(Purchase ( Other Supplier)

1. After the conduct of bidding/canvass, the purchase will be awarded to the lowest bidder/supplier
after a demo is being conducted and a Purchase Order is being prepared to be signed by both the
agency and supplier.
2. Upon delivery of the equipment, obligate the amount, P150,000, for the purchase of equipment to
an outside supplier supported by the PO and posted to the registry under the obligation column for
MOOE.
3. To record the delivery and acceptance of the delivered equipment.
10605020
20201010
20101010
4.

Office Equipment
Due to BIR
Accounts Payable

P150,000
6,250
143,750

To record payment of office equipment

20101010
10104040

5.

Accounts Payable
Cash MDS, Regular

143,750
143,750

To record remittance to BIR supported with approved TRA.

10104070
40301010

Cash - TRA
6,250
Subsidy from National Government
6,250
To recognize constructive receipt of NCA for TRA.

20201010
10104070

Due to BIR
6,250
Cash TRA
To record remittance of taxes withheld to BIR
Through TRA.

6,250

( If the purchase was charged to a trust account and not come from an NCA when paid,
No obligation is necessary and payment shall be charged to the cash in bank- lcca account)
F. . The agency received their bills of the following:
PLDT
P 12,000
Water
5,000
Electricity
18,000
Rental (1 yr, 6/1/14-5/31/15) 24,000
Payment was made a month after it was processed.
Record the transaction.
1. Obligate the billed accounts and post under the obligation column of MOOE.
2. Record the bills
19902020
50205020
50204010
50204020
20101010
3.

Prepaid rent
24,000
Telephone expenses 12,000
Water expense
5,000
Electricity exp
18,000
Accounts Payable

To record the payment of the above bills.

20101010 Accounts Payable
20201010
Due to BIR
10104040
Cash MDS, Reg

59,000
59,000
3,235
55,765

4. To record remittance to BIR supported with approved TRA.

10104070
Cash - TRA
3,235
40301010
Subsidy from National Government
3,235
To recognize constructive receipt of NCA for TRA.
20201010
10104070

Due to BIR
3,235
Cash TRA
3,235
To record remittance of taxes withheld to BIR
Through TRA.

G. The agency wanted to expand its building. The project was included in the approved budget
amounting to P7,500,000. It was awarded to a financially capable contractor and made to start
in May 15, 2014 to be finished four months after. However, constant rain caused the delay
in the completion, which made the agency charged a liquidating damages totalling P 55,000.
There were deficiencies noted during the inspection conducted when it was 35% completion and
claimed the payment of its first billing after being processed. The 2nd billing followed when it
was 60% completion and final billing when it was 100% completion..
Journalize the following transactions.
1. Obligate P7,500,000, construction of an expansion and post in the obligation column of the registry for CO.
2. To record receipt of cash from the contractor paid as performance bond (cash bond 5%).
10101010
Cash collecting officer
375,000
20401040
Guaranty/Security Deposits Payable
375,000
3. To record the temporary deposit of the performance bond to the National Treasury.
10104010
Cash Treasury/Agency Deposit Trust 375,000
10101010
Cash collecting officer
375,000
4. To record the 15% of the contract amount as advances to contractor.
19902010
10104040

Advances to Contractors
Cash MDS, Regular
(P7,500,000 x 15% = 1,125,000)

1,125,000
1,125,000

5. To record the 1st progress billing, 35% completion.

10610030
20101010
19902010

Construction in Progress Building and

Other Structures
Accounts Payable
Advances to Contractors

2,625,000
2,231,250
393,750

6. To record payment of the 1st billing;

20101010
Accounts Payable
2,231,250
10104040
Cash MDS, Regular
20401040
Guaranty/Security and Deposit Payable
20201010
Due to BIR

1,736,625
262,500
232,125

7. To record the receipt of the 2nd billing:

10610030 Construction in Progress-Building
And Other structures
20101010
Accounts Payable
19902010
Advances to Contractors

1,593,750
281,250

8. To record payment of the 2nd billing

20101010 Accounts Payable
10104040
Cash-MDS, Regular
20401040
Guaranty/Security and Dep Payable
20201010
Due to BIR

1,875,000

1,593,750
1,208,000
187,500
198,250

9. To record the receipt of the final billing:

(cost 7,500,000 - LD 55,000)
10610030 Construction in Progress Building
And Other Structures
20101010
Accounts Payable
19902010
Advances to contractor

2,945,000
2,495,000
450,000

10. To adjust obligation by negative entry in the obligation column of the Registry for CO
Reducing the original amount by P55,000 due to liquidating damages.
11. To record final payment:
20101010 Accounts Payable
2,495,000
10104040
Cash-MDS, Regular
20401040
Guaranty/Security and Dep Payable
20201010
Due to BIR

