Retained Operating Operating Surplus to Surplus Government Equity account. Government Equity
534
http://www.coa.gov.ph/ngas/lgu/lgu_ngas-c3v1.asp
10,170
534
501
Credit
5,670
5,670 5,670