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Chapter 3. ACCOUNTING SYSTEM
A. GENERAL ACCOUNTING PLAN
Sec. 05. General Accounting Plan. The GeneralAccounting 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 1) is presented as to the
following type of transactions:
a. Appropriations, Allotments and Obligations
b. Collections and Deposits
c. Disbursements
By cash
By check
d. Miscellaneous and Other transactions
B. BUDGETARY ACCOUNTS
Sec. 06. Budgetary Accounts. Budgetary accounts are
composed of appropriations, allotments and obligations.
Sec. 07. Accounting for 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.
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INSERT HERE TABLE 1
GENERAL ACCOUNTING PLAN (MS Excel file)
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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 bodyand 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:
a. Registry of Appropriations, Allotments and
Obligations - Capital Outlays (RAAOCO)
b. Registry of Appropriations, Allotments and
Obligations - Maintenance and Other Operating
Expenses (RAAOMO)
c. Registry of Appropriations, Allotments and
Obligations - Personal Services (RAAOPS)
d. Registry of Appropriations, Allotments and
Obligations - Financial Expenses (RAAOFE)
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 tothe amounts committed to be paid by the LGU for any lawful act
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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 ChiefAccountant 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:
P R O C E S S PERSON / UNIT
RESPONSIBLE
a. Records in the
appropriate RAAOs the approved
appropriation per Appropriation
Ordinance.
Office of the
Accountant
b. Forwards the advice
of allotments to the Office of the
Accountant and returns the work planto the concerned departments/ offices.
Office of the Budget
Officer
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P R O C E S S PERSON / UNIT
RESPONSIBLE
c. Enters the allotments
in the RAAOs.
Office of the
Accountant
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.
Heads of
departments/offices
e. Certifies the ALOBS
as to the existence of appropriations
based on the appropriation ordinance.
Assigns ALOBS number andforwards 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 Statusof 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
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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.)
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
b. RAAOPS
Salaries and Wages (e.g. regular pay, part-time
pay, overtime and night pay, holiday pay, etc.)
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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, exceptdepreciation, 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
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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 treasuryof 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. Tax revenues, fees and charges
b. Share from Internal Revenue Collections
c. Share from National Wealth
The sources of income are further classified into generalincome accounts and specific income accounts.
Sec. 17. General Income Accounts. The following shall
comprise the General Income Accounts applicable to LGUs:
a. Subsidy from Other LGUs
b. Subsidy from Other Funds
c. Subsidy from Special Accounts
d. Sales Revenue
e. Dividend Income
f. Interest Income
g. Gain on Sale of Securitiesh. Gain on Sale of Assets
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i. Sale of Confiscated Goods and Properties
j. Foreign Exchange (FOREX) Gains
k. Miscellaneous Operating and Service
Income
l. Fines and Penalties Government Services
and Business Operations
m. Income from Grants and Donations
Sec. 18. Specific Income Accounts. The following major
classification comprise the specific income accounts for LGUs:
1. Property Taxes
2. Taxes on Goods and Services
3. Other Taxes
4. 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 ofFunding 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 TaxesIncome/Deferred Special Education Tax Income. Real
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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/Taxpayers 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 theRPT 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
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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 EducationFund.
Sec. 24. Other Receipts. Other receipts of the local
government units shall be comprised of, but not limited to, the
following:
a. Borrowings
b. Sale of Property, Plant and Equipment
c. Refund of Cash Advances
d. Receipt of Performance/Bidders Bonds
Sec. 25. Borrowings. Borrowings are proceeds ofrepayable 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 Entry 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 becredited upon transfer of ownership.
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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 Treasurers 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 sameagainst the new balances on hand column. He shall indicate his
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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.
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.
b.
The liquidating officer shall perform the procedures for thereceipt 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.
c.
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 accompanyingdocuments 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.
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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 submittedby 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:
P R O C E S S PERSON / UNIT
RESPONSIBLE
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 theTreasurer/Cashier. Prepares RCD.