1,979,050
294,500
221,450

12. To record the turn-over and acceptance of the building extension:

Contract amount
Less: Liquidating damages
Net cost

10604010
10610030

P7,500,000
55,000
P7,445,000
========

Building
Construction in Progress Building
And Other Structures

7,445,000
7,445,000

13. Constructive Receipt of NCA for TRA

Cash-Tax Remittance Advice
10104070
Subsidy from National Government 40301010
To recognize constructive receipt
of NCA for TRA
14..To record remittance of withholding taxes thru TRA.
20201010
Due to BIR
10104070
Cash-Tax Remittance Advice

P 651,825
P 651,825

P651,825
P 651,825

13. To record receipt of NCA for deposited performance bond.

10104040
10104010

Cash MDS, Trust

Cash Treasury/Agency deposit

375,000
375,000

14. To record release of performance bond:

20401040
Guaranty/Security Deposits Payable
10104040
Cash MDS, Trust

375,000

15. Refund of retention fees to contractor:

20401040
Guaranty/Security Deposits Payable
10104040
Cash MDS, Regular

744,500

375,000

744,500

Illustrative Accounting Entries for Remittance of Taxes Withheld through TRA

Particulars
Account Code
Debit
Credit
A. Agency Books
1. Constructive Receipt of NCA for TRA
Cash-Tax Remittance Advice
10104070
P 5,000
Subsidy from National Government 40301010
To recognize constructive receipt of NCA for TRA

P 5,000

2Remittance of taxes withheld through TRA

Due to BIR
20201010
Cash-Tax Remittance Advice
10104070
To recognize remittance of taxes
withheld through TRA

P 5,000
P 5,000

B. BIR Books
1. Constructive Receipt of Tax Revenue through TRA from the NGAs
Cash-Tax Remittance Advice
10104070
Income Tax
40101010
To recognize constructive receipt
of tax revenue based on the TRA received
from the agency

P 5,000
P 5,000

C. BTr Books
1. Constructive Utilization of NCA for TRA by the remitting NGAs
Subsidy to NGAs
50214010
Cash-Tax Remittance Advice
10104070
To recognize remittance of taxes withheld
by the agency based on the TRA received.

P 5,000
P 5,000

Depreciation.
PPE gradually loses its ability to provide service over the course of time. Because of this, its cost needs to
be distributed on a systematic basis over its useful life. The allocated cost is referred to as depreciation. The
depreciation charge for each period shall be recognized as expense unless it is included in the carrying amount
of another asset. For example, the depreciation of manufacturing plant and equipment is included in the costs
of conversion of inventories. Similarly, depreciation of PPE used for development activities may be included in
the cost of an intangible asset recognized.
The following are policies regarding depreciation of PPE:
a. There are three factors an entity must consider in determining depreciation:
1. Initial cost,
2. Useful life, and
3. Expected residual value at the end of its useful life.
b. Except for land and not recognized heritage assets, all PPE shall be depreciated.
c..Depreciation of an asset begins when it is available for use such as when it is in the location
and condition necessary for it to be capable of operating in the manner intended by
management. For simplicity and to avoid proportionate computation, depreciation shall be
for one month if the PPE is available for use on or before the 15th of the month. However,
if the PPE is available for use after the 15th of the month, depreciation shall be for the
succeeding month.
d.. Depreciation of an asset ceases when the asset is derecognized. Therefore, depreciation does not
cease when the asset becomes idle or is retired from active use and held for disposal unless the asset
is fully depreciated.

e..A residual value equivalent to at least five percent (5%) of the cost shall be adopted unless
a more appropriate percentage is determined by the entity based on its operation subject to
the approval of COA. Generally, infrastructure assets have no residual value. In case, the
residual value of parts of the infrastructure assets can be determined, the policy of at least
five percent (5%) of the cost of that part shall be applied.
f. The computation of monthly depreciation expense shall be as follows:
Depreciation Expense =

Cost Residual Value

Estimated Useful Life (in months)

l. Depreciation shall be recognized as a debit to the Depreciation Expense account and a credit to
the Accumulated Depreciation account. Accumulated Depreciation is a contra-asset account
presented in the FS as deduction from the related asset account. Depreciation expense shall be
recognized on a monthly basis.
Example: On June 5, 2014, an office equipment was purchased at P22,000 and has an estimated
useful life of 5 years and 5% residual value. Said equipment was available for use on
June 20, 2014.
Monthly Depreciation =

P 22,000 P 1,100 = P348.33

60 months

The accounting entry shall be as follows:

Account Title
June 30, 2014
No depreciation expense recognized.
July 31, 2014
Depreciation-Machinery and Equipment
Accumulated Depreciation-Office
Equipment
To recognize depreciation for the
month of July 2014.

