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Accounting Methods
One-Fund Concept
This system adopts the one fund concept, that is the general fund, which is
generally available for all functions of government. Separate fund accounting shall
be done only when specifically required by law or by a donor agency or when
otherwise necessitated by circumstances subject to prior approval of the
Commission, in which case, a Special Purpose Fund may be created.
c. Chart of Accounts and Account Codes
COA Cir. No. 2013-002 provides that the account code structure consists of eight (8)
Mandatory digits, such as: one digit: Account Group; Two digits: Major Account
Group; Two digits: Sub-Major Account Group; Two digits: General Ledger Account
Group; and one digit: General Ledger Contra Accounts.
d. Responsibility Accounting
Responsibility accounting is a system that relates the financial results to a
responsibility center, which provides access to cost and revenue information under
the supervision of a manager having direct responsibility for its performance. It is a
system that measures the plans (by budget) and actions (by actual results) of each
responsibility center.
In order to be effective in identifying the performance of a segment or unit of the
agency under the control and responsibility of the segments manager, the coding
structure has been formulated. However, this coding structure was modified and
repealed by the Commission on Audit, Department of Budget and Management, and
Department of Finance through Joint Circular No. 2013-1 dated August 6, 2013:
Unified Accounts Code Structure (UACS). Apparently, the COA, DOF-BTr, and DBM
are collectively responsible for the UACS. The validation and assignment of new
codes for funding source, organization, sub-object codes for expenditure items shall
be the responsibility of DBM. The consistency of account classification and coding
structure with the Revised Chart of Accounts shall be the responsibility of COA. And,
the consistency of account classification and coding standards with the Government
Finance Statistics shall be the responsibility of DOF-BTr.
e. Books of Accounts
Under the NGAS, the General Journal shall be the only book of original entry to be
used. The journals shall be used to record in time sequence, financial transactions
For uniformity in the application of useful life and simplification in its computations,
the estimated useful life of government property, plant and equipment by
classification per COA circular No. 2003-007 dated December 11, 2003 shall be
applied.
p. Reclassification of Assets
Serviceable assets no longer being used shall be reclassified to the Other Assets
account and shall not be subject to depreciation. Also included under Other Assets
are obsolete and unserviceable assets awaiting final disposition.
q. Allowance for Impairment Accounts Receivable
An allowance for impairment accounts receivable shall be set-up for estimated
uncollectible trade receivables to allow for their fair valuation.
r. Recognition of Liability
Liability shall be recognized at the time goods and services are accepted or
rendered and supplier/creditor bills are received.
s. Interest Accrual
Whenever practical and appropriate, interest income and/or expense shall be
accrued and recognized in the books of accounts.
t. Accounting for Borrowings and Loans
All borrowing and loans incurred shall be recorded under the appropriate liability
accounts, which includes among others the following: (1.) Loans Payable
Domestic, (2.) Loans Payable Foreign.
u. Petty Cash Fund
The Petty Cash Fund shall be maintained under the imprest system. As such, all
replenishments shall be directly charged to the expense account. At all times, the
Petty Cash Fund shall be equal to the total cash on hand and the unreplenished
expenses. The Petty Cash Fund shall no be used to purchase regular inventory/items
for stock.
v. Foreign Currency Adjustments
Cash deposits in foreign currency and outstanding foreign loans shall be computed
at the exchange rate prescribed by the Bangko Sentral ng Pilipinas at the balance
sheet date. The total cash deposits and foreign loans payable shall be adjusted at
the end of each month and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign currency obligations shall reflect the
appropriate foreign currency in which the loan is payable. The liability shall be
expressed both in the foreign and local currency.