Liquidating
Officer
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P R O C E S S PERSON / UNIT
RESPONSIBLE
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. Proforma Accounting Entries. The following
are pro-forma accounting entries for income, collection and deposit:
Particulars Account Title
Acct.
Code Debit Credit
I N C O M E
1.Real Property Tax Basic
A. Books of the
Municipality
a. Setting-up of RPT
Receivable
Real Property Tax
Receivable 124 1,000RPT = P1,000 Deferred Real
RPT Sharing:
Municipal - 40%
Property Tax Income 448 1,000
Province - 35%
Barangay - 25%
b. Receipt of Cash in Treasury 101 100
Payment Real Property TaxReceivable 124 100
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Particulars Account Title
Acct.
Code Debit Credit
c. Distribution of
CollectionRPT Sharing:
Deferred Real Property
Tax IncomeReal Property Tax
448711
10040
Municipal - 40% Due to LGUs 431 60Province - 35%Barangay - 25%
d. Deposit of Collections Cash in Bank LCCACash in Treasury
110101
100100
e. Remittance of Share
(Province)
Due to LGUs
Cash in Bank LCCA
431
110
35
35
f. Remittance of Share(Barangay)
Due to LGUsCash in Bank LCCA
431110
2525
B. Books of the
Province
a. Upon receipt of the
Summary of the JEVfrom the Municipal
Accountant
Due from LGUs
Real Property Tax
131
711
35
35
b. Upon receipt of share Cash in Bank LCCADue from LGUs
110131
3535
2. Operating and Service Income
a. Receipt of Income Cash in Treasury 101 100Receipts from Markets
Garbage Fees
783
772
90
10
b. Deposit of Collections Cash in Bank LCCACash in Treasury
110101
100100
3. Share from Internal Revenue Collections
a. Receipt of Notice ofFunding Check Issued
from the DBM andcredit memo from
Cash in Bank LCCAShare from Internal
Revenue Collections
110
746
1,000
1,000
the bank for Sharefrom Internal Revenue
Collections
b. Receipt of Notice of Due from NGAs 130 1,000
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Particulars Account Title
Acct.
Code Debit Credit
Funding Check Issued Share from Internal
from the DBM for
Share from InternalRevenue Collections
Revenue Collections 746 1,000
4. Grants and Donations
a. Receipt of grants anddonations in cash
(Donations in kindshall be booked-up
using the appropriateasset account)
Cash in TreasuryIncome from Grants
and Donations
101
651
100
100
b. Receipt of grants anddonations in kind -
Motor Vehicle:
Motor VehiclesInvested Equity
218537
800800
Original Cost P1,000
Less: Acc. Depn. 200
(At the end of Year)
Invested Equity 537 800Book Value P 800 Government Equity 501 800
5. BORROWINGS
a. Receipt of borrowedfunds from bank -
Principal - P1,000Bank Charges - 10
Interest Expense- 12
Cash in Bank LCCALoans Payable
Current, Domestic
110
403
1,000
1,000Bank Charges
Interest Expenses
951
952
10
12Cash in Bank LCCA 110 22
b. Receipt of borrowed
funds from otheragency -
Cash in Treasury
Loans Payable Current, domestic
101
403
1,000
1,000
Principal - P1,000 Interest Expenses 952 6Interest Expense - 6 Cash in Bank LCCA 110 6
c. Payment of loanamortization
Loans Payable Current, Domestic 403 200
Cash in Bank - LCCA 110 200
6. SUBSIDIES
a. Subsidy from Other Funds (General Fund to Special Education Fund)
GENERAL FUND BOOKS
Transfer of subsidy Subsidy to Other Funds 897 500
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Particulars Account Title
Acct.