Account Code

50501050
10605021

Debit

Credit

P 348.33
P 348.33

BANK RECONCILIATION STATEMENT - the preparation of the bank reconciliation statements for
Cash
in Bank and Cash-Modified Disbursement System (MDS) accounts including the
proposed adjusting entries.
Definition of Terms:

Bank Charges charges imposed by the bank for various services rendered excluding interest charges.
This also includes cost of checkbooks, penalties and surcharges on overdrafts.
Bank Reconciliation settlement of differences contained in the bank statement and the cash account
in the agencys/entitys books of accounts.
Bank Statement reflects the transactions in the agencys/entitys (depositors) bank account for a
period such as deposits made to the account as well as checks/ADAs drawn on the
account, bank charges, returned items, etc.
Canceled Check/ADA checks/ADAs issued and chargeable to the agency bank account but was later
voided due to expiration of validity, and other valid reasons.
Credit Memorandum document issued by the bank informing an increase in the depositors
(Agencys/Entitys) account, such as previous bank debit errors and collection directly
deposited to the agencys/entitys bank account.
Debit Memorandum document issued by the bank informing a decrease in the account, such as
previous bank credit errors or service charges and fees.
Deposits-in-Transit are amounts of agency/entity deposits in the bank but which are yet to be recorded by the
bank until the next period. These usually pertain to late deposits in the last day of business for a period.
Lapsed NCAs NCAs which are no longer valid or its validity has expired but remain unadjusted by the bank
or the agency/entity.
Notice of Cash Allocation authority issued by the DBM to central, regional and provincial offices and
operating units to cover the cash requirements of the agency/entity.
Outstanding Checks checks the agency/entity has issued and recognized but which have not been presented to
the bank for payment.
Returned Check a check returned by the bank due to errors or deficiencies in the makers or agencys/entitys
account.
Unrecorded Deposits are collections of the agency/entity which are directly deposited by the debtor/client to
the bank account of the agency/entity but remain unrecorded by the agency/entity as at the period
under reconciliation.

Objectives. The Bank Reconciliation Statement (BRS) shall be prepared in order to:
a. check correctness of both the banks and agencys/entitys records,
b. serve as a deterrent to fraud, and
c. enable the agency/entity or bank to take up charges or credits recognized by the bank or
agency/entity but not yet known to the agency/entity or bank.
This shall be used in the reconciliation of bank and treasury accounts maintained with
Government Servicing Bank (GSB).
Method of Bank Reconciliation. The monthly BRS shall be prepared by the Chief Accountant
/designated staff for each of the bank accounts maintained by the agency/entity using the
Adjusted Balance Method. Under this method, the book balance and the bank balance are
brought to an adjusted cash balance that must appear on the Statement of Financial Position.
Illustrative Accounting Entries for Adjustments in the Bank Reconciliation Statement for CashModified Disbursement System (MDS) accounts.
The illustrative accounting entries for the adjustments are as follows:
a. Unrecognized/Understatement of NCA for regular and special account with allotment release order
Account Title
Account Code
Debit
Credit
Cash- MDS, Regular
10104040
xxx
or Cash- MDS, Special Account
10104050
xxx
or Cash- MDS, Trust
10104060
xxx
Subsidy from National Government
40301010
xxx
b..Unrecognized/Understatement of NCA for special account without allotment release order and
trust account
Cash- MDS, Special Account
or Cash- MDS, Trust
Cash-Treasury/Agency Deposit,
or
Special Account
Cash-Treasury/Agency Deposit, Trust

10104040
10104050

xxx
xxx

10104020
10104030

xxx
xxx

c. Cancelled MDS checks/ADAs (without intention to replace)

Cash- MDS, Regular

10104040

xxx

or
or

Cash- MDS, Special Account

Cash- MDS, Trust
Expenses or other appropriate account

10104050
10104060
xxxxxxxx

xxx
xxx
xxx

d. Understatement of Cash in Bank account due to erroneous recording of amount of checks issued
Cash- MDS, Regular
or Cash- MDS, Special Account
or Cash- MDS, Trust
Accounts Payable or Other Liabilities

10104040
10104050
10104060
xxxxxxxx

xxx
xxx
xxx
xxx

e. Lapsed NCA or unused NCA at yearend (For regular and special account with allotment release
Order)
Subsidy from National Government
Cash- MDS, Regular
or
Cash- MDS, Special Account