Code Debit Credit
to Special Education
Fund (Aid to SEF tofinance its projects)
Cash in Bank LCCA 110 500
SPECIAL EDUCATION FUND BOOKS
Receipt of subsidy fundsfrom Other funds
Cash in TreasurySubsidy from Other
101 500
Funds 605 500
b. Special Accounts (subsidy from General Fund proper to Operation of Public
Market)
BOOKS OF GENERAL FUND PROPER
Transfer of subsidy toSpecial Account
Subsidy to SpecialAccounts 898 500
Cash in Bank LCCA 110 500
BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)
Receipt of subsidy fromGeneral Fund Proper
Cash in Bank LCCASubsidy from Special
110 500
Accounts 606 500
7. REFUND OF CASH ADVANCES
a. Cash Advance by an Officer for Local Travel
a. To take up the cash
advance
Due from Officers &
Employees 128 10Cash in Bank LCCA 110 10
b. To take up refund ofcash advance
Cash in TreasuryDue from Officers &
Employees
101
128
10
10
b. Cash Advance by a Disbursing Officer for Salaries and Wages
a. To take up the cashadvance
Cash DisbursingOfficers 107 10
Cash in Bank LCCA 110 10
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Particulars Account Title
Acct.
Code Debit Credit
b. To take up refund ofcash advance
Cash in TreasuryCash Disbursing
Officers
101
107
10
10
8. RECEIPT OF CASH BONDS
a. To take up receipt ofperformance bond in
cash
Cash in TreasuryPerformance/ Bidders/
Bail Bonds Payable
101
414
50
50
b. To take up deposit ofperformance bond
Cash in Bank LCCACash in Treasury
110101
5050
c. To take up refund ofperformance bond
Performance/ Bidders/Bail Bonds Payable 414 50
Cash in Bank LCCA 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. Personal Services
2. Maintenance and Other Operating Expenses3. Capital Outlay
4. 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. Certification and approval of vouchers and payrolls as to
validity, propriety and legality of the claim (Box A of
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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.
2. Necessary documents supporting the disbursement
vouchers and payrolls as certified to and reviewed by the
Accountant. (Box B of DV)
3. 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 orpermanent 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 caseof 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.
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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:
P R O C E S S PERSON /
UNIT
RESPONSI
BLE
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 availability (Box C) and
forward to approving officer.
Treasurer
Note: If funds are not available, return
to Accountant for recording in the
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P R O C E S S PERSON /
UNIT
RESPONSI
BLE
books as Accounts Payable (AP). For
AP, JEV shall 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 Accountants
Advice of Local Check
Disbursements.
Administrator/
Vice-Mayor
for the Local
Sanggunian
Disbursements
h. Prepare
Accountants Advice of Local
Check Disbursements and submit tobank. 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
j. Prepare the JEV Accounting Unit
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P R O C E S S PERSON /
UNIT
RESPONSI
BLE
based on individual checks/voucher;
sign Prepared By portion
(approved by Chief Accountant),
and record JEV in the Check
Disbursements Journal. Post
monthly to 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 andmaintained 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 tothe 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.
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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 itssupporting 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 anOfficial Receipt to acknowledge the amount returned. A new
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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:
P R O C E S S PERSON /
UNIT
RESPONSI
BLE
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 cashadvance 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 Accountants Advice of
Local Check Disbursements and
Accountant
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P R O C E S S PERSON /
UNIT
RESPONSI
BLE
return DV, check and supporting
documents to Cashier/Treasurer.
h. Encash check and pay claimants.
Record disbursement in Cashbook
Cash Advances.
Treasurer/
Disbursing
Officer
i. Return unused cash to the
Treasurer/ 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. Recordthe refund as credit to cash advance
and attach OR to the Cashbook
Cash Advances.
Disbursing
Officer
j. 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
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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 theoryshall 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, theConstruction 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
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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. Pro-forma
accounting entries for disbursement transactions are shown
below:
Particulars Account Title
Acct.
Code Debit Credit
1. Payment through Cash Advances
a. Cash advance for personal services
Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000Additional Compensation, and P3,000 Personnel Economic Relief
Allowance (PERA).
1. Grant of cash advancefor payroll
Cash DisbursingOfficers
Cash in Bank LCCA
107
110
21,000
21,000
2. Liquidation of cash
advance for payroll
Salaries and Wages
Regular PayP E R A
801804
18,0003,000
AdditionalCompensation 805 5,000
Withholding TaxesPayable 410 2,000
GSIS Payable 411 1,500PAG-IBIG Payable 412 1,500
Cash DisbursingOfficers 107 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 and Retirement
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Particulars Account TitleAcct.
Code Debit Credit
life and retirement
insurance and PAG-IBIG Contributions
Insurance
ContributionsPAG-IBIG
Contributions
817
818
1,500
1,500GSIS Payable 411 1,500PAG-IBIG Payable 412 1,500
b. Petty Cash Fund
For establishment of fund, Enter obligation in RAAOMO as Other Expenses for
P6,000
1. Release of cash
advance for pettycash fundmiscellaneous
expenses
Petty Cash Fund
Cash in Bank LCCA
105
110
6,000
6,000
Enter obligation in RAAOMO for Office Supplies P2,500, Travelling
Expenses P500, Office Equipment Maintenance P1,000 and OtherExpenses of P800.
2. Replenishment ofpetty cash fund
during the year
Traveling Expenses Local
Office SuppliesExpenses
831
849
500
2,500Office Equipment
Maintenance 882 1,000Other Expenses 950 800
Cash in Bank LCCA 110 4,800
Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling
Expenses of P1,000.
3. Liquidation at year
end
Traveling Expenses
Local 831 1,000Office Supplies
Expenses 849 4,000
Petty Cash Fund 105 5,000
Cancel RAAOMO for setting up of petty cash fund at the start of the yearand refund for a total of P6,000.
4. Return of unusedPetty Cash Fund.
Cash in TreasuryPetty Cash Fund
101105
1,0001,000
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Particulars Account TitleAcct.
Code Debit Credit
c. Cash advance for travel
Enter obligation in RAAOMO for Travel of P1,000
1. Grant of cash advance Due from Officers and
Employees 128 1,000Cash in Bank LCCA 110 1,000
2. Liquidation of cash
advance during thecurrent year(assuming only P900
was utilized and P100was refunded)
Traveling Expenses
LocalDue from Officers and
Employees
831
128
900
900
Adjust RAAOMO for refund of cash advance of P100
3. For amount refunded
where official receiptwas issued
Cash in Bank LCCA
Due from Officers andEmployees
110
128
100
100
2. Payment by Check
a. Maintenance and Other Operating Expenses
Enter obligation in RAAOMO for rent P3,000
1. Payment of rent Rent Expense 841 3,000Cash in Bank LCCA 110 3,000
Enter obligation in RAAOMO for electricity of P1,500 andtelephone/internet of P2,000
2. Payment of utilities
(MERALCO andPLDT)
Electricity
Telephone/Telegraphand Internet
Cash in Bank LCCA
835
837110
1,500
2,0003,500
Enter obligation in RAAOMO for training and seminar expenses of P1,000
3. Payment of seminarfee
Training and SeminarExpenses 833 1,000
Cash in Bank LCCA 110 1,000
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Particulars Account TitleAcct.
Code Debit Credit
b. Financial Expenses
Enter obligation in RAAOFE for bank charges of P300
1. Bank charges upon
receipt of bankstatement
Bank Charges
Cash in Bank LCCA
951
110
300
300
Enter obligation in RAAOFE for interest expense of P400
2. Interest Expense Interest Expenses 952 400Cash in Bank LCCA 110 400
c. Office Equipment Enter obligation in RAAOCO for P6,000 for purchase ofequipment
1. Issuance of PO todealer
No entry
2. Receipt of office
equipment
Office Equipment
Cash in Bank LCCA
222
110
6,000
6,000
d. Construction of Roads by Contract Enter obligation in RAAOCO for P800,000for construction of road.