40301010
10104040
10104050

xxx
xxx
xxx

For special account without allotment release order and trust account
Cash-Treasury/Agency Deposit, Special Account
or Cash-Treasury/Agency Deposit, Trust
Cash- MDS, Regular
or Cash- MDS, Special Account

10104020
10104030
10104040
10104050

xxx
xxx
xxx
xxx

f. Overstatement of Cash in Bank account due to erroneous recording of the amount of checks issued
Expenses or Accounts Payable or Other Liabilities xxxxxxxx
Cash- MDS, Regular
10104040
or Cash- MDS, Special Account
10104050
or Cash- MDS, Trust
10104060

xxx
xxx
xxx
xxx

g. Overstatement of Cash in Bank account due to erroneous recording of the amount of NCA received
For regular and special account with allotment release order
Subsidy from National Government
Cash- MDS, Regular
or Cash- MDS, Special Account

40301010
10104040

xxx
xxx
10104050

xxx

For special account without allotment release order and trust account
Cash-Treasury/Agency Deposit, Special Account
10104020
xxx
Or Cash-Treasury/Agency Deposit, Trust
10104030
xxx
Cash- MDS, Regular
10104040
Or
Cash- MDS, Special Account
10104050
xxx
h. Bank Charges
Bank Charges or any appropriate Account
Cash- MDS, Regular
or
Cash- MDS, Special Account
or
Cash- MDS, Trust

xxxxxxxx
10104040
10104050
10104060

xxx
xxx
xxx
xxx

Preparation and Submission of Other Reports.

In addition to the set of financial statements, the following reports/schedules/statements shall be
submitted to GAS, COA:
a. Pre-Closing Trial Balances
b. Post-Closing
c. Other schedules
1. Regional Breakdown of Income
2. Regional Breakdown of Expenses
Trial Balance. Is a list of all the GL accounts and their balances at a given time. The accounts are listed
in the order in which they appear in the RCA, with the debit balances in the left column and the
credit balances in the right column.
a. The TB shows the equality of debit and credit balances of all GL accounts as at a given period.
It is prepared and submitted monthly, quarterly and annually. At the end of the fiscal year, the

xxx

pre-closing and the post-closing trial balances shall be prepared.

b. The TB is prepared to:
1. Prove the mathematical equality of the debits and credits after posting;
2. Check the accuracy of the postings;
3. Uncover errors in journalizing and posting; and
4. Serve as basis for the preparation of the financial statements.
Pre-Closing Trial Balance. The Pre-Closing Trial Balance shall be prepared after posting the AJE in the GJ and the same
to the GL. It shows the adjusted balances of all accounts as at a given period. This is also described or termed as the
Adjusted Trial Balance. The TB shall be supported with the schedule of SL balances of the controlling accounts.
Adjusting Journal Entries. Adjusting journal entries are made at the end of an accounting period to allocate revenue and
expenses to the period in which they actually occurred. AJEs are required every time a financial statement is prepared to
make the statement truly reflective of the financial condition of the entity at a given period. Adjustments are of two main
types:
a. Accrued items
b. Deferred items
Other Adjustments. The following adjustments shall also be made (if applicable) for fair presentation of the results of
operation of the entity in the financial statements:
a. Unused NCA (National)
b. Petty Cash Fund
c. Unreleased Commercial Checks
d. Allowance for/Accumulated Impairment Losses of asset accounts
e. Write-down of Inventories
f. Correction/Reclassification Entries
g. Adjustment for reversal of Impairment Losses
h. Depreciation Expense
i. Exchange differences on foreign currency
j. Other adjustments
Adjustment for Accrued Items. It is an adjusting entry for an economic activity already undertaken but not yet
recognized into asset and revenue accounts or liability and expense accounts. It requires asset/revenue adjustments and
liability/expense adjustments.
a. Asset/Revenue Adjustment. It involves earned revenues not yet recognized as assets and income at the end of the
accounting period. Examples are receivables for revenues already earned but not yet collected nor billed as at the yearend. The adjusting journal entry are as follows:
Account Title
Account Code
Interest Receivable
10301050
Interest Income
40202210
To recognize interest income already earned