1. Payment of firstbilling for 50%
accomplishment
Construction inProgress Roads,
Highways andBridges 232 400,000
Withholding TaxesPayable 410 40,000
Cash in Bank LCCA 110 360,000
2. Payment of secondbilling 100%
accomplishment
Construction inProgress Roads,
Highways andBridges 232 400,000
Withholding TaxesPayable 410 40,000
Cash in Bank LCCA 110 360,000
3. Remittance of taxeswithheld
Withholding TaxesPayable
Cash in Bank LCCA
410
110
80,000
80,000
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Particulars Account TitleAcct.
Code Debit Credit
If funded from regular agency income
4. To take up roads
completed
Public Infrastructure
Construction in
243 800,000
Progress Roads,
Highways andBridges 232 800,000
5. To transfer completed
roads to Registry ofPublic Infra- structures
at the end of the year
Government Equity
Public Infrastructures
501
243
800,000
800,000
Note: Using the JEV for the above transactions, the public infrastructures shallbe recorded in the Registry of Public Infrastructures.
If funded from a loan
6 To record completed Public Infrastructures 243 800,000roads Construction in
Progress Roads,Highways andBridges 232 800,000
At year end,upon full
payment of laon
Government EquityPublic Infrastructures
501243
800,000800,000
e. General Repair/Construction of Building by Administration
1. Approval of the
project P1M
No entry
Enter obligation in RAAOCO for P600,000 for construction materials
2. Issue PO for building
materials: Lumber,nails, cement, sand
and gravel, paints,etc. = P600,000
No Entry
3. Payment forconstruction materials
received
Construction MaterialsInventory
Withholding TaxesPayable
Cash in Bank LCCA
156
410
110
600,000
60,000
540,000
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Particulars Account TitleAcct.
Code Debit Credit
4. Issuance of materialsP590,000
Construction inProgress Agency
Assets 230 590,000Construction Materials
Inventory 156 590,000
Enter obligation in RAAOCO for P380,000 for labor
5. Cash advance granted
to Disbursing Officerfor payroll
Cash Disbursing
OfficersCash in Bank LCCA
107110
350,000350,000
6. Liquidation by
Disbursing Officer ofpaid payroll
Construction in
Progress AgencyAssets 230 380,000
Withholding Taxes
Payable 410 30,000
Cash DisbursingOfficers 107 350,000
7. Remittance of
withholding tax
Withholding Taxes
PayableCash in Bank LCCA
410
110
30,000
30,000
8. Accomplishment
Report approved bythe LCE
Buildings
Construction inProgress Agency
Assets
204
230
970,000
970,000
f. Acquisition of Land
Enter obligation in RAAOCO for P2million for purchase of land
1. Payment made for
land purchased
Land
Withholding TaxesPayable
201
410
2M
200,000
Cash in Bank LCCA 110 1.8M
2. Remittance ofwithholding tax
Withholding taxesPayable 410 200,000
Cash in Bank LCCA 110 200,000
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Particulars Account TitleAcct.
Code Debit Credit
g. Land and Building
Enter obligation in RAAOCO for P600,000 for land and P400,000 for
building
1. Payment of the landand building
(assessed value ofland is P600,000) for
P1,000,000
LandBuilding
Withholding TaxesPayable
Cash in Bank LCCA
201204
410
110
600,000400,000
100,000
900,000
2. Remittance ofwithholding tax
Withholding TaxesPayable
Cash in Bank LCCA410110
100,000100,000
h. Purchase of Inventories
Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
1. Payment of deliveredspare parts
Spare Parts InventoryWithholding Taxes
Payable
155
410
2,500
250Cash in Bank LCCA 110 2,250
i.Enter obligation in RAAOMO for purchase of office supplies
1. Payment of office
supplies delivered
Office Supplies
InventoryWithholding Taxes
Payable
149
410
3,000
300Cash in Bank LCCA 110 2,700
j. Fund Transfers
Enter obligation in RAAOMO for subsidy to LGU XYZ
1. Cash assistance toLGU XYZ
Subsidy to LocalGovernment Units 895 30,000
Cash in Bank LCCA 110 30,000
k.Enter obligation in RAAOMO for subsidy to SEF
1. Cash transfer to SEF
as subsidy
Subsidy to Other
FundsCash in Bank LCCA
897110
10,00010,000
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Particulars Account TitleAcct.