Debit
xxx

Credit
xxx

b. Liability/Expense Adjustment. It involves expenses, which have already been incurred but remained unpaid at the end
of the accounting period. Examples are salaries and wages, water, electricity and other expenses which are already
incurred but not yet paid. The adjusting journal entry are as follows:
Salaries and Wages-Regular
50101010
Due to Officers and Employees
20101020
To recognize salaries and wages not yet paid

xxx
xxx

Adjustment for Deferred Items. These are adjusting entries transferring data previously recognized in an asset account
to an expense account, or data previously recognized in a liability account to a revenue account. In contrast to the accrued
items, it requires asset/expense adjustments and liability/revenue adjustments.
a. Asset/Expense Adjustments. These pertain to assets, portion of which are consumed/used/incurred at the end of the
accounting period. Examples of these adjustments are prepayments. Prepayments are expenses paid before they are
incurred. At the end of the accounting period, the expired portion shall be determined and an adjusting journal entry shall
be prepared to recognize the expense applicable to the period being reported.
Original Entry:
Prepaid Rent
Cash - (MDS), Regular

19902020
10104040

P 1,000

Adjusting Entry:
Rent/Lease Expenses
Prepaid Rent

50299050
19902020

P 900

P 1,000

P 900

b. Liability/Revenue Adjustments. For accounting purposes, the cash received does not represent revenue until it has been
earned. Thus, the recognition of revenue must be deferred until it is earned. Advance income collections are recognized by
debiting Cash and by crediting a liability account for unearned revenue. As unearned revenue

is earned, an adjusting journal entry is made at the end of each period to transfer the appropriate amount from the liability
account to revenue account. This adjustment reflects the fact that all or part of the entity's obligation to its customers has
been fulfilled and that revenue has been realized.
Original Entry:
Cash- MDS, Regular
Other Unearned Revenue

10104040
20502990

P 1,000

Adjusting Journal Entry:

Other Unearned Revenue
Other Service Income

20502990
40201990

P 900

P 1,000

P 900

Petty Cash Fund Adjustments. At the end of the year, all unreplenished Petty Cash Fund expenses shall be reported and
supporting papers submitted to the Accounting Division/Unit, to recognize the expenses incurred to the period to which
they relate. In case no replenishment could be made for lack of fund, a JEV shall be prepared to recognize all the expenses
paid under the Petty Cash with a credit to the account Petty Cash. If replenishment is made, the credit shall be the
appropriate cash account.
Reversion of Unused Notice of Cash Allocation. For NGAs receiving subsidies from the national government in the
form of NCA, adjusting journal entry shall be made for the reversion of the unused or unutilized NCA at the end of the
accounting period. The entry for lapsed regular NCA and those issued for the payment of accounts payable/retirement
gratuity/terminal leave, shall be:
Subsidy from National Government
Cash- MDS, Regular

40301010
10104040

P 10,000
P 10,000

For unused NCA issued for the release of performance/bidders/bail bonds, which were deposited with the National
Treasury, a JEV shall be drawn with debit to account Cash-Treasury/Agency Deposit, Trust and credit to account CashModified Disbursement System (MDS), Trust.
Adjustments for Unreleased Commercial Checks. A Schedule of Unreleased Commercial Checks shall be prepared by
the Cashier for submission to the Accounting Division/Unit. All unreleased checks at the end of the year shall be reverted
back to the cash accounts. A JEV shall be prepared to recognize the restoration of the cash equivalent to the unreleased
checks and the recognition of the appropriate liability/payable account. The
accounting entry for the restoration of the unreleased check to the cash account shall be a debit to Cash in Bank, Local
Currency Current account with credit to the appropriate liability account. There shall be no physical cancellation of the
checks. The JEV supporting such restoration shall form part of the supporting document to the financial statements to be
submitted to COA at year end. At the start of the ensuing year, another JEV shall be drawn to reverse the previous entry
made and recognize the availability of the checks for release. This procedure shall not apply to account Cash-Modified
Disbursement System (MDS) since there is no actual cash with the
GSBs.
Closing Journal Entries. Closing journal entries are entries which close out the balances of all nominal or temporary
and intermediate accounts at the end of the year. The closure will reduce the balance of those accounts to zero. The
nominal and intermediate accounts that shall be closed at the end of the year are as follows:
a. Balance of all revenue accounts to the Revenue and Expense Summary account;
b. Balance of all expense accounts to the Revenue and Expense Summary account;
c. Balance of the Revenue and Expense Summary to the Accumulated Surplus/(Deficit) account;
d. Balance of all Cash-Treasury/Agency Deposit, Regular to the Accumulated Surplus/(Deficit)
account; and
e. Other Closing Entries.
For the purpose of preparing the financial statements for the first, second and third quarters, the closing entries shall be
prepared, but shall not be recorded in the books of accounts.
Post-Closing Trial Balance. The Post-Closing Trial Balance shall be prepared at the end of the year after preparing and
posting the closing journal entries in the GJ and posting to the GL. Since revenue and expense accounts have been closed
out, the only accounts with balances are balance sheet or real accounts.