Code Debit Credit
l.Enter obligation in RAAOMO for grants and donation to Trust Fund
1. Cash transfer to TrustFund as counterpart
LGU funds.
Grants and DonationsCash in Bank LCCA
889110
500,000500,000
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. Loss of Cash and Property Accountability
2. Cash Overage
3. Dishonored Check
4. Lost/Destroyed/Stale/Obsolete and Fraudulently
Encashed Check
5. Settlement of Suspensions/Disallowances/Charges
6. Refund of Overpayments
Sec. 54. Loss of Cash and Property. Loss ofcash 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 theaccountable officer concerned for purposes of requesting relief from
accountability. No accounting entry shall be made but the loss shall
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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 bedebited 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 CashbookCash in Bank and cancel payment in the taxpayers
index card. He shall also notify the collector/teller of the dishonor
and the cancellation of the official receipt. The collector/teller shallnote the cancellation in the triplicate copies of the receipt. The
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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 referencein 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 immediatelynotify 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.
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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 marked cancelled on its
face and reported as follows:
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 andsupporting 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
record 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 berequested 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
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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 TitleAcct.
Code Debit Credit
1. Cash Shortage
a. Cash shortage of the of the Disbursing Officer
To take up cash
shortage
Due from Officers and
Employees 128 50Cash Disbursing
Officers 107 50
b. Cash Shortage of the Treasurer
To take up cash
shortage
Due from Officers and
Employees 128 50Cash in Treasury 101 50
2. Grant of Relief from Accountability for Loss of Government Funds
To record the loss offund by a Disbursing
Officer (allegedly thrutheft ) = P50
Due from Officers andEmployees
Cash DisbursingOfficers
128
107
50
50
To take up relief from
accountability
Loss of Assets (current
year) or PriorYears adjustments
(prior years) 948 50Due from Officers and
Employees 128 50
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Particulars Account TitleAcct.
Code Debit Credit
3. Cash Settlement in case of denial of Request for Relief from
Accountability
To take uppayment/settlement
Cash in TreasuryDue from Officers and
Employees
101
128
50
50
4. Cash Overage
To take up cashoverage discoveredduring cash
examination
Cash in TreasuryOther Specific Income
of LGU
101
792
50
50
5. Dishonored Checks
From payment of real property tax in the current year or prior year
Upon receipt of advice
of dishonored checkand cancellation of
Official Receipt
Real Property Tax
ReceivableDeferred Real
Property TaxIncome
124
448
50
50
Due to LGUs 431 30
Real Property TaxIncome 711 20
Cash in Bank LCCA 110 50
Receipt ofrefund/settlement
Cash in TreasuryReal Property Tax
Receivable
101
124
50
50
6. Lost/Destroyed/Stale/Obsolete Checks
Check issued in the current/prior year for replacement
Check cancellation Cash in Bank LCCA 110 50
Accounts Payable 401 50
Replacement Accounts Payable 401 50Cash in Bank LCCA 110 50
7. Disallowances and Charges
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Particulars Account TitleAcct.
Code Debit Credit
a. Recording of disallowance for current years transaction
When the disallowancebecomes final and
executory
Receivables
Disallowances/Overpayment of Office
Supplies
Charges
Office Supplies
138 10
Amount paid - P100
Should be - 90
Expense 849 10
Difference - 10
Settlement of
Disallowance
Cash in Treasury
Receivables
101 10
Disallowances/
Charges 138 10
b. Recording of disallowance for prior years transaction
When the disallowance
becomes final andexecutory
Receivables
Disallowances/Charges 138 10
Prior YearsAdjustments 533 10
Settlement ofdisallowance
Cash in TreasuryReceivables
101 10
Disallowances/Charges 138 10
c. Settlement of Charges
c.1 Recording of charges which collection were made in the current year
When the chargebecomes final and
executory Underpayment of
Franchise Tax
Receivables
Disallowances/Charges
Franchise Tax
138
724
10
10Amount Paid - P 100
Should be - 110Charge - 10
Settlement Cash in Treasury 101 10
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Particulars Account TitleAcct.
Code Debit Credit
Receivables
Disallowances/Charges 138 10
c.2 Recording of charges which collection were made in the prior year
When the chargebecomes final and
executory
Receivables Disallowances/
Charges 138 10Prior Years
Adjustments 533 10
Settlement Cash in Treasury 101 10Receivables
Disallowances/
Charges 138 10
8. Refund of Overpayment
a. Overpayment taken up as receivable
To record overpayment
of salaries and wages(When overpayment is
ascertained)
Due from Officers and
EmployeesSalaries and Wages
Regular Pay
128
801
10
10
To record refund of
overpayment
Cash in Treasury
Due from Officers andEmployees
101
128
10
10
b. Refund of overpayment not taken up as receivable
Refund ofoverpayment of
Salaries and Wages Regular Pay during the
current year
Cash in TreasurySalaries and Wages
Regular Pay
101
801
10
10
To take up refund ofover payment in the
ensuing year
Cash in TreasuryPrior Years
Adjustments
101
533
10
10
F. ADJUSTING AND CLOSING ENTRIES
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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 orrevenues 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 productivefacilities 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.
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Illustrative accounting entries:
Particulars Account TitleAcct.
Code Debit Credit
1. Report of supplies
utilized for P2,000.
Office Supplies
ExpenseOffice Supplies
Inventory
849
149
2,000
2,000
2. Application
of advance RPT forP2,500.
Deferred Credits to
IncomeReal Property Tax
440711
2,5002,500
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 to 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 Account TitleAcct.
Code Debit Credit
1. Receipt of theNotice of Funding
Check Issued forthe DecemberShare from
Internal RevenueCollections forP20,000.
Due from NGAsShare from Internal
Revenue Collections
130
746
20,000
20,000
2. Unpaid salaries and
wages of employees,
Salaries and Wages
Regular Pay 801 50,000
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Particulars Account TitleAcct.
Code Debit Credit
at end of accounting
period, P50,000.
Due to Officers &
Employees
428 50,000
Sec. 66. Closing Journal Entries. Closing journal entriesare 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. Debit all revenue accounts balances and
credit the total to the Income and Expense
Summary account.
2. Credit all expense accounts balances and
cost of goods sold and debit the total to the
Income and Expense Summary account.3. 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.
4. 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.
5. Debit all credit balances of the intermediate
accounts and debit the total to the Government
Equity account.
6. Credit all debit balances of the intermediateaccounts and credit the total to the Government
Equity account.
Illustrative accounting entries:
Particulars Account TitleAcct.
Code Debit Credit
1. To close the Revenue
accounts to theIncome and Expense
Summary account.
Real Property Tax
Share from InternalRevenue Collections
Business Taxes &
Licenses
711
746
723
100
10,000
50
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Particulars Account TitleAcct.
Code Debit Credit
Registration Fees
Income and ExpenseSummary
761
532
20
10,170
2. To close the
Income andExpense Summary
to RetainedOperating Surplus
account.
Income and Expense
SummaryRetained Operating
Surplus
532
534
5,670
5,670
3. To close the
Retained OperatingSurplus to
Government Equityaccount.
Retained Operating
SurplusGovernment Equity
534501
5,6705,670
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